Investment in America Act of 2003

Mr. President, I yield to our majority leader whatever time he might consume.

Mr. President, I yield myself such time as I might consume.

Mr. President, we are in a position where there is a lot of anxiety about the economy. That anxiety probably started back in March of 2000, when we first saw a downturn in the manufacturing index, and the manufacturing index has been in a downturn for 33 months, at least as far as it relates to employment.

There is anxiety that the economy might go back to mid-2000 and later in 2000 when Nasdaq lost half its value. Then September 11 happened. There is anxiety about the war on terrorism, reinforced by the murder of Americans in Saudi Arabia yesterday. There is anxiety about the economy because of the war in Iraq and the war in Afghanistan. As far as war and foreign relations are concerned, there is not a lot we in Congress can do about it because people expect us to fight a war against terrorists. They expect us to make sure that bases for terrorism training against American citizens are not maintained by protection of foreign countries, such as Afghanistan.

Americans expect us to not allow a nation such as Iraq, where there has been a great deal of evidence of the existence of weapons of mass destruction that could be used against American citizens, to continue to exist, or a nation such as Iraq that supports terrorist organizations such as Hezbollah or Hamas, to create greater turmoil in the Middle East, threatening the oil supply coming to the United States which will affect our economy. There is not much we can do about that, but the American people expect us to do what we can.

Also, there are some actions we can take domestically that deal with the anxiety about the economy, whether it

is related to the downturn of the domestic economy or whether that downturn is related to our international relations, our international responsibilities, or the protection of American citizens.

What we are doing today is responding, as best we can, through the tax policy of our country, to the anxiety about the economy. We have had the good fortune of a President with vision, with ideas to stimulate the recovery and, in the process of this legislation, as economists will tell us, create more than 1 million new jobs through changes in tax policy.

We are responding to the issues that are on the minds of Americans, and those issues are the need to create jobs and bringing robust growth to the economy.

I have the good fortune of serving in the Senate at the same time we have a President who has a tax policy that tries to accomplish what I have been working for in the Senate as a member of the Finance Committee for a much longer period of time than President Bush has been President of the United States.

As chairman of the Senate Finance Committee, that good fortune gives me the opportunity to work for my goals simultaneously with the goals the President seeks. Many times being a member of the Senate Finance Committee--I was not chairman at that particular time--I found myself trying to fight what I thought were bad ideas put forth by Presidents of the United States on tax policy. Today I have the good fortune of trying to accomplish for President Bush good things for our economy along the lines that I have tried to accomplish over a long period of time. Not often do Senators have that opportunity.

On the other hand, we faced a challenge in meeting the President's goals. As many of my colleagues know, several weeks ago the Senate agreed upon the size of the reconciled tax relief cuts for jobs and for growth. I join many of my colleagues in wishing the reconciliation amount had been larger, and I believe we have put together a good proposal, given the limitation we face of the realities of compromising on the budget which we adopted 1 month ago.

I am pleased that the Finance Committee was able to report out legislation that received bipartisan support, although not as broadly bipartisan as I had hoped. While I wish the number of supporters from the other side of the aisle had been greater for final passage, I think the vote reflects broad bipartisan support for a significant majority of the provisions in this bill.

The vote also reflects a common goal: to see our economy strengthened by tax relief policies. At least three-fourths of this bill enjoys bipartisan support, for instance, with major parts of the income tax policy that is in this legislation, meaning personal income tax policy.

I believe the bill before us today is a balanced package of consumption and investment incentives that will provide short-term stimulus and provide the building blocks for meaningful future economic growth.

There is wide support for the provisions that accelerate the child tax credit, the marriage penalty relief, expansion of the 10-percent bracket, almost all of the marginal rates expanding small business expensing, and providing much needed alternative minimum tax relief.

These six provisions make up approximately $300 billion of the total package of economic growth proposals before the Senate and represent the three-fourths of the bill that I described that had broad bipartisan support. Unfortunately, from the statements by a few of my colleagues, one would never know about these items having broad bipartisan support.

I believe the American people sent us here to get the people's business done. Sadly, despite a bill that provides so much benefit to working families and will create over 1 million new jobs, there are many who put partisanship first and turn the other song on its head: accentuate the negative and eliminate the positive.

Let me try to counter the efforts to eliminate the positive by briefly taking Members through key provisions of the bill. I will emphasize first those that I can say categorically would have overwhelming support, meaning overwhelming bipartisan support, if they were voted upon separately.

With regard to the child tax credit, we immediately bring the child tax credit to $1,000 per year instead of waiting for that to be phased in over the rest of this decade. In addition, we also accelerate the refundable portion of the child credit.

In other words, we are going to speed up the giving of money to people who have not even paid income tax so that they benefit from our emphasis upon helping families with children.

Finally, we simplify the definition of a child for several different tax programs. I know it is not imaginable to the average taxpayer that somehow we would complicate the Tax Code by having half a dozen different definitions of the world ``child,'' but we do have. We simplified this by expanding who is eligible and making more families eligible for certain tax benefits. This is what that means: Over $75 billion that hard-working families will get to keep in their pockets. Thus, by far and away the biggest part of this bill is direct benefits that help middle and lower income families.

There is one more thing. Not only are hard-working families getting the biggest benefits, they are first in line to get the benefits of this bill because we include the President's proposal that would send checks--rebate checks, if you want to call them that--to those who receive the child credit in their 2002 tax year. The Treasury Department states that these checks will be sent out within 6 weeks of Congress approving this bill. So in just a few weeks, eligible families will receive a check from the Treasury of up to $400 per child.

Why $400 per child? Because presently the child credit is $600 and it would not reach $1,000 until later in this decade, gradually phased in. We make that $1,000 credit effective right now for the year 2004.

Now, there is another very popular change in this bill that a vast majority of this body believes should have been done a long time ago and was done in the year 2001 tax bill but phased in over this decade. What we do is provide marriage penalty relief of $51 billion in this package to de-emphasize the penalty for people being married, meaning they pay a higher tax bill than people who would have the same incomes not being married. So these people will not be penalized for being married and having both husband and wife working.

It also enhances tax relief for those families where one spouse decides to stay home and spend their time, rather than outside the family and the workforce, doing that work in the family, raising kids. As my wife reminds me, raising the family is one of the hardest and most important jobs, and that has been emphasized very effectively by the President of the United States.

So the marriage penalty would have been phased in over this decade, and now, retroactive to January 1, 2004, we are going to have the marriage penalty fully brought in under the 2001 tax bill policy.

There is another problem particularly for middle-income taxpayers, and that is how the alternative minimum tax is hitting an increasing number of American taxpayers. The bill before us actually ensures that fewer Americans will be subject to the alternative minimum tax through the year 2005, and we devote $49 billion in this bill to addressing the alternative minimum tax.

I want to be candid with the taxpayers of America and tell them that we are not doing in this bill, because of costs now, what we did in 1999 when, during the Clinton administration, the Senate and House sent to the President a bill abolishing the alternative minimum tax. That was vetoed by President Clinton. I am sure I am going to have Members on the other side of the aisle saying we are not doing enough for the alternative minimum tax. I hope they remember that when it was not as far down the road as it is now on covering more Americans being hit by the alternative minimum tax, this Congress had the foresight to do away with the alternative minimum tax and President Clinton vetoed it.

In this regard of how we handle the alternative minimum tax, we eliminate more people from being hit by the alternative minimum tax than we would have under the 2001 tax law.

In another area where we want to increase investment to create jobs, the bill provides for increasing expensing of depreciable investment by small

business. We increase that from a $25,000 a year write-off to a $75,000 a year write-off, to encourage expansion and investment by small business today and the new jobs that will result from that small business investment.

The acceleration of the expansion of the tax brackets at the 10 percent bracket benefits all taxpayers and will mean thousands of taxpayers no longer even owe Federal income tax. That 10 percent bracket relief reports $44 billion of revenue loss in this bill, meaning that people hit by the 10 percent bracket will pay $44 billion less in taxes. This is another one of the provisions in the 2001 tax bill that would have been phased in over the next decade that we are bringing back effective January 1, 2004, fully implemented.

The reduction of tax rates at all other levels--and this does reduce marginal tax rates back to January 1, 2004, rates that would have otherwise been reduced gradually over the rest of this decade, making those marginal tax rates fully effective this year. The reduction of the top rate amounts to less than 7 percent of the total cost of this package, although I fear that many speakers will have us think it is 93 percent from all the words spent on this matter.

The reduction of all tax rates will help the husband and wife who, after years of hard work, have finally achieved good paying jobs and now face the triple threat. That triple threat is the cost of paying for their children going to college, saving for their own retirement and, oddly enough, probably helping their own parents in retirement.

The reductions of rates as well as expensing will help small business owners, as in my own city of Dubuque, IA, and small business owners across the country. These small business folks are key to job creation. If they hire more workers, if they expand their businesses, we are all better off.

That brings me to the point of who most benefits from the reductions of rates as well as small business expensing: The people who are hired by the small business owner. What this bill is all about is the creation of jobs. Of all the people benefiting, it is going to be those who want to work and will have an opportunity to work because of the 1 million-plus jobs that will be created by this legislation. These new jobs and the people who will be in them do not show up on any of the charts that we will see. They do not show up on the benefit table. But it is those people and their families who benefit greatly from this bill.

This is jobs creation legislation. This is based on the presumption that if money is in the taxpayers' pockets and 110 million taxpayers in America decide how that money is going to be spent or invested, it will do more economic good, turn over the economy many more times, than if it comes through the Federal Treasury and 535 Members of Congress decide how it will be divided.

Do not buy into the argument: How can we afford a tax cut when the budget deficit is what it is. A lot of the same Members who are going to be bringing that issue forward are some of the same Members who offered amendments on the Budget Act or offered amendments on the appropriations bill in January to spend more money. A lot of the votes on the budget took money away from tax relief in the budget and spent it somewhere else. Anyone who is concerned about the budget deficit ought to have reduced taxes and put it against the bottom line, not spend it someplace else.

The conclusion can be drawn that a lot of Members expressing concern over the budget deficit are not really concerned about the budget deficit but want more tax money coming through the Federal budget, through the Federal Treasury, so 535 Members of Congress can spend the money rather than 110 million American taxpayers having it in their pockets.

I happen to believe how 535 Members of Congress spend the money is not going to respond to the dynamics of our free market system, compared to 110 million taxpayers making the decision of how that money is spent.

Much of the discussion I have spoken about, worry of the budget deficit, is going to be related to discussion regarding the top rate and whether or not we should reduce the top rate from 38.6 to 35. Remember, that was already legislated in 2001 but not going to be fully effective until the year 2006. We made a judgment that putting money into the pockets of people who will invest it and create jobs, particularly small business owners, is better to do now, starting January 1, 2004, rather than waiting until 2006.

For those listening, do not look exclusively at the number of taxpayers impacted by those rates. Such an analysis fails to tell a complete story about the efficacy and efficiency of lowering top rates and seems to focus instead on who gets what in a distributional sense, not the economic good that comes from the policy decisions.

In my opinion, the better way to think about it is to focus on: One, what most efficiently changes behavior of taxpayers; two, what provides incentives for the creation of jobs; and, three, what has the largest multiplier effect on the economy. And by ``multiplier effect,'' I mean what is going to be done with the money by the 110 million taxpayers who create jobs. That has to be one of two ways. Either they spend it and it enhances two-thirds of the economy related to consumer spending or it will be invested and, with investment, the creation of jobs.

We will hear a lot about distributional analysis of how this tax bill might affect certain classes of taxpayers. It also ignores the fact that successful businesses--in other words, profitable businesses that pay proportionately higher taxes and the highest marginal tax rates-- are the ones who will disproportionately add the most labor and capital. This is an important point to keep in mind.

Everyone knows most of my livelihood outside of Congress or even while I have been in Congress has been from farming. But throughout my lifetime I have had jobs with small business people in the Waterloo- Cedar Falls area of Iowa. I have had those jobs because I started out as a small farmer. If you are farming 80 acres, you cannot make a living so you moonlight someplace else to provide income to support your family. I had an opportunity to work at a little business called Universal Hoist. We made grain-moving equipment for farmers and grain elevators to buy. That business is still operating in Cedar Falls. I worked 10 years, from 1961 to 1971, as an assembly line worker at a company called Waterloo Register Company. We made furnace registers. I had the beautiful job of putting screw holes in those registers. Do that for 10 years and you have a lot of time to think about public policy, too, I guess. Regardless, that is what I did. That factory closed down in 1971. It no longer exists.

The point I make about higher income people, they provide jobs for people in my State. They probably provide a lot more jobs than the John Deeres and Maytags. These are outstanding businesses in my State and I do not denigrate their contribution to the economy. I had jobs because of small entrepreneurs investing and creating a job for me that I could not create for myself on an 80-acre farm. I created a part-time job on an 80-acre farm. Someone else invested money. These were middle-income taxpayers, as I knew them at that time. It takes people with money to create jobs.

Also, people who have money have not always been rich. And they are not always going to be rich. We have economic mobility studies that show that. One might get the opinion from debate on this bill--and I hope I am accurately anticipating because I have heard these debates before. One gets the idea from the debates on class warfare that somehow people who are poor in America are poor throughout their lifetime, and people who are rich are rich throughout their lifetime. People at the top levels have problems and they come down, and there is great mobility upwards in our society. I want people who discuss we are not doing enough for the poor or we are doing too much for the rich in America, I want these Members to understand the studies show as we divide our working people into quintiles of income, these studies show the people in the lowest quintile after 10 years have moved to the second, third, and fourth quintile, maybe some even up to the fifth quintile. But there is only 10 percent of the original 20 percent in the lower quintile after 10 years. That is 2 percent of our workforce.

There is great upward mobility. Those studies also show a lot of people

in the top quintile after 10 years are not in the top quintile. There is mobility downward.

What we are talking about in this legislation to create jobs, to give tax relief to American workers, is to give small business, and even large business, an incentive to create jobs in one of two ways: Either take the money and invest it and create jobs rather than spending it for you or for consumers to take their extra money and buy things and create consumer demand, in turn creating jobs.

It also has something to do with enhancing the capital-to-labor ratio. That is because when capital is more available, when there is a surplus of capital, that is when labor in America does its best because labor is going to be much more in demand when there is a surplus of capital. That is where labor is going to make its progress, with higher wages and more jobs being created. This bill will enhance the capital- to-labor ratio.

To further be definitive on what I have said as a philosophical statement with statements that are backed up by studies that have been made, we have, as far as cutting the marginal tax rate is concerned, studies suggesting that a 5 percentage point reduction in the top marginal tax rate would increase small business investment by as much as 10 percent. The Treasury has indicated that 80 percent of the benefits from the top rate acceleration go to small business.

I will digress for a minute to talk about something that troubles me about the debate on bringing down the top rate to 35 percent. Some folks, especially those who have acquired their wealth through professions, big business, or inheritance, are the ones most violently opposed to reducing the top rate. It makes you wonder why these people so oppose bringing down the tax burden on businesses that they probably do not even know about--small business.

I gave this some thought while I was out in the field helping to plant corn the other day. I asked myself, Could it be that they are envious? No, that doesn't make sense because these folks generally have more money than successful small business people.

I asked myself another question: Could it be they do not want others, maybe those looking to make the transition from modest success to very successful status, to make that transition that is possible given the economic mobility of our society? Could it be that they see high taxes as a way to bar others from moving up? Could it be that they believe high taxes are the necessary tool to block successful small business people? Could it be that these elitists want to block a class of people who move up because of hard work rather than by pedigree? Could it be that high taxes on small businesses is a way to sustain the status quo?

I hope that is not true, but it makes you wonder. I know in the heartland of America people do not resent or try to block success of those who acquire it through developing small businesses. In my State of Iowa, the opinion of a successful small business person is very important, if not more important, than that of a corporate CEO.

I was amused to read some press reports about how K Street lobbyists and the Fortune 500 have reservations about this Finance Committee bill before us. There were too many revenue raisers, too many loophole closers, too much to ask from big business.

I would like to ask a different question. Are we doing enough for small business and the people who want to hire them? I want to focus on that question. Small businesses, as I have indicated, are engines of growth for our economy. In the recent past, they have been the source of most newly created jobs. I also continue to believe it is important to ensure that small businesses do not operate at a competitive disadvantage vis-a-vis large corporations because they are forced to pay higher marginal income tax rates. Currently, successful small businesses incur a 10-percent rate penalty when compared to their big business counterparts. In other words, if you are not incorporated, you pay the higher marginal tax rate of 38 percent. There is a bias in favor of corporations away from small business, individual entrepreneurs, because of the 38-percent bracket on personal income versus the 35-percent bracket for the corporate tax rate.

Even common sense would tell you that does not make good economic sense. Why should you have a bias in the Tax Code against people who do not want to incorporate?

I want to leave that issue now and turn to the last major part of the bill, and that is the part of the bill that provides for a partial exclusion of dividend income from taxes. As my colleagues know, the President called for a complete end to this double taxation of dividends. He would even go further, as I would, and say that double taxation of anything is wrong, dividends or otherwise. I have to admit that our bill is not a bill that is an absolute victory against double taxation because the proposal as reported covers only 86 percent of dividend-receiving taxpayers and is a good step in the effort to eliminate economic distortion resulting from that tax policy framework. When in full effect, this policy would ensure that dividends would be subject to the top rate of 28 percent. All other ordinary income would be subject to a top rate of 35 percent. This means that dividend income would enjoy a significant preference over other forms of periodic investment income such as interest.

Let me note to my colleagues that we provide State fiscal relief in this bill. A lot of Senators, over a 2-year period of time, have talked to me about the necessity of doing this, both members of the Senate Finance Committee as well as people even in my own Republican caucus, and people who are not on the Senate committee. They have been indicating to me that they view State fiscal relief as a key component to an overall agreement on taxes and on growth.

To be perfectly candid, we have Members of this body, right or wrong, who are telling us if we don't have something in here for fiscal relief, this bill is not going to get 51 votes to pass. Like it or not, they have a great deal of leverage. So we are dealing with that and hopefully dealing with it in a responsible way, through programs where there has been a Federal/State partnership, such as Medicaid. There are some areas where there has not necessarily been a State/Federal partnership. These funds, under our agreement--and there will be an amendment that fleshes this out to a greater extent--could be used for education, health care, law enforcement, and essential Government services. I look forward to continuing to work with my colleagues on this important issue as we start filling in the details of that that will be part of an amendment offered later on.

I conclude by commenting briefly about the offsets that are in this bill.

Let me first note that there has been some surprise in the media about the fact that these are offsets. I respond by saying that if the media is somehow shocked that we would have offsets, they haven't been paying attention to a lot of tax bills which have been going through here. The fact is you are not going to get a tax bill through this body under what you call regular order unless there is unanimous consent to do it without a point of order. If there is a point of order, you have to have 60 votes, or you have to avoid a point of order, which is hard to do, by having offsets, meaning it would be revenue neutral.

As the President's own spokesperson stated, the President in his budget provided several billions of dollars in offsets--not necessarily the same ones we are using in this bill. In addition, my counterpart in the House has stated that he will look to offsets to pay for improvements in the international tax arena. Offsets are not new.

I will not discuss all the offsets at this point. But my colleagues should know that many of these offsets deal with the scandals we have seen recently at Enron and many other bad actors in corporate America.

That is not denigrating corporate America because the bad actors are a few compared to tens of thousands of legitimate, ethical, honest corporations in America.

It is my view that while we are trying to help shareholders with reductions in dividends, we should also be closing down the loopholes, the games and the gimmicks that executives have been playing. The shareholders and the workers--and many of the workers who also own shares--have been greatly

harmed by the actions of corrupt executives. This bill takes great strides in ending these loopholes.

Thus, shareholders benefit greatly from the dividend deductions as well as our efforts to end the fast and loose games being played in some corporate suites.

I haven't thanked Senator Baucus yet for his continued efforts to work with me despite our inability to find common ground on all the elements of this economic recovery package. Senator Baucus, ranking Democrat and former chairman of the committee, has worked very hard to help me move this bill along even though he could not vote for it in committee. That is particularly in the tradition of our committee. Rarely does a bill come to this floor where he and I are not on the same side of the fence. Yet there are going to be a lot more bills coming to the floor this year, as before, on which we are on the same side of the fence.

I look forward to continuing to work through our differences to produce legislation that will be helpful and getting things moving again as quickly and effectively as possible.

Amendment No. 555

Mr. President, I send an amendment to the desk.

Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.

Mr. President, I yield the floor.

Mr. President, the Senator from Alaska has asked for time to speak as in morning business for whatever time she needs. I will be glad to yield time to the Senator from Alaska.

Off our time, not extra time.

Let me explain why the distinguished Senator from Nevada is wrong. We are going to take it off the time on the bill, not extra time. This will come off the 7 hours we have on the bill.

I yield whatever time the Senator from Alaska may consume. I understand she is only going to take about 5 minutes.

Mr. President, I yield myself such time as I consume.

I have enjoyed listening to this debate. It is just like being in another world. The reason I say that is, why do you think that we tax 85 percent of Social Security income for certain Americans in the higher income tax brackets--I would say even in the middle-income tax brackets--at 85 percent? That was done in 1993. Do the people who have just spoken forget that every one of them voted that increase, to have the Social Security income be taxed at 85 percent of that income that has to be reported? Every one of the people who have spoken are responsible for that level of income reporting of 85 percent being on the tax books. Why do they want to repeal what they are responsible for passing? During the debate on the tax bill, every one of the Democratic Senators now serving in the Senate, except for Senator Bingaman from New Mexico, voted to have this money taxed. Now they are trying to take it out.

On June 24, 1993, there was an amendment offered by Senator Lott to change the amendment which was in the Democrat tax increase bill at that time to not report 85 percent of Social Security income for taxation. The rollcall shows that the motion to table was agreed to 51 to 46. The 51 Members who voted at that particular time were the ones who were voting to keep the level of Social Security income that was taxed at 85 percent and which needed to be reported. Every Democrat still serving in the Senate voted to table Senator Lott's amendment. Every Republican voted not to table the Lott amendment, which meant that every Republican was voting against that. We had the support of Senator Bingaman--the only Democrat from whom we had support.

They wonder why I am amused? If they think it is so bad today, why didn't they think it was bad 10 years ago? And we wouldn't even be debating this issue. It looks to me as if they want to maybe detract from the mistakes of the past. I don't know.

But also, earlier this year, on an amendment by Senator Bunning to the Budget Act, the very same Members opposing this amendment voted against the very same amendment when Senator Bunning offered it. What has happened in the last month? Do they realize that maybe the vote at that time was wrong and they have to have cover? I don't know. But every one of the Members who are proposing this amendment or speaking for it voted just the opposite way on Senator Bunning's amendment. That amendment was defeated 48 to 51.

But there are bigger things to worry about than how people voted in the past. I want the public to understand that there is some game playing going on here. We are talking about serious business as well. We are talking about a jobs bill before the Senate to give tax relief to American working men and women so they can have more money in their pockets.

To get the cover that some people need for previous votes, they are going to take tax decreases away from middle-class Americans to pay for that. I will be a little more specific on that in just a minute.

I have to repeat something I said in my opening remarks. We just heard a speech on the debt situation which might be forthcoming if we grow the economy. Reducing taxes is one way to grow the economy and will not have the debt situation we found with the growth we had in the 1990s. We paid down the national debt $550 billion.

We hear about this debt situation. My friends on the other side of the aisle are worried about the debt. They said if we adopt the President's plan, we are going to have greater debt. If they are so concerned about the debt, why didn't they offer all of their amendments on the budget bill about a month ago? They wanted to take money away from the tax reduction aspect of the budget. It begins at the bottom line. They took money away from tax decreases and spent it someplace else. If they are concerned about the national debt, it seems to me-- and they believe that one more dollar coming into the Federal Treasury is going to reduce the national debt--they shouldn't have been offering amendments to spend it someplace else. But they are very consistent in doing that. Amendment after amendment after amendment took money away from the tax reduction figure in the budget, which this bill is a result of, and spent it someplace else.

Do you know why? I think there is a difference in philosophy between my party and the other party. That difference in philosophy is very basic to this debate going on today. I just think people ought to realize that this is not a Republican-Democrat fight, or some little cat fight over some little bill in the Senate.

There is the difference between one party that believes money in the pockets of 110 million taxpayers is going to do more economic good if the 110 million taxpayers spend it or invest it than if I, Senator Grassley, and 534 others here in DC are going to make that decision. We have to believe that if the money is in the pockets of 110 million taxpayers and they spend it or invest it, it is going to do more economic good. It is going to turn over more times in the economy. It will respond to the dynamics of our free market economy rather than a political decision being made about what to do with it.

Obviously, I believe people on the other side of the aisle have the attitude that we in Congress know better than they do how to spend the taxpayers' money. If we are going to have a tax reduction, that will mean less money for us to spend. But it ignores the economic good that comes from private sector investment and private sector spending as opposed to public sector spending.

I think there is very much an inconsistency here. What we are talking about is a $430 billion tax reduction package--net $350 billion. As we have been told, we have been led to believe that this is responsible for doubling the national debt. This tax package is only one-half of 1 percent of all the dollars that are going to be collected by the Federal Government under existing tax law over the next decade. That is going to be $24.7 trillion. Tell me things are so tight here in Washington, DC, that somehow one-half of 1 cent on the dollar left in the taxpayers' pockets is going to be responsible for doubling the national debt. No. What is going to be responsible for doubling the national debt--if it were to happen; I don't think it is going to happen--is not because the people of this country are undertaxed; it is because this Congress overspends.

There again I would remind the Senator from North Dakota, the distinguished ranking member of the Budget Committee, the President's plan does not follow the pattern of the last few years, where back to back we had 9-percent increases in domestic discretionary spending each of those years. But the President's program, plus the budget of this Congress, has domestic discretionary expenditures not at 9 percent but at 4 percent. Now, yes, that is an increase. That is an increase, but that is an increase that is sustainable over the long haul. Nine- percent budget increases are not sustainable.

We are in a situation where nothing around here surprises me anymore. The very people offering this amendment are the same ones who created this tax increase back in 1993. As I indicated, they even voted against repealing the tax just 2 months ago on the budget resolution.

I think this is an amendment that is trying to fool the American people. Just about every Member on the Republican side has vehemently opposed the Democrats' 1993 tax increase on Social Security. Except for Senator Bingaman, every Democrat in the Senate today voted for that back in 1993. Now they want to try to cover up their votes supporting this tax, and they want to do it by destroying the underlying jobs and growth bill.

This is how they destroy it: The Dorgan amendment strikes our efforts to reduce all marginal tax rates above 10 percent. The efforts to reduce marginal tax rates for the middle class are eliminated by this amendment. As a result, a single mom making $40,000 in taxable income will see no reduction in the tax on her small pay increase. A family with taxable income of $70,000 will see no reduction in their marginal tax rate.

The Dorgan amendment takes away our bill's tax cuts for middle-income Americans. The Senator from North Dakota says this isn't a tax increase. I would like to have you tell that to the single mom, who is one of the targets of this amendment, who, on her pay raise, will not see a reduction in her tax. A vote for this amendment is, in fact, a tax increase, no matter how the authors want to try to dress it up.

I yield the floor.

Mr. President, I ask how much time remains on the Dorgan amendment on both sides.

Forty-five minutes on my side?

I rise to address a couple of issues that have been presented before we go to other people who want to speak. This is on the Dorgan amendment. It might be in the form of asking rhetorical questions or what have you. But first of all, I want to say to my friend from Montana, the distinguished ranking member of this committee, that for this farmer to be called a lawyer, if he were not a good friend of mine, I would take offense.

Regardless, before us is this amendment that reduces the amount of Social Security income that must be reported for taxation. One of the issues I didn't mention in my debate against the amendment is the fact that all the money raised from this tax goes into the Medicare health insurance trust fund. We all know the Medicare Program is in much more serious condition than the Social Security Program.

The Medicare trust fund has a drop dead date of 2026. The Social Security trust fund has a drop dead date of 2042. None of those dates are anything that I am making light of, that they are so far off that we should not be concerned. We have to be very concerned. But people ought to understand that to the extent this amendment is adopted, it would take money out of the Medicare health insurance trust fund. And I don't think we ought to be doing anything to weaken the Medicare trust fund. I would rather refer to a point made by the two Senators from North Dakota, most often made by the sponsor of this amendment. I cannot help but ask both of these Senators who are trying to make an issue about this bill by saying that this bill will increase the debt. Somehow that just doesn't add up, when you consider the thrust of their amendment.

How does this amendment they have before us reduce the debt? The bottom line of the bill is exactly the same with or without the Dorgan amendment. In other words, it costs the same as the underlying bill. So, again, we have people speaking on three sides of a two-sided coin. Senator Dorgan's amendment will increase the debt, so I don't hear any more about increasing the debt on the part of the underlying bill, because with their amendment, we end up exactly in the same place.

Madam President, I ask unanimous consent that the order for the quorum call be rescinded.

Madam President, the arguments we hear for various amendments are very interesting. It is kind of like the other side is going in a circle. In regard to the amendment of the distinguished Senate minority whip, the Senator argues against the jobs bill because Social Security funds are used.

Well, let's compare that argument to the arguments Senator Dorgan was using. How does the Senator from Nevada think the Dorgan amendment he supports is paid for? As the Senator from Montana pointed out, general revenues will be used to cover the costs of the Dorgan amendment.

We are in a deficit situation. Everybody acknowledges that. So where does the Senator think these revenues will come from? They will raid the Social Security trust fund to pay for the Dorgan amendment.

Once again, it seems to me the other side is trying to be on three sides of a two-sided coin. Maybe if we keep this up long enough with their circular arguments they will be supporting the jobs bill when we finally get to final passage.

I yield the floor.

Madam President, I yield such time as he might consume to the Senator from Utah to either speak on the pending amendment or to speak on the bill.

I am prepared to do that. The answer is, yes, we will have a vote at 2 o'clock, but I don't want to propound the unanimous consent right now.

I could make the unanimous consent request and then raise a point of order later.

Madam President, I ask unanimous consent, notwithstanding the remaining debate time, it be in order for me to raise a point of order against the pending Reid amendment No. 560; provided further that Senator Reid then be recognized and ordered to move to waive. Finally, I ask consent that the vote in relationship to the amendment occur at 2 p.m.

Madam President, I yield such time as the Senator from Utah might consume.

I move to reconsider the vote.

Mr. President, an amendment will be offered tomorrow which Senator Breaux has already spoken in favor of. I wanted to speak in support of the language that is in the bill. I am speaking against the amendment which will be offered by Senator Breaux tomorrow.

The policy issue presented by repeal of section 911 is whether taxpayer dollars should be used to underwrite an employer's cost of sending employees overseas. Section 911 excludes from tax the first $80,000 of foreign wages and additional foreign housing costs that are paid for by the employer. Under normal tax rules, these amounts would be taxable. According to the latest IRS data, 358,000 taxpayers claim this exclusion, yet repeal of the exemption raises $35 billion.

The reason repeal raises so much is because many U.S. citizens living overseas don't pay tax to either the United States or even to the foreign country. The section 911 is skewed heavily towards upper-income taxpayers. The more a person owns, the more they can exclude free foreign housing.

Section 911 then is a subsidy to an employer for the costs of sending employees overseas. Section 911 only applies to private sector employees who move overseas of their own free will. It is not available to government or military employees stationed overseas who are obviously there through somebody's command and not by their own choice.

Most employers offer their overseas employees ``tax equalization'' packages which guarantee the employee will not pay more taxes working overseas than they would pay if they were working within the United States.

Section 911 reduces the amount of tax an employer has to reimburse under those agreements, making it then a help to the employer as much as to the employee.

Why does this make any sense? Obviously, I feel it makes sense or it

wouldn't be in this bill that I present to the Senate. If an employer sends an employee from Florida, which has no income taxes, to Massachusetts, which has very high income taxes, we do not provide such a subsidy.

Why do we subsidize moving employees overseas? I think sending employees overseas should be a business decision, not a tax decision. Repeal will not cause U.S. citizens to be double taxed. A U.S. citizen who earns income that is taxed by a foreign country is allowed to reduce their U.S. taxes for any foreign income taxes paid. A foreign tax credit is not allowed, however, for foreign property and gas taxes and levies for social programs sponsored by the governments of foreign countries.

We do not subsidize those taxes or those policies. Many claim U.S. exports are enhanced by sending U.S. personnel overseas. However, there is no basis for such a claim. Whether a U.S. company uses U.S. products in its foreign operations is a business decision of the U.S. employer. It is not determined by the nationality of the foreign manager.

It has come to our attention that certain nonprofits, charities, and religious organizations use section 911 to further their overseas activities. We plan to work with these organizations to exempt these activities.

Section 911 is a tax loophole that forces you and me, as well as every other taxpayer out there throughout the United States, to subsidize high-paid corporate employees and their companies. It is unfair, and the Congress needs to fix it, and the legislation before us fixes it.

The Breaux amendment, if agreed to, would take that fix out of this legislation. Everyone voting for the Breaux amendment will be voting for these tax benefits the rest of us are paying for.

So obviously, tomorrow, I urge the defeat of the Breaux amendment.

I yield the floor.

Madam President, I yield the Senator from Pennsylvania such time as he may consume.

Madam President, I am a cosponsor of the amendment by the Senator from Pennsylvania. I very much support this amendment. I do not think we have a hard time convincing the people of this country about the complicated aspects of the Tax Code and the need for something more simple to replace it. There seems to be an overwhelming consensus on the part of the American people about that point.

What we need a national dialog about--and I think this amendment encourages that dialog--as well as a study is what is going to take its place. Seventy percent of the people think the present Tax Code ought to be thrown out, partly because of how complicated it is and because it may be viewed as unfair. There does not seem to be that sort of consensus as to what takes its place.

For instance, I have had opportunities to see surveys where approximately 20 percent of the people want a national sales tax and 30 percent of the people want a flat rate income tax. Maybe Congress ought to show leadership and follow up on that 20 percent or 30 percent, but I do not think that is going to happen until we get some consensus among the American people that is in the 40-percent range of what ought to take the place of the present income tax mess.

The amendment before us is very useful from the standpoint of encouraging congressional committees to do the proper work, but I believe in the final analysis, to get the consensus that it is going to take to bring about a simplified tax system, replacing the present complicated system, is when it becomes part of the national debate between two candidates for President.

For instance, ideally, we have President Bush seeking reelection next year, and he would make an issue out of how complicated the Tax Code is and offer an alternative. Ideally, a flat rate income tax along the lines of what Mr. Forbes did a few years ago when he was running for the Republican nomination and made this type of reform a major plank of his campaign. Ideally, we would have a Democratic candidate who says the current progressive system, even though it is a mess, is what is best for the country. Then we will have a winner out of this that shows a clear division of keeping what we have, which I hope does not happen, or coming up with something new.

That mandate from an election will move the people and the people then will move the Congress. Being chairman of the Senate Finance Committee, I should not have to wait for that to happen, but it seems that we have so much work before us dealing with short-term issues that we do not spend time on the long-term policies, which this amendment encourages.

I thank the Senator from Pennsylvania for his amendment. I am going to obviously vote for it. I hope it is adopted overwhelmingly, but I hope it has an impact beyond what we in the Congress will be called upon to study. I hope it has an impact on the next Presidential election.

Madam President, we do not want this vote now. We want to have this vote later.

I suggest the absence of a quorum.

I yield myself such time as I might consume.

I find it necessary to explain what our legislation does because a lot of times there are explanations about it that are not very accurate. One of the impressions is our bill is not very well balanced. Our bill does, in fact, attempt to strike a good balance between consumption on one hand and investment on the other hand. We do this to provide incentives such that we can provide both short-term economic stimulus and the building blocks for meaningful future economic growth.

The refundable tax credit outlined in the amendment before the Senate, which I oppose, would be paid irrespective of whether a person had any income tax liability at all. If the person owes no tax, we are to view this proposal as effectively refunding payroll taxes. But we already have a provision that refunds payroll taxes. It is called the earned-income credit and the child tax credit. This proposal, the Baucus amendment, a refundable tax credit proposal, would be duplicative of the earned-income tax credit and the refundable child tax credit to refund payroll taxes for those with insufficient income to have tax liability with the result of encouraging people to work as opposed to receiving welfare or unemployment compensation.

In my estimation, such refundable credits do not provide incentives to work. They do not create jobs, and they do not stimulate the economy.

Providing incentives to work, creating actual jobs, and stimulating the economy are the purposes of the legislation from the Senate Finance Committee that I presented.

Job creation is a handup, not a handout. It is a handup to help people out of poverty. Refundable tax credits are handouts which may have just the opposite effect. We should ensure that we are providing building blocks for long-term growth and the economic stability that comes from that growth.

I appreciate Senator Baucus's support for our dividend proposal and his desire to accelerate into this year. However, acceleration means we subject more dividends to double taxation because the exclusion never reaches 20 percent. In other words, ours goes from 10 percent through the year 2007; 2008 to 2013, it is 20 percent, whereas his proposal always stays at 10 percent.

People invest in stock for long-term gain. We need to provide long- term tax relief. This bill contains a lot of short-term stimulus already.

I appreciate the points he has raised regarding the child credit. The largest item in this bill is the child credit, and that amounts to over $95 billion. It includes a simplification of definition that Senator Baucus has already mentioned. In addition, I note we expand the refundable portion of the child credit that targets help to the low- income families he seeks to assist with his amendment.

I appreciate his position. I believe our bill provides proper balance in encouraging the economy.

Finally, I note this amendment violates section 202, page 35 of the Budget Act, so I will be raising a point of order later on.

I yield the floor.

Madam President, I suggest the absence of a quorum.

Would the Senator from Massachusetts yield? I do not intend to object, but we have always been promised copies of amendments. I assume the Senator is going to offer an amendment.

Amendment No. 544

(Purpose: To provide for additional weeks of temporary extended

unemployment compensation, to provide for a program of temporary

enhanced regular unemployment compensation, and for other purposes)

I ask Senator Kennedy, would he speak without our consenting to the hour so we could look at the amendment for a while?

I thank the Senator.

Mr. President, we will extend unemployment compensation. We will support an extension, though, of current law. We will do it before its expiration at the end of May. But this amendment goes beyond extending unemployment compensation as it is written in current law.

This is unprecedented for sure, and I also think it is an unjustified expansion. There might be legitimate debate on that point, but there is no legitimate opposition to a statement that this is unprecedented.

Also, this extension and this change in law comes at a time when unemployment is not as high as it has been in previous recessions. The current unemployment rate is 6 percent. That is compared to 7 percent at times during the 1990s and more than 8 percent during the 1980s.

It was in the 1990s at 7 percent, in the 1980s at 8 percent. Those happen to be the last two times that Congress provided extended benefits.

I also point out the unemployment rate right now in 23 States is lower than it was 1 year ago. When it comes to people who have exhausted benefits, this amendment would provide 26 weeks of Federal benefits even without regard to the duration of State benefits. So this violates an insurance principle that we followed for a long time inherent in the unemployment program, and it violates it by breaking the link between the time someone has worked and the time that person can collect unemployment benefits.

This amendment additionally would also allow someone who worked as few as 20 weeks to collect as much as 26 weeks of federally-funded benefits.

This amendment also deals with part-time workers. In offering this amendment, what they forget at the Federal level is that we already give States the option of covering part-time workers. So why a national policy of covering part-time workers when this has been historically a State program that has been financed through some Federal taxation? There are a lot of details left to individual States to decide. It is not possible for us to legislate at the Federal level the conditions that exist in various States for deciding whether part-time workers should be included.

This provision would allow those seeking only part-time work to collect unemployment benefits. What this basically means is a worker could turn down a full-time job and continue collecting unemployment benefits.

There is a provision of this amendment that changes policy in regard to low-wage workers. This is another provision under Federal law where States already are given the option of doing this. This provision would require States to use what is referred to as an alternative base period. That means using the most recent quarter to calculate benefits.

In 1997, this was offered to the Senate and we voted 85 to 15 to overturn a Federal court decision that would have required the States to use the most recent quarter. In other words, Congress decided in 1997 against a court decision doing what this amendment does. We decided 85 to 15 to leave it to the respective States, as has historically been the case, to make this decision of using an alternative base period.

So as I mentioned, I will support, and I believe the Senate will pass, an extension of current law for unemployment benefits before it runs out.

This amendment is paid for in a way that discourages job creation. Remember, the fundamental purpose underlying this legislation is to give incentive for investment for the creation of jobs. So how is this amendment paid for? By attacking small businesses, by delaying the tax relief that is in this bill for 80 percent of those who are taxed at the 39 percent rate. Remember, we reduce the highest marginal tax rate down to the same as the highest corporate tax rate. Why? Because there should not be a bias in our tax law against small entrepreneurs, unincorporated entrepreneurs.

As we have been told so often by Joint Tax and by the White House, 80 percent of the benefits go to small business. Now, that does not mean all small business is taxed at the 39 percent level, but by reducing this we are taking away a bias against small business. There should not be an 11 percent penalty for being an unincorporated small business. It is unfair. When we had a lower marginal tax rate for small

business at 28 percent for the top individual rate, as we did after 1986 until it was raised, we had a 5 percent differential between the corporate rate of 33 percent and the highest individual rate of 28 percent. During that period of time, we had an explosion of small business, setting the stage for the massive growth we had in the economy in the 1990s.

What does this amendment do? It will kill the opportunity for job expansion that we have prepared in lowering the marginal tax rate for self-employed people, doing away with the bias in favor of corporations so that where 80 percent of the jobs are created in small business, there will be an incentive to create new jobs.

The National Bureau of Economic Research shows that the surest way of expanding small business is from their own equity, by reducing the marginal tax rates, which is going to encourage the sort of investment that creates jobs.

The Senators who have offered this amendment are complaining about lost jobs, but then this amendment undermines the very provisions of the basic bill that will create the jobs we need.

Obviously, I urge the defeat of this job-killing amendment.

I yield the floor.

I ask unanimous consent that immediately following action on S. 1054, the Senate turn to consideration of legislation introduced by the majority leader or his designee to extend emergency unemployment benefits until November 30, 2003; that the bill be considered as read three times and passed; further, that the motion to reconsider be laid upon the table, with all this to occur without intervening action or debate.

Mr. President, I will answer his question, if I am permitted.

Two reasons: One, this amendment is not germane to this bill; two, it goes to the expansion of unemployment benefits as opposed to extension of existing benefits.

Yes.

Mr. President, America has a major flaw in its defenses against bioterrorism. Hearings I chaired in the Government Affairs Committee on bioterrorism demonstrated that America has not made a national commitment to research and development of treatments and cures for those who might be exposed to or infected by a biological agent, chemical toxin, or radiological material. Correcting this critical gap is the purpose of legislation we are introducing today.

This legislation is a refined and upgraded version of legislation I introduced last year, S. 1764, December 4, 2001, and S. 3148, October 17, 2002, and I am delighted that Senator Hatch has joined me as the lead cosponsor of the new bill.

Obviously, our first priority must be to attempt to prevent the use of these agents and toxins by terrorists, quickly assess when an attack has occurred, take appropriate public health steps to contain the exposure, stop the spread of contagion, and then detoxify the site. These are all critical functions, but in the end we must recognize that some individuals may be exposed or infected. Then the critical issue is whether we can treat and cure them and prevent death and disability.

In short, we need a diversified portfolio of medicines. In cases where we have ample advance warning of an attack and specific information about the agent, toxin, or material, we may be able to vaccinate the vulnerable population in advance. In other cases, even if we have a vaccine, we might well prefer to use medicines that would quickly stop the progression of the disease or the toxic effects. We also need a powerful capacity quickly to develop new countermeasures where we face a new agent, toxin, or material.

Unfortunately, we are woefully short of vaccines and medicines to treat individuals who are exposed or infected. We have antibiotics that seem to work for most of those infected in the current anthrax attack, but these have not prevented five deaths. We have no effective vaccines or medicines for most other biological agents and chemical toxins we might confront. We have very limited capacity to respond medically to a radiological attack. In some cases we have vaccines to prevent, but no medicines to treat, an agent. We have limited capacity to speed the development of vaccines and medicines to prevent or treat novel agents and toxins not currently known to us.

We have provided, and should continue to provide, direct Federal funding for research and development of new

medicines, however, this funding is unlikely to be sufficient. Even with ample Federal funding, many private companies will be reluctant to enter into agreements with government agencies to conduct this research. Other companies would be willing to conduct the research with their own capital and at their own risk but are not able to secure the funding from investors.

The legislation we introduce today would provide incentives for private biotechnology companies to form capital to develop countermeasures--medicines--to prevent, treat and cure victims of bioterror, chemical and radiological attacks. This will enable this industry to become a vital part of the national defense infrastructure and do so for business reasons that make sense for their investors on the bottom line.

Enactment of these incentives is necessary because most biotech companies have no approved products or revenue from product sales to fund research. They rely on investors and equity capital markets to fund the research. They must necessarily focus on research that will lead to product sales and revenue and, thus, to an end to their dependence on investor capital. There is no established or predictable market for countermeasures. These concerns are shared by pharmaceutical firms. Investors are justifiably reluctant to fund this research, which will present challenges similar in complexity to AIDS. Investors need assurances that research on countermeasures has the potential to provide a rate of return commensurate with the risk, complexity and cost of the research, a rate of return comparable to that which may arise from a treatment for cancer, MS, Cystic Fibrosis and other major diseases.

It is in our national interest to enlist these companies in the development of countermeasures as biotech companies tend to be innovative and nimble and intently focused on the intractable diseases for which no effective medical treatments are available.

The incentives we have proposed are innovative and some may be controversial. We invite everyone who has an interest and a stake in this research to enter into a dialogue about the issue and about the nature and terms of the appropriate incentives. We have attempted to anticipate the many complicated technical and policy issues that this legislation raises. The key focus of our debate should be how, not whether, we address this critical gap in our public health infrastructure and the role that the private sector should play. Millions of Americans will be at risk if we fail to enact legislation to meet this need.

On November 26 of 2001, the Centers for Disease Control issued its interim working draft plan for responding to an outbreak of smallpox. The plan does not call for mass vaccination in advance of a smallpox outbreak because the risk of side effects from the vaccine outweighs the risks of someone actually being exposed to the smallpox virus. At the heart of the plan is a strategy sometimes called ``search and containment.''

This strategy involves identifying infected individual or individuals with confirmed smallpox, identifying and locating those people who come in contact with that person, and vaccinating those people in outward rings of contact. The goal is to produce a buffer of immune individuals and was shown to prevent smallpox and to ultimately eradicate the outbreak. Priorities would be set on who is vaccinated, perhaps focusing on the outward rings before those at the center of the outbreak. The plan assumes that the smallpox vaccination is effective for persons who have been exposed to the disease as long as the disease has not taken hold.

In practice it may be necessary to set a wide perimeter for these areas because smallpox is highly contagious before it might be diagnosed. There may be many areas subject to search and containment because people in our society travel frequently and widely. Terrorists might trigger attacks in a wide range of locations to multiply the confusion and panic. The most common form of smallpox has a 30 percent mortality rate, but terrorists might be able to obtain supplies of ``flat-type'' smallpox with a mortality rate of 96 percent and hemorrhagic-type smallpox, which is almost always fatal. For these reasons, the CDC plan accepts the possibility that whole cities or other geographic areas could be cordoned off, letting no one in or out--a quarantine enforced by police or troops.

The plan focuses on enforcement authority through police or National Guard, isolation and quarantine, mandatory medical examinations, and rationing of medicines. It includes a discussion of ``population-wide quarantine measures which restrict activities or limit movement of individuals [including] suspension of large public gatherings, closing of public places, restriction on travel [air, rail, water, motor vehicle, and pedestrian], and/or `cordon sanitaire' [literally a `sanitary cord' or line around a quarantined area guarded to prevent spread of disease by restricting passage into or out of the area].'' The CDC recommends that states update their laws to provide authority for ``enforcing quarantine measures'' and it recommends that States in ``pre-event planning'' identify ``personnel who can enforce these isolation and quarantine measures, if necessary.'' Guide C--Isolation and Quarantine, page 17.

On October 23, 2001, the CDC published a ``Model State Emergency Health Powers Act.'' It was prepared by the Center for Law and the Public's Health at Georgetown and Johns Hopkins Universities, in conjunction with the National Governors Association, National Conference of State Legislatures, Association of State and Territorial Health Officials, National Association of City and County Health Officers, and National Association of Attorneys General. A copy of the model law is printed at www.publichealthlaw.net. The law would provide powers to enforce the ``compulsory physical separation (including the restriction of movement or confinement) of individuals and/or groups believed to have been exposed to or known to have been infected with a contagious disease from individuals who are believed not to have been exposed or infected, in order to prevent or limit the transmission of the disease to others.'' Federal law on this subject is very strong and the Administration can always rely on the President's Constitution authority as Commander in Chief.

Let us try to imagine, however, what it would be like if a quarantine is imposed. Let us assume that there is not enough smallpox vaccine available for use in a large outbreak, that the priority is to vaccinate those in the outward rings of the containment area first, that the available vaccines cannot be quickly deployed inside the quarantined area, that it is not possible to quickly trace and identify all of the individuals who might have been exposed, and/or that public health workers themselves might be infected. We know that there is no medicine to treat those who do become infected. We know the mortality rates. It is not hard to imagine how much force might be necessary to enforce the quarantine. It would be quite unacceptable to permit individuals to leave the quarantined area no matter how much panic had taken hold.

Think about how different this scenario would be if we had medicines that could effectively treat and cure those who become infected by smallpox. We still might implement the CDC plan but a major element of the strategy would be to persuade people to visit their local clinic or hospital to be dispenses their supply of medicine. We could trust that there would be a very high degree of voluntary compliance. This would give us more time, give us options if the containment is not successful, give us options to treat those in the containment area who are infected, and enable us to quell the public panic.

Because we have no medicine to treat those infected by smallpox, we have to be prepared to implement a plan like the one CDC has proposed. Theirs is the only option because our options are so limited. We need to expand our range of options.

We should not be lulled by the apparent successes with Cipro and the strains of anthrax we have seen in the recent attacks. We have not been able to prevent death in some of the patients with late-stage inhalation anthrax and Robert Stevens, Thomas Morris Jr., Joseph Curseen, Kathy Nguyen, and Ottilie Lundgren died. This legislation is named in honor of

them. What we needed for them, and did not have, is a drug or vaccine that would treat late stage inhalation anthrax.

As I have said, we need an effective treatment for those who become infected with smallpox. We have a vaccine that effectively prevents smallpox infection, and administering this vaccine within four days of first exposure has been shown to offer some protections against acquiring infection and significant protection against a fatal outcome. The problem is that administering the vaccine in this time frame to all those who might have been exposed may be exceedingly difficult. And once infection has occurred, we have no effective treatment options.

In the last century 500 million people have died of smallpox--more than have from any other infectious diseases--as compared to 320 million deaths in all the wars of the twentieth century. Smallpox was one of the diseases that nearly wiped out the entire Native American population in this hemisphere. The last naturally acquired case of smallpox occurred in Somalia in 1977 and the last case from laboratory exposure was in 1978.

Smallpox is a nasty pathogen, carried in microscopic airborne droplets inhaled by its victims. The first signs are headache, fever, nausea and backache, sometimes convulsions and delirium. Soon, the skin turns scarlet. When the fever lets up, the telltale rash appears--flat red spots that turn into pimples, then big yellow pustules, then scabs. Smallpox also affects the throat and eyes, and inflames the heart, lungs, liver, intestines and other internal organs. Death often came from internal bleeding, or from the organs simply being overwhelmed by the virus. Survivors were left covered with pockmarks--if they were lucky. The unlucky ones were left blind, their eyes permanently clouded over. Nearly one in four victims died. The infection rate is estimated to be 25-40 percent for those who are unvaccinated and a single case can cause 20 or more additional infections.

During the 16th Century, 3.5 million Aztecs--more than half the population died of smallpox during a two-year span after the Spanish army brought the disease to Mexico. Two centuries later, the virus ravaged George Washington's troops at Valley Forge. And it cut a deadly path through the Crow, Dakota, Sioux, Blackfoot, Apache, Comanche and other American Indian tribes, helping to clear the way for white settlers to lay claim to the western plains. The epidemics began to subside with one of medicine's most famous discoveries: the finding by British physician Edward Jenner in 1796 that English milkmaids who were exposed to cowpox, a mild second cousin to smallpox that afflicts cattle, seemed to be protected against the more deadly disease. Jenner's work led to the development of the first vaccine in Western medicine. While later vaccines used either a killed or inactivated form of the virus they were intended to combat, the smallpox vaccine worked in a different way. It relied on a separate, albeit related virus: first cowpox and the vaccinia, a virus of mysterious origins that is believed to be a cowpox derivative. The last American was vaccinated back in the 1970s and half of the US population has never been vaccinated. It is not known how long these vaccines provide protection, but it is estimated that the term is 3 to 5 years.

In an elaborate smallpox biowarfare scenario enacted in February 1999 by the Johns Hopkins Center for Civilian Biodefense Studies, it was projected that within two months 15,000 people had died, epidemics were out of control in fourteen countries, all supplies of smallpox vaccine were depleted, the global economy was on the verge of collapse, and military control and quarantines were in place. Within twelve months it was projected that eighty million people worldwide had died.

A single case of smallpox today would become a global public health threat and it has been estimated that a single smallpox bioterror attack on a single American city would necessitate the vaccination of 30 to 40 million people.

The US government is now in the process of purchasing substantial stocks of the smallpox vaccine. We then face a very difficult decision on deploying the vaccine. We know that some individuals will have an adverse reaction to this vaccine. No one in the United States has been vaccinated against smallpox in twenty-five years. Those that were vaccinated back then may not be protected against the disease today. If we had an effective treatment for those who might become infected by smallpox, we would face much less pressure regarding deploying the vaccine. If we face a smallpox epidemic from a bioterrorism attack, we will have no Cipro to reassure the public and we will be facing a highly contagious disease and epidemic. To be blunt, it will make the current anthrax attack look benign by comparison.

Smallpox is not the only threat. We have seen other epidemics in this century. The 1918 influenza epidemic provides a sobering admonition about the need for research to develop medicines. In two years, a fifth of the world's population was infected. In the United States the 1918 epidemic killed more than 650,000 people in a short period of time and left 20 million seriously ill, one fourth of the entire population. The average lifespan in the US was depressed by ten years. In just one year, the epidemic killed 21 million human beings worldwide--well over twice the number of combat deaths in the whole of World War I. The flu was exceptionally virulent to begin with and it then underwent several sudden and dramatic mutations in its structure. Such mutations can turn flu into a killer because its victims' immune systems have no antibodies to fight off the altered virus. Fatal pneumonia can rapidly develop.

Another deadly toxin, ricin toxin, was of interest to the al-Qaeda terrorist network. At an al-Qaeda safehouse in Saraq Panza, Kabul reporters found instructions for making ricin. The instructions make chilling reading. ``A certain amount, equal to a strong dose, will be able to kill an adult, and a dose equal to seven seeds will kill a child,'' one page reads. Another page says: ``Gloves and face mask are essential for the preparation of ricin. Period of death varies from 3 to 5 days minimum, 4 to 14 days maximum.'' The instructions listed the symptoms of ricin as vomiting, stomach cramps, extreme thirst, bloody diarrhea, throat irritation, respiratory collapse and death.

No specific treatment or vaccine for ricin toxin exists. Ricin is produced easily and inexpensively, highly toxic, and stable in aerosolized form. A large amount of ricin is necessary to infect whole populations--the amount of ricin necessary to cover a 100-km\2\ area and cause 50 percent lethality, assuming aerosol toxicity of 3 mcg/kg and optimum dispersal conditions, is approximately 4 metric tons, whereas only 1 kg of Bacillus anthracis is required. But it can be used to terrorize a large population with great effect because it is so lethal.

Use of ricin as a terror weapon is not theoretical. In 1991 in Minnesota, 4 members of the Patriots Council, an extremist group that held antigovernment and antitax ideals and advocated the overthrow of the US government, were arrested for plotting to kill a US marshal with ricin. The ricin was produced in a home laboratory. They planned to mix the ricin with the solvent dimethyl sulfoxide, DMSO, and then smear it on the door handles of the marshal's vehicle. The plan was discovered, and the 4 men were convicted. In 1995, a man entered Canada from Alaska on his way to North Carolina. Canadian custom officials stopped the man and found him in possession of several guns, $98,000, and a container of white powder, which was identified as ricin. In 1997, a man shot his stepson in the face. Investigators discovered a makeshift laboratory in his basement and found agents such as ricin and nicotine sulfate. And, ricin was used by the Bulgarian secret police when they killed Georgi Markov by stabbing him with a poison umbrella as he crossed Waterloo Bridge in 1978.

Going beyond smallpox, influenza, and ricin, we do not have an effective vaccine or treatment for dozens of other deadly and disabling agents and toxins. Here is a partial list of some of the other biological agents and chemical toxins for which we have no effective treatments: clostridium botulinum toxin, botulism, francisella tularensis, tularaemia, Ebola hemorrhagic fever, Marbug hemorrhagic fever, Lassa fever, Julin, Argentine

hemorrhagic fever, Coxiella burnetti, Q fever, brucella species, brucellosis, burkholderia mallei, glanders, Venezuelan encephalomyelitis, eastern and western equine encephalomyelitis, epsilon toxin of clostridium perfringens, staphylococcus entretoxin B, salmonella species, shigella dysenteriae, escherichia coli O157:H7, vibrio cholerae, cryptosporidium parvum, nipah virus, hantaviruses, tickborne hemorrhagic fever viruses, tickborne encephalitis virus, yellow fever, nerve agents, tabun, sarin, soman, GF, and VX, blood agents, hydrogen cyanide and cyanogens chloride, blister agents, lewisite, nitrogenadn sulfur mustards, and phosgene oxime, heavy metals, arsenic, lead, and mercury, and volatile toxins, benzene, chloroform, trihalomethanes, pulmonary agents, Phosgene, chlorine, vinly chloride, and incapacitating agents, BZ.

The naturally occurring forms of these agents and toxins are enough to cause concern, but we also know that during the 1980s and 1990s the Soviet Union conducted bioweapons research at forty-seven laboratories and testing sites, employed nearly fifty thousand scientists in the work, and that they developed genetically modified versions of some of these agents and toxins. The goal was to develop an agent or toxin that was particularly virulent or not vulnerable to available antibiotics.

The United States has publicly stated that five countries are developing biological weapons in violation of the Biological Weapons convention, North Korea, Iraq, Iran, Syria, and Libya, and stated that additional countries not yet named, possibly including Russia, China, Israel, Sudan and Egypt, are also doing so as well.

What is so insidious about biological weapons is that in many cases the symptoms resulting from a biological weapons attack would likely take time to develop, so an act of bioterrorism may go undetected for days or weeks. Affected individuals would seek medical attention not from special emergency response teams but in a variety of civilian settings at scattered locations. This means we will need medicines that can treat a late stage of the disease, long after the infection has taken hold.

We must recognize that the distinctive characteristic of biological weapons is that they are living micro-organisms and are thus the only weapons that can continue to proliferate without further assistance once released in a suitable environment.

The lethality of these agents and toxins, and the panic they can cause, is quite frightening. The capacity for terror is nearly beyond comprehension. We do not believe it is necessary to describe the facts here. Our point is simple: we need more than military intelligence, surveillance, and public health capacity. We also need effective medicines. We also need more powerful research tools that will enable us to quickly develop treatments for agents and toxins not on this or any other list.

We need to do whatever it takes to be able to reassure the American people that hospitals and doctors have powerful medicines to treat them if they are exposed to biological agents or toxins, that we can contain an outbreak of an infectious agent, and that there is little to fear. To achieve this objective, we need to rely on the entrepreneurship of the biotechnology industry.

In the summer of 200_, the Defense Science Board completed a study of the countermeasures we have available. It focused on countermeasures-- diagnostics, vaccines, and drugs--for the top nineteen bioterror threats, and estimated what we have available today, what we might have available in five years and what we might have available in ten years.

If one assumes that we need diagnostics, vaccines, and drugs for all nineteen of these bioterror threats, we need fifty-seven countermeasures (19 times 3). It found that today we have only one of these fifty-seven countermeasures, a drug for Chlamydia psittaci. It found that in five years we might have twenty of the fifty-seven countermeasures and in ten years we might have thirty-four of the fifty-seven. These are optimistic assessments.

It set reasonable criteria for what constitutes an effective countermeasure. For diagnostics, it said that we are unprepared if our diagnostic takes more than 24 hours, requires confirmatory testing and the patient must be symptomatic. If said we are somewhat prepared if the diagnostic takes 12 to 24 hours, requires confirmatory testing, and works in some cases where the patient is asymptomatic. It said we are only truly prepared if the test takes less than 12 hours, requires no confirmatory testing, and detects the disease when the patient is asymptomatic. It found that we have no diagnostics today that meet the top standard and might have diagnostics for seventeen of the nineteen terror threats in five years and eighteen of the nineteen in ten years.

For vaccines it found that we are unprepared if we have no vaccine. We are partially prepared if we have a vaccine but have production or use limitations. And we are fully prepared if we have a vaccine generally available. It found that we have no vaccines today that meet the top standard and might have vaccines for two of the terror threats in five years and nine in ten years.

For therapeutics it found that we are unprepared if we have no approved treatment. We are partially prepared if we have a treatment available but have production or use limitations. And we are fully prepared if we have a treatment available. It found that we have one treatment that meets the top standard and might have treatments for the same agent in five years and seven treatments in ten years.

Obviously, we are woefully unprepared. The Defense Science Board only focused on the top nineteen threats, and there are many others for which we are also unprepared.

My proposal would supplement direct Federal Government funding of research with incentives that make it possible for private companies to form the capital to conduct this research on their own initiative, utilizing their own capital, and at their own risk--all for good business reasons going to their bottom line.

The U.S. biotechnology industry, approximately 1,300 companies, spent $13.8 billion on research last year. Only 350 of these companies have managed to go public. The industry employs 124,000, Ernest & Young data, people. The top five companies spent an average of $89,000 per employee on research, making it the most research-intensive industry in the world. The industry has 350 products in human clinical trials targeting more than 200 diseases. Losses for the industry were $5.8 billion in 2001, $5.6 billion in 2000, $4.4 billion in 1999, $4.1 billion in 1998, $4.5 billion in 1997, $4.6 billion in 1996, and similar amounts before that. In 2000 fully 38 percent of the public biotech companies had less than 2 years of funding for their research. Only one quarter of the biotech companies in the United States are publicly traded and they tend to be the best funded.

There is a broad range of research that could be undertaken under this legislation. Vaccines could be developed to prevent infection or treat an infection from a bioterror attack. Broad-spectrum antibiotics are needed. Also, promising research has been undertaken on antitoxins that could neutralize the toxins that are released, for example, by anthrax. With anthrax it is the toxins, not the bacteria itself, that cause death. An antitoxin could act like a decoy, attaching itself to sites on cells where active anthrax toxin binds and then combining with normal active forms of the toxin and inactivating them. An antitoxin could block the production of the toxin.

We can rely on the innovativeness of the biotech industry, working in collaboration with academic medical centers, to explore a broad range of innovative approaches. This mobilizes the entire biotechnology industry as a vital component of our national defense against bioterror weapons.

The legislation takes a comprehensive approach to the challenges the biotechnology industry faces in forming capital to conduct research on countermeasures. It includes capital formation tax incentives, guaranteed purchase funds, patent protections, and liability protections. We believe we will have to include each of these types of incentives to ensure that we mobilize the biotechnology industry for this urgent national defense research.

Some of the tax incentives in this legislation, and both of the two patent incentives I have proposed, may be controversial. In our view, we can debate tax or patent policy as long as you

want, but let's not lose track of the issue here--development of countermeasures to treat people infected or exposed to lethal and disabling bioterror weapons.

We know that incentives can spur research. In 1983 we enacted the Orphan Drug Act to provide incentives for companies to develop treatments for rare diseases with small potential markets deemed to be unprofitable by the industry. In the decade before this legislation was enacted, fewer than 10 drugs for orphan diseases were developed and these were mostly chance discoveries. Since the Act became law, 218 orphan drugs have been approved and 800 more are in the pipeline. The Act provides 7 years of market exclusivity and a tax credit covering some research costs. The effectiveness of the incentives we have enacted for orphan disease research show us how much we can accomplish when we set a national priority for certain types of research.

The incentives we have proposed differ from those set by the Orphan Drug Act. We need to maintain the effectiveness of the Orphan Drug Act and not undermine it by adding many other disease research targets. In addition, the tax credits for research for orphan drug research have no value for most biotechnology companies because few of them have tax liability with respect to which to claim the credit. This explains why we have not proposed to utilize tax credits to spur countermeasures research. It is also clear that the market for countermeasures is even more speculative than the market for orphan drugs and we need to enact a broader and deeper package of incentives.

The government determines which research is covered by the legislation and which companies qualify for the incentives for this research. No company is entitled to utilize the incentives until the government certifies its eligibility.

These decisions are vested in the Secretary, Department of Homeland Security. In S. 1764, the decisions were vested in the White House Office of Homeland Security, but it is now likely that a Department will be created. I have strongly endorsed that concept and led the effort to enact the legislation forming the new Department.

The legislation confers on the Secretary, in consultation with the Secretary of Defense and Secretary of Health and Human Services, authority to set the list of agents and toxins with respect to which the legislation and incentives applies.

The Secretary determines which agents and toxins present a threat and whether the countermeasures are ``more likely'' to be developed with the application of the incentives in the legislation. The Secretary may determine that an agent or toxin does not present a threat or that countermeasures are not more likely to be developed with the incentives. It may determine that the government itself should fund the research and development effort and not rely on private companies. The Department is required to consider the status of existing research, the availability of non-countermeasure markets for the research, and the most effective strategy for ensuring that the research goes forward. The legislation includes an illustrative, non-binding list of fifty- four agents and toxins that might be included on the Secretary's list. The decisions of the Secretary are final and are not subject to judicial review.

The Department then must provide information to potential manufacturers of these countermeasures in sufficient detail to permit them to conduct the research and determine when they have developed the needed countermeasure. It may exempt from publication such information as it deems to be sensitive.

The Department also must specify the government market that will be available when a countermeasure is successfully developed, including the minimum number of dosages that will be purchased, the minimum price per dose, and the timing and number of years projected for such purchases. Authority is provided for the Department to make advance, partial, progress, milestone, or other payments to the manufacturers.

The Department is responsible for determining when a manufacturer has, in fact, successfully developed the needed countermeasure. It must provide information in sufficient detail so that manufacturers and the government may determine when the manufacturer has successfully developed the countermeasure the government needs. If and when the manufacturer has successfully developed the countermeasure, it becomes entitled to the procurement, patent, and liability incentives in the legislation.

Once the list of agents and toxins is set, companies may register with the Department their intent to undertake research and development of a countermeasure to prevent or treat the agent or toxin. This registration is required only for companies that seek to be eligible for the tax, purchase, patent, and liability provisions of the legislation. The registration requirement gives the Department vital information about the research effort and the personnel involved with the research, authorizes inspections and other review of the research effort, and the filing of reports by the company.

The Secretary then may certify that the company is eligible for the tax, purchase, patent, and liability incentives in the legislation. It bases this certification on the qualifications of the company to conduct the countermeasure research. Eligibility for the purchase fund, patent and liability incentives is contingent on successful development of a countermeasure according to the standards set in the legislation, as determined by the Secretary.

The legislation contemplates that a company might well register and seek certification with respect to more than one research project and become eligible for the tax, purchase, patent, and liability incentives for each. There is no policy rationale for limiting a company to one registration and one certification.

This process is similar to the current registration process for research on orphan, rare, diseases. In that case, companies that are certified by the FDA become eligible for both tax and market exclusivity incentives. This process gives the government complete control on the number of registrations and certifications. This gives the government control over the cost and impact of the legislation on private sector research.

The registration and certification process applies to research to develop diagnostics and research tools, not just drugs and vaccines.

Diagnostics are vital because healthcare professionals need to know which agent or toxin has been used in an attack. This enables them to determine which treatment strategy is likely to be most effective. We need quickly to determine which individuals have been exposed or infected, and to separate them from the ``worried well.'' It is likely in an attack that large numbers of individuals who have not been exposed or infected will flood into healthcare facilities seeking treatment. We need to be able to focus on those individuals who are at risk and reassure those who are not at risk.

In terms of research tools, it is possible that we will face biological agents and chemical agents we have never seen before. As I've mentioned, the Soviet Union bioterror research focused in part on use of genetic modification technology to develop agents and toxins that currently-available antibiotics can not treat. Australian researchers accidentally created a modified mousepox virus, which does not affect humans, but it was 100 percent lethal to the mice. Their research focused on trying to make a mouse contraceptive vaccine for pest control. The surprise was that it totally suppressed the ``cell- mediated response''--the arm of the immune system that combats viral infection. To make matters worse, the engineered virus also appears unnaturally resistant to attempts to vaccinate the mice. A vaccine that would normally protect mouse strains that are susceptible to the virus only worked in half the mice exposed to the killer version. If bioterrorists created a human version of the virus, vaccination programs would be of limited use. This highlights the drawback of working on vaccines against bioweapons rather than treatments.

With the advances in gene sequencing--genomics--we will know the exact genetic structure of a biological agent. This information in the wrong hands could easily be manipulated to design and possibly grow a lethal new bacterial and viral strains not found in nature. A scientist might be able to mix

and match traits from different microorganisms--called recombinant technology--to take a gene that makes a deadly toxin from one strain of bacteria and introduce it into other bacterial strains. Dangerous pathogens or infectious agents could be made more deadly, and relatively benign agents could be designed as major public health problems. Bacteria that cause diseases such as anthrax could be altered in such a way that would make current vaccines or antibiotics against them ineffective. It is even possible that a scientist could develop an organism that develops resistance to antibiotics at an accelerated rate.

This means we need to develop technology--research tools--that will enable us to quickly develop a tailor-made, specific countermeasure to a previously unknown organism or agent. These research tools will enable us to develop a tailor-made vaccine or drug to deploy as a countermeasure against a new threat. The legislation authorizes companies to register and receive a certification making them eligible for the incentives in the bill for this vital research.

The legislation includes four tax incentives to enable biotechnology and pharmaceutical companies to form capital to fund research and development of countermeasures. Companies must irrevocably elect only one of the incentives with regard to the countermeasure research.

Four different tax incentives are available so that companies have flexibility in forming capital to fund the research. Each of the options comes with advantages and limitations that may make it appropriate or inappropriate for a given company or research project. We do not now know fully how investors and capital markets will respond to the different options, but we assume that companies will consult with the investor community about which option will work best for a given research project. Capital markets are diverse and investors have different needs and expectations. Over time these markets and investor expectations evolve. If companies register for more than one research project, they may well utilize different tax incentives for the different projects.

Companies are permitted to undertake a series of discrete and separate research projects and make this election with respect to each project. They may only utilize one of the options with respect to each of these research projects.

The first option is for the company to establish an R&D Limited Partnership to conduct the research. The partnership passes through all business deductions and credits to the partners. For example, under this arrangement, the research and development tax credits and depreciation deductions for the company may be passed by the corporation through to its partners to be used to offset their individual tax liability. These deductions and credits are then lost to the corporation. This alternative is available only to companies with less than $750,000,000 in paid-in capital.

The second option is for the company to issue a special class of stock for the entity to conduct the research. The investors would be entitled to a zero capital gains tax rate on any gains realized on the stock held for at least three years. This is a modification of the current Section 1202 where only 50 percent of the gains are not taxed. This provision is adapted from legislation I have introduced, S. 1134, and introduced in the House by Representatives Dunn and Matsui, H.R. 2383. A similar bill has been introduced by Senator Collins, S. 455. This option also is available to small companies.

The third and fourth options grant special tax credits to the company for the research. The first credit is for research conducted by the company and the other for research conducted at a teaching hospital or similar institution. Tax credits are available to any company, but they only are useful to a company with tax liability against which to claim the credit. Very few biotechnology companies receive revenue from product sales and therefore have no tax liability. Companies with revenue may be able to fund the research from retained earnings rather than secure funding from investors.

A company that elects to utilize one of these incentives is not eligible to receive benefits of the Orphan Drug Tax Credit. Companies that can utilize tax credits--companies with taxable income and tax liability--might find the Orphan Credit more valuable. The legislation includes an amendment to the Orphan Credit to correct a defect in the current credit. The amendment has been introduced in the Senate as S. 1341 by Senators Hatch, Kennedy and Jeffords. The amendment simply states that the Credit is available starting the day an application for orphan drug status is filed, not the date the FDA finally acts on it. The amendment was one of many initiatives championed by Lisa J. Raines, who died on September 11 in the plane that hit the Pentagon, and the amendment is named in her honor. As we go forward in the legislative process, I hope we will have an opportunity to speak in more detail about the service of Ms. Raines on behalf of medical research, particularly on rare diseases.

The guaranteed purchase fund, and the patent protections, and liability provisions described below provide an additional incentive for investors and companies to fund the research.

The market for countermeasures is speculative and small. This means that if a company successfully develops a countermeasure, it may not receive sufficient revenue on sales to justify the risk and expense of the research. This is why the legislation establishes a countermeasures purchase fund that will define the market for the products with some specificity before the research begins.

The Secretary will set standards for which countermeasures it will purchase and define the financial terms of the purchase commitment. This will enable companies to evaluate the market potential of its research before it launches into the project. The specifications will need to be set with sufficient specificity so that the company--and its investors--can evaluate the market and with enough flexibility so that it does not inhibit the innovativeness of the researchers. This approach is akin to setting a performance standard for a new military aircraft.

The legislation provides that the Secretary will determine whether the government will purchase more than one product per class. It might make sense--as an incentive--for the government to commit to purchasing more than one product so that many more than one company conducts the research. A winner-take-all system may well intimidate some companies and we may end up without a countermeasure to be purchased. It is also possible that we will find that we need more than one countermeasure because different products are useful for different patients. We may also find that the first product developed is not the most effective.

The purchase commitment for countermeasures is available to any company irrespective of its paid-in capital.

Intellectual property protection of research is essential to biotechnology and pharmaceutical companies for one simple reason: they need to know that if they successfully develop a medical product another company cannot expropriate it. It's a simple matter of incentives.

The patent system has its basis in the U.S. Constitution where the federal government is given the mandate to ``promote the Progress of Science and the Useful Arts by securing for a limited time to Authors and Inventors the exclusive right to their respective Writings and Discoveries.'' In exchange for full disclosure of the terms of their inventions, inventors are granted the right to exclude others from making, using, or selling their inventions for a limited period of time. This quid pro quo provides investors with the incentive to invent. In the absence of the patent law, discoverable inventions would be freely available to anyone who wanted to use them and inventors would not be able to capture the value of their inventions or secure a return on their investments.

The patent system strikes a balance. Companies receive limited protection of their inventions if they are willing to publish the terms of their invention for all to see. At the end of the term of the patent, anyone can practice the invention without any threat of an infringement action. During the term of the patent, competitors can learn from the published description of the invention and may well find a new and distinct patentable invention.

The legislation provides two types of intellectual property protection. The

first simply provides that the term of the patent on the countermeasure will be the term of the patent granted by the Patent and Trademark Office without any erosion due to delays in approval of the product by the Food and Drug Administration. The second provides that a company that successfully develops a countermeasure will receive a bonus of two years on the term of any patent held by that company. Companies must elect one of these two protections, but only small biotechnology companies may elect the second protection. Large, profitable pharmaceutical companies may elect only the first of the two options.

The first protection against erosion of the term of the patent is an issue that is partially addressed in current law, the Hatch-Waxman Patent Term Restoration Act. That act provides partial protection against erosion of the term, length, of a patent when there are delays at the FDA in approving a product. The erosion occurs when the PTO issues a patent before the product is approved by the FDA. In these cases, the term of the patent is running but the company cannot market the product. The Hatch-Waxman Act provides some protections against erosion of the term of the patent, but the protections are incomplete. As a result, many companies end up with a patent with a reduced term, sometimes substantially reduced.

The issue of patent term erosion has become more serious due to changes at the PTO in the patent system. The term of a patent used to be fixed at 17 years from the date the patent was granted by the PTO. It made no difference how long it took for the PTO to process the patent application and sometimes the processing took years, even decades. Under this system, there were cases where the patent would issue before final action at the FDA, but there were other cases where the FDA acted to approve a product before the patent was issued. Erosion was an issue, but it did not occur in many cases.

Since 1995 the term of a patent has been set at 20 years from the date of application for the patent. This means that the processing time by the PTO of the application all came while the term of the patent is running. This gives companies a profound incentive to rush the patent through the PTO. Under the old system, companies had the opposite incentive. With patents being issued earlier by the PTO, the issue of erosion of patent term due to delays at the FDA is becoming more serious and more common.

The provision in the legislation simply states that in the case of bioterrorism countermeasures, no erosion in the term of the patent will occur. The term of the patent at the date of FDA approval will be the same as the term of the patent when it was issued by the PTO. There is no extension of the patent, simply protections against erosion. Under the new 20 year term, patents might be more or less than 17 years depending on the processing time at the PTO, and all this legislation says is that whatever term is set by the PTO will govern irrespective of the delays at the FDA. This option is available to any company that successfully develops a countermeasure eligible to be purchased by the fund.

The second option, the bonus patent term, is only available to small companies with less than $750,000,000 in paid-in capital. It provides that a company that successfully develops a countermeasure is entitled to a two-year extension of any patent in its portfolio. This does not apply to any patent of another company bought or transferred in to the countermeasure research company.

I am well aware that this bonus patent term provision will be controversial with some. A company would tend to utilize this option if it owned the patent on a product that still had, or might have, market value at the end of the term of the patent. Because this option is only available to small biotechnology companies, most of whom have no product on the market, in most cases they would be speculating about the value of a product at the end of its patent. The company might apply this provision to a patent that otherwise would be eroded due to FDA delays or it might apply it to a patent that was not eroded. The result might be a patent term that is no longer than the patent term issued by the PTO. It all depends on which companies elect this option and which patent they select. In some cases, the effect of this provision might be to delay the entry onto the market of lower priced generics. This would tend to shift some of the cost of the incentive to develop a countermeasure to insurance companies and patients with an unrelated disease.

My rationale for including the patent bonus in the legislation is simple: I want this legislation to say emphatically that we mean business, we are serious, and we want biotechnology companies to reconfigure their research portfolios to focus in part on development of countermeasures. The other provisions in the legislation are powerful, but they may not be sufficient.

This proposal protects companies willing to take the risks of producing anti-terrorism products for the American public from potential losses incurred from lawsuits alleging adverse reactions to these products. It also preserves the right for plaintiffs to seek recourse for alleged adverse reactions in Federal District Court, with procedural and monetary limitations.

Under the plan, the Secretary of HHS is required to indemnify and defend entities engaged in qualified countermeasure research through execution of ``indemnification and defense agreements.'' This protection is only available for countermeasures purchased under the legislation or to use of such countermeasures as recommended by the Surgeon General in the event of a public health emergency.

The legislation contains a series of provisions designed to enhance countermeasure research.

The legislation provides for accelerated approval by the FDA of countermeasures developed under the legislation. In most cases, the products would clearly qualify for accelerated approval, but the legislation ensures that they will be reviewed under this process.

It provides a statutory basis for the FDA approving countermeasures where human clinical trials are not appropriate or ethical. Rules regarding such products have been promulgated by the FDA.

It grants a limited antitrust exemption for certain cooperative research and development of countermeasures.

It provides incentives for the construction of biologics manufacturing facilities and research to increase the efficiency of current biologics manufacturing facilities.

It enhances the synergy between our for-profit and not for profit biomedical research entities. The Bayh-Dole Act and Stevenson-Wydler Act form the legal framework for mutually beneficially partnerships between academia and industry. My legislation strengthens this synergy and these relationships with two provisions, one to upgrade the basic research infrastructure available to conduct research on countermeasures and the other to increase cooperation between the National Institutes of Health and private companies.

Research on countermeasures necessitates the use of special facilities where biological agents can be handled safely without exposing researchers and the public to danger. Very few academic institutions or private companies can justify or capitalize the construction of these special facilities. The Federal government can facilitate research and development of countermeasures by financing the construction of these facilities for use on a fee-for-service basis. The legislation authorizes appropriations for grants to non-profit and for-profit institutions to construct, maintain, and manage up to ten Biosafety Level 3-4 facilities, or their equivalent, in different regions of the country for use in research to develop countermeasures. BSL 3-4 facilities are ones used for research on indigenous, exotic or dangerous agents with potential for aerosol transmission of disease that may have serious or lethal consequences or where the agents pose high risk of life-threatening disease, aerosol-transmitted lab infections, or related agents with unknown risk of transmission. The Director of the Office and NIH shall issue regulations regarding the qualifications of the researchers who may utilize the facilities. Companies that have registered with and been certified by the Director--to develop countermeasures under Section 5 (d) of the legislation--shall

be given priority in the use of the facilities.

The legislation also reauthorizes a very successful NIH-industry partnership program launched in FY 2000 in Public Law 106-113. The funding is for partnership challenge grants to promote joint ventures between NIH and its grantees and for-profit biotechnology, pharmaceutical and medical device industries with regard to the development of countermeasures, as defined in Section 3 of the bill, and research tools, as defined in Section 4(d)(3) of the bill. Such grants shall be awarded on a one-for-one matching basis. So far the matching grants have focused on development of medicines to treat malaria, tuberculosis, emerging and resistant infections, and therapeutics for emerging threats. My proposal should be matched by reauthorization of the challenge grant program for these deadly diseases.

The legislation also sets incentives for the development of adjuvents to enhance the potency, and efficacy of antigens in responding to a biological agent.

It requires the new Department to issue annual reports on the effectiveness of this legislation and these incentives, and directs it to host an international conference each year on countermeasure research.

This legislation is carefully calibrated to provide incentives only where they are needed. This accounts for the choices in the legislation about which provisions are available to small biotechnology companies and large pharmaceutical companies.

The legislation makes choices. It sets the priorities. It provides a dose of incentives and seeks a response in the private sector. We are attempting here to do something that has not been done before. This is uncharted territory. And it also an urgent mission.

There may be cases where a countermeasure developed to treat a biological toxin or chemical agent will have applications beyond this use. A broad-spectrum antibiotic capable of treating many different biological agents may well have the capacity to treat naturally occurring diseases.

This same issue arises with the Orphan Drug Act, which provides both tax and FDA approval incentives for companies that develop medicines to treat rare diseases. In some cases these treatments can also be used for larger disease populations. There are few who object to this situation. We have come to the judgment that the urgency of this research is worth the possible additional benefits that might accrue to a company.

In the context of research to develop countermeasures, I do not consider it a problem that a company might find a broader commercial market for a countermeasure. Indeed, it may well be the combination of the incentives in this legislation and these broader markets that drives the successful development of a countermeasure. If our intense focus on developing countermeasures, and research tools, provides benefits for mankind going well beyond terror weapons, we should rejoice. If this research helps us to develop an effective vaccine or treatment for AIDS, we should give the company the Nobel Prize for Medicine. If we do not develop a vaccine or treatment for AIDS, we may see 100 million people die of AIDS. We also have 400 million people infected with malaria and more than a million annual deaths. Millions of children die of diarrhea, cholera and other deadly and disabling diseases. Countermeasures research may deepen our understanding of the immune system and speed development of treatments for cancer and autoimmune diseases. That is not the central purpose of this legislation, but it is an additional rationale for it.

The issue raised by my legislation is very simple: do we want the Federal government to fund and supervise much of the research to develop countermeasures or should we also provide incentives that make it possible for the private sector, at its own expense, and at its own risk, to undertake this research for good business reasons. The Frist- Kennedy law focuses effectively on direct Federal funding and coordination issues, but it does not include sufficient incentives for the private sector to undertake this research on its own initiative. That law and my legislation are perfectly complimentary. We need to enact both to ensure that we are prepared for bioterror attacks.

Mr. President, I ask unanimous consent that a summary of the bill be printed in the Record.

Will the Senator yield for a question?

Is the Senator aware of some statements made by some of our friends on the other side of the aisle?

For example, I quote Senator Santorum. And this is from the Pittsburgh Post Gazette on November 15, 1995:

The American people are sick and tired of excuses for

inaction to balance the budget. The public wants us to stay

the course towards a balanced budget, and we take that

obligation quite seriously.

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

I think the most important thing really does involve the

budget, keeping a balanced budget, not dipping into Social

Security, and continuing to reduce the national debt.

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

The real threat to Social Security is the national debt. If

we don't act to balance the budget and stop adding to the

debt, then we are truly placing the future of Social Security

in jeopardy.

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

As long as we have a Republican Congress, we're going to

have a balanced budget, and if we can get a Republican

President, we can start paying down the debt on the Federal

government.

I give you these quotes.

Also, very soon, in the next few days, we are going to take up the issue of increasing the national debt by almost $1 trillion. So will the Senator comment on these direct quotes from Republican leaders and the fact we are being asked by the President of the United States to increase the national debt by almost $1 trillion in the next few days?

If the Senator would allow me to ask him a question.

Is the Senator from Illinois aware that the Congressional Budget Office, the White House Council of Economic Advisors, and the private sector economists who helped the President analyze this proposal have stated that the President's tax break plan will weaken the long-term health of our economy? This is from the Congressional Budget Office, the first part of April of this year. Is the Senator aware that these institutions and individuals have so stated?

Is the Senator aware that in the State of Illinois the number of jobs lost since the beginning of the Bush administration is nearly 200,000, and last month alone it was almost 20,000 jobs?

Mr. President, it is my understanding the Senator is asking that in the form of a unanimous consent agreement she speak in morning business.

I am not going to object to this request, but I do want everyone to understand that the majority leader asked that we expedite the tax bill. We are trying to do that, but speaking in morning business is not going to expedite consideration of this bill. There is limited time. We have 7 hours on our side. We are going to try to spend all 7 hours on tax matters. I want everyone to understand this when the majority leader is asking why this is not moving more quickly

Mr. President, reserving the right to object.

My dear friend from Iowa was wrong in saying that the time would be used up anyway, and here is the point I am making: We have been asked to move the tax bill. That is what we should be doing. We have turned down a number of requests on this side of people wanting to speak, no matter how important it might be, on issues other than those relating to the tax bill. The time used on the bill talking about morning business, no matter how important it might be, does not deal with the tax issues of this country. The majority leader has asked us to cooperate in trying to move this bill along. It is obvious as the day is clear that we are not moving this along when we are talking about extraneous matters. That is the point I am making. I have no objection.

Will the Senator yield?

Mr. President, the amendment offered by the Senator from North Dakota will be voted on as it stands. If there is any suggestion that there will be an offer or attempt to second-degree the amendment or somehow not give us a straight up-or-down vote, we will continue to offer this second-degree amendment on other things. There will be a vote on this amendment.

It would be to everyone's best interest to get that out of the way as quickly as possible and vote on this very important amendment offered by the Senator from North Dakota.

Madam President, I suggest the absence of a quorum.

Madam President, I ask that amendment No. 560 be reported.

Madam President, I ask unanimous consent that the reading of the amendment be dispensed with.

Madam President, I can remember as a little boy my grandmother getting what she referred to as her old-age pension check. That is what she called it. We have refined the name. That is not politically correct anymore. We now refer to someone receiving a Social Security check.

The Social Security check my grandmother received gave her dignity. She had eight children. The children helped her, but my grandmother, a proud widow, did not want to feel dependent on people, even her own children. I repeat, that old-age pension check gave her dignity. It gave her independence. She had money of her own that she could spend. She was unable to work. My grandmother, for all the time I remember her, could not walk very well. She was very heavy and did not move around very well. But that check still gave her the ability to feel free to do things on her own.

Social Security is the most important, the most successful social program in the history of the world. There has never been a program that has worked as well as Social Security. In addition to helping my grandmother as it did, Social Security has other important effects. It helps those who are widows.

I have said on this floor before and I will repeat it, I was in my Senate office in the Hart Building, and a woman was there representing an agency from Nevada. It was obvious she was very anxious to make her flight. I asked: You can make your plane easily; why are you so nervous? She had to get home to her children. She proceeded to tell me she was a widow. She was a young woman. I asked her what happened to her husband. He was murdered. Social Security steps in in situations such as that to help widows and orphans. Social Security also helps the disabled.

Social Security is more than a check for my grandmother. It is a check for the widow whose husband was murdered. It is a check for someone who has a debilitating disease and cannot work. Social Security is an important program. Our Social Security program is the envy of the rest of the world. It is a program that came about during the Great Depression, the brainchild of Franklin Delano Roosevelt, and the program has been remarkable.

Not every Member of this body is committed to protecting Social Security. That is a fact. The former majority leader of the Senate, my friend, the distinguished Senator from Kansas, Mr. Dole, is proud of the fact he voted against Medicare. He acknowledges, as do a number of other distinguished Republican leaders, that Social Security and Medicare are bad programs.

I carry in my wallet--I still have them here; I have read them so many times and I am not going to do it again--quotes from Republican leaders--Gingrich, Armey, Dole, and there are others who are not as nearly forthright as these three men who acknowledge their dislike for these programs, but we know there are people in the other body who do not like these programs. We know there are people in this body, Senators who do not like these programs.

As has already been stated on this floor by the distinguished Senator from North Dakota, the former chairman of the Budget Committee, Senator Conrad, part of this tax program of the majority is simply to do away with programs they cannot defeat head up. They cannot get rid of Medicare and Social Security with votes on the Senate floor. So these tax programs will starve domestic discretionary spending and cause us to cut back and maybe even eliminate, if they get what they want, these important programs.

I repeat, not every Member of this body is committed to protecting Social Security. The amendment I have offered will give Members an opportunity to show not only seniors, but others, that Social Security is a program believed to be important to this country.

Young people believe in Social Security, and there has been this myth propounded by the majority that Social Security is about to go broke. Social Security is not about to go broke. We need to do things in the outyears, probably around 2040, to make Social Security a better program than it would be without our help, but even if we did nothing, Social Security recipients would be able to draw 75 to 80 percent of their benefits. We need to do something.

What is being done is exactly the wrong approach. The Republican tax bill that is before this Senate--call it growth and opportunity, call it whatever you want--is a tax bill that is devastating to the security of this country. It is devastating to the Social Security program.

My amendment is very simple. It says Congress cannot raid Social Security surpluses to fund tax cuts on corporate dividends. It is as simple as that. The Social Security trust fund is being raided as we speak.

During the Clinton years, we came to the conclusion that it was not appropriate to mask the yearly deficit with Social Security surpluses. So we had an accurate accounting system. When we talked about there being a surplus, there was a real surplus. What we have here is a report in the newspapers by the administration of what the deficit is, but that deficit is masked because of Social Security surpluses.

As we speak, there are huge amounts of money coming in to the Social Security trust fund, and these moneys are not being spent. There is a surplus.

As the late Senator Moynihan and I, in a dialog in the Senate one afternoon, talked about, it should be a Social Security trust fund, not a Social Security slush fund.

It is being used as a slush fund to cover deficits. The deficit this year will approach $600 billion. So I believe that we should protect Social Security. We used to have debates going on about lockboxes. What was a lockbox? A lockbox was a box that the Social Security surpluses were in and it could not be raided. We said: You cannot have the key to unlock that lockbox for Social Security surpluses. That debate is gone. Nobody talks about it anymore because everyone knows this administration has not only given the key away to the lockbox but thrown away the lockbox. Social Security surpluses are raided every day in this country.

The last 3 years of the Clinton administration there were huge surpluses, retiring hundreds of billions of dollars of debt. Now we have the direct opposite. We are creating hundreds of billions of dollars of debt, and in the next few days we are going to be asked to vote upon increasing the national debt ceiling by a trillion dollars, approximately, some 980-odd-billion dollars. Round it off to a trillion dollars.

My amendment is about priorities. Are we going to protect Social Security or are we going to take the money raised with payroll taxes and use it for a tax cut for the elite of this country?

Every worker pays payroll taxes. Yet every worker will not benefit from a corporate dividend tax cut. So it hardly seems right that we would support using payroll tax money to fund a tax cut that will benefit a select few of the elite of this country.

A short time ago the county assessor from Washoe County, NV, Reno, NV, came to my office. He came for one reason, to tell me: Please, Senator, do not do anything to allow this dividend tax cut to go through. It will devastate Washoe County. How we build roads, bridges, and schools is through floating bonds. That is how we do our assessment districts, to put in water systems, curbs and gutters. If the dividend tax cut goes through, State and local governments are going to be devastated. They will not be able to raise money as they did before.

So as far as I am concerned, this dividend tax cut is not good for our country. In just 6 years, the baby boom generation will begin to retire and our senior population will double--almost double from 44 million to 77 million. We need to make sure that we are prepared to meet the obligations we have made to our parents, our grandparents, as well as our children and our grandchildren.

When the Bush administration came into office, there was a projected $5.6 trillion 10-year surplus. Some say it was over $7 trillion. Now, the Government will have a record of a $1.8 trillion deficit, and maybe a $2 trillion deficit, and spend every dollar of the $2.2 trillion Social Security surplus over the next 10 years.

Before Social Security, 1 in 3 older Americans lived in poverty. Social Security has reduced that number to 1 in 10. Over the past few decades, millions of older Americans have been lifted out of poverty by Social Security.

I believe Social Security is one of the greatest success stories in the history of our country. I have already stated that.

As I said, Social Security is something everyone in this country wants to believe is going to continue to be as successful as it has been. Yet it is a success story that will be rewritten with a tragic ending if we decide to plow ahead with the corporate dividend tax cut before we meet our commitment to future generations. If we are going to build on the success of the Social Security Program, we cannot allow Congress to raid the Social Security surplus in order to fund corporate dividend tax cuts. New tax cuts will run up debt, make it harder for Social Security to meet its future obligations, and further threaten its long-term solvency. Simply, this means future generations of seniors can look forward to uncertain retirements. For many, this will mean retirements into poverty.

Social Security is a guarantee of some measure of security in retirement. It is not everything, but it is a guarantee of some security in retirement. The collapse of corporations like Enron and WorldCom underscore the importance of maintaining this guarantee and not forcing workers to depend entirely on pensions for their retirement savings.

We have just started to see what is happening to the retirements of people who have worked all their lives. For example, in the airline industry we have real concern about the future. Are they going to be able to maintain their programs so people can draw their benefits? The airline industry is only one. We have battled with the steel industry, coal miners. We have had all kinds of problems and that is only a small portion of what is probably going to happen in the future.

Not everyone agrees on how to approach Social Security reform. But one thing is certain, nearly every single Social Security reform plan that has been proposed requires additional resources, not less resources. In fact, the plan recommended by the President's own commission to strengthen Social Security required over a trillion dollars. What has happened to that? The true question is, Where does Social Security rank on the page of important issues voted on? Will this Senate say that protecting Social Security is more important than giving a dividend tax cut to the elite of this country? I hope the answer is yes. I hope people vote to put Social Security first. I hope every Member in this body agrees we should not raid Social Security trust fund dollars so we can offer tax cuts for the elite of this country.

Let's show our seniors and future generations we are serious about fulfilling our obligations to them. It is time, and this amendment is the time to demonstrate that Social Security is a top priority for this Congress and for the Nation.

A constituent said it best in a recent e-mail that he wrote to me. I do not know if that is a proper term for e-mail, but I received it. He said:

Tax cuts are nice . . . but if we can't depend on what the

Federal Government promises, then what is left for us to

believe in?

Of course, that was referenced directly to Social Security.

I hope we will join to do the right thing for the millions of people who are on Social Security, the millions of people who will go on Social Security, and for those people who recognize that this program is the most successful social program in the history of the world.

I ask for the yeas and nays on my amendment.

Madam President, I personally think we should have a real jobs bill. For example, there has been a lot of talk about how many jobs this tax bill will create. Let's analyze this.

There is no dispute that for every $1 billion we spend on public works projects--for example, building highways, roads, bridges, dams, water systems, sewer systems--for every $1 billion we spend, we create 47,000 jobs. The math is simple. By spending just a few billion dollars compared to the multitrillion-dollar tax program that has been recommended, we could create many more jobs. Those are direct, high- paying jobs. Every $1 billion, 47,000 jobs. Multiply that and it comes out to lots of jobs, especially those that would be created indirectly.

I hope some day we have a real jobs bill, instead of what we are talking about, jobs and growth; call a pig a horse all you want, but it is still a pig. You can talk all you want about this tax bill and how much growth it will create; the fact is it is a program for the elite of this country.

Simple and direct to the point, it is what it is. It is an effort to devastate the ability for domestic discretionary spending and cause tremendous harm to programs such as Social Security and Medicare.

I hope when we vote on this measure there will be a resounding yes vote. I understand there will be a technicality raised because, under this rule, germaneness is a very tight rule and it will require 60 votes. That is not such a high burden.

We should be able to have 60 Senators vote to put Social Security before giving tax cuts to the elite. My amendment goes only to the dividend tax cut. I hope we have support on that. If 60 Senators do not agree to support Social Security over a dividend tax cut, I feel very sorry for the remainder of the session and what it will do to the American people.

Will the Senator withhold for a brief minute?

Madam President, there are Senators wondering what will happen this afternoon. It is my understanding that the distinguished Senator from Iowa will propound a unanimous consent request that we will have a vote around 2 p.m.; is that right?

It is my understanding, though, that we will have a vote, try to have a unanimous consent agreement and vote on the Dorgan amendment and the Reid amendment, and the Senator from Iowa may raise points of order against those.

That is right.

Mr. President, I have the deepest affection for my friend from Utah. He lives in a different political world than I do. He just did a stunning job in his debate, but he was debating himself. The matter pending before the Senate is whether we should have tax cuts for the elite--that is, dividend tax cuts--or whether those moneys should be kept for Social Security. That seems pretty simple to me.

I did mention, and the Senator from Utah responded briefly, that my proposal to have public works projects is not in keeping with his idea of how to create jobs. The only way to create jobs, he said, is through entrepreneurship.

Well, Frainer Construction of Nevada, Helms Construction of Nevada, Granite Construction, Las Vegas Paving--large by Nevada standards--are companies that believe in entrepreneurship. Every road they build, every water project they work on, every bridge they repair is entrepreneurship. What is the difference in these huge tax cuts that go to the elite, that create no jobs, as I will shortly show? If past experience means anything, I think we are better off directly doing something.

My friend from Utah has acknowledged that there is not going to be anything happening in the near future. He is talking about future Presidents taking credit, future Congresses. He has acknowledged that nothing is going to happen in the near term with this foolish tax cut that has been proposed.

All this talk about growth and jobs, as this bill is intended to do, simply will not work. I direct my friend to a few people on this chart. These are the economists who support the Bush tax plan. You can see them on the left hand side, few in number. The economists opposing the Bush tax plan are 450 in number. Those who support the plan are 13 in number. Those opposing are 10 people who have won Nobel Prizes for their work. We have, in fact, professors from the University of Utah, Gail Blattenberger, Samuel Jameson, David Kiefer, Thomas Maloney, James M. Rock, Norman Waitzman, all distinguished scholars from Utah who are on this chart who say this tax plan the President has proposed is not good.

The question before the body--the vote will take place at 2--is whether this body will vote to have a tax cut for the elite as it relates to dividends or whether Senators will vote to protect Social Security. The Social Security debate has left this body since Republicans became the party that dwells in the White House. We used to talk about a lockbox. Not only the key has been lost but the whole lockbox has been thrown someplace we can't find. Social Security is not part of the equation anymore. Suddenly deficits don't matter.

I say to my distinguished friend who was a courageous soldier for the United States, somebody who was valiant in battle and who I have the greatest respect for as a legislator, I want to bring to his attention some of the problems that exist with this new philosophy that deficits don't matter.

I refer the distinguished Presiding Officer to a statement he made on the 6th of February 1997, in the Omaha World Herald:

The real threat to Social Security is the national debt. If

we don't act to balance the budget and stop adding to the

debt, then we are truly placing the future of Social Security

in jeopardy.

I ask my friend, when he comes down to this table in 40 minutes and votes, to remember what he said in 1997. This is clearly an indication that we are driving this country into a terribly difficult situation as it relates to the deficit.

Deficits don't matter? I hope they do. But apparently there has been a new philosophy from the other side of the aisle.

We are going to be asked in a few days to increase the national debt by almost $1 trillion. I hope people will be more concerned about the debt. I agree with the statement made by the Senator from Nebraska.

I believed the chairman of the Federal Reserve System when he told us in the Appropriations Committee that the most important thing we could do is get rid of the deficit. We did that. We took him at his word. As a result of that, we had years where we paid down the debt to the tune of $600 billion.

When the Bush administration took office, they promised to eliminate the national debt and spur the economy with a massive tax cut for the elite. I didn't vote for that tax cut because I thought it would do exactly what it has done. I have been through the years in the past when we were told that the trickle down theory was a great one and would help the country economically. It didn't then, and it didn't during the Bush 2 program. This plan has failed the vast majority of people in America who are worse off than 2 years ago when this man took office.

Since this administration took office, the economy has lost almost 3 million private sector jobs. The economy has shed 500,000 jobs in the past 3 months alone. About 9 million people are looking for work. The unemployment rate is 6 percent. The number of unemployed workers has increased 47 percent since the President took office. A growing share of the unemployed workers are long-term unemployed. In February, nearly 2 million people had been unemployed for 6 months, which is triple what it was before this man became President. The Bush administration is on track to post the worst job creation record of any administration in almost six decades. This tax cut raids Social Security, and that is what this amendment is all about.

I have been here long enough to know that the majority are not very independent. I believe--and I hope my belief is unfounded--that come 2 o'clock people will march down here and vote against this amendment. They will vote that it is not germane. It takes 60 votes. We know the rules of germaneness. They will march down here just like lemmings over the cliff and throw Social Security to the wind, I am sorry to say, but I think that is what is going to happen.

Even without the new tax break for the elite, this Government will spend every dollar of the $2 trillion Social Security surplus over the next 10 years--even without this. So with this, it will be done more quickly.

The real reason for the deficit is the tax cut--the tax cut previously made, which I voted against. It is not easy to vote against tax cuts. People love them. It will be used against me in my campaign. That is the way it is.

The Congressional Budget Office says that only 14 percent of the deficit is as a result of homeland security and defense spending. Over 10 years, Federal spending on interest on the public debt will amount to $2.4 trillion. Of course, every dollar directed toward interest is diverted from Social Security. It is diverted from Medicare, education, defense, and homeland security.

The additional interest burden on a family of four will be $30,000. That is the additional burden. State and local governments are in the midst of the worst fiscal crisis since World War II. Last month, the cumulative 2004 budget shortfall was about $54 billion. A billion of that is in the small State of Nevada. State and local governments, which bear primary responsibility for most education, health care, and first responder expenditures, will bear the brunt of the consequences of this irresponsible tax plan.

The second phase gets even worse. Sixteen States have cut education programs in elementary schools. In Nevada, the Clark County School District is considering going to a 4-day week for kids because it is having trouble paying for a 5-day week. Twenty States have cut health care programs, even though we are living in a heightened risk of bioterrorism and SARS. It makes no sense to just chop to pieces

our State public health budgets. But that is a consequence of what is happening in this administration.

What is wrong with this plan we are being asked to approve? It fails to help working people, for one thing. Our top priority is to create jobs. I will say it again, Mr. President--creating jobs. The moneys that would be given in these public works projects, which are not new jobs--I bet in the States of Utah and Nebraska there are many projects on the drawing board that simply cannot be completed because there is no money to do it--roads, water and sewer projects, bridges, dams, all those activities. They are on the drawing boards now and would go forward tomorrow if there were money to do it.

As I indicated before, for every billion dollars spent, 40,000 jobs are created. Those are direct jobs, all high-paying jobs. These people would buy refrigerators, carpets, cars, all kinds of consumer items. There are a lot of indirect jobs as a result. The Republican plan fails to help working people. It fails to preserve Social Security. It offers no relief to the 9 million Americans who want to work but cannot find a job.

People on the other side refer to this as a ``jobs and growth package.'' As I said earlier today, you can call a pig a horse, but it doesn't matter how many times you call a pig a horse, it is still a pig. Or you can call a horse a pig; it doesn't matter; that animal is still a horse. You can call this program jobs and growth all you want, but it doesn't make it a jobs and growth program. Calling this a jobs and growth program--there could not be anything further from the truth.

The CBO, the White House Counsel of Economic Advisers, and the private sector economists who helped the President analyze this proposal have stated that his tax break plan won't create jobs and will weaken the long-term health of this country. In fact, some economists have forecast that the plan will cause an annual .25 percent drop in GDP and will result in a loss of almost a million jobs in the next 10 years. That is in addition to the jobs that have already been lost. There are the 400 economists there on the chart. And I am sure there would be more if we spent a little extra time. So 400 economists, including 10 Nobel laureate prizewinners, signed a statement warning that the President's plan would do long-term harm to the economy, adding to the Nation's projected deficits.

Mr. President, you were not standing there alone saying deficits matter. Some of your colleagues also felt the same. A number of very distinguished colleagues felt the same. For example, somebody for whom I have the greatest respect, Trent Lott--we worked together on the floor very closely for 4 years--said on the 27th day of January, 2002:

I think the most important thing really does involve the

budget--keeping a balanced budget, not dipping into Social

Security, and continuing to reduce the national debt.

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

As long as we have a Republican Congress, we are going to

have a balanced budget. And if we can get a Republican

President, we can start paying down the debt on the Federal

Government.

What has happened to that? Do deficits not matter anymore? Obviously, they don't. We are going to be asked to increase the national debt a trillion dollars in a few days.

I am happy to yield to the Senator from Illinois for a question.

Mr. President, I say to my friend in answer to his question, the Senator is absolutely right. What is happening boggles my mind. I am certainly not a genius, but I did OK in school, and I can understand some basic facts. How can people, for whom I have the highest respect, say one thing about deficits mattering and Social Security mattering and vote for this awful program?

I say to my friend, the distinguished Senator from Illinois, what I said earlier today. I believe this is all part of a program to do away with some of these programs in which we really believe. I repeated in different words what the Senator said today in responding to a statement made by the distinguished chairman of the Finance Committee. I said the same thing to the distinguished junior Senator from Utah. They live in a different world than I live in. It is as simple as that. They live in a different world. They care about the trickle down theory. I do not. I do not think it has worked. Over the years I have seen it trying to work where you give money to the elite of this country. It does not trickle down.

We have significant problems in the State of Nevada. We are battling budget problems in the little State of Nevada, and the Republican Governor in the State of Nevada--I am sure it was very difficult for him--because there is no alternative because of the unfunded mandates the Federal Government passed on to the State of Nevada, is trying to find ways to create new revenues. I say the word, the Republican Governor of the State of Nevada has asked for new taxes.

I respond to my friend, I voted against the first tax cut. It was not an easy vote. Just on general principle you want to vote for tax cuts. I believe the payroll taxes are something most people pay much more than they do in income taxes. I would like to figure out some way to give them a break from payroll taxes. I think there are ways we can reduce taxes.

At first glance, you do not want to vote against a tax cut, but I had an inkling, I had a belief, I had a conviction that doing what was done with the first big tax cut would throw this country into an economic downturn, and that is what it has done.

When the Bush administration took office, they promised to eliminate the national debt and spur the economy with a massive tax cut for the wealthy. They failed to deliver. Most people are not better off; they are worse off than they were 2 years ago, I say to my friend.

I will be happy to yield for a question from my friend from Utah without losing my right to the floor.

I respond to my friend from Utah, I borrowed this chart from somebody else. I am not much on this chart business, but I know that if there are that many who favor the tax cut, you should do your own chart.

I yield for a question. I will do that.

I will be happy to respond to the question. First, it seems a little unusual to me, the huge tax cuts written by the Republicans and passed virtually by Republican votes, with very few Democratic votes, now they are saying the tax cut was not big enough and not quick enough. So now what we are going to do is come back with a bigger tax cut and I guess they say it is not quick enough.

The majority has written both tax bills. I voted against the first tax cut, and I will vote against the second tax cut because I believe the tax cut certainly is not going to help Social Security. Remember, the issue before the Senate today, and we are going to vote on it at 2 o'clock, is whether this body should give tax cuts to the elite of this country in the form of reducing the tax on corporate dividends or whether that money should be put back in Social Security. That is the issue before the Senate. It is a very simple issue.

I have talked about what I think is wrong with the plan in general. Remember, my statement has been directed toward what I feel is a very pertinent question: Does this body, the Senate, want to preserve Social Security or destroy Social Security? The vote at 2 o'clock will take that into consideration.

I believe when we had discussions on the Senate floor dealing with lockboxes and keys to lockboxes that it was a good discussion because I felt very strongly that we should do something to preserve Social Security.

It is interesting to me that there was a constitutional amendment offered on the Senate floor to balance the budget. It was offered by Republicans. I offered a counter amendment. I said that is a great idea, let's do it, but we are going to do it without using the Social Security surpluses. That was not enough for my friends on the other side of the aisle. My amendment received 44 votes. I was six votes short. I wanted a constitutional amendment to balance the budget but not use the surpluses of Social Security. The majority disagreed. They wanted to use Social Security surpluses to balance the budget. That is unfair. I have no regret having done that.

I yield to my friend for a question.

The Senator is absolutely right. The baby boom generation is upon us.

Our senior population will nearly double from 44 million to 77 million in just 6 years. That is what it is all about. I am just stunned by--I believe in intellectual consistency, and I try to be consistent on what I do in my legislative voting on the Senate floor. I try to remember statements I have made, so I do not want to be inconsistent, to say something today that is inconsistent with something I said previously.

What has happened to our friends on the other side of the aisle who cared so much about deficits and balancing the budget, who offered a constitutional amendment on the Senate floor to balance the budget? Of course, they wanted to use Social Security surpluses, but still they were concerned about balancing the budget.

Senator Rick Santorum, the junior Senator from Pennsylvania, who is one of the leaders on the other side of the aisle, is quoted in the Pittsburgh Post Gazette:

The American people are sick and tired of excuses for

inaction to balance the budget. The public wants us to stay

the course towards a balanced budget, and we take that

obligation quite seriously.

Take it quite seriously, when we are going to be asked to increase the national debt in a few days by a trillion dollars--by a trillion dollars; not a billion, not a million but a trillion? Where are all of these statements? What happened to them? What happened to the consistency? Why all of a sudden do deficits not matter, the national debt does not matter, Social Security does not matter, Medicare does not matter, education does not matter, just give tax cuts to the elite and it will all be fine?

It is going to take care of all the environmental problems we have in America today. We do not have to worry about Superfund, endangered species, clean air, clean water. Just cut taxes. That takes care of it all.

The Senator from Illinois has raised a question, and I am sure the people watching this have the same question, which is: Okay, you do not like the Republican plan. What is your idea?

Well, we do have an idea. It costs much less money and has a direct impact. We would want a new wage credit, which would provide $300 for each adult in a family; $300 for the first two

children. We want to accelerate the child tax credit to $800 from the current $600. It eliminates the marriage tax penalty. It provides marriage penalty relief for recipients of the earned-income tax credit, which by the way, Ronald Reagan said was the most important tax policy this country has ever had, the earned-income tax rate. What is that? It creates a desire for people to work rather than try to go on, say, welfare, because they can actually make money by working with their hands.

Ronald Reagan loved this program, the earned-income tax credit, and we want to make it even more important.

We want to have a 50-percent tax credit to help small businesses pay for health insurance premiums. These estimates are not exact, but there are from 21 million to 25 million Americans with no health insurance. There are millions more who are underinsured. Now, this is not going to answer all the problems, but it sure is a step in the right direction. It will help small businesses pay for health insurance premiums.

As I mentioned, the answer to all of the problems-- environmental problems, better schools, homeland security--is cut taxes for the elite of this country. That will handle everything. I am sure that is their reasoning for this no-tax policy on health insurance.

In answer to the Senator's question, we would allow small business expensing that I think is very important. That is in the Republican plan. I think it is important we have that in ours. We want a bonus deduction for businesses on depreciation rules. We want a 20-percent tax credit for businesses that invest in the broadband high-speed Internet infrastructure. We want $40 billion direct relief to States and local governments. It is so important we do that.

As I mentioned to the Senator earlier in responding to one of the questions, the State of Nevada is devastated because of unfunded mandates. Leave No Child Behind, as I said, according to the State legislature, is leaving lots of kids behind because they have no money to implement all the testing requirements and things that our school districts are being forced to do. They do not have the money to do it.

Homeland security, we have all kinds of burdens upon us as a result of 9/11, and I think we should be helping with that.

With our tax plan, which we are going to have a chance to vote on and which I think is going to be offered by the Senator from Louisiana, we are going to have an opportunity to do something about unemployment benefits. Our plan calls for unemployment benefits. I think that is extremely important.

Our plan is so much better. It creates over a million jobs right away. It is a program that has something the working men and women in this country will benefit from. We had a meeting with one of the most successful businesspeople in the country, Warren Buffett, a man who is a study in how entrepreneurship should work. We have heard a lot about entrepreneurs in speeches on the other side.

He is what the free market system is all about. When asked a direct question about what he thinks of the Bush tax cut plan, after he wiped the smile off his face, he said: You know, if this tax cut plan passes, next year I will receive--and this figure might not be exact but real close--an extra $390 million for me, Warren Buffett.

He said: I do not need that. I do not want that. It is not going to create jobs. What we should do, if there is $390 million to go around, is give 390,000 people a thousand dollars.

He said: They will spend that. That will help the economy.

That is the difference between our plan and their plan. The Warren Buffett understanding of what our economy is all about is about people spending money.

I say to my friend, in parroting something the Senator said earlier today, those people on the other side of the aisle who are pushing this tax plan are not evil people; they are not bad people. They are good people. They just live in a different political world. They live in a world where they are willing to change their political philosophy according to who is in the White House. People who used to say that deficits matter now say they do not matter. People who said we had to balance the budget no longer say we have to balance the budget. They simply are not willing to approach the world the way I think the world needs to be approached.

I think I am right. I believe I am right. Everyone is entitled to their opinion. I have a little substantiation. I have 10 Nobel laureates who believe I am right, that this tax cut is not good; it will not help the economy. However, no one has to accept these Nobel laureates. Ask the Congressional Budget Office. They, the Republicans, picked who runs that, we did not, and the Congressional Budget Office says it will not help anything.

I say to my friend from Illinois, this vote we will take in a few minutes is an example of the difference in philosophy between what is going on with the majority and we, the Democrats. What we are saying is the dividend tax cuts for the elite of this world should not go forward. That money should be saved for Social Security. That money that will go to elite people is coming out of the Social Security trust fund.

If there was ever an example of how we should vote for constituents, it is now. Do you vote for people who want to maintain the strong Social Security Program or do you vote for the people who are going to give big tax cuts to Warren Buffett? There is a simple answer to the question.

Remember the vote today at 2 p.m.: Dividend tax cuts or saving Social Security. It is as simple as that. We recognize that anyone can puff it any way they want; anyone can slam it any way they want. That is what the vote is about. The first vote we will take on this tax cut bill is whether you are going to vote for Social Security or the wealthy of this country. It is as simple as that.

Pursuant to section 904 of the Congressional Budget Act, I move to waive the section of the Budget Act for the pending amendment, and I ask for the yeas and nays.

I announce that the Senator from North Carolina (Mr. Edwards), the Senator from Massachusetts (Mr. Kerry) and the Senator from Maryland (Mr. Sarbanes) are necessarily absent.

I further announce that, if present and voting, the Senator from Massachusetts (Mr. Kerry) would vote ``Aye''.

I move to lay that motion on the table.

The motion to lay on the table was agreed to.

Mr. BREAUX addressed the Chair.

Madam President, I have cleared this with the distinguished chairman of the committee. I ask unanimous consent that the pending amendments be temporarily set aside so the Senator from Massachusetts may offer his amendment.

Will the Senator from Massachusetts call up his amendment?

Madam President, I ask unanimous consent reading of the amendment be dispensed with.

Madam President, I ask unanimous consent that the time used by the distinguished Senator from Massachusetts be charged against the time on this amendment.

Madam President, how much time does that leave on this amendment on the side of the minority?

So the Senators from Washington and Rhode Island will have 36 minutes, or whatever time they need.

I ask Senator Kennedy, will you yield time to the Senator from Rhode Island?

Mr. President, I send an amendment to the desk and ask for its immediate consideration.

Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.

Mr. President, let me briefly describe the amendment I offer on behalf of myself and Senator Baucus. This amendment deals with repealing the 1993 provision that would increase the amount of Social Security income received by a senior citizen to be reported for tax purposes. Let me describe the history of this a bit and then talk about why I believe we ought to do it.

For a good many years after Social Security was created, the Social Security receipts that a senior citizen would receive would not be required to be reported for tax purposes on their income tax return. It was exempt income. Then at one point the Congress decided that one-half of the payments for Social Security that go to a recipient should be described as income on their income tax return. So we went for a long while with 50 percent of the Social Security payments to senior citizens being required to be reported for tax purposes.

In 1993, in a rather large piece of legislation that moved this country towards a different fiscal policy in a very significant way-- the results of which throughout the 1990s expanded the economy, created jobs, did a number of things--one of the provisions was to increase from 50 percent to 85 percent the amount of income that would be required to be subject to income tax and reported on the tax return for single beneficiaries with incomes over $34,000, married couples income over $44,000. So moving that 50 percent to 85 percent now means that roughly 8 million senior citizens pay an average increased income tax of about $1,500 a piece per year. I propose that we repeal that provision, go back to previous law which is a 50-percent reporting requirement.

Let me talk for a moment about the Social Security issue and senior citizens. There is discussion on the Senate floor--and there will be much more, I expect--that this tax proposal that comes to the Senate will use all of the trust funds that are to be set aside for Social Security to pay for tax cuts. I don't think that is going to be disputed. I don't think that is subject to contest. There will not be Social Security trust funds if we pass this tax cut.

This is a circumstance where upper income Americans will receive very generous tax cuts and senior citizens will see their Social Security trust funds depleted in order to finance it.

I mentioned yesterday that on page 4 of the Budget Act, which brings us to the floor under reconciliation, the description of what is happening to the debt is it goes from $6.7 trillion to $12 trillion in a decade.

Some say: That is not much to worry about. Don't worry about debt.

I don't understand that. The debt, of course, is going to be inherited by our children because they will inherit this economy and this country. We are saying to them: We have a new plan. Our fiscal policy plan will double the Federal debt to $12 trillion in 10 years.

I have never heard of a plan doubling the debt described as a success. But that is what I am hearing in the Senate. This is a plan that is gearing this country towards long-term economic solvency, economic opportunity, growth, hope, and most especially jobs by doubling the Federal debt to $12 trillion--a rather curious argument.

I managed to teach economics for a couple of years. I don't think there is anything in any book anywhere that would have you teach this lesson. This is apparently a new form of economic theory.

I recall the book written by Tom Brokaw called ``The Greatest Generation.'' I have visited with many of the folks described in that book, the folks who lie on their belly on the sands of Normandy, risking their lives for their country, seeing their comrades die in foxholes beside them, those who were asked to go halfway around the world to fight for liberty and did so without complaint, never asked for much, but were told by this country a couple things: When you get back from serving your country, we will provide free health care for life for you in the veterans health care system.

That turned out to be a promise this Congress is unwilling to keep, regrettably. They also were told: When you come back, there will be a Social Security system you can count on; you can rely on. Of course, what is happening now is we have people who don't support that system, don't believe we ought to keep the promise, don't believe trust funds ought to include the word ``trust.''

If I can digress for a moment, I recall one day going to a veterans hospital in Fargo, ND, about which I have told my Senate colleagues before.

When we talk about the greatest generation and senior citizens, I went to a veterans hospital on a Sunday morning to provide the medals that had been earned by a Native American veteran. His name was Edmond Young Eagle. He was dying of lung cancer. I learned later that he died a week after I had been there. His sisters asked if we could get his medals, and so I did. I presented them to him at the VA hospital that Sunday morning. The doctors and nurses gathered, and his sisters were there. We cranked up his bed so that he was in a seated position, and I pinned the medals he had earned during the Second World War on his pajama top.

Edmond Young Eagle never had much in life. He fought in Africa and in Europe, and he went where this country asked him to go. He risked his life and served America with great distinction. He came back to live on the reservation, and he never had very much, never had a very good life. He had it pretty tough. That day, on a Sunday morning, having the medals that he earned 50 years previously pinned on his pajama tops, Edmond Young Eagle, 7 days from dying of lung cancer, said: ``This is one of the proudest days of my life.'' He didn't have much, but he deeply valued the service he had given his country. I told him how much this country valued the service he had provided and how proud we were of him.

Edmond Young Eagle and millions of others have answered the call to serve this country in so many ways. I talk about the greatest generation. Yes, it was the soldiers and it was ``Rosie the Riveter'' back then. Moving forward, so many people have served this country, and this country made a bargain with them and a promise to them. We said to them: If you will pay from your paycheck, every time you receive a paycheck, a tax that goes into a trust fund to fund something called Social Security, when you reach retirement age, that Social Security payment will be there for you. Yes, we want you to save and invest yourself, but at least this will be a basic insurance retirement payment for you.

We have always made that promise. In fact, we changed that promise in 1983 and said: You know what? Because the largest baby crop in the history of this country will retire after the turn of the century--and that is called the war babies, the group of babies who came after the soldiers came home after the Second World War and the largest outpouring of affection in the history of the country occurred, and we had so many babies born, the largest baby crop in the history of America. They will begin to retire now. When they retire and hit the retirement rolls, then we have maximum strain on the Social Security system.

So in 1983, we put in place a little different approach. The approach was to say we are actually going to collect more money than we spend on a current basis in order to have a trust fund

balance that begins to save so that the resources are there when the baby boomers retire. That is what the trust fund is about. I mentioned that if we decide to increase the Federal debt--as is the case in the bill brought to the floor of the Senate, and as was the case with respect to the Budget Act--from $6 trillion roughly to $12 trillion, there won't be a Social Security trust fund. It is to say that that which is to be put away in a trust fund for Social Security will be used as an offset to provide tax cuts for Donald Trump. I know I should not use his name, but he likes to have his name used. I think he is an interesting guy, a good businessman and investor. He does very well. He puts his name on his buildings, so he certainly won't mind my using his name.

The question is, Should we decide that the trust funds we are trying to save for the future, which we need when the baby boomers retire, will be used as offsets so that we can give Donald Trump, or others in the upper income bracket in the country, large tax cuts?

Is that what you would sit around a table and decide as an American family that represents the priorities, values, and needs? Is that what you would decide we ought to do now? Is that the urgency for our country in public policy? I don't think so.

In addition to trying to save money in a trust fund, in 1993 we changed the mechanisms by which we assessed taxes, and especially with respect to senior citizens. We said: We will require you to report more of our Social Security payments as income on your tax returns--from 50 percent to 85 percent. That means about 8 million senior citizens now pay $1,500 a year in additional taxes.

I wish we had not done that in 1993. I voted for a bill that included it because it had a lot of things in it that put this country back on track, but I wasn't pleased that was in it. Twice since then, I have voted to try to repeal it. Now if we are going to have a substantial change in tax laws and evaluate who ought to get a tax break and who should not, and where should we cut taxes or where should we not, perhaps we ought to consider this at the top of the list. Why not make this change now? Why not go back to the 50 percent? That is where it was. Why not say that senior citizens--those who reached their declining income years--are those who ought to get the tax breaks?

That is what my amendment does. It is fairly simple. Senior citizens are living longer and better lives. Really, people say we have all these problems with Social Security and Medicare. Do you know what they are? They are problems of success. Just go back to the old life expectancy. People are living longer and better lives. I know a woman who is 89 years old. She bought a car a while back, and she used 5-year financing. God bless her. I have an uncle who is 81 years old. He runs in the Senior Olympic events. He has 43 gold medals. He runs the 400 and the 800. Thirty years ago when one reached 80 years of age, they had to find a La-Z-Boy. You were then at that age where it was time to find an easy chair because you were not going to run races or buy a car and finance it for 5 years.

Now things have changed in a very dramatic way. People are living longer and much better lives. But it is true that as they live longer lives, they reach a period of time when their income declines. Inevitably, they stop working and retire. Their income declines. As they reach the declining income years, then the question of what kinds of taxes they pay is a very important question. Do they, as some are required, go into a grocery store, where the pharmacy is in the back, and have to ask themselves: Should I buy groceries first so I can see how much I have left for prescription drugs? Of course, they make those choices.

When they reach their declining income years, the question is, What should their tax obligation be? How should we construct this tax obligation? My amendment is devastatingly simple: Let's relieve them of that 30 percent in extra income on Social Security they are required to report, which will save 8 million people $1,500 a year. These are not the top-income folks. These are folks who have retired and now have less income than they had during their working years. In many cases, they are folks who saved and are trying to help their kids and grandkids. They have less income, and they are now in the last 10 years, and they are required to pay higher taxes.

This provision will relieve them of some of that burden. I was thinking the other day about this tax debate because it is the case that some will benefit and some will not. There is an old saying: When you rob from Peter to pay Paul, you can always count on Paul being grateful.

The fact is, this bill is going to make some people in this country very grateful--but it is not the senior citizens, unless we pass this amendment; it is the folks at the very top of the income ladder. We have people come to the floor of the Senate and say the big priority here is to exempt dividends from taxation.

First of all, most dividends are not double taxed. I will make that point. Second, if you want to talk about double taxation, why talk about double taxation just for the top of the income heap--those who clip coupons to get unearned income to the tune of millions of dollars a year? Why talk about them being exempt? Why do you have a philosophy that says let's exempt investment and tax work? What kind of value system is that? Nobody is saying let's exempt work, let's just exempt investment. I don't understand that.

The tax system ought to be about values. But if you are talking about double taxation, which I think is the principle by which some brought to the floor this issue of dividends, how about double taxation of Social Security? That is a good example. Wages. We tax on your wage, you put some money away, and then you come back and get a Social Security payment, and you have to pay a tax on part of that. It is 85 percent now. I propose 50 percent. Double taxation on Social Security. Is that more or less important? I guess you could talk about almost anything, could you not? Go buy a car this afternoon. You pay taxes on the wages you earn, and when you buy a car, they are going to charge a big old excise tax. Double taxation.

So the question I have is, When some people apparently got bottled water and sat around a big old mahogany table and started thinking, the biggest problem in America is double taxation so let's try to get rid of that, how did they come up with the notion that dividends represented that priority? Were there people smoking Cohibas there who were getting a lot of dividends and said: The biggest problem for me is that I get $10 million of dividends and, by God, that is double taxation? Is that where that came from?

Or were there perhaps some senior citizens who were supposed to be there and their chairs were empty? I assume they would have said: Double taxation? Here is an example of double taxation. Help us.

No, that is not the priority. The priority is not about helping them. The priority is helping the folks at the top and then saying: And if we do that, we are going to create a massive amount of new jobs in America.

We have heard this argument before--massive new jobs--new jobs. Jobs is a four-letter word, but it is a good one, as long as jobs are present someplace. We went through this with a very large tax cut 2 years ago, and now we have 2.3 million fewer jobs. It might be because other events happened. They certainly did.

One wonders, if the first dose of medicine makes you sick, whether you ought to trot out the same bottle and label another batch to an unsuspecting public. Is there a time perhaps when we decide maybe the way we create new jobs in America is to put the economy back on track and say we are not going to double the debt, we are not going to run the largest deficits in history, and we are not going to tell the working folks who represent, in my judgment, the engine of our economy and of our country: By the way, you do not matter much.

I will finish my remarks. I am going afield. The fact is, in the Senate, you speak when you have the opportunity to do so.

My amendment deals with senior citizens. I am trying to describe some of the circumstances that would persuade senior citizens to think they have not been treated fairly in this bill, and this is a way to remedy that.

It seems to me both political parties have something to offer this country that is constructive in discussing taxation and economic policy. I happen to think those on the Republican side are a little better at trying to make sure we tamp down spending. They are a little better at that than we are. Sometimes I do not think they have the judgment they should have when they tamp down spending, but the fact is they are a little better at it than we are.

It seems to me we are a little better at the notion of how you do things that give people confidence in the future that can provide the buoyancy, the growth, and the lift to the American economy. Getting the best of what both parties have to offer is better than getting the worst of either. I think often we get the worst either party can offer this country.

My proposal is just to begin to amend this tax bill. I am not saying the bill is worthless. There are some provisions in this bill that have great worth, some provisions I support. The child tax credit and others, I think, make sense. We should do what is contained in these provisions, even as we try to put this economy on track so that the numbers add up.

There is not any way the numbers add up. My colleague, Senator Conrad from North Dakota, has spoken on the floor at great length about this issue. We also were together yesterday at a presentation. Even as we do these things, some of which have great worth and some of which, in my judgment, are just waving a flag to the upper income folks in America to say our party is still with you--those on the other side of the aisle--it seems to me you need to do them in the context of saying to the American people that the future of this economy is not going to be a future mired in debt and choking on yearly deficits.

I will make one final point. As we do this, understand that what is being proposed now is the largest deficits in history, in fiscal policy, on top of the largest trade deficits in history. Those two problems together potentially can cause very significant problems for the value of this country's currency.

As Mr. Friedman says in ``The Lexus and the Olive Tree,'' when the electronic herd runs and begins to move to other currencies, it has a profound impact on your economy, and we should be concerned about that.

To come back to my amendment, this amendment is about priorities-- what is important and what is not; what should we do and what should we not do. It seems to me one of the high priorities for us in dealing with reducing taxes ought to be to say to senior citizens, among them the greatest generation and others who are struggling and who are trying to make sure they get through these difficult times, those who have reached their lowest income years: We are going to repeal that portion of the law that was passed 10 years ago. We are going to do it because we believe the 8 million people who are now required to pay $1,500 apiece in additional taxes ought to be relieved of that burden.

As I indicated, I have on two previous occasions voted to repeal this tax. It has never gotten done. I know there is disagreement as to whether it should get done. I believe it should get done because, frankly, this is double taxation. It is not just dividends. It is this as well.

I am proud to offer this amendment with my colleague, Senator Baucus from Montana, and I assume many other colleagues would like to cosponsor it before they vote. I hope we have a vote on it.

I did not mention this will be paid for by offsets. We would not accelerate the scheduled rate reductions in the highest rates, and we would strike the dividend income relief in the bill. We do not increase taxes. If someone stands up and says what you are going to do is increase taxes with your offset, that is not the case. There is no increase in taxes in this amendment, but we do not accelerate the top rates and, at the same time, we decide not to proceed with the dividend income tax relief in the bill, the bulk of which goes to upper income Americans.

I hope, perhaps, this amendment will be accepted on a voice vote. If that is not the case, we will have some debate and then I am hoping we will have a successful record vote. Perhaps I will be inspired to speak again after I have heard the debate on this amendment. I yield the floor.

Mr. President, reserving the right to object, I shall not object, but I want to clarify with the Chair, do I control the time on the amendment on this side?

Mr. President, following the presentation, then, it would be my opportunity to yield time; is that correct?

I yield 5 minutes to the Senator from Montana.

Mr. President, I yield 2 minutes to the Senator from Nevada.

I yield 10 minutes to the Senator from North Dakota, Mr. Conrad.

Mr. President, I was unable to hear.

I ask if the Senator from Iowa wishes to use some of his time at this point.

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

Mr. President, this was an interesting and clever argument to listen to. I have great respect for my colleague who chairs the Finance Committee. We have worked on many issues together. But I listened to his argument, which was more about motives with respect to this amendment than it was about merits.

It is, I guess, perfectly plausible to talk about the motives of others. I won't do that at this moment, but he was describing the motives of people dealing with this amendment. Let me talk a bit about the merits and correct some of the misstatements, if I might, and then describe why this is an important amendment.

Let me take the last point first. My colleague says this is going to take away the tax cuts for middle Americans. Nonsense; simply untrue. Is this going to take away the tax cuts for the child credit, which is going to be very significant to that single mom? Does this take that away? The answer is no.

So if someone says this takes away the tax cuts for middle Americans, they are wrong, just wrong. It is not supported by the facts. I will go through a whole list of others that this does not take away.

This does take away the tax cut that accelerates the rate reductions going down to the 28 percent. It is not all those above 10 percent, as my colleague suggested. But let me go back to the top and take his arguments one by one.

The Senator from Iowa is right, this was put in place 10 years ago as part of a large plan. I was not happy it was there 10 years ago, but it was part of a plan we passed.

Twice, since that time, I have supported efforts to get rid of this tax on Social Security--the 50 percent to 85 percent--but we have been unsuccessful. The question now is, Are we willing to cut taxes now by abolishing the 85 percent back down to 50 percent? That is the question for us now.

As a result of the 1993 new economic proposal, which included this piece, we had unprecedented economic growth that turned this country around, turned the biggest budget deficits then into the biggest budget surpluses we have ever had. Now, we have people who are still huffing and puffing that it really was not the result of that economic plan, but, notwithstanding that, the fact is, that put this country back on track. This piece was a part of it. I am not pleased it was, but it was. As I said, I voted previously to try to get rid of this piece. Now we have the opportunity.

If the prospect of the majority is to come to the floor of the Senate and say, let's have very large tax cuts, the question is, it seems to me, Where do you start? Who benefits most? Wouldn't it be a good thing to cut these taxes so 8 million senior citizens who are paying $1,500 a year more in taxes as a result of that change 10 years ago would be able to begin to pay less as a result of our repeal of that provision?

My colleague said: Gee, there was just an amendment offered by Senator Bunning on the floor of the Senate that dealt with this very issue. Total nonsense. It was offered during the budget debate, and the budget debate did not have anything to do with what we were going to do on specific tax cuts. That can only be done with respect to the Finance Committee and on the floor of the Senate.

The Bunning amendment was a proposal to increase the overall tax cut by $146 billion. But the Bunning amendment--if I just ask you to go read it--says nothing about this issue that I have as a matter of the amendment today. I assume my colleague will say: Everybody knew what he was doing. No, you can't do that during a budget debate. There is no vote during the budget debate that is going to affect what the Finance Committee does to cut taxes at some point later. So the Bunning issue is a specious issue.

We are told this is a jobs bill, and we are also told by my colleague as to this ``debt situation,'' don't worry so much about that because we are going to grow the economy and the debt isn't going to happen. This reminds me of that old joke in the movies: Who are you going to believe, me or your own eyes? Well, let's take a look with our own eyes here.

When somebody says, this doubling of the Federal debt, from $6 to $12 trillion, is probably not going to happen, let me refer you to the budget that was passed by this Senate, embraced by the previous speaker and all on his side of the aisle, I believe--or almost all--except two. On page 4 of that conference report, they say, if they get all they want--they grow the economy, they create the jobs, they get all they want in budget and appropriations and tax cuts and so on--they say they will have a $12 trillion debt in the year 2013. This isn't a case of, well, if we grow the economy, the debt situation will not happen. No. This is what they predict will happen if they get all they want.

So I would refer you to page 4 of the conference report, that you voted for--I say to those who voted for it--and ask yourselves: Were you creating a plan and supporting a plan that doubles the Federal debt? The answer is yes. Case closed. No more discussion about that, I am sorry.

Now, the question was asked: Do we want to repeal this or don't we want to repeal this? The reason I have offered the amendment is, yes, I think we ought to repeal that provision. I did not like that provision when it was put in, but it was. It was part of a larger plan we all protected in order to make that plan work. The fact is, I did not like it then. I do not like it now. I think we ought to repeal it.

The question now is not, What did you think about someone doing that 10 years ago? The question is, In the year 2003, do you support repealing this provision or don't you?

This, in fact, is a tax cut for senior citizens, 8 million of them who have reached their declining income years and who have earned the opportunity to go back to the provision we used to have where 50 percent of their Social Security payments are counted as income for tax purposes rather than the 85 percent. That is what my proposal does.

We are told that what this larger tax bill is about is putting money in the pockets of American taxpayers. That is true. It will be borrowed, of course. We are going to borrow money to provide tax cuts. But if we are going to provide tax cuts, it is perfectly appropriate to ask the question: What are the priorities? Who ought to be first in line? Those at the very top of the income ladder who earn the biggest dividends, should they be first in line? Is that who edges up to the trough here? Or perhaps should we take a look at the issue of the tax burden on senior citizens and especially the income they receive from Social Security?

If this is about putting money in the pockets of the American taxpayers, I say without respect to the motives of those who disagree with me, if the motive is to put money in the pockets of senior citizens who have had to pay a higher tax than they should have to pay, this amendment gives you the opportunity to vote yes or no.

We can have people stand and steam and bluster about other people's motives, but in the end, we will vote on this. And the vote is going to be, do you believe we ought to relieve senior citizens of this tax obligation they have had to pay? In my judgment, the answer ought to be yes. My hope is that enough colleagues will join me so we can make this kind of affirmative change that will be helpful to cut taxes for 8 million senior citizens to the tune of $1,500 a year. These are taxes that ought to be cut. I hope my colleagues will support this amendment.

One more time. There are a lot of mirages created in this Chamber, a lot of word castles being built: We will grow; we will create jobs; we will grow the economy; we will expand all these things that we hear about.

It is not contestable that we have a fiscal plan passed by one vote in this Congress that says: Let us borrow a great deal of money, provide very large tax cuts mostly to upper income folks, double the Federal debt from $6 to $12 trillion, increase funding on defense, increase funding for homeland defense and security, and then shrink domestic discretionary and at the same time double the Federal debt. That is a legacy we will leave to our children if everything goes as is predicted.

I happen to think this fiscal policy makes little sense. If we are going to cut taxes, let's make sure we have a priority in terms of the value system we want to exhibit as we cut taxes. I say those who have reached their declining income years and who are now paying higher taxes because of this provision put in 10 years ago deserve the opportunity to see this provision repealed, and my amendment does exactly that.

I yield 3 minutes to the Senator from Montana.

Madam President, my colleague from Iowa just won a debate we were not having. That is an interesting thing to do. I wasn't proposing this amendment as one that would dramatically reduce the Federal debt. I never suggested that or proposed it.

My point is, we lost on that issue when my colleague and his party passed in the Senate this budget which, on page 4, says they want to double the Federal debt from $6 trillion to $12 trillion. They passed that without my vote. I didn't support it. But I didn't propose this amendment saying it will reduce the Federal debt. I am saying this: Since they won, and since they are going to cut taxes, the question is of choice and priority: Which of the taxes ought to be cut? Which ought to be cut first?

My amendment simply says I think it is more important to cut these taxes for senior citizens--8 million of them who pay $1,500 a year, at this point, more than I think they should pay. I think the priority ought to be to cut taxes for them at this point. Is it more important to do that than to, as I said earlier, cut dividend taxation? I think it is. I think those individuals are in the highest income levels.

Again, I hope Donald Trump won't mind, but since he names everything after himself, and he is a very successful businessman, he probably doesn't mind my using his name. He is at the top of the income ladder, and God bless him. But it is a reasonable thing to ask: what is the priority? Is it providing tax exemptions that will provide large tax cuts to those at the top or to provide tax exemptions for senior citizens who have reached the lower part of their income in their lives and are struggling to make it?

What I propose has nothing to do with the debt. This doesn't reduce the debt. I am not saying it does. If we are going to cut taxes, the question ought to be one of choice and priority. That is what this amendment is. I am going back to the question of debt because it is the very reason I voted against the budget in the first place. We cannot come to the floor and say this debt situation ``isn't real'' because it may not happen because we have this policy or plan that will grow the economy, and if and when we do these debts won't appear.

I am sorry, that just doesn't wash. This plan is a plan that says if we get all we want, if we get this economic growth, if we create these jobs, if our plan is approved, we will then double the Federal debt. Are we concerned about that? You bet your life we are. Are some others around here concerned about it? No. There is a lot of thumbing of suspenders and saying, ``Aw shucks, this doesn't matter.'' Well, it matters. Our kids and their kids will inherit this debt. It will be their burden to pay this.

We just came through a war, and God bless the soldiers we called on to ask to fight that war. This country is enormously blessed that it lasted only a very short time. But I think it is very unusual that America sends her sons and daughters to war but says we don't choose to pay for it at this point. It is a very costly enterprise. Nobody is saying we ought to pay for this. What we said was: When you come back from the war, you can come back to the welcome arms of your family and then inherit the burden of paying the costs. That is my point about the debt and deficit.

Have I used my 7 minutes?

I yield the floor.

Madam President, I ask unanimous consent that the order for the quorum call be rescinded.

Madam President, my understanding is that when I asked whether I had used the 7 minutes, the response was not accurate and that there are, in fact, 3 minutes left.

I knew I talked fast, but I didn't think I finished all 7 minutes then. I thank the Presiding Officer and the Parliamentarian as well.

I wanted to make a point in response to something said earlier that, well, if this amendment passes, the tax cuts for American families will be gone. That is simply not the case. I will describe that I don't, with this amendment, change the child tax credit. That moves to $1,000. It has nothing to do with that. That stays in place. I don't propose changing expensing to $75,000. That stays in place. The increase in the AMT, the alternative minimum tax, exemption stays in place. Acceleration to the 10 percent bracket stays in place. Acceleration to the 15 percent bracket stays in place.

My point is that a lot of things are said on the floor of the Senate, and they are often said by someone who might mean them, but they might be mistaken. It is a mistake to say that this amendment somehow, in some way, jeopardizes tax cuts to most American families. It doesn't. It simply does not.

The only question the Senate will be voting on with respect to this amendment is the following: Do we, at long last, repeal the provision put in place 10 years ago? And, yes, many voted 10 years ago for that large package and put the country on track, and that led to awfully good economic times. But do we repeal that provision? I felt 10 years ago it would be better not to have that provision in the package. I have on two occasions voted to repeal it. Let's try again.

If we are on the floor saying there will be very large tax cuts, let's ask the question: Should this tax cut be one of them, a tax cut for senior citizens that says to them the $1,500 in additional taxes that 8 million of you are now paying, because we changed the rules on what percent of the Social Security receipts you get should be reported for tax purposes, should that be cut? The answer is yes.

While we are talking about double taxation, yes, some dividends-- fewer than 50 percent--are subject to double taxation in this country, but all of this is double taxation--all of this. Senior citizens pay a tax on their wage when they are working. When they retire, they get a Social Security benefit and pay a tax on now 85 percent of that. That is double taxation.

If, in fact, the culprit we are chasing is double taxation, why do we start with dividends first? What about double taxation that results in Social Security recipients being taxed while they work on the same income we will now tax when they retire? It does not make any sense to me. The only question is not one of motives of someone who might be supporting this or offering it, as my colleagues suggested a moment ago, the question is when the roll is called, do you believe we ought to repeal this tax increase that senior citizens face? My answer is yes, let's repeal this tax increase. That ought to have a priority over other provisions in the bill.

One last point. The Senator from Montana clarified the point with respect to Medicare. I appreciate he did that. I failed to do it. This bill does not jeopardize the Medicare trust funds at all. They are restored in the bill.

I yield the floor.

Mr. President, I very much thank my friend and colleague, Senator Grassley, chairman of our committee. He has done an excellent job working on this bill. As he said, I do not support the bill but I do support the process and the will of the Senate to proceed; let Senators vote as they wish. That is, frankly, why we are standing here--to get things done, although we may not always agree.

I now yield to the Senator from Illinois 15 minutes from the time on our side.

Mr. Chairman, I yield 5 more minutes to the Senator from Illinois.

I yield 5 minutes off the amendment to the Senator from Illinois.

Mr. President, I ask unanimous consent that the pending amendment be temporarily laid aside and that the amendment to be offered by the Senator from North Dakota be in order.

Mr. President, I ask unanimous consent that the following staff of the Joint Committee on Taxation be granted the privilege of the floor, and I send the list to the desk. We worked out an arrangement so they rotate.

I thank the Senator.

The amendment the Senator from North Dakota is offering, that I cosponsor, is a tax cut amendment. Most Members of this body like to cut taxes. That is what this amendment is all about. It is cutting taxes.

Second, which group is getting the benefit of the tax cut under this amendment? Under the amendment offered by the Senator from North Dakota, cosponsored by myself, it is senior citizens who get the benefit of the tax cut.

I join the Senator in offering this amendment. It repeals the 1993 tax of Social Security benefits, the tax this body imposed on certain senior citizens in 1993.

We are currently debating a $350 billion tax cut reconciliation bill. This bill is about priorities, about values. That is what budgets are about. Part of the budget is $350 billion in tax cuts. The budget we are working under that was adopted by the Congress set those numbers. I am pleased there was a commitment to limit that reconciliation bill through conference to $350 billion. That was the commitment made by certain key Senators on this side.

It is within this tax reconciliation bill we debate and decide how the changes in revenues and outlays affect our constituents. The debate is about who the $350 billion benefits: do we give more money to some taxpayers or others? The choices are real. We are here to make decisions. We are here to decide.

We need to make sure our Nation's seniors receive a significant benefit. If this bill before the Senate will allocate benefits to certain groups, certainly senior citizens in our country should be a main beneficiary of a tax reduction. This amendment offered by the Senator from North Dakota is just that, a tax reduction for senior citizens. It repeals the 1993 provision which imposed taxes on certain senior citizens.

The bill reported by the Finance Committee provides a tax break for taxpayers with dividend income. That proposal costs $81 billion over 10 years out of the $350 billion. That proposal provides a few seniors, not very many, a few with a small amount of tax relief; 77 percent of seniors in our country will receive no relief, no tax reductions, under the Finance Committee bill on dividends; 77 percent of Americans do not receive any of the $81 billion that will go to very few Americans, the most wealthy, the least in our country.

In contrast, our amendment will provide 8 million seniors with a significant tax cut. All the cost of this goes back to America's seniors. That means $150 billion over 10 years is put back into the pockets of our senior citizens.

The current law enacted in 1993 has two significant flaws. First, in 1993 we changed the rules in the middle of the game for people receiving Social Security benefits. I will never forget. Suddenly that was enacted. It came out of the blue, an additional tax on our senior citizens and their benefits. We began to tax Social Security benefits at a higher rate for individuals at certain income levels.

The second flaw in 1993, we failed to adjust the income levels for inflation. For the past 10 years, there has been no adjustment. This means more and more seniors will be subjected to this tax as each year passes. We need to correct those flaws.

Again, this debate is about choices. We make choices here. Life is making choices. We think the choice here is clear. If we have $150 billion to spend, spend it on seniors. As such, we offset the cost of our amendment to repeal the tax to Social Security benefits. That is the purpose of the underlying amendment by striking the dividend proposal in the bill and also striking reductions in the top rates.

Again, this is a tax cut amendment. Those seniors I mention are currently paying that tax. We are proposing that tax be repealed. That is a tax cut amendment. It is being paid for by a promise to the future. Those provisions of the Finance Committee dealing with dividends are not currently in effect. They are future promises, we suggest, to be repealed so our seniors get the benefit of the repeal of the taxes imposed upon them in 1993.

A couple of numbers: Repealing the 1993 tax of Social Security benefits gets an average of $1,500 into the hands of 8 million seniors. Contrast that with the dividend proposal in the Finance Committee bill. The dividend proposal in the bill gets an average of $19,000 to fewer than 5,000 seniors. Again, what is better: $1,500 in the hands of 8 million seniors or $19,000 in the hands of the most wealthy, only 5,000 seniors? And fewer than 1 million taxpayers, regardless of whether they are 65 or 25, would benefit from the top rate reductions. Remember, there are 130 million filers in America. Fewer than 1 million taxpayers who are not seniors, who are between 65 and 25 get reductions from the top rate reductions.

Members on the other side of the aisle have supported this in the past. Repealing the 1993 Social Security tax is a better choice for our constituents than enacting dividend proposals in the top rate reductions contained in the underlying bill.

Mr. President, how much time is remaining on both sides?

Mr. President, there isn't anybody in this body for whom I have higher respect and more affection than the Senator from Iowa. I must say when I listened to his arguments against this amendment, virtually nothing was said that addressed the merits. In fact, there were some statements which were a little bit misleading. Lawyers like to call them red herrings. That is when you say something to try to get people off track so they don't think about the subject at hand. It is called a red herring.

One of the red herrings we heard was that Democrats voted against this amendment in the past, and it was Democrats who voted for this increase in Social Security taxes back in 1993. That was 10 years ago. That is a different time, a different situation, different circumstance. Back then the Congress voted to reduce deficits, and that was part of a large deficit reduction package. This is 10 years later, 2003. We are faced with the question, within a $350 billion tax bill, how should the tax cuts be allocated. That is the question before us.

Many of us believe it is a far wiser policy that seniors receive more of the tax benefit as a result of the cuts than is the case under the Senate Finance Committee bill. That is why we think the 1993 provision should be repealed

because then seniors will receive significant benefits if it is repealed, and we believe that is a higher priority than giving a lot more dollars to very few Americans who are the elite, the extremely wealthy Americans.

Repealing the 1993 tax on Social Security benefits gets an average of $1,500 in the hands of 8 million Americans. Eight million seniors will receive, on average, a benefit of $1,500 under our amendment. Otherwise, if this amendment does not pass, then by contrast, under the committee bill, which gives dividends to all Americans tax free, a few seniors, 5,000 seniors, will get $19,000.

We are saying there should be a better priority; that is, the money should be given to people who are going to spend it. It should be spread out more evenly rather than have the benefits, as in the Finance Committee bill, so heavily skewed to the Nation's elite. This should not be an elite bill. This should be an American bill. This should be a bill for Americans, and American seniors should be included as the rest of America.

There are other provisions of the bill that give tax benefits other than to seniors. We believe seniors should get a significant part of the benefit. I strongly urge passage of the amendment.

The Senator from Iowa also said there is a difference in philosophy: One party wants to put money in the pockets of people; the other does not.

That, too, is not a valid argument. We are talking about whose pockets this money should be put into, if you want to put it in those terms. We on our side are suggesting that the people whose pockets should receive the money are the seniors, that they should receive the benefits, much more than is the case in this bill. In this bill, the people who receive the money, whose pockets get the money, are the elite, the wealthy elite of America generally. That is not right. That doesn't work. It is not fair. It is not American. We believe this should be a bill that is more evenly balanced for all Americans.

For all those reasons, I urge my colleagues to support the amendment. It is good for America.

Madam President, I yield myself 5 minutes off the bill. For the record, I want to make a correction. I know it was an oversight by the Senator from Iowa when he mentioned that the Medicare trust fund will be somewhat in jeopardy in future years.

That is true, but I know it was an oversight when he failed to state that, under the terms of our amendment, the trust fund will be made whole through transfers from the general fund over to the Medicare trust fund, so it will be made whole or kept whole and held harmless under this amendment.

I know that was an oversight, but I wanted to say that for the record.

Madam President, I ask unanimous consent that the pending amendments be temporarily laid aside so the Senator from Nevada may offer an amendment.

Madam President, I yield whatever time the Senator from Louisiana would desire to have.

Yes.

Madam President, it is my understanding the Senator from Pennsylvania wishes to offer an amendment. I ask unanimous consent that the pending amendments be set aside so the Senator from Pennsylvania may offer his amendment.

Madam President, besides being willing to accept the amendment offered by the Senator from Pennsylvania, I add that there are some portions of this bill which further make the Tax Code more complex. We often do that as we are trying to, on the one hand, balance the budget or fit within certain budget restrictions and, on the other hand, help a certain tax policy which, in effect, adds a lot more complexity to the code. Regrettably, the code is going to be much more complex after this legislation is passed, and it will be passed, than is the code today.

We did, however, include one measure of tax simplification at my behest. It is small, but it is important, I think. There are many definitions in the code. There is a definition of a child for the purpose of the child tax credit or the earned-income tax credit or as an exemption as a dependent or for purposes of a head-of-household exemption. It depends on how many children the household has in terms of what additional credits or exemptions that head of household has. There are five definitions in the code, each different for each of the conditions I mentioned. We simplified that situation.

We said, whether it is earned-income tax credit, the child credit, a dependent for the purpose of exemption or head-of-household exemption, the definition of child is the same. That will make the code a bit easier for taxpayers and practitioners.

I appreciate the amendment offered by the Senator from Pennsylvania. It is helpful always to look for ways to simplify the code. I am not terribly encouraged we are going to get the code simplified very much in the next several years. It would be great if we could. We should make those efforts. If history is any guide, regrettably the President and the Congress together are making the code more complex every year.

Some day the straw will break the camel's back. The code, in my judgment, is going to collapse. It is going to get so complex and finally people are going to get fed up and make significant changes. We are not there. I do not think that will occur for several years.

The amendment offered by the Senator from Pennsylvania is a step in the direction toward forcing us in the Congress to grapple with the undue complexity of the code, whether the flat tax, consumption tax, value-added tax--who knows what is the right approach; that is to be decided another day--or just stay with our current code and make a lot of simplifications. For example, phasing out so-called Peps and Peases. That is the section of the code that says we will give you a tax break on the one hand but take them away on the other. We will give a tax break, but it phases out in a few years. There are lots of provisions in the code like that. One major simplification would be to get rid of those provisions.

I compliment the Senator for advancing the ball and thinking more about simplification. I thank him for offering the amendment.

Madam President, I ask unanimous consent that the order for the quorum call be rescinded.

Madam President, I ask unanimous consent that the pending amendments be temporarily set aside so I might offer an amendment.

Madam President, I send an amendment to the desk and ask for its immediate consideration.

Madam President, I ask unanimous consent that the reading of the amendment be dispensed with.

Madam President, this amendment is designed to take effect earlier rather than later and provide substantially more benefits than the tax bill that is presently before us. It is designed to help stimulate the economy with more wallop, more punch, earlier rather than later.

How does it do that? Two ways. First, it would speed up the dividend tax relief. It would make it take effect earlier rather than later. Second, it would simplify the mechanism that will be sending checks out to people who qualify for the child tax credit. So, there are two ways that this amendment will help provide more income relief, more quickly, to more Americans, than what

is contained in the bill. It is an improvement upon the bill.

First, with respect to speeding up the dividend relief, the dividend proposal in this bill is not effective until the year 2004. Many provisions of this bill take effect in 2003, but the dividend provisions of the bill do not take effect in 2003; rather, a year later, in 2004. I suspect it is to save revenue. There will be no dollars injected into the economy, as a consequence of the dividend proposal, in the year 2003. It will be later, in 2004, and even then it is going to take some time for Americans to change their tax returns to take advantage of this change.

As I stated earlier, we are here today because the economy demands that we act quickly to help our anemic economy. Let's see what we can do to help create more jobs. To rebuild the economy. To rebuild America.

In my State of Montana, we desperately need jobs. Many of our high school and college graduates are leaving Montana. Why? Because they cannot find a job in the State. They go elsewhere. There is a better chance of finding a job in one of the larger cities. But, even that is difficult. Lack of jobs is a national problem, it is not just a problem in Montana. I think over 2 million jobs have been lost in the last couple of years because of an anemic economy. We want to get moving quickly. We want to get moving earlier than we otherwise would. We should seek policies to help the economy grow as soon as possible.

I disagree with the current dividend proposal for several reasons. One, it creates a three-tiered regime. It makes the Tax Code even more complex. It creates a three-tiered regime for investment income. Interest income would be fully taxed, as it is today. Capital gains would be taxed at about half the rate of ordinary income, as it is today. But we now add a third complexity of taxation of investment income, and that is dividend income which would fall to the new regime; that is, the first $500 of dividend income would be excluded from one's income tax, and then, beginning in later years, in 2004, the next 10 percent of dividend income would be excluded, and then in the year 2008, 20 percent of dividend income would be excluded. A new layer, a new complexity, certainly with respect to investment income.

My point is, if we are going to include a dividend proposal in this bill, why not make it take effect earlier? Our economy needs the boost right now, not when taxpayers file their returns in 2005. The dividend provision takes effect in 2004 but, frankly, it does not really take effect until 2005 when people file their tax returns. The dividend proposal has no stimulative effect in the year 2003. Most people do not even get the benefit in 2004. Most individual taxpayers will have to wait until they file their tax returns in 2005 to reap the benefit of a dividend exclusion in the bill.

My amendment will advance the effective date of the dividend provision in the bill to January 1, 2003--this year. This means taxpayers will get relief for dividends they receive this year.

I have my doubts whether the dividend tax relief has much stimulative effect generally, but some will praise the economic virtues of dividend tax relief. I ask, if there are virtues, why wait? Make the proposal effective for 2003 at least to provide the possibility that the economy will see some benefit.

The second provision in my amendment will get more dollars to families by simplifying the distribution of the increased child credit that we passed this year. The President has proposed accelerating the full $1,000 child credit to 2003. It is currently $600. The President has proposed accelerating that, the full $1,000 to take effect this year, 2003. Instead of making taxpayers wait until next spring when they file their tax returns to get the credit, the President has proposed sending the checks out this summer for the $400 increase in the credit. That is the same provision which is included in the Finance Committee bill. I support the acceleration of this credit for working families. It is the right thing to do. I think sending this increase out to taxpayers right away also makes good economic sense. Why wait? This gets money into the people's hands immediately so they can spend it. This will spur consumption and boost the economy, which is exactly what we should be doing in this bill.

My concern, however, deals with the millions of families who will not receive the full $400 check due to refundability limits. I might remind our colleagues that a couple of years ago, when we sent out the so- called $300 check for individuals and the $600 check for married couples, a lot of people did not get the $300; married couples did not get the $600. Why? Because of the tax brackets the taxpayer happened to fall into when they did the calculation to find out what portion of the $300 an individual might receive. If the taxpayer had a lower income, the taxpayer might not receive the full $300. It was a mess. Some got the full $300, some did not. It was a mess.

Under current law, the credit is partially funded. Families can take part of the credit if they pay payroll taxes but do not have income tax liability. Not the whole credit, but part of it. The amount that a low- income family can get refunded is to increase in 2005. The President's proposal did not accelerate the refundability of the credit. Fortunately, during consideration of the bill, the Finance Committee adopted an amendment offered by Senator Lincoln. Her amendment was to accelerate the refundability of the credit. This will allow many low- income families to see some benefit from the increased tax credit. However, even with the inclusion of the refundability amendment, many low-income families will not be eligible to receive the full $400. Millions of working families who have incomes between $10,000 and $20,000 will not get the full $400 check. They will receive a partial check. Again, people are not getting what they are promised.

We are increasing the child tax credit from $600 to $1,000 to take effect in 2003 and telling people they get an additional $400 in 2003 and many will not get it. We tell them that is the law, but they will not get it because their incomes are in certain brackets. Those whose incomes are between $10,000 and $20,000 will get less than the full $400 and receive only partial checks, and they will not know how much unless the IRS tells them how much the following year.

That does not make sense. The families who are most likely to spend the check, those who spend most of their income, will not get the full amount.

My amendment guarantees each and every working family eligible for the child credit would get the full $400 check. This fulfills two of the goals of the stimulus package, getting more money out of the door immediately and getting it to the people who will spend it, lower income people. These two changes to the bill will inject an additional $15 billion into the economy in 2003 and 2004, more than provided for in this bill. That makes sense. The additional dollars in the next 2 years will help create more jobs, help boost demand, and help rebuild the economy.

To pay for the modifications, my amendment merely eliminates the increase of the dividend exclusion from 10 percent to 20 percent in the year 2008. To repeat, in the bill, the 10 percent exclusion is increased to a 20-percent exclusion, and does not take effect until 2008. I say that is too far off. Let's repeal the increase that is scheduled to take effect in 2008 and take that $15 billion and dedicate it to the working families. That will take effect in the early years, 2003 and 2004. We could make the dividend proposal, therefore, effective now, not later.

The current provisions in the bill provide that the dividend exclusion does not take effect until 2004, not 2003. This amendment leaves in place the 10-percent exclusion that is still in place but takes effect a year earlier; that is, 10 percent above the $500 goes in. We are simply saying that the exclusion in 2008 will still be 10 percent. That is so far off. Why schedule an increase that does not take effect until 5 years from now?

I urge my colleagues to support this amendment. Briefly, it moves money upfront. It does not change the total amount of the bill but moves it upfront a little more so there is more stimulative effect in the short run. Thus, the bill does what it is purported to do, which is to create more jobs.

I yield the floor.

I see Senator Dodd ready to speak. I suggest that he speak, and I will speak after him.

Mr. President, I ask all Senators to heed the words of the Senator from Connecticut. I think he is accurate. I think he is on target.

The amendment before us, of which I am a cosponsor, is very simple. The answer of whether it should be adopted is also very easy.

Getting to the point, the question is, Should we extend unemployment benefits to those millions of Americans who do not have jobs and whose unemployment insurance is about to expire?

The provisions in Federal law that give unemployment insurance benefits will expire in a few weeks. The number of unemployed people is rising. These are people who have lost their jobs not because of their fault but because they have been laid off, because the economy is anemic. They lost jobs because their employers are laying them off.

The question is, Should the Congress extend unemployment benefits? Should they extend unemployment benefits to these hard-working men and women who are not making a lot of money? They are basic wage earners. Should we extend unemployment benefits? To ask the question is to answer it: Of course, we should.

I hear from the other side that maybe they will not look for jobs because they are getting additional benefits. They are not getting more dollars in benefits, they are just getting more weeks during which they can receive about $200 a week while they are looking for a job. The obvious answer to that charge is these are not good times. Two-hundred dollars a week is not a lot of money. I daresay no Member of this body can live on $200 a week. We are so used to living on more than $200 a week. I see the Presiding Officer smiling, knowing there is probably a little truth in that. I am suggesting we should do the obvious and extend unemployment benefits.

Another argument I hear against this proposal is that it is not a stimulus to extend the period during which people get unemployment benefits. Of course it is a stimulus. Those people are going to spend that $200-a-week check. Of course, they are going to spend it. Economists will tell us that for every $1 of unemployment benefits, there is a multiplier effect of $2.15 to the economy; that is, for every $1, an additional $2.15 is spent in the economy. It is pretty simple.

I also think it is pretty simple because we are paying for this by repealing the top bracket, repealing the acceleration of the reduction of the top tier. Some people say: That is a small business bracket. Those people are all small business people. We should do this to stimulate the economy.

That is totally wrong. It is totally incorrect. Less than 5 percent-- probably 2 or 3 percent--of the people who receive benefits in the top bracket are small businesses. Let me put it differently; 2 to 3 percent of small businesses in America are in that top bracket. Just 2 to 3 percent. Most of the people in the top bracket are not small business. They are other people. They are very wealthy people. I have nothing against wealthy people getting a tax break. Everybody should get a tax break. It would be wonderful if we all could get a tax break.

We are elected to make choices and set priorities. The economy today is not in great shape. This bill before us is designed and intended to stimulate the economy by reducing taxes. I suggest the right course would be, instead of giving the elite a tax break right now--a lot of them tell me they do not want it; they do not need it--take some of that money and extend unemployment benefits.

Mr. President, I have the highest regard for my friend from Iowa, but for him to characterize this as a job-killing amendment is just beyond the pale. The fact of the matter is that less than 5 percent of small businesses are in the top bracket that will be repealed under the amendment. That is a very conservative estimate.

Second, when we are talking small businesses under terms of this amendment, we are talking about law firms, we are talking about partnerships of all kinds. We are talking about dental partnerships and doctor partnerships. When people use the word ``small business,'' it conjures up a 15 or 20-person operation that is working hard to make ends meet. When we talk about small business, however, we must be clear as to which small businesses are in that top rate. Less than 5 percent of all small businesses pay that top rate, so we are not hurting small business with this amendment, by any stretch of the imagination.

Second, this roughly 5 percent of small businesses includes the mom- and-pop small businesses we have all talked about, but also the partnerships like law firms and dental partnerships. I do not think the latter really conjures up what we are talking about when we talk about helping a small business. Maybe we are, but I think most Americans are not. That is a fact I want to get in the record, that really so few small businesses are in that top rate.

I ask unanimous consent that the pending amendments be temporarily set aside so that the Senator from Arkansas may offer her amendment.

This is the first I have heard this. I don't know what this is all about. Pending a better understanding of the request, I respectfully object.

I ask unanimous consent that the pending amendment be set aside and the Senator from Arkansas be recognized to offer her amendment.