An original concurrent resolution setting forth the congressional budget for the United States Government for fiscal year 2005 and including the appropriate budgetary levels for fiscal years 2006 through 2009.

Thank you, Madam President.

I join the chairman of the committee in reminding our colleagues that this

will be a long week with many amendments. I am very hopeful that we on our side can find a way to get more amendments considered on the front end more quickly--the chairman and I discussed this and I think we are of like minds on this--rather than having a big crush at the end. Maybe if we spent less time on amendments on the front end and more votes on the front end we could eliminate some of that gridlock at the end. I think the chairman is entirely correct. That would be good for the Senate. It would be good for the disposition of these amendments and a better way to reach a conclusion.

The President has sent us a budget. I want to talk about that in part and then later on to talk about the chairman's mark.

First of all, I want to discus the budget the President sent to the Congress. In the President's budget, it spends $991,000 a minute more than it takes in. That is truly a stunning statistic. Every minute, under the President's plan, this country spends $991,000 more than it takes in.

In 2001, the President told us:

Tax relief is central to my plan to encourage economic

growth, and we can proceed with tax relief without fear of

budget deficits, even if the economy softens.

That is what he told us in 2001.

Let us look at the result. We have seen the deficits absolutely skyrocketing. Here we are back in 2001, and we are still in the black. But look at where we have gone. So the President was wrong when he asserted that.

A year after the President's first budget, he said to us:

. . . [O]ur budget will run a deficit that will be small

and short term.

This is after we saw a return of deficits which the President said would not happen.

In the second year, he told us:

. . . [O]ur budget will run a deficit that will be small

and short term.

That proved to be wrong as well. We don't see deficits that are small and short term. We see deficits that are large and long term. In fact, this chart shows the operating deficits under the President's plan from this year going to the end of the budget period. You can see these are massive deficits, by far the biggest we have had in our country's history.

In the third year, the President told us:

[O]ur budget gap is small by historical standards.

Let us look at in fact what has occurred with respect to that claim. You can see this goes back to 1969. It shows the deficits in dollar terms. It shows these are record budget deficits, the biggest we have ever had. So the President was wrong again.

The President said at the end of last year:

Now, we've laid out a plan that shows the deficit will be

cut in half over the next five years, and that's good

progress toward deficit reduction.

We have to ask, Is the President going to be wrong again?

This chart speaks to that. It shows, I believe, that the President will be absolutely wrong again, and wrong by a big margin. The President says in the fifth year the deficit will be $237 billion. But that is only the case if you leave out lots of items. If you leave out the $30 billion of additional war cost the Congressional Budget Office tells us we will still be facing in that fifth year; if you leave out the money needed to fix the alternative minimum tax, which was, as you know when it began, a millionaire's tax. Now it is rapidly becoming a middle-class tax. In fact, about 3 million people are now affected by the alternative minimum tax. By the end of this period, we will have 30 million to 40 million people affected by the alternative minimum tax.

In addition, the President is not talking about the money he will be taking from the Medicare trust fund, or the Social Security trust fund. In that fifth year alone, the President will be taking $235 billion from the Social Security trust fund. That is much bigger than his entire projected deficit for that year. Every penny of this has to be paid back, and the President has no plan to pay it back.

The same is true with the Medicare surplus--$22 billion he is borrowing from the Medicare trust fund, again with no plan to pay it back.

Of course, we have the Congressional Budget Office reestimate. They have looked at the President's numbers and made a change. They think the number will be bigger than the President anticipated.

If you add all of this up, instead of adding $237 billion to the debt in that fifth year, we believe under the President's plan he will be adding $600 billion to the debt.

What we have, I believe, is a consistent pattern by the President to hide from the American people the full story of our fiscal condition. Here is just a few of the ways he is hiding the full effect of his plan.

The first way he does it is he provides no new funding for ongoing operations in Iraq, Afghanistan, and the continuing war on terror, no new money past September 30 of this year.

Does anybody seriously believe the war in Iraq, the war in Afghanistan, and the war on terror are going to end on September 30, which happens to be the end of the fiscal year? Does anybody believe that? That is what is in the President's budget. When we ask the President's representatives, they say: Well, it is hard for us to know what the cost will be.

We can understand that. But the right answer is not zero, and the President is telling us there is no cost for the war on terror, no cost for the war in Afghanistan, no cost for the war in Iraq past September 30 of this year.

The Congressional Budget Office tells us that, instead of a zero, we ought to be putting in $280 billion for these costs for the period 2005 to 2014. That is what they say the war cost will be going forward: $280 billion. The President has nothing.

But that is not the only place the President is failing to tell the American people what we really face. The Bush budget also hides the full story on the cost of extending the tax cuts. The President has come before us and said: Make all the tax cuts permanent. I wish we could do that. But look at what happens. This dotted line shown on the chart is the first 5 years. The Bush budget only covers the first 5 years. But look what happens to the cost of the tax cut right beyond the 5-year budget window. The cost of the tax cut explodes.

This is being hidden, in effect, from the American people. I think if they have a chance to see this information, they will realize the President has us on a fiscal course that simply does not add up. The deficits and debt absolutely skyrocket as we approach the retirement of the baby boom generation.

It is not just the war cost or the cost of the tax cuts, but we also see the same pattern with the alternative minimum tax. The alternative minimum tax was the tax that was designed to catch millionaires, catch people who were filing and paying no taxes. Remember, back in the 1980s, we had that circumstance where Congress found there were a number of people making, at that time, $200,000 a year, and there were 22 of them who did not pay a penny of tax.

In response to that, Congress put in place the alternative minimum tax. It affected a very small number of taxpayers. But it has not been adjusted since the time it was put in place, and now we have between 2 and 3 million people caught up in the alternative minimum tax.

But we have not seen anything yet because by the end of this 10-year period, they are telling us 40 million people will be caught up in the alternative minimum tax. The old millionaires' tax is swiftly becoming a middle-class tax trap. The President deals with the problem only for the first year in his budget. He does not deal with the soaring cost over the 10 years, again hiding the full story from the American people.

But perhaps the biggest place--the biggest place--the President is hiding the full effect of his budget policies is with respect to Social Security. The President, after pledging not to use Social Security to pay for tax cuts or other expenditures of Government, is now using, over the next 10 years, every penny of Social Security surplus. And remember, the word ``surplus'' is not accurate because the money is not extra. This is money that is needed when the baby boomers retire. It is surplus for the moment. That is money that should be used to pay down the debt or prepay the liability.

Instead, the President is taking it to pay for tax cuts and other things. He is

taking every penny of Social Security surplus, not just this year, not just next year, not just for the next 5 years, but for the next 10 years under the President's plan--and all of that at the worst possible time, right before the baby boomers begin to retire. Those funds will be needed to keep the promise made to them.

Remember, in 2001, the President told us he was going to have maximum paydown of the debt. He said he would virtually eliminate the debt. Well, he was wrong again. Because we see the debt exploded. The gross debt of the United States was $5.8 trillion in 2001 when he took office. We now project--using his tax cuts, the alternative minimum tax reform that will be required, and the ongoing war costs; just making those three corrections--the gross debt of the United States will skyrocket to $14.8 trillion in 2014.

You wonder, where is all that money coming from. We are running up this huge debt. Where is this money coming from? Well, we have already seen the President is borrowing $2.4 trillion from the Social Security trust fund--$2.4 trillion; every penny of the Social Security surplus. He is taking every penny available to borrow, and using it to pay for tax cuts and other things.

But that is not the only place from which he is borrowing. He has borrowed already $545 billion from Japan, $149 billion from China; he has borrowed $69 billion from the so-called Caribbean banking centers; he has borrowed $58 billion from Hong Kong; he has even borrowed $43 billion from South Korea. I do not think this makes us stronger. I think this makes us weaker. And that is what has happened.

The President is very fond of saying it is the people's money; we have to give it back to them.

Well, that may have made more sense when there was a surplus, but now that you are in deficit, it is the people's money, certainly, but it is also the people's debt. Where is the money coming from to finance this debt? It is coming from borrowing. We are borrowing from ourselves. We are borrowing from the Social Security trust fund, the Medicare trust fund, under the President's plan, and we are borrowing from countries all around the globe, money that will ultimately have to be paid back, and the President has no plan to do it.

Here are the implications of this policy. This is from a story that was in the Washington Post on January 26 of this year: ``Economists Worry About Long-Term Effects of Weak Dollar and Heavy U.S. Borrowing.'' Here is what it said in the article:

Currency traders fretting over that dependency--

The dependency they are talking about is our need to borrow all this money, borrow from the budget deficit, now approaching $500 billion this year. We are also, in effect, borrowing from the rest of the world to finance our trade deficit, which is also about $500 billion a year.

Currency traders fretting over that dependency have been

selling dollars fast and buying euros furiously. The fear is

that foreigners will tire of financing America's appetites.

Foreign investors will dump U.S. assets, especially stocks

and bonds, sending financial markets plummeting. Interest

rates will shoot up to entice them back. Heavily indebted

Americans will not be able to keep up with rising interest

payments. Inflation, bankruptcies and economic malaise will

follow.

That is the risk the President is running with these enormous deficits as far as the eye can see. We have a circumstance where we have run deficits in the short term. That is more understandable. We have been wracked by an attack on September 11. We have had an economic slowdown. We have a war in Afghanistan and Iraq. I think we can all understand that we would expect to run deficits in that circumstance.

The problem I see is the President's plan going forward. Because even when he sees economic recovery continuing, we are running deficits that are larger than anything we have seen in our country's history--not just for the next few years but the next 5 years and the next 10 years.

When they said in the article that economists are worried about the long-term effect of the drop in the value of the dollar, here is what they are talking about.

The dollar has declined more than 30 percent against the euro just since 2002. In other words, our currency has lost 30 percent of its value against the European currency in the last 2 years. That has enormous implications, both short term and long term.

In the short term, it helps us celebrate abroad. If our dollar is worth less, it makes it easier for us to sell abroad. It makes it harder for us to buy from other countries, so that gives a boost in the short term to our economy.

The problem is, if it continues for an extended period, then people who are investing in the United States in dollar-denominated securities may decide it is no longer advantageous to invest in dollar-denominated investments. They may decide it is time to diversify out of dollar- denominated investments. That could have a very serious and negative consequence on the American economy.

From the Washington Post this morning, I urge my colleagues to look at the story about Warren Buffett--Warren Buffett, the second richest man in the world, somebody who is a patriotic American--indicating that he is betting against the value of the U.S. dollar. He has bet $12 billion against the value of the American dollar.

I was just with a financial adviser, one of the most prominent financial advisers in America, who had a strategy meeting with one of America's wealthiest families. For the first time at their meeting, they decided to begin to invest in other than dollar-denominated investments because they believe the threat to the value of the American dollar to long-term American economic strength is being so undercut by these budget and trade deficits.

We have to get serious about the long-term economic security of our country. Do not take my word for it. This is from the President's own budget document. It is the long-term budget outlook. If we adopt the President's spending plan and if we adopt the President's tax plan, this is what it shows. This is a very sobering chart. It tells us that right now we are in the budget sweet spot. Even though this represents a record budget deficit, the biggest we ever had, it shows things getting somewhat better on a so-called unified basis when Social Security money is being used to pay our bills.

Look what happens in the long term as the baby boomers start to retire and the cost of the President's tax cuts explode: The deficits go right off the cliff, deficits that are utterly unsustainable and that fundamentally threaten the economic strength of the country. That is from the President's own budget document. That is their outlook of where this is all headed. This is a policy that cannot be justified over the long term. It is utterly unsustainable.

If you do not want to trust the President's numbers--and I understand that after we have looked at the previous claims of what would happen-- this is what the Congressional Budget Office shows. It is exactly the same thing. This is their long-term budget outlook--again, a percentage of GDP so the effect of inflation has been taken out.

They show, with the President's tax cuts, the need for alternative minimum tax reform, maintaining current spending policies, and, of course, the President is really increasing current spending because of the increases in defense and homeland security. Look what happens. The long-term deficits absolutely skyrocket.

All of this is happening at the worst possible time, as this chart shows. This chart shows the tax cuts explode as the trust fund cash surpluses become deficits. This chart shows, in green, the Social Security trust fund. The blue is the Medicare trust fund. The red are the tax cuts, both those already passed and those proposed by the President.

What this chart shows is right now the surpluses in the Social Security and Medicare trust funds are offsetting the cost of the tax cuts. Look what happens when the trust funds go cash negative in 2016 and 2017. At the very time the cost of the tax cuts explode, that combination drives us right over the fiscal cliff. This sets up a very difficult set of choices for the future.

This is a joint statement by the Council on Economic Development, the Concord Coalition, and the Council on Budget and Policy Priorities. In the fall of last year, trying to help people understand what we will face in the future as a result of digging the hole so deep now, this is what they said:

To get a sense of the magnitude of the deficits the nation

is likely to face without a

change in policies, consider that even with the full economic

recovery that CBO forecasts and a decade of economic growth,

balancing the budget by the end of the coming decade would

entail such radical steps as:

Raising individual and corporate income taxes by 27

percent; or eliminating Medicare entirely;

We have had tough choices in the past. Wait and see what is to come. Three very serious groups are warning where we are heading.

Continuing:

Raising individual and corporate income taxes by 27

percent; or eliminating Medicare entirely; or cutting Social

Security benefits by 60 percent.

We have just had the head of the Federal Reserve, Chairman Greenspan, say we are overcommitted. He said we ought to consider cutting Social Security benefits. But he has not said cut Social Security benefits by 60 percent. That is what these three organizations are saying would be the options facing a future President and a future Congress if we stay on this current course.

Or shutting down three-fourths of the Defense Department;

or cutting all expenditures other than Social Security,

Medicare, defense, homeland security, and interest payments

on the debt including expenditure on the debt--including

expenditures for education, transportation, housing, the

environment, law enforcement, National Parks, research on

diseases, and the rest--by 40 percent.

I hope our colleagues are listening. I hope they are paying attention. We are on a course that is a reckless course. It is not a conservative course. It is a radical course. It is a course that is utterly unsustainable and will lead us into very serious trouble.

If we look at what has happened to spending, it is important to know, again, if we look at total Federal spending, a share of GDP, and we go from 1981, we reached a peak in 1983 of 23.5 percent of gross domestic product going to the Federal Government and then it zigzagged.

In 1991, we put in place a 5-year budget plan that took spending down each and every year as a share of gross domestic production. Then, in 1997, we passed a bipartisan plan that took us down even further, so that in 2001 we were down to 18.4 percent of gross domestic production.

The Federal Government spending had come down very sharply in that 20-year period. Now we have had this tick-up, and this tick-up primarily has been for defense, homeland security, and the response to the September 11 attack, rebuilding New York, and bailing out the airlines. Even with that tick-up, we see we are still well below the spending levels of the 1980s and 1990s in terms of what the Federal Government is spending.

If we turn to the revenue side, we see quite a different picture. On the revenue side, we can see the revenue side of the equation has just collapsed. In 2004, we now expect revenue to be 15.8 percent of gross domestic production. The revenue has just collapsed. We will have the lowest revenue as a share of gross domestic production since 1950.

Spending is down substantially from where it was in the eighties and nineties, however up from where it was in 2001 because of the increases for defense. Ninety-one percent of the increases have been for defense, homeland security, and the response to the attacks of September 11.

Look what has happened on the revenue side of the equation. The revenue side of the equation has collapsed. About half this is due to the tax cuts. The other half is due to the economic slowdown. Again, we have a real problem on the revenue side of this equation.

The President said last month in a speech in Louisville:

We've got plenty of money in Washington, DC, by the way.

We do not have plenty of money to pay the bills. There is a lot of money here, there is no question about that, but we cannot pay our bills and we cannot come anywhere close to paying our bills. So when the President says we have plenty of money here, he certainly is right, these are very big numbers with which we are dealing, but we do not have enough money to pay the bills.

We are going to hear from the other side that the President has done a good job with his budgets getting the economy growing again. If we look at the economic record of this President, what we see is, in terms of creating private sector jobs, this administration is the first one in 70 years to lose private sector jobs. It is pretty stunning. If you look back, every single President--President Roosevelt, President Truman, President Eisenhower, President Kennedy, President Johnson, President Nixon, President Ford, President Carter, President Reagan, President Bush 41, and President Clinton all had positive job creation in the private sector. We have to go all the way back to Herbert Hoover to see a President who has lost private sector jobs. That does not tell the full story because as we look at what has happened and compare it to history, what we see should be of concern to all of us.

I asked my staff to go back and look at what has happened in the previous times when we had an economic slowdown. I asked them to look at the last nine recessions we have had since World War II and compare job recovery out of those recessions to what is happening now because I think this should alert all of us. Something is wrong, and we have to diagnose what it is. I have some ideas. I am sure my colleagues will have some ideas, but there is something very wrong happening.

This is a chart of a fit line looking at what happened in the last nine recessions. We have a dotted red line, the average of nine recessions since World War II coming out of recessions. The bottom of the chart is the months after the business cycle peak. What we see is about 17 months after the peak, there is typically a strong job recovery. That is about 17 months after the business peak.

Look at what has happened this time. We are now 35 months or 36 months past the business cycle peak, and still we see no substantial job recovery. In fact, we are now 5.4 million jobs short of the typical recovery.

If we were comparing to just one time, I would be less concerned, but this is every recession since World War II, nine recessions, and if we compare what has happened in each of those to what is happening this time, something is wrong. Something is radically wrong. Typically in these other cases, 17 or 18 months past the business cycle peak, we started to see very strong job recovery. Here we are 37 months past the business cycle peak and we still do not see job recovery. As I indicated, we are 5.4 million jobs short of the typical recovery. In fact, it is not just of a typical recovery; it is of every other recovery since World War II. In the nine previous recessions, every other time, by this time, we would have been strongly recovering. It has not happened.

Again, we are going to hear from the other side that things are pretty good. What we see here is the smallest share of the population is at work since 1994. Again, this is a warning signal to us. Madam President, 62.2 percent of the population is employed now. We see the percentage of the population employed down very sharply from 2000 to now--down very sharply. Only 62.2 percent of the population is employed. We have to go all the way back to 1994 to see a number that weak.

It is not just that statistic which ought to concern us. We also see the longest average duration of unemployment in over 20 years--that is, if we look at how long people are unemployed, we find they are staying unemployed for a longer period than any time in the last 20 years. In other words, people are not finding jobs quickly when they become unemployed. When they are laid off, they are not finding jobs for extended periods of time.

This side of the graph is over 20 weeks people have been waiting to find a new job. Again, that takes you all the way back to 1984 to see people having to wait so long to find other work.

I also asked my staff to look at what has happened to real wages during the Bush administration and compare it to the previous administration. Here is what we found.

If we go back to 1996, the average wages in the country were $485. By the end of the Clinton administration, it got up to $530. During the Bush administration, average wages have only gone up $8 a week. That is very weak in historical comparison. Again, it is another warning sign that the set of policies which are in place are not working appropriately.

I know we will hear the other side talk about the stock market recovery that has taken place, and that certainly has been welcomed. It is much

better than where we were. We need to remind ourselves where we are now compared to where we were.

As this chart shows, the market recovery still leaves stock prices at 1998 levels. We have to go back 6 years to find the stock market at this level.

Another point we have heard from the other side--and I am sure we will hear again--is don't worry, it is the surveys that are at fault; that is what is misleading us as to what is going on in terms of employment. They will say over and over that the household survey--we heard this in the Budget Committee debate--the household survey is the one to which we ought to be paying attention, but that contradicts their Commissioner of the Bureau of Labor Statistics in testimony before the Joint Economic Committee. The Commissioner said:

The payroll survey is the best indicator of current job

trends.

That is what we have used here in these statistics. I am sure we will hear the other side argue, as they have in the Budget Committee, that the household survey is better. But the person who is in charge of the Bureau of Labor Statistics contradicts that and says the payroll survey is the best indicator of current job trends.

If we look at the President's economic report that was issued on February 9, just a month ago, they said in that report:

[W]e expect sort of an average jobs in 2004 to be 2.6

million more than jobs in 2003.

This is the President's economic report. This is his prediction of what is going to happen, that there are going to be 2.6 million more jobs this year than last year. From here going forward, that would require the creation of 520,000 jobs a month.

Let's do a little reality test. Here is what happened in February: The increase in jobs was not 520,000 for that month. It was 21,000. In the private sector, there were no new jobs. Every one of these jobs was a Government job. Of the 21,000 jobs created in February, every single one of them was a Government job. There were no private sector jobs created.

The President's report says there are going to be 520,000 jobs created if we are going to meet their claim that there are going to be 2.6 million more jobs by the third quarter of 2004 compared to the third quarter of 2003. For that to come true, they would have to generate 520,000 jobs a month. In February, it was 21,000 jobs and not a single one of them was in the private sector. Every single one of these new jobs in February was in the Government.

So the President's plan is not working. He told us in 2001 this plan would not create deficits. It has created the biggest deficits in our country's history. He told us it would create jobs. Here we are 3 years later. Where are the jobs?

This is what consumers believe is happening. Consumers believe jobs are hard to get. Eighty-eight percent believe jobs are not plentiful or are hard to get. Only 12 percent believe jobs are plentiful. It is not just with respect to recovery. It is not just with respect to job creation. It is not just with respect to people having an opportunity to find a new place if they lose their old job. We are also seeing the wage growth of production workers starting to fall behind inflation.

This green line shows the average hourly earnings of production of nonsupervisory workers. Let's look at this because it goes back to 2001. This is the 12-month percentage change. Back in 2001, we saw an average hour of earning increasing at a rate of over 4 percent. Since that time, it has been almost a steady downward pattern. We see now average wages are going up between 1.5 percent and 2 percent. The red line shows consumer prices, and this year we have now seen the lines cross, so that hourly average earnings are not keeping up with inflation. We are not seeing them keep pace with the increases in consumer prices, another warning sign this is a policy that is not working.

This is our initial take on the President's budget. We think it is taking us in the wrong direction. Let me be clear. When the President came into office in 2001, on our side we proposed a much larger tax reduction in the near term than did the President. I know many people will be surprised by that, but it is a fact. We proposed a budget that had much bigger tax cuts in the short term, to give lift to the economy, than did the President. But we had much less in tax cuts over the 10-year period, about half as many, to avoid going into this deficit swamp.

In retrospect, we were right. It was right to have tax cuts on the front end to give lift to the economy. The economy clearly needed it. It was a mistake for the President to propose these massive tax cuts going out for years into the future when we had the baby boom generation about to begin retiring. It is the combination of policies the President has pursued that we believe is a mistake. We believe, yes, we should have had tax cuts in the short term to give lift to the economy, although we would have chosen a different mix of tax cuts than the President did.

Interestingly enough, the President adopted some of our suggestions, the 10-percent rate, the child care credit, reducing the marriage penalty, and we salute him for that. Those are policies many of us on this side agreed with. But the President also adopted dramatic cuts in capital gains and dividend taxation. These are taxation policies the Congressional Budget Office told us would give us very little bang for the buck in terms of job creation and economic growth. I think the Congressional Budget Office was right. I think that particular mix of tax cuts the President chose was not the right mix to give maximal lift to the economy in the short term.

As we see going forward, the President's tax cuts are so large they fundamentally threaten our long-term economic security. That is where we have the significant difference.

I am pleased to see members of the Budget Committee in the Senate and the House have not adopted the President's full tax cut proposal going forward. Now maybe it will occur in later years, past the 5 years. None of us can know that now, but at least in this budget cycle they are not endorsing the President's plan to have another trillion and a half dollars of tax cuts when we already have the largest deficits in the history of our country and we are about to have the baby boomers begin to retire, which will dramatically increase the expenditures of the Federal Government, because that is one thing we know. The baby boomers are not a projection; they are out there. They have been born. They are alive. They are eligible for Social Security and Medicare, and we are faced with a circumstance in which we have to start making very tough decisions.

My own belief is we have to be tough on the spending side of the equation and we have to be tough on the revenue side of the equation. We have to slow the growth of Federal spending. On the other side of the equation, we have to do something about the revenue mess because the revenue this year is the lowest as a percentage of gross domestic product since 1950. When the revenue was high as the share of gross domestic product, the President said we needed tax cuts. Now that it is the lowest it has been since 1950, the President's answer is, more tax cuts.

It does not matter what the problem is, this President comes up with the same answer: Tax cuts, tax cuts, and tax cuts that primarily go to the wealthiest among us.

I have a chart with me which I will use later on that shows 33 percent of the tax cuts this President has proposed and those that have been enacted have gone to the wealthiest 1 percent, those earning over $337,000 a year. That is not a fair distribution of the tax cuts in this country. It is one reason we have a very weak job recovery, because the tax cuts that were selected were tax cuts that primarily went to the wealthiest among us rather than being targeted at middle- income people who would spend the money. So much of this money has gone to high-end people who save it.

As meritorious as it is to save money, and I try to remind my daughter of this from time to time, that saving is a good thing, but when talking about getting an economy moving we need that money to be spent, we need that money to be moving in the economy. If we look at this economic recovery that has occurred, to the extent it has occurred, there are many factors. One of the biggest factors is the monetary policy of this Nation.

The Federal Reserve has the most accommodative monetary policy in 40 years. It is a key reason this economy has recovered. We have combined debt in this country of over $20 trillion.

So an accommodative monitoring policy, the lowering of short-term interest rates from 6.5 percent down to 1 percent, has been a key reason for the lift of this economy. The second key reason for the lift of this economy has been the stimulus both on the tax side and the spending side. The two of them are about equal over this 3-year period.

If we look at the increased spending that has occurred--and it has been substantial since 2001--from 2001 to 2003, the Federal Government has increased expenditures by 20 percent. Of course, the tax cuts-- especially those geared to the middle class--have helped give lift to this economy.

A third factor helping economic recovery has been the decline in the value of the dollar. That can have negative long-term consequences; but in the short term, a decline in the value of the dollar makes it easier for us to sell abroad, which helps our manufacturing industry and all those that export. It holds down imports because imports become more expensive. So that has helped give lift to the economy in the short term as well.

Madam President, the bottom line is that I believe the fiscal course the President is taking us on--not so much in the short term, although that is of increasing concern, but the longer term proposals by the President are truly dangerous to the economic security of our country. The deficits are too large. They are too long lasting. They explode as the baby boomers retire and the full cost of the President's tax cuts become clear.

I believe we have a responsibility to alter that course. I believe it will become more and more clear in the months ahead that the course we are on is utterly unsustainable and fundamentally reckless. That is why we simply must change course.

I thank the Chair and yield the floor.

Madam President, I suggest the absence of a quorum.

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

Madam President, the chairman has indicated to me he will return in a few minutes and begin his presentation at that time. Rather than have the time be lost, I will say a few words now.

In addition to being concerned about the President's plan to explode the deficits and the debt, as I look at the President's plan I also see what I believe are misplaced priorities. Let me discuss just a few.

As this chart shows, the Bush plan cuts No Child Left Behind, but that cut saves very little in comparison to the cost of the tax cuts for that same year going to the most wealthy 1 percent. Let me just be very clear. The President's plan shorts No Child Left Behind by $9.4 billion in this fiscal year, 2005. We passed legislation here that gave increased responsibility to the States, increased the expenses of the States, and in exchange we said we would cover the costs. The President's budget fails to do that. It fails to do it by $9.4 billion for 2005.

But in that same year the cost of the President's tax cuts for the most wealthy 1 percent, those who earn over $337,000 a year, are $45 billion, five times as much as the money needed to keep the promise of No Child Left Behind.

I must say I am in this category. My wife and I are in the top 1 percent. I would be happy to give up part of my tax cut. I would be happy to have it reduced by 20 percent to keep the promise for No Child Left Behind.

The same is true in other categories--veterans medical funding, for example. The President's budget is $521 million short of providing funding for veterans medical care in 2005 that should be in place to fund it at the same level as last year. It would take $521 million to bring it up to what we did last year for veterans medical care.

In that same year, the President's tax cuts cost $45 billion for the wealthiest 1 percent, those earning over $337,000. That is 90 times as much as the money necessary to restore the funding for veterans medical care. I must say I don't understand these priorities. It doesn't stop there.

This is President Bush's plan for cutting firefighting funds. It would cost $246 million to restore the money. Again, in 2005, in comparison, the President has $45 billion in tax cuts going to the wealthiest 1 percent, those earning over $337,000 a year. That is almost 200 times as much as the money necessary to restore the cuts to the firefighters.

We talked a lot about homeland security. Firefighters who are the first responders, the police who are first responders, ought to be high up on the list of our priorities, and certainly veterans health care. We have just sent thousands of men and women half a world a way to defend this country. Then we cut their medical care. I don't think these are the priorities of the American people.

It doesn't stop there. The President plans to cut COPS funding to put police on the streets. The COPS program has put 100,000 police on the streets in this country. The President proposes deeply cutting COPS funding. It would cost about $700 million to restore that funding for 2005. Instead, the President says it is more important to have $45 billion of tax cuts for the wealthiest 1 percent. I do not think that is the priority of the American people.

When we look at these programs individually, we can see the Bush budget cuts the COPS program by 94 percent. This is the amount of money we provided in 2004. We provided $742 million to put these police on the streets. The President proposes cutting that down to $44 million. He is cutting it by almost $700 million at the same time, saying, No, it is more important to have $45 billion of tax cuts for the wealthiest 1 percent, those earning over $337,000 a year.

My own belief is the COPS program ought to be funded. I believe we are safer because there are 100,000 more police on the streets. The President, with these deep cuts--cutting the COPS program 94 percent-- is going to take police off the streets. When we have a terrorist threat in this country, as we do, why would you take police off the streets? Why would you take police off the beat? It makes no sense to me.

As I say, it doesn't stop there. Here is the President's plan for firefighters. He cuts that program 33 percent. Again, firefighters are first responders.

I can remember well September 11 when the Pentagon was attacked. I remember watching the television. I remember seeing all those first responders. Who was it we asked to respond to the disaster? Firefighters, police, and EMTs. Those are the people who were there to help those who had been hurt.

The President's answer is cut the COPS program 94 percent, cut the firefighters 33 percent, and cut port security 63 percent. We provided $125 million last year for port security. The President wants to cut that by almost two-thirds, down to $46 million. We know we are only inspecting about 4 percent of the containers that come into our ports. We know we need to do more. We know we need to do more to secure the ports. In fact, those who are involved with the ports of the country say we ought to have $5 billion for port security. Obviously, we can't afford $5 billion. But on the other hand, does it make any sense to cut what we are doing now by 63 percent? I don't think that makes much sense in the light of what we face in terms of a terrorist threat to the country.

Earlier I was talking about the tax cuts the President put in place and the distribution of those tax cuts. Again, I want to make clear I proposed in 2001 much bigger tax cuts on the front end than the President proposed. You will recall the President's initial two proposals would have very small tax cuts in the initial years, and much more in

the outyears. I thought he had it upside down and backwards. I thought we should have more tax cuts on the front end to give life to the economy and much less in the long term so we could prepare for the retirement of the baby boom generation and not undermine Social Security and Medicare and national defense. The President largely got his way, with some exceptions.

Here is what we see as beneficiaries of those income tax cuts. Of the income tax cuts, 68.7 percent of the benefit goes to the top 20 percent, and 33 percent of the benefits--almost a third--go to the top 1 percent. Those are people earning over $337,000 a year.

I believe one of the reasons we are not seeing the kind of job creation we might have otherwise seen is the President shows the wrong mix of tax cuts. He has it much too weighted to the top end and not enough to the middle class who are the ones who would spend the money and really fuel the economy.

This next chart shows in a little different way who benefited from the 2003 tax cut. Net tax cuts under the tax act passed in 2003 for upper-income individuals was 67 percent of the benefit, according to the Joint Committee on Taxation. Low- and middle-income people got 29 percent, and businesses 3 percent. Again, I think the President chose the wrong mix of tax cuts.

There is no question that stimulus is what the economy needs when you have that kind of slowdown. Stimulus can be either spending or tax cuts. I believe we ought to do both. We have economic weakness and we spend more money--a 20-percent increase from 2001 to 2003 in Federal spending, most of it for defense and homeland security and responding to the effects of September 11, but we also cut taxes. That is a strategy that makes sense at a time of economic weakness. The problem with what was put in place is the taxes were so directed to tax reduction, so directed at the wealthiest among us, the highest income, that we didn't get the same bang for the buck in terms of economic growth and job creation we would have gotten had we targeted more to middle-income individuals and lower-middle-income individuals who would more likely have spent the money.

This is a very interesting chart. I hope my colleagues will have a chance to see a lot of this chart in the coming days. This is how the tax benefits stack up--the average tax cut in 2006. Middle-income people got an average $566. This is the combined effect of the 2001 and 2003 tax cuts. Middle-income people got an average of $566.

But look at what happened. Those earning over $1 million a year got $140,000 on average in tax cuts. If these bars were proportionate, the bar showing what the people earning over $1 million get would have to go 35 feet higher. I don't know how high the Chamber is here, but 35 feet would be a long way up in the air to show the comparable tax cuts going to those earning over $1 million compared to what the middle- income people get. Middle-income people got $566. People earning over $1 million got $140,000 in tax cuts on average in 1 year.

If we were going to have the comparison done in a proportional way, the bar showing what those earning over $1 million are receiving for the year would have to go 35 feet high compared to this little bit at the middle income.

Again, I believe one of the reasons we are not seeing the job recovery all of us would like to see is the President simply has the wrong mix of tax cuts.

This chart shows it a different way. A typical taxpayer, one right in the middle of the income distribution in the country, under this scenario got $685. This is from the Center on Tax Policy, the average tax cut in 2004. In 2004, those earning over $1 million got $127,000 in tax cuts. That is a stunning difference. The Bush income tax cuts give three times as much benefit to the top 1 percent as the middle 20 percent.

Looking at the middle 20 percent of the people in the income distribution in this country, they have 11 percent of the benefit of the President's tax cuts. The top 1 percent got almost three times as much. In fact, they did get three times as much for those earning over $337,000 a year.

I asked my staff to go back and look at how the top 1 percent of our country has done compared to the rest of the American people. Here is what we found looking at increases in average aftertax income from 1979 to 2000. Those in the top 1 percent improved their condition by $576,000, the middle 20 percent, $5,500. That is 100 to 1.

The people who have benefited by the economic growth are the top 1 percent. That is fine. I am all for that. We all want people to be able to succeed. That is what opportunity is about. That is what freedom is about, the ability to do better, do better for your family, do better for yourself. Great. But when we come along and make tax policy and we look at those people having been the greatest beneficiaries of what has occurred on a basis of 100 to 1 and we in this tax policy say that is not good enough of a difference, we want to turn around and give those earning over $1 million a year a $140,000 tax cut on top of it in 1 year and the middle-class people get $500.

How is that fair? It eludes me how that is fair. I don't think it is fair. Not only is it not fair, but it is not good economic policy. Why not? Because the middle-income people are the ones who spend the money. We need people to spend money to get the economy moving. People in the higher income categories are the least likely to spend it. They are much more likely to save and invest, which is good to do, but that is not what primes the pump. That is not what gets the economy moving.

When I look at who got the biggest benefit, many times friends on the other side of the aisle say, Hey, wait a minute, the wealthiest folks pay most of the taxes. That is exactly right. That is true. The wealthy people do pay more of the taxes. We have a progressive tax system, so higher income people pay a greater proportion of taxes, but they do not pay the same share. They do not pay as much more as we gave in the tax cut side of the ledger. As I indicated, they got 33 percent of the President's tax cuts, but they paid 23 percent of the income and payroll taxes. This is the wealthiest 1 percent. They got 33 percent of the benefit, but they paid 23 percent of the taxes. I don't think it is fair on any basis what the President chose as the mix of tax cuts and I don't think it is good economic policy either.

It is stark when we look at the top 1 percent, those earning over $337,000 a year. They got 33 percent of the benefit of the tax cuts. The bottom 60 percent in this country got 15 percent of the benefit.

Our friends on the other side will say, Hey, wait a minute, the higher income people pay more. Yes, they do, but they do not pay 33 percent of the taxes. Our friends on the other side want to talk about income taxes. They forget that people do not only pay income taxes; they pay income taxes; they pay payroll taxes. The fact is, three- fourths of the American people pay more in payroll taxes than they pay in income taxes. Yet all of the relief has been to income tax payers and done in a way that gives an overwhelming benefit to the highest income tax payer, those earning over $337,000 a year.

The disparity is even bigger when we look at those who earn over $1 million a year. As I showed, those earning over $1 million a year got the cake. We talk about the crumbs and the cake. Here is the cake. Those earning over $1 million a year, for 2006, will get a $140,000 tax cut in that year alone. Here is what the middle-income folks in the country are going to get: $566. There is something wrong with this plan.

Again, when we look at what has happened from 1979 to 2000, the change in share of pretax income, this chart is quite stunning. It is the reason there is a lot of anger in the country, I believe. There is much more anger in the country than I think is generally understood by people in Washington. The reason is middle-income people in this 20- year period have actually lost ground. They are worse off in their share than they were in their pretax income shares in that 20-year period. The middle-income people have actually lost share, 15 percent. Their pretax incomes have gone down. Look what has happened to the top 1 percent. Their pretax income has gone up 91 percent.

We heard Senator Edwards from North Carolina in his Presidential campaign talking about two Americas. The reason that got such a tremendous response is because there is a lot of truth in what he is saying. There are two Americas developing: those who are well-to-do, those who are secure, those

who are fully competitive in this global environment; and then middle- income people, who all of a sudden are finding themselves in competition with people who are earning 25 cents an hour in some other part of the world. We are faced with a circumstance that is changing very dramatically.

I met a man who is involved with one of the major industries in the country at a breakfast I attended several weeks ago. He said, Senator, something is changing structurally in this country. Something is happening that is very dramatic. In the business I am in--he is in the machine tool business--at this stage of an economic recovery, we should find our order books filled. We should see dramatic increases in orders. Senator, that is not what we are finding. Yes, economic growth has improved. We saw 4 percent the last quarter, 8 percent the quarter before that. But, he said, our order books are not filling up in the machine tool business. Something structurally is changing here.

There are jobs being created, but not jobs in this country. There is business being created, but it is not business in this country. The jobs are being created in China. The jobs are being created in Mexico. Jobs are being created in India. Business is being created to some extent in this country because we see strong economic growth here, but it is not as it should be in this stage of recovery.

I believe part of it is we have adopted a flawed policy. We have helped with tax policy the very people who have already done extremely well in the last 20 years. Those who are the most educated, the best trained, are doing extremely well. That is great. I am all for that. I hope very much everybody gets into that category. That is what opportunity is about. Through our policies, we are helping the very people who have already done the best, and we are not doing much for the people who are falling behind.

Chairman Greenspan says we ought to focus on education because if we are going to compete in this global environment, we must have the best trained, best educated workforce. Yet in this budget, the President cuts No Child Left Behind $9 billion.

Does that make sense for our country? Does it make sense to cut education for what was promised by $9 billion when in that same year we are giving the top 1 percent a $45 billion tax cut? Does that make sense? Is that good judgment to strengthen our country for the future? I do not think so.

If we look at what has happened, again, from 1979 to 2000, to those in the middle 20 percent, their share of pretax income has dropped. Look at what has happened to the top 20 percent. Their share has almost tripled.

If people are not paying attention, they are going to get swamped. There is anger in this country because when Senator Edwards talks about two Americas, he is exactly right. Those at the top are doing better and better. I am delighted they are doing better. But those in the middle, they are falling behind.

Why? Because this global economy is great for the people who are the best educated and the best trained. That is why we, as a society, ought to make certain we are doing everything we can to make Americans the best educated and the best trained because if you are not, you are not going to be able to compete. You are not going to do well in this global competition, and your share of the national income pie is going to get cut. Those who are well educated and well trained are going to prosper. They are going to soar. We have to somehow fashion a policy that gives all Americans a chance to compete and to do well and to be winners.

We hear a lot from the other side that the biggest beneficiaries of the top rate cut are the 23 million small businesses; that is where most of the jobs are generated. I agree, most of the new jobs are generated by small business. But I do not agree that the top rate cut benefits most businesses. In fact, only 2 percent of businesses qualify for that top rate. Ninety-eight percent got no benefit from the top rate cut.

I hope very much as this debate goes forward that we think very carefully about what we are doing because it is abundantly clear, while there is economic recovery underway, it is an uneven economic recovery. It is a recovery that is not generating jobs in the same way we have seen in the nine previous recessions. We are 5.4 million jobs behind where we typically have been in other recoveries since World War II.

Something is wrong. Something is not going right. I believe one part of that is the tax policies that have been put in place that have benefited primarily the top 1 percent. The top 1 percent got a third of the benefit--those earning over $337,000 a year. Those are the very people who have done the best in the last 20 years on every scale. They have increased their incomes by over half a million dollars. They have seen their pretax income go up 91 percent, while those in the middle have seen theirs shrink.

I think that is right at the heart of why we see a jobless recovery underway. The people who are the very ones who would spend the money are not getting the money. The people who are getting the money, under the President's plan, are the wealthiest among us. They are the least likely to spend it. They are the most likely to put it in the bank. And while savings is a good thing, and I am delighted to always see people save because that helps investment for the future--and we need to have more savings in order to have more investment, to have more growth for the future--in the short term, to get people back to work and to fuel the economy, you need people spending money. The people most likely to spend money are the people in the middle class.

Of course, we have also seen somebody else spend money. That is Uncle Sam. Uncle Sam has been spending a lot more money. From 2001 to 2003, Federal spending went up 20 percent. From 2001 to 2004, Federal spending has gone up almost 30 percent.

Where is the increased spending going? Ninety-one percent of the increased spending is going in just three areas. Most of it is defense. The next biggest is homeland security. The third biggest was a response to the attacks of September 11--rebuilding New York, bailing out the airlines, and the international programs that have been adopted to deal with the crisis in Afghanistan and Iraq. That is where the increased spending has occurred.

We will hear a lot from the other side that spending is out of control. It really is not. We have seen a big bump up in the 3 years of this President, but where has it been? The increases have been for defense, homeland security, and the response to the September 11 attack.

The place where the deficits have really opened is on the revenue side. It is the revenue side of the equation that has collapsed. We are going to have the least revenues as a share of gross domestic product since 1950. So if we are going to be honest and straight with the American people about diagnosing the problems we have, we have to address the circumstances as we know them, as we face them.

Let me just quickly say, on the revenue side of the equation, I know a lot of people's impulse is, well, if you are talking more revenue, you are talking tax increases. That would not be the first place I would look for more revenue. The first place I would look for more revenue would be the tax gap, the difference between what is owed and what is being paid.

I met with the head of the Revenue Service in the last 2 weeks, and he told me the tax gap, as of 2001--the difference between what is owed and what is paid--was $255 billion in that year alone. We ought to have a concerted effort to go after those who are not paying what they legitimately owe under this Tax Code--those companies, those individuals who are dodging what they legitimately owe, to the tune of $255 billion in 2001 alone. It is totally unfair to the rest of us who pay what we legitimately owe to let others--a small percentage--escape what they owe.

A previous Revenue Commissioner did an analysis and said the rest of us paid 15 percent more because of that small group of companies and individuals who are not paying what they legitimately owe.

I hope we shine a bright light on this tax gap because I believe it is the first place we ought to look to start to fill in this revenue hole that has been created. Instead of going to a tax increase, the first thing we ought to do is close the tax gap so everybody can be assured everyone else is paying what they fairly owe under the law.

I thank the Chair and yield the floor.

I ask the Senator, are you ready to proceed or should I put in a quorum call?

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

Mr. President, the very able chairman of the Budget Committee has just given his review of his proposal on both the revenue and the spending side. Let me put up this chart which shows a bit of a different perspective.

The chairman put up a chart which shows the deficit being cut in half over the next several years. This is the problem I have with that chart. I think it fundamentally misleads the American people about the fiscal condition of the country.

The chairman's chart is entirely accurate about the unified deficit. What does that mean? That is when you put all the money in the same pot, all the income tax collections and all the payroll tax collections to support Social Security, Medicare, and then you take all the spending out of that same pot. That is how we have done the budget here for years.

The problem now is we are in a different situation. The different situation is Social Security, in the 1980s, was changed to run large surpluses during this period in preparation for the retirement of the baby boom generation. So when you put all the money in the same pot, it gives a misleading result. It misleads you as to your true fiscal condition.

Let me take this chart from the chairman's own budget. It shows, for 2004, that the overall debt is going to increase by $612 billion between 2004 and 2005. It is going to increase by $612 billion.

Let's go out. Under the chairman's mark, I think he is saying that the deficit will be cut in half in--Mr. Chairman, 4 years or 3 years? The deficit will be cut in half in 3 years.

But look at this. When you look at the total picture, you see a different result. You see, between 2004 and 2005, the debt being increased by $612 billion; in the next year, $569 billion; in the next year, $553 billion; and in what was supposed to be the third year, where it is supposed to be cut in half, the debt is increasing by $563 billion. There is almost no difference here in how much the debt is increasing. In fact, in the 5 years the debt is increasing $2.86 trillion under the chairman's mark.

The chairman is putting the most positive complexion on this budget he can, and I understand that. But when you look at what he is proposing, he is talking about the unified deficit, he is talking about jackpoting all the money, he is talking about the so-called unified deficit being cut in half. To me, that does not give an accurate picture of the fiscal condition of the country.

I will be happy to yield.

That is correct.

The Senator makes a very powerful point. As you can see just on the tax side of the ledger, the President's tax cut proposal explodes right beyond the 5-year window.

If the Senator will put the chart up again, what that shows----

It is truly stunning. It is not just the tax cuts that have that same pattern. Fixing the alternative minimum tax, which was the original millionaire's tax, is rapidly becoming a middle-class tax increase that has that same pattern.

In addition, they are hiding the cost of the war. The war, they say, has no additional cost. The war in Iraq, the war in Afghanistan, and the war on terrorism has no additional cost past September 30. Who believes that? We know right now they are preparing a request for additional funding, a vote to be held after the election in which they are going to ask for another $50 billion.

At least. The Congressional Budget Office tells us the true ongoing cost of the war over the 10-year period will be $280 billion. There is not a dime of it in the President's budget.

The Senator is quite right. It is this pattern of hiding from the American people the full cost of these budget proposals that is a great concern.

I am happy to yield.

Real money.

You have the same pattern on the alternative minimum tax, as the Senator showed. Interestingly enough, that costs $658 billion over the 10 years. The President only provides for 1 year in his budget--$23 billion. He shows the $23 billion necessary to keep this thing from cutting more and more into the middle class. In fact, we have 2 million or 3 million people affected by the alternative minimum tax. By the end of that 10-year period, 40 million people are going to be caught up in the alternative minimum tax. Boy, are they in for a big surprise. They thought they were getting tax cuts. They are going to get a whooping tax increase. What the President's budget does, and the budget from the Republican side in the Budget Committee, is just deal with this problem for 1 year.

Yes.

The reason for that is, as the Senator knows, more and more people are getting sucked into this alternative minimum tax designed to catch millionaires. Now it is going to be catching middle- class people. In fact, there was an excellent article in the Washington Post this weekend by a young journalist whose family just got sucked into the alternative minimum tax. It cost his family over $2,000 in this year alone to get sucked into this alternative minimum tax problem.

Our friends on the other side are saying they have tax cuts for the middle class which they want to continue. I support continuing those middle-class tax cuts. But they are not dealing with the alternative minimum tax that used to be the millionaires' tax and rapidly becoming a middle-class tax trap. They only deal with that for 1 year.

They have tax increases, as well, built into this budget that are very disguised. It is going to affect millions and millions and millions of people.

Yes. It is hard to believe, but it is true. The President is telling us he has put nothing in the budget because he says it is hard to estimate how much it will be. I have said to these representatives, the thing we know is the right answer is not zero. That is the thing we know for sure. Zero is not the right answer.

The Congressional Budget Office tells us that the 10-year effect of the war in Iraq, the war in Afghanistan, the war on terror is $280 billion. But the President's budget has nothing for it.

That is part of the reason I have said this budget doesn't reveal to the American people our true financial condition. You have the exploding cost of the tax cuts beyond a 5-year window, you have the cost of fixing the alternative minimum tax to prevent it from sucking in more and more middle-class taxpayers, you have the cost of the war that is not in the President's budget, then the biggest one of all, the President is going to take over the next 10 years $2.4 trillion from Social Security. He is borrowing it from Social Security with no plan to pay it back. If you were running any other enterprise, if you were running a private company, you could not take the retirement funds of your employees and use it to pay the other expenses of the enterprise. You would be in violation of Federal law if you did that.

That is what this chart shows under the President's budget and under the chairman's mark. Here is a chart that shows it very well. This is what is entirely hidden from people's view with respect to what is happening to our fiscal condition. This shows the Social Security surpluses by year. You can see the surpluses are exploding. The reason for that is to get ready for the retirement of the baby boom generation. But what our friends on the other side of the aisle are doing with their plans is taking all of this money and using it to pay for tax cuts and other expenditures now, leaving the cupboard bare for the future. How are they going to pay back this money?

Yes. I knew we were going to get into this debate at some point so I asked my staff to see if we could put together some charts and try to explain what is happening. It is the part of this discussion that has received almost no attention, and the Senator is exactly right. Here is what is happening.

We have a dramatic increase in people eligible for Social Security. This chart shows the number of Social Security beneficiaries exploding with retirement of the baby boom generation. This is the increase in people eligible. We will see in short order a doubling of the people eligible for Social Security.

The President told us repeatedly:

None of the Social Security surplus will be used to fund

other spending initiatives or tax relief.

He broke that promise.

He said:

Every dollar of Social Security and Medicare tax revenue

will be reserved for Social Security and Medicare.

He broke that promise.

Then he said:

We're going to keep the promise of Social Security and keep

the government from raiding the Social Security surplus.

He said that in a radio address in March of 2001.

Then he said in 2002:

None of the Social Security surplus will be used to fund

other spending initiatives or tax relief.

I went back and I said, let's add up how much money the President in his budget is taking from the Social Security trust fund. He is borrowing $2.4 trillion. Compare that to the income tax cuts of the same period, $2.5 trillion. Amazing how close these things are.

In effect, what he is doing is taking money from Social Security, raised by payroll taxes paid overwhelmingly by middle-income people. He is using it to fund tax cuts that are income tax cuts for overwhelmingly the wealthiest, and 33 percent of the benefit goes to the top 1 percent, those earning over $337,000.

We have the spectacle of people, through their payroll taxes, funding an income tax reduction that goes primarily to the wealthiest among us and then creating a circumstance in which the Chairman of the Federal Reserve comes in and says, Oops, we are overcommitted; we now have to cut Social Security benefits.

That is really kind of a stunning policy if one thinks about it, if you think about who is adversely affected when you talk about cutting Social Security benefits. Two-thirds of retirees rely on Social Security for more than half of their income; 31 percent get at least 90 percent of their income from Social Security; 50 percent to 89 percent of their income is 33 percent.

Chairman Greenspan now says we have to cut these benefits because we are overcommitted, because we have, in part, taken the money, the President has taken the money under his plan from Social Security to finance income tax cuts that have gone overwhelmingly to the wealthiest of the people among us. That is the reality we confront.

Interestingly enough, they say, you have the shortfall in Social Security which is $3.8 trillion over the next 75 years. That is absolutely true. We have a shortfall in Social Security of $3.8 trillion over 75 years. Interestingly enough, the cost of the President's tax cuts over that same period is three times as much: $12.1 trillion.

Yes. If you look at this chart, it goes back to the point the Senator was making about choices. This is all about choices. The choices the President has made are, yes, to have tax cuts in a time of economic weakness. That we could all understand and even support. We would choose a different package of tax relief than he chose. We would have targeted, clearly, more to the middle class because that would have given us more of an economic boost than diverting so much of it to the highest income in the country.

However, the President is digging a very deep hole. More and more debt. More and more deficits. Deficits that explode right beyond the budget window, right at the time the baby boom generation retires.

What happens? A future Congress and a future administration will have to make very tough choices, which I outlined earlier in my presentation. Very deep cuts in spending, very large tax increases, or some combination to fill in these holes. That is where I fault the President for taking us on a course that is reckless and fundamentally not conservative. This is a course that is reckless.

The Senator is right, we are talking about choices. These are the choices that are made in the budget.

Will the Senator yield on that point?

I was looking at this same data, looking at the President's claim that they are going to create 2.6 million new jobs, and looking at where we are since they made that prediction. It is quite stunning.

In February, of these new jobs that were created, some 20,000, as the Senator indicated, not a single one was in the private sector, not one. The whole assertion by the President, on his tax cut plans, has been, if you cut these taxes, you will get more jobs. He was not saying more jobs in Government; he was saying more jobs in the private sector. Yet the only new jobs we got in February were in Government. They were Government jobs. There was not a single new job in the private sector.

So if the President's plan is working, I do not see the evidence for it. The evidence is, it is failing, and it is failing by a big margin.

I believe one of the reasons maybe it is failing is that the tax cuts he chose were tax cuts that were geared to the highest income people, overwhelmingly.

The Senator might be interested to know, I put up a chart that showed, for 2006, the average tax cut going to somebody earning over $1 million a year is $140,000.

The tax cut for that year alone, 2006. Under the President's plan, the tax cut for those earning over $1 million a year is $140,000.

The average middle-class individuals, those who are in the middle 20 percent of the income spectrum--you break it down into five 20-percent groupings--the middle 20 percent, they get about $560 of tax benefit in that year. The person earning over $1 million gets $140,000.

If you were going to put it on a graph and have the two related--the tax cut for those in the middle 20 percent and those earning over $1 million a year--the chart would have to be 35 feet tall to make a comparison between what the wealthiest get and what the middle class get.

Maybe that is part of the reason this JOBS program is not working, because it has been so tilted to the highest end that we are not getting money into the hands of middle-income people who would be more likely to spend it, thereby spurring the economy.

I was reading the New Yorker magazine last night and they had two guys talking. One said:

I have quit looking for work; I understand that will help

the economy.

Well, it will help the economy because they quit counting him. That is the point the Senator is making. The Senator wasn't on the floor when I showed this chart. I would like the Senator to see this because it really makes a point he is making. This looks at the last nine recessions since World War II, what happened in terms of job production. The Senator was making the point we are now 35 months into this recession, and that is right here, this line, which shows the job recovery this time compared to the last 9 recessions. You can see, in every recession since World War II, 17 months after the peak of the business cycle, job recovery started in a very healthy way. This time, it has not happened. We are 35, 36 months past the peak of the business cycle. Now we see we are 5.4 million jobs short of the typical recovery.

If that isn't a warning sign to all of us that something is wrong here, something is not working here--after every recession since World War II we saw a healthy job recovery beginning 17 months after the business cycle peak. Now we are at 36, 37 months past the business cycle peak and we still are not seeing job recovery.

The chart says ``smallest share of the population at work since 1994.'' That is really stunning. My

colleague, the chairman of the committee, talked about having more people at work than ever before. That is one way of looking at it. Another way of looking at it is, what is the share of our population at work. Of course, more people are at work; we have a much larger population than we have had before but jobs have not grown. If you look at the percentage of the people who are at work, we are at the lowest we have been in 10 years--the smallest share of the population at work since 1994.

I have another chart that shows the duration of unemployment, which is the highest in over 20 years. That is, when people become unemployed, they are taking the longest they have taken in 20 years to find a new job. Something is not right here. Anybody who comes out on the floor and asserts everything is fine, the economy is growing, jobs are being produced--no, no, no, things are not fine. There is something very seriously wrong in this recovery. I just had a gentleman, I said on the floor earlier, in business who told me, ``Senator, there is something very different from what we have seen in different recoveries.'' He is in the machine tool business. He said, ``We should see our order books filling up, and they are not.'' He said, ``I suspect that the jobs being created are in China, Mexico, and India, and not here.''

That goes right to the heart of the point the Senator was making.

Will the Senator yield?

As part of my presentation earlier, I showed this tradeoff very directly. If we look at 2005, the cost of the tax cuts for those who are in the top 1 percent, those who earn over $337,000 a year, for the 1 year it is $45 billion. The amount the President is shorting No Child Left Behind for that same year is $9 billion.

In fact, this is the chart. Ask and ye shall receive. This kind of reveals the President's priorities. Mr. President, $45 billion is the cost of the Bush tax cut for those making over $337,000 in 2005.

The top 1 percent earns over $337,000. That costs $45 billion. But he does not have the money, he says, to fund No Child Left Behind.

That is exactly what it shows. It shows he would only need to reduce the tax cut to the wealthiest 1 percent by 20 percent in order to fund No Child Left Behind.

I said earlier I am in this category. We are very fortunate. My wife and I are in this category. I asked myself, would I be willing to give up 20 percent of my tax reduction to fund No Child Left Behind? I would, because it is the future.

Chairman Greenspan has said if we are looking ahead to the competitive position of our country, the absolute key is education. Our people have to be the best educated and the best trained if they are going to succeed in this highly competitive global environment.

This is about choices. The President is saying it is more important to have all of this $45 billion tax cut for those earning over $337,000 than to take even one-fifth of it to provide for better education in the country. I do not think that is the right priority. I think the Senator is correct.

That is those earning over $1 million.

Mr. President, my colleague keeps referring to pet projects. We on our side do not believe it is a pet project to educate the children of this country. We on our side do not believe putting cops on the street is a pet project. We do not believe funding our firefighters is a pet project.

But I am very glad the Senator has talked about the record on debt. Here is the Republican record on debt. When the President took office, the projection for the publicly held debt was $36 billion. In the President's 2002 budget, that increased to $1.2 trillion. After his tax cut passed, that increased to $1.6 trillion. In the President's 2003 budget, the debt went up to $3.3 trillion. In the President's 2004 budget, it went up to $5 trillion; with the Senate GOP budget for next year, $5.5 trillion.

If our friends want to have a debate about who is responsible for the growth of the debt, it is squarely on their shoulders. Their budgets have passed. They have shredded this deficit and debt. They can say they are interested in fiscal responsibility. They have not

walked the walk and they have not voted the votes.

I wish our colleague had not had to leave because he has come back with this old canard that I heard again in the committee saying that we offered amendments that added to the debt last year, or would have if only the Republicans had not defeated them. The problem with that argument is it is not true.

Here is what happened. Democratic amendments on the Budget Resolution were all paid for last year, and more than paid for, so that we would actually reduce the deficits, reduce the growth of debt. If you took all of the amendments we offered, they did not increase the deficit. No, no. Let's go to the record. What actually happened? Our amendments on the Budget Resolution would have reduced the deficit by $687 billion.

I am so glad the Senator brought this up because I have a list of every Democratic amendment to the Budget Resolution, that I will print in the Record, offered last year, what the cost was, and what the offset was. If any Member wants the opportunity to go back and check the record, here is their chance. What they will find is on every amendment, Democrats paid for their amendments, and Democrats also included deficit reduction. At the end of the day, if all of our amendments would have been adopted, we would have reduced the deficit by $687 billion.

In addition, our friends on the other side are trying to rewrite history. They are trying to act as though our amendments last year were a package. They were not a package. They also want to act as though they were amendments for 10 years. Half of them were not. Half of them were 1-year amendments. In each and every case, we not only paid for our amendments on the Budget Resolution, we had additional deficit reduction.

For example, Senator Biden offered an amendment to fund the COPS Program, $1 billion in cost, and he provided $2 billion of offset. He paid for the amendment, plus he provided $1 billion of deficit reduction.

I ask unanimous consent to have this printed in the Record so hopefully our colleagues will not keep repeating these false claims they have made in the past.

Every single time I have heard our friends on the other side claim the Democratic amendments to the Budget Resolution would have increased the deficit, it is absolutely false. Go back and read the amendments. The deficits would have been reduced under our amendments because we provided fully the offsets for each of those amendments.

We can go down the list. In fact, I had an amendment to fund IDEA and completely paid for it. Senator Lautenberg had an amendment restoring the defense cuts. Members will recall, there were defense cuts last year. Senator Lautenberg fully funded defense and provided the money to do so. On homeland security, there were increases offered to better protect the country. It was fully paid for, plus an amount for deficit reduction. Every single amendment was fully paid for. Accumulate the totals, it is $687 billion of deficit reduction.

Our friends on the other side talked about the record on deficit reduction. I am glad he did because here is what has happened to the deficits over time. We can see on this chart going back to 1969, the last time we had record deficits was in the administration of the previous President Bush. President Clinton came in 1992, and we can see the deficit went down each and every year until we were back in surplus. It was only when this new Republican President took office that we again went back into deficits and now have gone into record deficit territory, the biggest deficits in the history of the country.

Here is what has happened to Federal spending. The Senator from Idaho wants to posture this as a question of spending, who is responsible for spending, and that spending is the reason we have deficits.

No, we have deficits because we spend more than our income. Deficits are a function of spending and revenue, not just a factor of spending but a question of spending, the relationship between spending and revenue.

This chart shows going back to 1981 spending as a share of our gross domestic product. Go to 1992 when a Democrat took control, and what happened to spending as a share of our gross domestic product? Spending went down each and every year from about 22 percent of gross domestic production to 18 percent of gross domestic production. Spending has now gone back up with our friends on the other side in charge of the White House. And I don't fault them for the increases; 91 percent of the increases in spending were for defense, homeland security, and responding to the attack on September 11. We all supported that increase in spending, as well we should have. We had to defend this country.

However, I remind my colleagues, when Democrats were in charge in 1993, we put in place a 5-year deficit reduction plan without a single Republican vote, and we reduced spending each and every year of that 5- year plan. In 1997, we had a bipartisan plan. Thankfully, that was a nice moment in time. We

had a bipartisan agreement. We continued to take spending down. Spending has now bumped up because of what has happened.

Let's look on the revenue side. On the revenue side, again, President Clinton came in and revenue went up. It was that combination of spending going down under the Democratic plan, and revenue going up that got us back into balance, and stopping the use of Social Security for other purposes. That is the Democratic record on spending and revenue. We lowered spending. We raised revenue so that we balanced the budget, and stopped the raid on Social Security.

Our friends on the other side have raised spending--and I don't fault them for that because it had to be done to respond to the attack on this country--but they also dramatically cut revenue. Here is what has happened to revenue. It has been shredded. We will have the lowest revenue this year as a percentage of GDP since 1950. It is that combination of increased spending and reduced revenue that has mushroomed the deficits.

Let's be honest. I don't think the deficits we are facing at the moment are the basis for our strongest criticism of the President's proposals. Anyone who is honest would acknowledge once we had been attacked, once we had to increase defense spending, increase homeland security spending, the economy took a hit, we would expect budget deficits.

Our criticism of the President and his preliminary is that he is suggesting deficits from now forward as far as the eye can see. He never wants to balance the spending and the revenue. Oh, he wants to keep the spending going. They say he is going to restrain spending.

Please, the spending he is restraining in his budget is 17 percent of Federal spending. He is going to save about $7 or $8 billion when the operating deficit, this year, is $700 billion. That is a 1-percent solution the President has come with. He is solving 1 percent of the problem.

Now, let's get serious. Let's be direct and honest with people. Talking about that restraining spending is going to solve the problem, and you come in here and save $7 billion, when you have a $700 billion problem, and suggesting you are solving the problem? That is not real. That is not serious. That is not credible. That does not stack up.

What the President is proposing is increasing spending and cutting revenue, when we already have record budget deficits. And what does it do? It balloons the deficits and the debt at the worst possible time, right before the baby boomers retire. That is the President's plan: to put us deeper and deeper into the deficit ditch, to take every penny of Social Security surplus over the next 10 years--$2.4 trillion--every penny of which has to be paid back. The President has no plan to do it.

The President says he is cutting the deficit in half over the next 5 years? The only way he is cutting the deficit in half is if he leaves out things, he leaves out that there is a war going on. He says there is no war cost past September 30. That is what his budget says: zero to fund this war past September 30; nothing for Iraq, nothing for Afghanistan, nothing for the war on terror.

He says he is going to fully and aggressively prosecute the war on terror, but he has no money to do it. Zero is not the right answer. That is what is in the President's budget to fight the war in Iraq, to fight the war in Afghanistan, to fight the war on terror. The President has a big goose egg past September 30 of this year.

And tax cuts? The President says: Do not worry. Do not worry, my budget will cut the deficit in half over the next 5 years. What he does not tell people is, beyond the 5-year window, the cost of his tax cuts explode.

He also leaves out the alternative minimum tax. It affects 3 million people now, the old millionaire's tax that is now becoming a middle- class tax trap. The President deals with that crisis for 1 year, does nothing for the next 4 years--a problem that is growing geometrically. It is going to affect 40 million people by the end of this budget period. The President does nothing past the first year.

The President's budget adds $3 trillion to the national debt in the next 5 years. This is the President who told us he was going to have maximum paydown of the debt, and he is increasing the debt by $3 trillion over just the next 5 years, and all of it at the worst possible time--right before the baby boomers retire.

I have shown chart after chart today showing the long-term implications of the President's plan. The long-term implications are to dig this deficit hole deeper and deeper and deeper as you go out into future years. The cost of his tax cuts explode at the very time the trust funds of Social Security and Medicare go cash negative. He is putting us in a situation that will require the most agonizing of decisions in the future.

No, our chief complaint against the President's budget is not the deficits being run now, although they are of record proportion. Our chief criticism of the President's budget is he has us on a course to balloon the deficits and the debt in future years, right before the baby boomers retire, compelling a future Congress and future President to make tough choices.

On the question of the tax choices the President has made, when I hear it said, ``Oh, really, the wealthy in the country are paying more,'' please, the wealthy in the country are paying more? I do not know how anybody can stand on the floor of the Senate and seriously assert the wealthy are paying more. I have just shown that those earning over $1 million a year, under the President's proposal, in 2006, are going to get a $140,000 tax cut, on average, in that year.

The wealthy are paying more? Who are we kidding? In 2005, the top 1 percent, those earning over $337,000, are going to get a $45 billion tax cut. That is the cost of the tax cut going to the wealthiest 1 percent. The cost of the tax cut for those earning over $1 million a year, in 2005, is $27 billion. The President chose a set of tax policies that overwhelmingly go to the wealthiest among us.

I put up a chart earlier that showed the top 1 percent--those earning over $337,000--get 33 percent of the benefit of the tax cut in 2005--33 percent, the top 1 percent.

The President said this is all to get the economy moving. Look, I believe it was important to have tax reductions to get the economy moving. Of course, it is not just the tax reductions, it is also the spending. About half the stimulus in the last 3 years has been spending; about half of it has been tax cuts. Both of those were warranted.

The problem is, the tax cut mix the President chose did not give us the biggest bang for the buck at creating jobs or growing the economy. And that is not just my view, that is the Congressional Budget Office's view. They were asked to look at all of the tax cut proposals and tell us what kind of bang for the buck you would get. Interestingly enough, the tax cut on personal capital gains, they said, would give you a small bang for the buck--small--yet that was singled out as one of the important areas for tax reduction.

The same is true on the dividend tax reduction that our colleague mentioned. He said that was a centerpiece. Well, it was a centerpiece in terms of what it cost. It was not a centerpiece in terms of what most economists would tell you is bang for the buck at getting economic growth and job creation. I believe that is a fundamental reason we are in the circumstance of today.

Yes, we should have stimulated the economy. Yes, we should have had tax cuts. Yes, we should have had increased Government spending to give a lift to the economy. But the tax cuts should have been geared to primarily the middle class. They are the folks who spend the money. Instead, this tax cut proposal has gone primarily to the wealthiest among us, those who are the most likely to save the money rather than spend it. However laudatory it is to save money, the thing that stimulates the economy, at least in the short term, is to spend it. This is a bad set of choices.

In addition to that, going forward, the President's proposal will dig us into a deeper and deeper deficit ditch, creating a circumstance, when the baby boomers start to retire, that will become more and more difficult and require tough choices.

What is going to be needed is not just tax increases, no. We need more revenue. The first place we ought to look is not tax increases but closing the tax gap, the difference between what people owe and what they pay because we

know the vast majority of people pay what they owe. But we have a small group of people and companies who do not. We now know that is costing us $255 billion a year. That is not a tax cut. That is somebody cheating on their taxes, cheating all the rest of us, cheating the ability of this country to meet its requirements of national defense and homeland security. That is the first place we ought to go to begin to close this gap.

Yes, we are going to have to be tough on the spending side, too. It is going to take both. We are going to have to restrain the growth of spending, and we are going to have to get more revenue. It is as clear as it can be. Anybody who tells you something other than that is not being straight.

I hope before we are done we will have a healthy debate on the priorities of the country. I believe one of our top priorities is to get our fiscal house in order. Now that we have economic recovery underway, we have to move back to fiscal balance. We have to reduce these deficits that are at record levels, and not just by make believe.

The President says he is cutting the deficit in half in the next 5 years. He says the deficit is only going to be $237 billion in that fifth year. But when we total up the things we know are going to be the costs, including the war and fixing the alternative minimum tax and the money that he is taking from Social Security and Medicare that has to be paid back, what we see in that fifth year is not $237 billion being added to the national debt; it is $600 billion. It is $600 billion the next year and $600 billion the next year and $600 billion the next year. What we see happening is, right before the baby boomers retire, an explosion of the national debt under this President's plan. That cannot be the answer.

I yield the floor.

Mr. President, I thank Senator Domenici, former chairman and very distinguished member of the committee, and someone to whom we all look for wisdom on budget issues.

Let me pick up on the last point he made, the pay-go provision. What the Senator is talking about are rules that we used to have that were allowed to lapse in 2002 which required if you wanted to add spending or cut taxes, that was fine, but you had to pay for it. You had to pay for it. I think that budget discipline that was lost is unfortunate. We ought to renew those budget disciplines as quickly as possible.

I think it is fine to say there are certain taxes we should cut. In fact, I have

indicated publicly that I will vote to extend the 10-percent bracket. I will vote to extend the marriage penalty relief. I will vote to extend the expansion of the child care credit. I will vote to extend the small business expensing. I personally believe--and I think Senator Allard and I may agree--those are provisions that we ought to continue. There may be some more that Senator Allard wants to continue that I would not without paying for it.

But I would say on any spending that is new and any tax cuts that are new, we ought to pay for them. This deficit ditch is so deep now that I think we ought to impose that discipline on ourselves. We did it before. It helped. I don't think it solved the problem, but it certainly made a contribution. It provided a discipline on both the spending side and the taxing side that was important. That doesn't mean you can't, on an emergency basis, spend more or tax less. It requires a supermajority vote. It requires 60 votes to break that discipline. I think it helped us immeasurably. I think it saved hundreds of billions of dollars.

I was on this floor last year with Senator Nickles siding with him in stopping some spending by raising budget points of order that apply on the spending side of the ledger.

I think it is very important that we reintroduce those disciplines as soon as possible.

Let me talk a little about this budget. I talked earlier about the President's budget. I also want to talk a little about this budget and why I think it is deficient.

The first thing that concerns me is it adds $2.86 trillion to the debt over the next 5 years. I think one of the things that is being missed in these discussions is something that is flying right below the radar. It is the amount of money that is being taken out of Social Security to pay for other things, money that has to be paid back but that gets lost in this discussion of deficits. The reason for that is they are talking about what is called the unified deficit. That is when you put all the money in the pot and you treat it all the same. All the Social Security revenue goes into the pot along with the income tax revenue and every other kind of revenue. All the spending comes out of that pot. The problem with that approach is at this moment in time, Social Security funds are running big surpluses in preparation, supposedly, for the retirement of the baby boom generation. But we are not using that money to pay down the debt or prepay the liability. We are taking that money and using it to fund tax cuts and other expenditures of Government, and those Social Security surpluses are growing dramatically, by the end of this 5-year budget the Social Security fund surplus just for the fiscal year 2009, is going to be up over $235 billion. I think it is hiding, basically from all of us, and from the American people, our true fiscal condition.

Let me make this point. If we take the chairman's mark--I have high regard for the chairman. I respect him. I have found that he is somebody I can trust. I also like him. This does not have anything to do with personalities. This has to do with the fiscal situation we face as a country. Under the chairman's mark, the total debt of our country at the end of this year is going to be $7.4 trillion. But this year, $612 billion will be added. Next year, we will have $8 trillion of debt. The next year, $569 billion is being added to the debt; the next year, $553 billion; the next year, $563 billion; the next year, $564 billion. Do you notice a certain sameness as to how much is being added to the debt every year? Yet at the same time, the chairman and other Members have said it is cutting the deficits in half. And both statements are true. The deficit--which is calculated on a unified basis with all funds going into the pot, all revenue and all spending coming out of that same pot--is being reduced in half over 3 years by the chairman's mark. The problem is the increases in the debt are not being cut in half. The increases in the debt are virtually unchanged.

The debt is increasing this year by $612 billion under the chairman's mark. By the third year it is going to increase by $563 billion.

The debt increases are not being reduced by this plan in any significant way.

As a result, for the 5 years, the debt is being increased by $2.860 trillion.

This is, in many ways, the good times because the baby boomers have not started to retire yet. They start to retire in 2008. When we couple the increased expenses which flow from the baby boomers retiring with the reduced revenue by making the tax cuts permanent--and, by the way, that cost explodes right outside this 5-year budget window--what we see is under any growth scenario, any reasonable growth scenario, this debt problem, this deficit problem, is going to get much more serious in this next 10-year period. It is not getting better.

Those who say, gee, with some more growth this will all work out--no, it does not work out. That is what the Comptroller General of the United States is warning us about, that is what the International Monetary Fund is warning us about, that is what budget group after budget group is warning us about. We cannot grow our way out of the deficits that are coming because we are stacking up debt at the time that is most favorable. We are stacking up debt when we have the trust funds throwing off huge cash surpluses.

What is going to happen when those trust funds go cash negative? Instead of $160 billion of Social Security surplus, which will happen this year, instead of $235 billion of Social Security surplus which will happen in the fifth year, when those trust funds go cash negative, then what happens, and the baby boomers have retired and the full cost of the President's tax cuts have been phased in? Then these deficits look like child's play. Then we have a real chasm which has to be dealt with.

As I see it, the chairman's budget simply does not do the job. When we look at the chairman's mark and we put back in the war costs CBO says will be there, and we look at addressing the alternative minimum tax, here is what we see the operating deficits looking like over the next 5 years. They are enormous. The operating deficits are enormous. We see very little reduction in them under the chairman's mark. There is $638 billion going down in 2009 to $520 billion, and I don't believe that is an accurate reflection. I believe by the time we get to the fifth year we will add another $600 billion to the debt, based on my own analysis.

Our colleagues on the other side have talked about this proposal reducing the deficit. Actually, this proposal does not reduce the deficit. The deficit is going down on a unified basis, not counting the money that is being taken from Social Security, if we do nothing. The deficit is going down if we do nothing. But if we adjust the baseline for the one-time expenditures that were made last year, when we had a supplemental appropriations bill for over $85 billion last year--that is in the so-called baseline going forward--if we take that out, which the chairman has done--and, by the way, I commend him for doing that because otherwise we build in spending that should not repeat itself. It is one-time spending that should not be added to the base. The chairman has taken it out of the base. He is absolutely right to do so.

Once we have done that and then we look at what is happening with the deficits under the chairman's proposal, what we see is it increases the deficit by $177 billion over the next 5 years. He is adding $177 billion to the deficit over the next 5 years. That is a mistake. We have record deficits now. We have the baby boomers coming. They will retire. We should not be adding to the deficit by the policy decisions we make here. We ought to be reducing it.

The chairman says the deficit in the fifth year under his plan will be $202 billion. That is only true if we leave out certain things. Number one, he is leaving out additional war costs in that fifth year. The Congressional Budget Office says residual war costs in the fifth year will be $30 billion. He leaves out the alternative minimum tax fix, that costs $55 billion in the fifth year. He leaves out the $22 billion he will borrow from the Medicare trust fund that year which he has to pay back. He is leaving out the $235 billion he is borrowing from the Social Security trust fund in that fifth year. In that year alone, he will borrow $235 billion from Social Security. He will borrow another $22 billion from Medicare trust funds so he is borrowing $257 billion in that year and that is being stacked on the debt. So instead of adding $202 billion to the debt in that fifth

year, he is adding at least $545 billion to the debt. That is my own conclusion.

What is wrong with, for example, this budget in terms of revealing our full fiscal condition? One of the first problems we have is the war costs. The President has zero for war costs past September 30th. The chairman has put in a reserve fund of $30 billion which is certainly more forthcoming than the President's plan. But the chairman does not include it in his actual budget so he does not add to the deficit calculations by that $30 billion. He just says it is in a reserve fund. It may be spent, but we are not counting on it.

That is not a budget. It is not a budget when you say we may spend this money, and if we do, we will find someplace to get it. I guess we will have to borrow it because he is not providing the funding for it. He is not adding it to the deficit totals for that year. He is not budgeting for it.

The Congressional Budget Office says for the 10 years from 2005 to 2014, the residual war cost is $280 billion. We are not facing up to the real costs we all know are coming.

Then we look at priorities. In 2005, the tax cuts going to the top 1 percent cost $45 billion, those earning over $337,000. If we were to keep the promise of No Child Left Behind in that year according to the chairman's budgets--this is a different number compared to the Bush budget because this budget before the Senate, the chairman's mark, is somewhat more generous in dealing with No Child Left Behind than the President's budget--but looking at this budget, he is $8.6 billion short of meeting the amount committed to No Child Left Behind. That is less than 20 percent of the money that is going in the tax cut to the wealthiest 1 percent.

The same is true as we look at other priorities. Veterans medical funding. If we were to increase veterans medical care funding to meet the 2004 service levels, it would cost $521 million. Instead, we are giving $45 billion of tax cuts to the wealthiest 1 percent.

This is a question of priorities. What is more important? They are saying it is 90 times as important. We will spend 90 times as much providing a tax cut to the wealthiest 1 percent than to restore medical care funding to the 2004 service levels in 2005. If we took a poll of those who are the wealthiest 1 percent in this country and they were asked, Would you be willing to give up 1\1/3\ percent of your tax cut so we could match the medical care funding of our veterans in 2005 with what we did in 2004, there would be a resounding yes, I would give up 1 percent of my tax cut in order to provide decent medical care for our Nation's veterans.

The COPS program. It would take $700 million to restore the cuts being made in the COPS program. COPS program is the program that has put 100,000 police officers on the street. It costs $700 million to restore those cuts that are in this chairman's mark. Again, I compare it to the $45 billion being provided in tax cuts to the wealthiest 1 percent.

Does it make sense to cut the COPS program, reduce the number of police on the street, when we are threatened by terrorist activity in this country?

I do not think that makes sense. I do not think those are the right priorities for the country.

We look at the firefighters in the same way. It would cost $246 million to restore the cuts to the firefighters that are included in this budget. Again, if one looks at a comparison of the tax cuts provided to the wealthiest 1 percent--those earning over $337,000--it costs $45 billion for that same year.

If you asked the people who are in this category: Gee, would you be willing to give up one-half of 1 percent of your tax cut so we do not cut the firefighters, I think overwhelmingly people in that category would say, yes, that is a priority that we fund the firefighters at last year's levels and not cut them, not cut them dramatically.

This is a debate about choices. It is about choices of what is the future course for our Nation. I believe the deficits and debt that are contained in these budgets are simply too large and we need to take aggressive action to deal with them, and this is all happening at the worst possible time, right before the baby boomers retire.

But I am not focused on this year's deficit. That concerns me, but that is not the focus of my concern. I am much more worried about where this is all headed under the President's plan. I am much more worried about where this is all headed under the chairman's plan than the immediate deficits.

One would expect deficits at a time we have been attacked. One would expect it at a time we have been recovering in the economy. The problem with the President's plan, the problem with the chairman's plan, is they never plan to get out of deficit. Instead, they keep adding to the debt, and by hundreds of billions of dollars a year, not just this year, but next year, and the next year, and the next year, and the next year--every year by over $500 billion of added debt, and every year thereafter, taking every penny of Social Security surplus, borrowing it, using it to fund tax cuts and other expenditures, with no plan to pay it back.

No, this does not add up. This does not add up. This does not come close to adding up. It has enormous implications for our long-term economic strength.

Now I understand this is an election year and things are unlikely to be changed very dramatically this year. I have had probably a dozen of my colleague say to me, what we need is a big plan for next year. I wish we could take more aggressive action this year, but I am realistic and know it is probably true that our best opportunity to deal with this problem in a fundamental way will come next year, and that is when we need to be prepared to act in a serious way and quit just hoping against hope that somehow this all goes away.

It is not going away. It is not going away under the chairman's plan. He is adding $500 billion to the debt every year of this plan. It is not going away under the President's plan. He is adding even more. The President adds $3 trillion to the debt over the next 5 years--$3 trillion. This plan is a little bit better. It adds $2.860 trillion to the debt. None of this is sustainable, especially in light of the retirement of the baby boom generation, which starts in 2008, and of the cost of the President's tax cuts that absolutely explode beyond the 5 years of this budget plan.

I thank the Chair and yield the floor.

Mr. President, I agree with much of what the Senator from Utah has indicated. There are basic fundamentals to the functioning of our economy. Right at the heart of the determination of how successful we are as an economy and the role the Federal Government plays is first on the monetary side with the Federal Reserve Board and on the fiscal policy side what we do with our spending and taxing decisions.

The problem I have with the President's budget and the budget offered by the majority is it contemplates deep additions to the debt even at a time of economic strength leading into the retirement of the baby boom generation which will explode the cost of the Federal Government. When we overlay that with the President's tax proposals, it explodes the cost of revenue lost to the Federal Government at the very time the baby boomers retire, taking us right over a fiscal cliff.

Those are not just my views. Those are the views of many who have studied the President's plan. That is why we have the Comptroller General of the United States warning us we are heading in a direction that is unsustainable. That is why we have the head of the Federal Reserve Board saying to us we are overcommitted and tough choices are going to have to be made. That is why responsible budget group after budget group has said to us you are overcommitted. You have massive deficits--the biggest we have ever had in dollar terms--and you are headed for even more trouble in the future.

I would be happy to.

I am fully aware of that. I say to the Senator the Chairman of the Federal Reserve Board has also told the Congress to consider cutting Social Security benefits. That is part of the logic of where it all leads. The 75-year shortfall in Social Security is one- third the 75-year cost of the President's tax cuts. To suggest these two things are not related is to avoid reality--an unpleasant reality, but, nonetheless, a hard fact we have to cope with.

The fundamental problem we have here is our appetite for spending is greater than our appetite to tax ourselves to pay for it. I believe it is going to take an approach on both sides of the equation. I believe we are going to have to restrain our impulse to spend, and I believe we are going to have to be more disciplined on the revenue side of the equation.

The revenue side of the equation is what has really fallen out. We now look at this year and we see revenue will be at the lowest percentage of gross domestic production since 1950. While it is true we have seen an up-tick in spending largely because of the needs for additional money for defense and homeland security and responding to the September 11 attacks, it is still true even with that increase in spending that we are well below the levels of Federal spending in the 1980s and the 1990s as a share of our national income.

As I diagnose this problem, I come to a different conclusion than the Senator from Utah. I share with the Senator the conclusion we have to discipline spending. I also believe we have to work on the revenue side of this equation. I say the first place we ought to look is not to a tax increase but to the tax gap, the difference between what is owed and what is being paid that the revenue commissioner now tells me for 2001 was $255 billion for the 1 year alone. We have not had any serious aggressive effort to go after this tax gap.

I was also told by the former revenue commissioner that he anticipates those in the vast majority who pay what they legitimately owe are paying 15 percent more because we have some--both companies and individuals--who are failing to pay what they legitimately owe. I am confident the Senator from Utah pays what he legitimately owes. I know I do.

I would be happy to review the Senator's returns and render another judgment.

I might say for my part I always enjoy visiting with the Senator from Utah and his questions. He thinks about these subjects in a very careful and disciplined way. I always enjoy these chances to have a serious discussion and a serious debate that is all too lacking in the Senate.

Just momentarily, because I know the Senator from Nevada has a presentation he would like to make, and I know the Senator from Washington also has something, for the record I will provide the other side of the story with respect to something Senator Allard presented.

Senator Allard was making the argument that those at the highest income levels are actually going to bear a greater proportion of the total tax bill going forward than they did before the tax cuts. The analysis we have seen by others reaches a different conclusion. Let me share that with my colleagues.

This is done by the Tax Policy Center which is run jointly by the Urban Institute and the Brookings Institution. Their conclusion is those with very high incomes will be paying a smaller share of total taxes as a result of the Bush tax cuts.

Let me give three examples. Those with taxable incomes above $1 million who constitute 0.2 of a percent of taxpayers would pay 12 percent of total taxes in 2006 without the Bush tax cuts. With the tax cuts, these same pairs will pay 11.2 percent of total taxes in that year. This includes not only income taxes but payroll taxes.

Second example. Those with taxable incomes above $500,000, who constitute one half of 1 percent of taxpayers, would pay 17.4 percent of total taxes in 2006 without the Bush tax cuts. With the tax cuts, these same taxpayers will pay 16.4 percent of total taxes in that year.

Finally, those with taxable incomes above $200,000, who constitute 2.4 percent of taxpayers, would pay 30.7 percent of total taxes in 2006 without the Bush tax cuts. However, with the tax cuts, these same taxpayers will pay 30.1 percent of total taxes in that year.

The Senator from Colorado was arguing that those who are at the high incomes will pay more of total taxes as a result of the Bush tax cuts. This independent analysis by the Tax Policy Center reaches just the opposite conclusion. When you look at income taxes and payroll taxes, higher income people, those at $1 million, those at $500,000, those at $200,000, all will pay less than they would have paid without the tax cuts.

Finally, looking at it in a different way, under the Bush income tax cuts, the top 20 percent of income earners got 68.7 percent of the benefit. More striking, the top 1 percent of income earners, those earning more than $337,000, got 33 percent of the benefit of the Bush tax cut. That is much more than any other income class.

Finally, looking at 2006, how the tax benefits stack up, in that year, middle-income taxpayers, those who are right in the middle of the income stream, the 20 percent right in the middle, will receive an average tax cut of $566. Those with incomes over $1 million in 2006 will get an average tax cut of $140,369. If these bars were actually proportionate, the bar representing the tax cuts received by those with over $1 million of income would have to be 35 feet tall. It would have to be 35 feet tall in order to compare proportionately with what the middle-income taxpayers will receive in that year.

I thank my colleagues and yield the floor so the Senator from Nevada can speak.

I ask the Senator, will you give us an idea how long you intend to speak?

Ten or 15 minutes. And then for the information of our colleagues, I ask the Senator from Washington, how much time would she like?

After that, we will then probably close down the shop. We do not have any other speakers on our side, I say to my colleague.

Mr. President, I thank my colleague from Nevada. He is also a valuable member of the Budget Committee. I enjoy these discussions with him. He is thoughtful. We disagree, but we will have a chance to talk about some of those disagreements as we go through the debate.

I am going to take a moment to talk about some of these issues now, but I believe he does share a fundamental commitment to the notion that we have to get these deficits down. We may have some differences about how to do that. I believe we have to both restrain spending and work the revenue side of this equation. I don't think it is going to work without that.

Let me start with a little different take on what has caused this dramatic flip in where we are with respect to deficits and what we earlier projected to be surpluses. We have had, for the period from 2002 to 2011, a $9 trillion reversal. As we look at the causes, here is what we see. The tax cuts are 33 percent of the difference.

The Senator from Nevada had a chart. I think it showed 23 percent. I don't quite know what the difference is, although I will bet in his chart he did not include the additional debt service as a result of the tax cuts. My recollection is it was 23 percent in his chart. We may also have a different timeframe.

Our analysis from 2002 to 2011 is that 33 percent of the disappearance of the surplus was from tax cuts. The second biggest reason was technical changes, primarily lower revenues--lower revenues that were not caused by the tax cuts; lower revenues that were because the projections were overly optimistic.

The third biggest reason was other legislation. It is spending. Most of the spending went to increased defense spending, increased homeland security spending, and the response to the 9/11 attack, rebuilding New York, the airline bailout, and the rest. Only 8 percent of the disappearance of the surplus for the years 2002 to 2011 is the result of the economic downturn. In our analysis, the biggest reason for the disappearance, the biggest single reason, is the tax cuts.

I am much less concerned about the tax cuts in the short term. I think all of us know you have to run deficits in the short term with an economic downturn, with the attack. It is the longer term policy of continuing to run these deficits that is truly dangerous and reckless.

When we look at where the increase in spending occurred, we can see that 91 percent of it is in these three areas: The increase in defense spending, which is by far the biggest, the increase in homeland security, and the response to the attack.

Here is what has happened to the debt under the President's plan. The debt is taking off like a scalded cat;

again, right before the baby boomers retire. The problem I see with the budget the President has put before us is there is no real progress on reducing the increases in the debt. The President says he is going to cut the deficit in half, but that is only because he leaves out whole areas of expenditures. But if you look at increases in the debt, what you see is quite a different picture. The debt keeps getting increased under the President's plan by $600 billion a year, each and every year, for as far as the eye can see. At the end of the budget period it is increasing by $700 billion.

The Senator from Nevada says we have to get back to reducing the deficit so we stop accumulating debt and so we are in a position to start paying down debt. That isn't where the President's plan takes us.

This is from the President's own budget document.

What it shows is record deficits, the biggest deficits in dollar terms we have ever had, a slight improvement in terms of the so-called unified deficit where all the funds are jackpotted, Social Security money is used to pay for tax cuts and other expenditures. But then look what happens. As the baby boomers retire and the President's tax cuts explode in cost, we are taken right over the cliff. That is the problem with the President's plan. It doesn't add up in the long term. It does not add up in the short term, and it takes us in a very reckless direction, one in which we will not be able to meet the long-term obligations of the country.

With that, I yield the floor and thank the Senator from Washington for being here this evening and for her invaluable contributions to the deliberations of the Budget Committee.

Mr. President, I think we should see how the morning goes before we make that decision.

Mr. President, I have been interested to listen to this early morning repartee on the other side about what the status of the economy is and what the status of the job market is. I do not think it is a matter of spin to talk about what the facts are, and the facts are really very clear with respect to this President and what has happened to the job market under this President.

When people say this is the first President to have lost private sector jobs since Herbert Hoover, that is a fact. Nobody is saying, as the Senator from Kentucky represented, the Bush record on the economy is the same as the Herbert Hoover record on the economy. That is not what anybody has said here. The Senator from Kentucky has not been here; perhaps he missed what has been said.

What has been said is the simple fact that this administration is the first administration since Herbert Hoover to lose private sector jobs. In every other administration--Roosevelt, Truman, Eisenhower, Kennedy, Johnson, Nixon, Ford, Carter, Reagan, the first President Bush, President Clinton--there has been in every one of those administrations growth in the private sector job market.

Under President Bush, we have seen a loss of private sector jobs. The last time that was true was in the administration of Herbert Hoover. That is a fact. That is not talking down the economy. It is a fact.

The second fact is this recovery is very different from every other recovery from recession since World War II. That also is a fact.

If we look at the average of the nine recessions since World War II, what we see is, after 17 months, after the business cycle peaked, we start to see substantial job recovery. That has been the pattern of the nine recessions we have had since World War II.

Look what is happening in this recovery. Here we are 36 months past the peak of the business cycle, and still we are not getting job recovery. Something is wrong. If we want to be serious about figuring out how to solve the problem, we first have to diagnose it correctly. We are 5.4 million jobs short of the typical recovery in the nine recessions since World War II. Something is wrong.

Private sector jobs have declined. We have seen 3 million jobs lost since January of 2001. That is not talking down the economy. That is a fact, I say to my friend. It is a fact. If we are going to diagnose what is going wrong here, we have to figure out how is this different from what we have seen previously. I think any objective observer looking will have to conclude this is something dramatically different.

The Chairman of this President's Council of Economic Advisers, in a briefing on the 2004 Economic Report of the President, which was issued just last month, said:

[W]e expect sort of on average jobs in 2004 to be 2.6

million more than the jobs in 2003.

That was this administration's projection a month ago. For that projection to come true, there would have to be 520,000 jobs created in every month from now to the third quarter of this year.

Look what happened in February. There were not 520,000 jobs created. There were not 420,000 jobs created. There were not 320,000 jobs created. There were not 120,000 jobs created. There were 21,000 jobs created in February. That is 500,000 jobs short of the monthly totals this administration will need to meet its projection.

Every one of these jobs that was created was a Government job. There were no jobs created in the private sector. Something is wrong.

When we report to the American people on the status of the economy, there is a dramatic difference between what was occurring during the Clinton years--remember, during the Clinton Presidency, 22 million jobs were created. This President has lost 3 million jobs. In the Clinton administration, there were 22 million jobs created in the private sector.

If we look at this current recovery, one of the things we see is that we have the longest average duration of unemployment in over 20 years. In other words, when somebody loses their job, it is taking them longer to find a new job than at any time in 20 years. Now, that is dramatically different than what occurred during the Clinton administration. During the Clinton administration, there was very powerful job creation. In fact, there was not only powerful job creation but the longest economic expansion in our Nation's history.

In addition to that, we had the lowest unemployment in 30 years, the lowest inflation in 30 years, the highest level of business investment in our Nation's history, and record deficits were turned to record surpluses. That is the economic record during the Clinton administration. So if that is what they want to debate, we would be delighted to join in the discussion. We would be delighted to talk about the difference between the economic performance during the Clinton years and the Bush years.

This is just one indication, the longest average duration of unemployment in over 20 years. That is what is happening in this Bush administration. Something is wrong.

When we go further and look at the number of people employed, the Senator from Kentucky said we have over 100 million people employed--I do not remember the exact number he used but I am sure he was accurate in his number--but if we look at it in a different way, we see the smallest share of the population at work since 1994; 62.2 percent of the American people are employed. That is the lowest level in a decade.

Again, it is just a fact. If we are going to analyze what is happening in this economy, we have to diagnose what is happening. To diagnose what is happening, we have to describe accurately what is occurring.

We also look at real wages. I asked my staff to find out for me what has happened to real wages in this country during this administration. We went back to 1996--we probably should have gone back even further-- and look what happened in 1996 to 2000, the last term of the Clinton administration. We saw a dramatic growth in weekly wages. Since that time, they have basically stagnated. Real wages are up less than $8 a week in this administration.

If we are interested in public opinion, which I think we all are--the Senator from Kentucky talked about public opinion--consumers believe jobs are hard to get. Eighty-eight percent believe jobs are not plentiful or are hard to get. Only 12 percent believe jobs are plentiful. So this is not just a matter of opinion on the Senate floor. The American people are saying jobs are hard to get. They are saying jobs are scarce.

This is another look at what is happening in the job market. We see that wage growth of production workers is starting to fall behind inflation. Again, we went back to the beginning of this administration. The red line is consumer prices. The green line is average hourly earnings. We can see now for the first time the lines crossing. So wage increases are not keeping pace with inflation. That is putting pressure on people. That is why I think we see this strong concern all across the country. People are worried about what is happening in this economy.

I would be happy to yield.

That is a fair statement.

Well, let's first talk about what is happening with deficits under this administration. Over the next 5 years, under the President's plan, the debt of the United States will increase by $3 trillion. Now let's think about that. That is an average of $600 billion a year of increased debt.

The President says he is going to cut the deficit in half over the next 5 years, but he only gets that by leaving out things. For example, he leaves out any war cost past September 30 of this year. He says there is no cost of the war in Afghanistan, the war in Iraq, the war on terror, past September 30 of this year. Does anybody believe that?

When we ask his people about it, they say, well, it is hard to predict what the cost will be. Well, we would agree with that, it is hard to predict. The right answer is not zero. The right answer is there is not going to be no cost. The Congressional Budget Office tells us the cost is going to be $280 billion. Yet the President has nothing in his budget.

It does not stop there. If one looks at the cost of the President's proposed tax cuts, what one sees is that in the first 5 years they are relatively modest, but the cost of those tax cuts explode in the second 5 years. It does not end there. The alternative minimum tax, which is going to cost some $600 billion to fix, according to the Congressional Budget Office--my colleagues will remember the alternative minimum tax was designed to catch millionaires. It was put in place back in the 1980s, but it has not been adjusted. The result is, more and more middle-income people are being sucked into the alternative minimum tax. There are about 3 million people affected now. By the end of this decade, 40 million people will be affected.

In his budget, the President provides 1 year of the cost of fixing the alternative minimum tax. He lets the rest of it go, which is writing in a tax increase beyond the first year, and it will be a tax increase increasingly on the middle class.

It does not end there. The biggest thing the President is proposing, in terms of how he finances these massive deficits and debt, is to borrow money. The President is fond of saying it is the people's money, and he is exactly right, it is the people's money. It is also the people's debt.

How is he financing these enormous deficits and debt? First, he is borrowing every penny of the Social Security surplus over the next 10 years, every dime, $2.4 trillion, money that is really not in surplus at all because it is going to be needed when the baby boomers retire.

So the President is really not showing the American people how serious our fiscal condition is. When he says he is going to cut the deficit in half, he says the deficit in the fifth year will be $237 billion, but if we add back all of the things he has just left out, what we find is the debt of the country will actually increase by over $600 billion in that fifth year. All of this is right before the baby boomers retire.

So on the question of do deficits matter, certainly deficits matter. The trade deficit matters. That is running nearly $500 billion a year. The budget deficit matters. That is going to run nearly $500 billion this year. Why does it matter? Deficits matter because when the Government spends more than it takes in, it has to borrow the money. When the Government borrows money, it is in competition with others to borrow money.

In this society, we have over $20 trillion of debt--government debt, Federal Government debt, State and local government debt, corporate debt, private debt--$20 trillion. When the Government has to go borrow money in competition with the private sector, most economists would argue that puts upward pressure on interest rates. When you have $20 trillion in debt in an economy, a 1-percent change in interest rates costs you $200 billion.

I can remember very well when Lloyd Bentsen was Secretary of the Treasury, he called me to lunch one day down at the Treasury Department. I walked in and sat down.

He said: Kent, you probably wondered why I asked you here today.

I said: Yes, I did wonder.

He said: I wanted to share with you because now you are on the Finance Committee, you have my seat on the Finance Committee, something that is very important to remember when you are dealing with the economics of the country; that is, when you look at the debt of the country in all forms--government debt, corporate debt, individual debt--and you look at a change in interest rates, you come to understand how critically important it is to manage this economy in a way that keeps pressure off of interest rates. That means it is critically important to hold down deficits and to hold down debt because that will keep pressure off of interest rates. If you hold down pressure on interest rates, you are giving more lift to the economy than anything you can do on the tax cut side of the ledger. It is so powerful, the difference 1 percent makes in interest rates in this society because of all the debt there is.

It is a lesson I have never forgotten. I don't think any of us should forget it. That is why deficits matter.

Some will say interest rates are at very low levels now. Indeed they are. In fact, one of the reasons we have seen the economy resume growth is because interest rates are at a 40-year low, even though we have these massive deficits. How can it be? How can interest rates be at a 40-year low when we have these massive deficits? It is because right now there is very little competition for money from the private sector because the economy has been weak. As the economy resumes growth, as it has, we will see upward pressure on interest rates. That is something we have to keep in mind as we fashion Federal policy on the budget.

We have the ability in the Senate, the Congress and the President, to influence the fiscal policy of the country. There are two things that contribute and affect the economy. One is fiscal policy, spending and revenue decisions that are made here and in the House of Representatives and by the President. The other aspect of Government policy that affects the economy is monetary policy.

The monetary policy is guided by the Federal Reserve. The Federal Reserve has put in place a very accommodative economic policy, the lowest interest rates in 40 years. It is a key reason for this economic recovery. But that is jeopardized, it is threatened if interest rates are forced up.

What might force them to go up? As we see economic recovery, as we see the private sector borrowing more money to build and expand their businesses, and the Federal Government is also borrowing these record amounts of money, that will put upward pressure on interest rates. That will threaten long-term economic growth and recovery. That is why deficits matter.

Does the Senator from Pennsylvania seek time? I yield the floor.

Mr. President, I am delighted to follow the Senator from Pennsylvania. I have been looking forward for a long time to this opportunity because the Senator from Pennsylvania makes a lot of aggressive assertions. Unfortunately, he is aggressively wrong, wrong, wrong.

Let's start with the question of when the deficit starts. The Senator from Pennsylvania says it started in the Clinton administration.

I am happy to yield if I misstated.

I apologize; I meant to say when the recession started. I think the Senator from Pennsylvania said the recession started during the Clinton administration.

I am happy to have the Senator state his position.

Let me just say the problem with that is the National Bureau of Economic Research, which does the official dating of recessions, says the downturn began in March 2001, early in Bush's Presidency.

But that is not the thing I am most eager to answer in terms of what the Senator from Pennsylvania has said. He has repeatedly used his spend-o-meter chart in the Senate and that chart is just a complete fabrication. I don't know of a nice way to say this. That chart is a complete fabrication.

How is it a fabrication? First of all, all the Democratic amendments to last year's budget resolution were paid for. The Senator from Pennsylvania said they were not paid for. That is factually wrong and he ought to come out here and correct the record because it is wrong. All he has to do is look at the record to know it is wrong. Our amendments were paid for. I will go to a complete list of those amendments next to demonstrate the statements of the Senator from Pennsylvania are false.

In addition, the Democratic amendments were offered individually, not as a package. The Senator from Pennsylvania wants to act as though the Democratic amendments were offered as a big package. False. They were offered individually.

Third, the Senator from Pennsylvania wants to act as though these amendments were all 10-year amendments. False again. Half of these amendments were for 1 year.

What the Senator from Pennsylvania has done is very conveniently taken 1-year amendments and multiplied to make them 10-year amendments and then cumulate them to act as though they were a package. Wrong, wrong, wrong.

What is most wrong, he asserts they were not paid for last year. He ought to have done his homework better before coming out and making an assertion like that because even the least bit of research, even the least bit, would have demonstrated that is a false statement.

Let's go to the amendments that were offered. I have a list of all of the amendments. We can see whether the statement of the Senator from Pennsylvania was correct. He says the amendments were not paid for. Let's go down the list.

An amendment by Senator Biden to restore the COPS Program was a 10- year amendment and costs $1 billion. It was fully paid for, plus $1 billion to reduce the deficit.

An amendment by Senator Kerry on HIV/global AIDS cost over 10 years about $800 million. Completely paid for, plus an additional amount to reduce the deficit.

We can go right down the list. Every single one of the Democratic amendments was completely paid for--in most cases, more than paid for-- so the deficit would be reduced as well.

The chart of the Senator from Pennsylvania is wrong. Factually wrong. He ought to come out here and correct the record.

As I say, I will put this entire list in the Record because it demonstrates all of the Democratic amendments were paid for, countering the assertion of the Senator from Pennsylvania--and more than paid for. So if you did cumulate them, it would reduce the deficit $687 billion. It is not right to cumulate. They were not offered as a package but individually.

There was an amendment by Senator Dorgan for veterans, to give greater budget resources for veterans health care, for $1 billion. But that was completely paid for, plus an additional amount to reduce the deficit. That is the fact of the matter.

These amendments were offered not as a package, they were offered individually. So this amendment was offered. It was defeated.

Then we offered another amendment on rural health care. That amendment was defeated. Then we offered another amendment. The idea you can combine them as a package is false and misleading.

Then the Senator from Pennsylvania has another chart on the appropriations bills. This is my favorite because this is another complete fabrication. The Democratic amendments to the Omnibus appropriations bill were offered individually, not as a package. You cannot accumulate them.

No. 2, the Democratic amendments were for 1 year, not 10 years. They just took 1-year amendments and multiplied them by 10. They were not 10-year amendments. They were 1-year amendments.

No. 3, if you did total them and take out the duplication, they totaled $37 billion, not the $500 billion asserted by the Senator from Pennsylvania. That is an absolute fiction, a concoction. It has absolutely no merit.

What is really interesting is what the Republicans did. Our amendments, if you can total them--which you should not do because they were not offered as a package--but if you did, they were $37 billion.

But do you know what the Republicans did when they recaptured control? They went into a conference committee, locked out the Democrats, and they came back and increased spending by $63 billion.

Let's look at the difference between what they are saying and what they did. Here are the amendments we offered to the Omnibus appropriations bills. Each one of them was offered individually.

We offered improvements in homeland security. It would have cost $5 billion. That was defeated. So that money was still available. We then offered an amendment to improve education. That was defeated. It would have cost $6 billion.

What the Senator from Pennsylvania has done is add up all these. They were not offered as a package. They were offered individually. They were 1-year amendments, and he multiplied them as 10-year amendments. What is interesting is, if you did add them all up,

they do not cost $500 billion; they cost $37 billion.

But look what our friends on the Republican side did when they captured control and wrote the final Omnibus appropriations bill. They went into the conference committee and came back with $63 billion of add-on--$63 billion--trumping us almost two to one if you did accumulate our amendments.

I am happy to yield.

Yes.

That is correct. Rarely have I seen in my time in the Senate--I have been here 17 years--rarely have I seen somebody come out with a more fabricated chart than the one presented by the Senator from Pennsylvania. It is false in its detail. It is false in its assertion. It is a complete fabrication. For him to come and say our amendments on the budget resolution were not offset is absolutely false, and the record shows it as clearly as it can be shown.

On the appropriations bills, to assert we offered $500 billion of amendments is just false. It is not true. We authored, if you totaled them, $37 billion of amendments. But you cannot total them. They were offered one after another. We would offer an amendment. It would be defeated. Then we would take that same money and offer a different amendment. That is the fact of the matter.

But what is most interesting is, if you did total them, we were completely outstripped by what the Republicans did when they went into the conference committee between the House and the Senate to work out the differences and they came back and increased spending $63 billion.

Now, let's talk about who has responsibility here for the explosion of the debt, because that record is very clear. Our friends on the other side are in total control. They control the House. They control the Senate. They have since 2001. They control the White House. This is what has happened to the debt under their stewardship and under their leadership. The debt has exploded.

When President Bush took office, the publicly held debt was projected to be, in 2008, at that amount, $36 billion. In his 2002 budget, it got raised to $1.2 trillion. Then his tax cut passed and it went up to $1.6 trillion. Then the President's 2003 budget came up and he expanded the debt to $3.3 trillion. Then we got his budget for 2004 and it increased the debt to $5 trillion. Then we got the Senate GOP 2005 budget and they increase the debt to almost $5.5 trillion.

These guys are totally in charge. The Republicans control the House. They control the Senate. They control the White House. It is on their watch that the debt has exploded. That is the fact of the matter. It is no wonder they are now trying to distort our record to give themselves cover for what they have done.

Amendment No. 2704

Mr. President, I am now going to lay down an amendment. I send an amendment to the desk. I might add, I have the agreement of the chairman of the committee that we will proceed with this amendment at this time. I inform the Presiding Officer, I have discussed this with the chairman. I send this amendment to the desk.

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

Mr. President, the amendment I am offering today is to protect the Social Security trust fund surpluses from additional raids. My amendment would establish a 60-vote point of order against the consideration of any direct spending or revenue legislation that would increase the on-budget deficit in any fiscal year until we have balanced the budget without counting the Social Security surpluses.

Very simply, what this amendment does is to say, no new spending, no new tax cuts, unless they are paid for, until we secure Social Security, until we stop the raid on Social Security trust fund surpluses.

I said from the beginning that President Bush's fiscal plan would ultimately threaten Social Security. I believed it then, and I, unfortunately, believe that events have confirmed how seriously the President's fiscal plan threatens the fundamentals of our economic security.

Now we see the Chairman of the Federal Reserve, Chairman Greenspan, suggesting we are overcommitted. He has said to the Congress of the United States that he recommends we consider reducing Social Security benefits. That is where the President's overall fiscal plan leads. It fundamentally threatens not only Social Security but Medicare as well.

I want to go back to 2001 and what the President told us then. The President told us, in his budget blueprint for the 2002 budget:

None of the Social Security surplus will be used to fund

other spending initiatives or tax relief.

Yet that is precisely what we see happening. Not only is the President using Social Security, he is using $2.4 trillion of Social Security surpluses over the next 10 years. Let me be quick to say they are not surpluses. All of that money is going to be needed to pay for the retirement of the baby boom generation. The President, who pledged not to take the money and use it for other purposes, is doing precisely that. He is using every penny of the Social Security surplus over the next decade to pay for his tax cuts and other expenses of Government.

Interestingly enough, if one looks at the Social Security money that he is borrowing over this next 10 years to pay other bills and compares it to the cost of his tax cuts--both those already passed and those proposed--one finds a very close fit, a very close fit between the money he is borrowing from Social Security, with no plan to pay it back, and the cost of his tax cuts. They are almost identical.

There is $2.4 trillion of Social Security money taken over the next 10 years--all of it financed with payroll taxes, primarily paid by middle-income people--and he is using it to provide income tax cuts that disproportionately go to the wealthiest among us.

It is very interesting to pierce the veil and to see what the President is doing and to see the full effects of his policy: $2.4 trillion taken from Social Security--borrowed, if you will--and then used to finance income tax cuts.

If we look at who the beneficiaries are of those income tax cuts, here it is: We see overwhelmingly they are going to the wealthiest among us. The top 1 percent, those earning over $337,000 a year, get 33 percent of the benefits of these tax cuts. Almost 69 percent of the benefits go to the top 20 percent.

Shown down here on the chart, the bottom 20 percent get virtually nothing. The second 20 percent gets 4.8 percent of the benefits. The middle 20 percent gets 10.6 percent of the benefits.

The fourth 20 percent in terms of income, those with $73,000 or less in income, get 15.8 percent of the benefits. The top 20 percent get 69 percent of the benefits.

If we look on the recipient side, those who get Social Security benefits, that is instructive as well. What this chart shows is almost two-thirds of retirees rely on Social Security for more than half of their income. In fact, 31 percent of Social Security beneficiaries get at least 90 percent of their income from Social Security benefits; 33 percent get 50 to 89 percent of their income from Social Security; and 36 percent get less than 50 percent of their income from Social Security.

What is going on is--again, I like to use the term ``pierce the veil''--the President is borrowing from the Social Security trust fund, $2.4 trillion during this next 10 years, using it to finance income tax cuts costing $2.5 trillion. The income tax cuts go overwhelmingly to the wealthiest among us. Thirty-three percent goes to those earning over $337,000 a year, and it is all financed by payroll taxes paid disproportionately by middle-class people. In fact, over 70 percent of Americans pay more in payroll taxes than they pay in income taxes.

This is the greatest shift of wealth that has perhaps ever occurred in our history, from the many to the few. That is the President's plan.

Here we see the difference Social Security has made, before we had Social Security and without it. Nearly 50 percent of beneficiaries would be in poverty. That has been the extraordinary power of Social Security and Medicare. It has lifted people out of poverty. Before we had Social Security and Medicare, almost half of seniors were in poverty. Social Security has reduced that to 9 percent; 9 percent now of our seniors are in poverty. What a remarkable social program this has been, the combination of Social Security and Medicare, to lift people out of poverty.

The President says: Well, we have a big shortfall in Social Security over the next 75 years.

Indeed, we do. The 75-year shortfall in Social Security is $3.8 trillion. That is according to the actuaries. But interestingly enough, if you look at the cost of the President's tax cuts over that same 75- year period, they are three times as much: $12.1 trillion is the 75- year cost of the President's tax cuts.

All of this should inform what we face in the very near future. The President's massive runup of deficits and debt is occurring at the worst possible time, right before the baby boomers begin to retire. This chart shows it very well. It shows the tax cuts explode as the surpluses in the trust funds of Social Security and Medicare become deficits.

The green part of these bars is the Social Security trust fund. The blue part is the Medicare trust fund. The red is the costs of the President's tax cuts. What you can see is right now the surpluses from Social Security and Medicare are larger than the cost of the tax cuts. As I have indicated, over the next 10 years the Social Security surpluses that are being taken to finance the tax cuts are about equivalent to the cost of the tax cuts. That is over the next 10 years. But look what happens when the trust fund goes cash negative. At that very time the cost of the tax cuts explodes, driving us right over the cliff into deeper deficit and debt. This is what is so fundamentally flawed about the President's fiscal plan for this country. We see the same flaw in what has been reported out of the Budget Committee. It is seen most clearly in the President's plans because of his adherence to even more tax cuts when we are running record budget deficits. The President is proposing increasing spending and cutting revenue when we already can't pay our bills. What does that do? We can see what it does as he takes more and more of the Social Security money to finance tax cuts and other expenditures. That string starts to run out when the trust fund goes cash negative.

Unfortunately, the President has made no provision for it. His answer is: Cut the revenue more. Spend more, when you already have record deficits.

This is where it is all headed. It is not just the Congressional Budget Office and it is not just this Senator's calculations. We see these warnings coming from the Comptroller General of the United States. We see them coming from the International Monetary Fund. We see them coming from responsible budget groups warning the President has us on an unsustainable course.

Here is what is going to happen with Social Security. We are going to see a dramatic increase in the number of people who are eligible to receive it. There is going to be a doubling of those eligible for Social Security. We have about 40 million people now who are eligible for Social Security. That is going to double to more than 82 million. The President has no plan to deal with it.

Unfortunately, what he is doing is taking the Social Security surpluses. We can see the pattern on the Social Security surplus. We can see it is at very high levels now. The Social Security surplus for this year will be about $160 billion. That continues to increase dramatically in preparation for the retirement of the baby boom generation. But instead of using this money to pay down the debt or prepay the liability, the President is taking it all to finance current tax cuts and other expenditures, putting us in a more vulnerable position.

My amendment says, let's protect Social Security first. We protect the Social Security trust funds from further raids by preventing the consideration of new revenue or new spending that is not paid for until the budget is balanced without counting the Social Security surplus. This is enforced by a 60-vote point of order.

I want to make clear, the basic idea is if you want new spending, if you want new tax cuts, you can do it, but you either have to pay for it, or you have to get a supermajority vote. We would maintain that discipline until the raid on Social Security is stopped, until we stop the Bush administration from using Social Security funds to pay for tax cuts and other expenditures.

This is a commonsense amendment. I hope very much our colleagues will support it. It is critically important to provide the discipline on both the spending side and the tax side as we go forward.

I yield the floor.

Mr. President, I think this is a very important debate, and I thank my colleague for the way he has joined the debate. I disagree profoundly with him. He knows that, but that is what a debate is about. I think this is absolutely one of the most critical debates that we can have because of where we are headed.

The Senator from Oklahoma put up a chart that lumps Social Security and Medicare together as though they are one program. They are not. Social Security is completely separate and apart from Medicare, as the Senator knows. The Senator says if we look at all of the payroll taxes, they do not cover Medicare and Social Security. So there is no real surplus. But that isn't the way these programs are funded. Social Security is funded with payroll taxes. If you look at Social Security, the revenue coming in is far in excess of the money going out. This year there is a $160 billion Social Security surplus. For this next year, it will be $172 billion. By 2009, the surplus in Social Security will be $235 billion.

Under the President's plan, and under the chairman's plan, all of these surpluses in Social Security are going to be taken and used to pay for other

things. It is very interesting to see that the Social Security surplus being taken over the next 10 years is almost equal to the amount of the income tax cuts proposed by the President. You have what I consider a spectacle of financing income tax cuts that primarily go to the most wealthy in the country out of payroll taxes being paid predominantly by middle-income people. Then you don't have the money to keep the promise in Social Security, so you have the head of the Federal Reserve coming to Congress and saying: Whoops, you are overcommitted, you better cut Social Security benefits.

Look, I don't think it was ever anticipated when Social Security was reformed that those surpluses would be used to pay the operating expenses of the Government. You couldn't do that in the private sector. No private sector employers could take the retirement funds of their employees and use them to pay the operating expenses of the company. You could not do that in the private sector. If you did, you would be on your way to a Federal facility, but it would not be the Congress of the United States. It would not be the White House. You would be on your way to a Federal facility, all right. It would be a Federal prison, because that is a violation of Federal law, to take the retirement funds of employees and use them to pay the operating expenses of a company. That is a violation of Federal law. That is exactly what we are doing here. Let's understand what we are doing.

I will be happy to yield.

The Senator is exactly right. The problem is this. That is what is being done. How do those T-bills get redeemed? We have borrowed the money under the President's plan, all of us, instead of using it to pay down debt or to prepay the liability. The cash is gone. The cash has been used for something else, leaving an IOU behind.

How does the IOU get paid back? The President has no plan to pay it back. The only way I believe the President intends to pay it back is dramatically reduce Social Security and Medicare payments in the future. I think we have seen a forewarning of where it is headed with the head of the Federal Reserve saying to people you ought to consider cutting Social Security benefits.

The Senator said payroll taxes don't pay for Social Security and Medicare. They were never designed to pay for both. Payroll taxes were designed to pay for Social Security and those funds are in surplus, but they are being used for another purpose. Medicare is a separate program, financed in part by payroll taxes, in part by general fund transfers. So these are not the same programs. They are not funded in the same way. The fact is payroll taxes, in both the part of Medicare they fund and in Social Security, are in surplus, and the surpluses, the funds, are being taken and used to pay the operating expenses of the Federal Government. I think that is a serious mistake.

What is the alternative? I think the alternative is to use the money to either pay down debt or prepay the liability. That is what most people would do in their private lives, getting ready for retirement, and that is what we should have done to prepare for the retirement of the baby boom generation.

The Senator says all the money goes in one pot, and that is exactly right. That is how it works. All the revenues coming in go in one pot. All the expenditures come out of that pot. The problem with that is all these revenues are not the same. Some of them are supposedly for a trust fund for Social Security and Medicare. Those moneys are designed to be in surplus now in preparation for the retirement of the baby boom generation, but they are not being used in a way that will prepare for the retirement of the baby boom generation.

The Senator talked about budgets I have offered, and that they are exactly the same as what is being done here. No, I say respectfully, no, they are not. In 2002 I proposed a budget that had $473 billion less in deficit. Why? Because I wanted to use that money to prepare for the retirement of the baby boom generation. In 2003, my budget had $523 billion less in deficit and added debt. In 2004, my budget proposal had $1.2 trillion less in deficit and debt for the budget period.

The reason was, I wanted to use that money to either pay down debt or prepay the liability we all know is coming.

I would prefer not to yield for the moment. I would like to complete a thought and then I will be happy to yield.

My own belief is that would have been a much better strategy for the country than to run up the credit card. Obviously, once this hole has been dug so deep, any budget one writes for a time will use Social Security money. There is no other way to write one anymore. This hole has been dug so deep, the Senator is correct when he says budgets I offered last year would have used Social Security funds for a time. Absolutely. There is no way to write a budget anymore that does not.

The trick is to get on a glidepath to stop it. We did that successfully in the late 1990s. I was very proud to have been part of the 1993 effort and the 1997 effort. Those two budget plans put us on a course to stop using Social Security money for other purposes, and for 2 years we stopped what I considered to be a raid on Social Security. We stopped it.

The President pledged to continue that policy, not to use Social Security revenues for other purposes. Why did he make that pledge if he didn't think it was important? Why did he make that pledge if he didn't think it was important?

He thought it was important. I think the vast majority of Members in this body pledged to protect Social Security funds. But it is not being done.

On the question of this amendment, whether there is a bias towards spending or tax cuts, I would say there is no intention to have any bias here. When we have put in place budget disciplines, I say to my friend, the chairman of the committee, we have always targeted mandatory spending with respect to pay-go provisions and revenue. That is how we have done it in the past--mandatory spending and revenues. That is what this amendment does.

We have used spending caps to discipline discretionary spending. I support both. I think we need both disciplines. Mandatory spending is now two-thirds of Federal spending. We just saw the biggest increase in mandatory spending ever last year, a program that now they tell us will cost $530 billion over the next 10 years. I think it would have been very healthy to have in place the budget discipline my amendment contemplates. My amendment says no new mandatory spending--and that is two-thirds of Federal spending--and no new tax cuts, unless they are paid for, until we stop using Social Security money, Social Security surpluses to pay other bills of Government, to pay for tax cuts, to pay for other expenditures of Government. I think that would be the right policy to put in place.

The Senator says, Then you would require 60 votes for all these kinds of spending initiatives. Absolutely, I would. I would put in place a requirement for at least a supermajority vote, at least 60 votes for new spending. I would put in place a supermajority requirement for additional tax cuts. And, I say to my colleague, I would be part of the 60 on the middle-class tax cuts. I have stated publicly I am for extending the 10-percent bracket. I am for extending marriage penalty relief. I am for extending the child care credits. I would even vote to extend the expensing for small business. Sign me up. I will work to get the 60 votes. But I think it ought to be paid for. I think any new spending ought to be paid for, until we stop taking the Social Security funds and using them to pay other bills, to pay for the tax cuts, and to pay for other expenditures of Government.

I think at this time with the baby boom generation about to retire we ought to be taking those Social Security surpluses that are being generated

now that we all know are going to be needed when the baby boomers retire and we ought to use that money in one of two ways: We either ought to pay down the debt with it to better prepare ourselves for what we all know is to come, or we ought to prepay the liability.

That is what I urged my colleagues to do back in 2001 when we had these supposedly huge surpluses. I urged that we use a third of that money to either pay down the debt more or to prepay the liability that we all know is coming. I think that would be a far wiser course than the one we are embarked on now.

I yield the floor.

Mr. President, this is a very important debate. I know it is probably hard for people at home to follow.

The Senator says we are treating the money exactly the same way, and that we are following the law. To a point, he is exactly right. When the money comes in, the Social Security payroll tax revenue comes in, and the money is used, as he described, to buy what are special issue Treasury bonds with the full faith and credit of the United States.

The Senator made reference to West Virginia. That is where those bonds are in a vault calling on the Federal Government to pay back Social Security for the money that has been borrowed. The difference is, What is used with the receipts? What is used with the actual cash?

I believe the right course would be to use that cash to either pay down the Federal debt or to prepay the liability that we all know is coming in Social Security.

The budget I proposed in 2001 for 2002 did precisely that. Instead of having as big of a tax cut, I had half as big a tax cut and used the rest of that money to pay down the debt or prepay the liability.

There is a fundamental difference here about how to use the cash receipts that are the overage from the money coming in from Social Security payroll taxes that are over and above what is needed to pay the immediate benefit. The Senator says we are following the law. Yes. We are following the law. But it is also true that we are taking the money, and instead of using it to pay down the debt or prepay the liability, we are using it to pay for other tax cuts and to pay other Government expenses.

I believe that is a profound mistake. The only way we get back to some policy that stops that practice is to discipline both the spending side of the equation and the revenue side of the equation to require a 60-vote point of order against new tax cuts or new spending that is not paid for.

I think it would be a tremendous advance for this Congress to say, Let's secure Social Security first. That is the first thing we ought to protect. The way to do it is to provide additional discipline on the spending side of the equation and the revenue side of the equation, to say if it is not paid for, it has to require a 60-vote hurdle, a supermajority vote, for new taxes and for new spending that is not paid for.

I note the Senator from New Jersey is seeking time. How much time does the Senator desire?

Let me yield 20 minutes off the resolution to the Senator from New Jersey.

Mr. President, I give 10 more minutes off the resolution to the Senator from New Jersey.

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

Mr. President, I will make the point once again as to the great concern I have about both the President's budget and the budget that has come out of the Budget Committee, and that is it adds dramatically to the national debt right before the baby boom generation starts to retire. I look at the President's budget, and in the 5 years that he has proposed, he will add $3 trillion to the national debt. When I look at the budget proposal from the Budget Committee, it adds almost as much, $2.86 trillion to the national debt over that same 5 years.

I hear the other side saying we are cutting the deficit in half. Well, maybe they are cutting the deficit in half but the increases in the debt are not being reduced hardly at all. If we look at this chart, in 2004 the debt subject to limit, that is the gross debt of the United States, is $7.4 trillion.

Under this budget, they will add over $600 billion to the debt. The next year, they will add nearly $600 billion to the debt, $569 billion. The next year, they will add $552 billion to the debt. The next year, they will add $563 billion to the debt. And out here, in 2008, between 2008 and 2009, they will add another $563 billion to the debt.

How can it be that these two statements are both right? How can it be they say they are going to reduce the deficit, they are going to cut it in half, and on the other hand the increases in the debt are hardly being reduced at all? The biggest reason is the Social Security trust funds that are being taken. Over this 5-year period, hundreds and hundreds of billions of dollars of Social Security trust fund money is being borrowed and is being used to pay for tax cuts and other things. It is, in effect, hiding from us our true fiscal condition.

The hard reality is the increases to the debt are not being reduced by this budget proposal. In fact, the debt is being run up and, as I have said many times, that is at the worst possible time, right before the baby boomers retire. That is why I think the amendment I put before our colleagues is so important, because it adds discipline. It says: Look, we can't do new mandatory spending--and that is two-thirds of Federal spending--and we can't do new tax cuts that are not paid for, without a 60-vote supermajority, until we stop taking the Social Security fund and using it to pay for the operating expenses of the Federal Government.

This reminds me so much of what has happened in the corporate sector when these various companies--Enron most notably, WorldCom the same way--understated how far underwater they really were. They were basically hiding their debt from the shareholders, hiding the debt from investors, hiding the debt maybe even from themselves. I see some of that same pattern occurring here.

The Senator from North Dakota is here. How much time does the Senator require?

Mr. President, I ask unanimous consent that the presence and use of small electronic calculators be permitted on the floor during Senate consideration of the fiscal year 2005 concurrent resolution on the budget.

I suggest the absence of a quorum.

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

Mr. President, as we begin consideration of the budget resolution, I want to urge our colleagues to be prepared for a long, busy week. Under the rules of budget law, we have 50 hours on the resolution. Last year I am not sure how many hours we had, but it was a lot more than 50. I believe we had 81 rollcall votes. It was a very difficult and long week. It was actually longer than a week. It spilled over into 2 weeks.

It is our intention to finish this week. That is going to take the cooperation of all Members. The majority leader already announced for Members to expect long nights, long days, and a lot of votes. I urge our colleagues to be prepared for a long week. Please don't come up and say, I have a plane reservation at 3 o'clock. I don't think you can count on that. I think you have to assume you are going to be here for very long evenings during long days--especially on Wednesday, Thursday, and Friday--until we conclude this resolution. I want to make sure that is known.

Saying that, I urge colleagues to work with my friend and colleague, Senator Conrad, and myself. If you have amendments, please present them to us. Give us time to consider them. Maybe we can accept them; maybe we can't; maybe they will have to be objected to. But at least give us a chance to review the amendments.

Last year we ended up in a very demeaning process. We called it a vote-arama. But we had a lot of votes that were on sincere issues that were considered with very little debate. I would like to--one of the little legacy things--change the way we manage Senate budget resolutions. By saying that, I would like to avoid the vote-arama, or at least minimize it, and maybe have a certain number of votes on each side. Sometimes last year we voted on the same thing several times. I don't think that helps the Senate. I want us to represent the Senate very well.

I want to warn our colleagues to expect a long week. Hopefully we will conclude. I would love to have it concluded Thursday night. I doubt that will happen. But we will work aggressively with all of our colleagues. And when we get into votes, we are going to be very pushy on trying to limit the time on those votes.

I am just making mention of a couple of those things to let colleagues know they should expect a long week and late nights. It may be that Senator Conrad and those who are proposing amendments will work late and we will stack votes for the next morning. That might be my preference. But I will work with Senator Conrad, who is a very good friend and manager on the minority side, on this difficult challenge of passing a budget.

Again, we have the budget resolution before us. I will be talking about that momentarily. It cuts the deficit in half. Actually, we cut it in half over 3 years. The deficits are far too high. Having $500 billion deficits is not acceptable to this Senator, nor do I think it is acceptable to anybody. We charted a path to bring it down and bring it down rather abruptly. It will take the cooperation of all people to conclude this week, and also to make that happen. That is not easy easily done.

Again, I urge the cooperation of all of our colleagues and look forward to working with my colleague, Senator Conrad, for the remainder of this week.

I yield the floor.

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

Madam President, I ask unanimous consent that the time during quorum calls be equally divided.

Mr. President, I thank my friend and colleague, Senator Conrad, for his remarks. I agree with some of them, not necessarily all of them. Let me make a few comments on the budget. And I, again, appreciate his patience in waiting for me so I could have a bite to eat and also get prepared for this presentation.

The budget is a difficult challenge. To write a budget for the United States of America, the largest government in the world, the largest economy in the world, is not easy.

President Bush has written a budget. We produced a budget out of the Budget Committee. I hear a lot of complaints about how bad the President's budget is or how bad the resolution on which we will be voting on the floor is, but I have not seen alternatives. I would urge people, show me your alternative. Show me how much money you would spend, how much money you would tax. That is basically what a budget outline is: how much money we are going to spend and how much money we are going to tax. What is our objective? How are we going to achieve it?

We use assumptions. A lot of times the assumptions are wrong. I have heard a lot of complaints: Well, President Bush missed the assumptions big time. In 2001, we projected enormous surpluses, and now we have enormous deficits--trillions of dollars of difference. What happened? We don't understand.

Well, a lot of things happened. Let me just say there have been a lot of inaccurate assessments made. And I go back to the year 2001. In January 2001, everybody missed--everybody missed--big time, not just President Bush. President Clinton, the Congressional Budget Office, the Office of Management and Budget all missed more than you can imagine.

I will just make a couple comments on a little history.

The NASDAQ collapsed in the year 2001, and it continued to decline a little bit in 2002. But a big collapse was really in the year 2000.

I might mention that President Clinton was still President. Yet I will show you the next thing. His forecast for 2001--this was given in January of 2001--estimated about an additional employment of almost 2 million jobs.

Frankly, the economy was already falling into recession, which was shown by the fact that NASDAQ went down by almost 50 percent in 2000. Yet the budget experts, Democrats and Republicans, CBO and OMB--CBO is the Congressional Budget Office and OMB is the Office of Management and Budget--projected that revenues would continue to climb, employment would continue to climb, as President Clinton did. They all missed it. They missed it by an enormous amount. They were forecasting trillions of dollars in surpluses. They were way wrong. Of course, they also didn't know, and could not have expected, the hit we had in September of 2001. But there were enormous mistakes that were made.

The market collapse, or the crash of the market and NASDAQ declining by that much was missed. They didn't estimate what the impact would be on revenues and to the economy.

We had trillions of dollars in market value that was lost in the collapse. If you look at the NASDAQ chart again, in March, that collapse started in March of 2000. Individuals, investors know that. They remember that is when the bubble popped. NASDAQ was almost 5,000. Then all of a sudden it was going down to 4,000, 3,000, and it ended up that year at 2,500. So there was an enormous decline of market value. A lot of it was inflated. Chairman Greenspan called it ``irrational exuberance,'' and he was probably right. It flowed through as a real loss and decline of revenue coming into the Federal Government.

In the year 2000, we had over $2 trillion of revenue. That declined to last year's $1.78 trillion in revenues. Part of that was tax cuts, but the bigger part of it was the recession.

Look at this chart. Where did the deficits come from? Most of the deficits came from economic and technical changes. That is 40 percent, from the assumptions made in 2001. New spending comprised 37 percent. So you had economic and technical changes of 40 percent; new spending, 37 percent; tax cuts, 23 percent.

Again, this is comparing 2001 to the forecast of today. My point is, I want to give people a perspective of what happened. The new spending--we had big supplemental changes--changes were made as a result of the war. We had two very large supplementals to fight the wars in Afghanistan and Iraq, and a big supplemental to help New York City and Virginia. That totaled almost $250 billion in new spending just to take care of those who were injured and to rebuild New York City and fight the war on terrorism.

That is kind of what we inherited last year. Last year, the previous year, we didn't have a budget. Last year we had to pass a budget, and the economy was still rather flat. Besides, Democrats and Republicans said we needed a stimulus package, we needed to grow the economy. We had different ideas of how to do it. I think some of what we did last year helped a lot.

I have heard criticism. I will make a couple of comments. I think the changes we made last year did grow the economy, did make a difference. If you look at the GDP, gross domestic product, you can see what we were looking at last year. It was rather stagnant. The economy started dropping in 2000, a negative quarter in 2000, and in 2001 it was still pretty negative.

Then we started to have a growing economy. When we passed the tax bill last year--when we started talking about it, we started to notice the GDP started rising dramatically.

The last three quarters were very positive. The third quarter of last year is the largest economic growth period we have had in any quarter in decades--not in years but decades. So the tax bill changes we made were positive.

Some people say I think we want to make changes to grow the economy. We did. We basically accelerated the tax cuts that were already in progress and moved the rates to the rates they are today. That was positive, in my opinion, and very beneficial. We cut in half the tax on dividends. Chairman Greenspan and others said we should go to zero.

The Senate passed a bill that would take the tax on dividends to zero, i.e., they should only be taxed once. We found out then in comparing it that we taxed the contribution distributions from corporations higher in the U.S. than in any other country in the world. We tied with Japan for the highest tax rate on taxing proceeds from corporations, higher than anybody else in the world. We cut that tax in half, to 15 percent.

We cut the capital gains rate from 20 percent to 15 percent. It has made a big difference. You see these economic growth figures--GDP going up by 4, 5, 8 percent. Those are very positive and good numbers.

If you look at what was done in the stock market, there was over a $4.5 trillion increase, almost on a straight line basis, since the tax bill we passed last year. That is astronomical--great, good news. That is good news for all Americans.

Some people say, well, that only benefits the Warren Buffetts or the wealthy people who invest. That is not correct. It benefits the entire economy. That means the wealth of these companies is growing. These companies are owned by, frankly, almost all Americans. I think over 50 percent of the households have direct ownership, if you looked at the investments they have, such as the teachers public employee trust funds, all kinds of retirement plans, 401(k)s, almost all of which have investments in the stock market. That means instead of having declining market value in their retirement accounts, they have increasing ones, escalating amounts. That is all good news. We want to continue that good news.

The point is, very seldom can you say--we passed a budget last year and, if we had not done that, we would not have had a growth package, we would not have cut the tax on dividends to 15 percent, or reduced the tax rate on capital gains 25 percent, from 20 to 15 percent. That would not have happened. But we passed a budget and it made it possible for that to happen. As a result, I think we have good news to share.

When people think about whether budgets make a difference, they make

a world of difference. Can you impact the economy? Yes. We proved that and we did.

If you look at the unemployment rate, for example--and we have heard a lot of discussion on it--it is now 5.6 percent. It was up to 6.3 percent. It has been declining ever since we passed the bill. We made some good progress. We have not had the increase in employment certainly that I would like to see, but it is moving in the right direction.

As far as the employment rates or the number of people employed, we are making progress. I think one of the reasons it has not been as good as we would like in many cases is because productivity has escalated rather dramatically. That is good for consumers, certainly good for our economy. That keeps us competitive. That means we produce more goods per hour and that is all positive. We will see a rise, hopefully, in the employment rates as we continue.

The unemployment rate is down and employment rates are up. If you look at the number of people employed, it is an all-time high. It all happened because we passed a budget last year. So I encourage people who are very critical of this budget to come up with their own. This is not an easy job. So I welcome the discussion.

I also wish to talk a little bit about tax rates. I have heard a lot of complaints about the wealthy benefitting so much from these tax cuts, and how terrible it is that they were disproportionately benefiting from this proposal--either the tax cut of 2001--and there is a lot of discussion and confusion about the 2001 tax cut and the 2003 tax cut. I was one of the principal authors of both. Primarily, I was very involved with it. Let me defend it.

One, for those people who say it didn't benefit the low-income people, that is not correct. In the 2001 tax cut, we accelerated the tax reduction for low-income people and made it effectively retroactive. Maybe some people forgot that, but we did that.

Again, we passed the tax cut in 2001, and we reduced every tax bracket--every tax bracket, not just the tax brackets for the higher brackets. We reduced every tax bracket, and we reduced the lower tax bracket more than any other bracket.

The lowest tax bracket at that time, other than zero, was 15 percent. We made it 10 percent, and we did it retroactive to January. So we took the lowest bracket, cut that tax rate by 50 percent, and we made it retroactive.

We took the maximum rate, which was 39.6 percent, and we reduced it by 1 point to 38.6 percent for 2 years. Last year we finally got it down to 35 percent. It took us from 2001 to the middle of 2003 before we got it down to the 35-percent tax bracket. It was 39.6 percent under President Clinton. We took it to 35 percent. It is still much higher than it was under President Bush 1 at 31 percent. Thirty-five percent over 31 percent, it is almost 20 percent higher than it was under President Bush 1. But we made the lower income tax bracket reduction effective immediately and we did it all in 1 year. We did not phase it in over 3 years.

We also did some other things. We made the tax cut more refundable. I don't happen to agree with that, but we did, so we write a check to people who do not even pay taxes. In many cases, we write them a check much greater than their payroll taxes.

I hear some people say: You need to include payroll taxes. I understand there are income taxes and payroll taxes combined, but for low-income people, in many cases we would write a check to them that greatly exceeded their 2001 tax bill. Maybe some people forgot that point.

Then we also increased the $500 per child tax credit to $1,000. Last year, we took it from $700 to $1,000. That is a $1,000 tax credit per child. If we do not extend it this year, it will go back to $700. We assume in our budget that we are going to extend it.

When people say we did not do anything for low-income people, if you have 4 kids, that is $4,000--4 times the $1,000 tax credit on which you do not have to pay taxes.

The net impact of that is a lot of people do not pay income taxes because if you look at the child tax credit and you look at the earned income tax credit and so on, we have a lot of programs for low-income people, so maybe they do not pay taxes.

Then we hear the argument of distribution, the class argument: The wealthier are the ones who are benefiting. Frankly, people in the upper 5 percent of income pay half the income tax. Think of that. The upper 5 percent of the American people pay half the income tax. Sure, if you are going to cut income taxes, they are going to benefit. The point being, how much should the rate be? What is the right level? I happen to think when we talk about a 35-percent rate--that is over a third, if my math is somewhat accurate--that is a lot. Why should the Federal Government take over a third of anybody's income for any reason? Why is the Government entitled to take half?

When I was first elected, the rate was all the way up to 70 percent. The Government could take 70 percent of any additional dollar you earned. I think that is wrong. We have gradually reduced it to 28 percent, and it went up to 39.6 percent. Frankly, it is even higher than 39.6 percent because there is a tax on all income of 2.9 percent to pay Medicare. So you actually add 2.9 percent for these income tax figures. Add 2.9 percent, so the maximum percent is 37.9 percent today. Maybe people don't realize that. How much money should the Federal Government take? The power to tax is the power to destroy. Where do you destroy an individual's or company's incentive to produce more? At some point, I can tell you from my experience in the private sector--I used to be in the private sector; I will be returning before too long--at some point, when you work more for the Government than you work for yourself, you lose a lot of your incentive to grow, build, and expand, and when I say expand, I am talking about hiring more people.

I found out earlier when I had a janitor service that I was almost in a 40-percent tax bracket. Why in the world should I get up early every morning or work late at night if Uncle Sam and the State--combined between the two--are going to take about half? It is a real disincentive to grow. I had several employees and could have had several more. I had the same situation when I ran a manufacturing company in Oklahoma. Marginal tax makes a difference.

I mentioned the top rate today is 35 percent. If you add the 2.9 percent because of Medicare, that is 37.9 percent, and you have not yet paid any State income tax. A lot of States have 6 or 7 percent, so you add that. Now you are at 45 percent. Some cities have an income tax. You add that and you are at the 50-percent rate.

Why does someone want to continue building and growing and expanding? Expanding is where jobs are created.

No, I will not yield. I am going to make a fairly significant statement.

Not at this point.

Some people say that is a big benefit for the wealthy. I say why in the world should the Government take half? I don't think they should. Maybe some people believe they should. I disagree.

What we have assumed in the budget is we are going to continue present law; that we are not going to have a tax increase. Some people don't want that to be in there. We assume we are going to continue present law, where we have several provisions that are due to expire at the end of this year. Some of those, frankly, are targeted toward low- or middle-income people. They would expand the child tax credit. As I mentioned, if we do not extend it, the child tax credit will go from $1,000 to $700. There is a $1,000 tax credit today. If we do not extend it, as assumed in the budget, it goes to $700. So they will lose. If they have 4 kids, they are going to have to pay $1,200 more in taxes next year than they pay this year.

What about the marriage tax penalty? We assume we are going to extend the marriage penalty relief we put in last year's bill. That is very significant for middle-income tax relief.

I heard my good friend Senator Conrad talk about the middle-income class does not get anything. That is not accurate, in my opinion. The middle-income class people do very well. If you have a taxable income of $58,000, your tax bracket is 15 percent. We want to keep it at 15 percent. If we do not pass the extension, it is going to revert

down and people will be paying 25 percent if they make $58,000. As a matter of fact, the savings on that income category is about $900. So if a married couple and their combined, joint taxable income is $58,000, the marriage penalty relief we passed last year which we want to extend is $900. So you have $900 there. If they have 4 kids, that is another $1,200 difference. That is $2,100 of tax relief for a couple with 4 kids. That is a rather typical American family. I happen to have four kids. I don't qualify for this, but most American families have taxable incomes of $58,000 and would qualify for it. My kids are too old. My point being, this is real tax relief for American families.

We also expand the 10-percent bracket, and we continue that expansion, or we assume that will be continued under our resolution. That is another $100.

If you look at the savings, we have $900 on marriage penalty relief we would extend; we have $1,200 for the child tax credit we would extend; another $100 for the 10-percent expansion. We expand the amount of income that would be taxed at 10 percent. By continuing those provisions, we save the American family which has $58,000 in taxable income and 4 kids about $2,200. That is real relief. Percentage-wise, on the amount of taxes they pay, it is probably a greater percentage relief than anyone. It is very significant. So I want to put some of the tax equity arguments in perspective.

I will make just a couple of other comments about the budget. I mentioned what we assume on the tax side. I tell my colleagues if they are bent out of shape, we have a reconciliation package instruction that would make all of those things I just mentioned be extended throughout the 5-year window of this bill.

This is a 5-year budget. I am assuming all those things would be made permanent, or at least be extended through this resolution. Things cannot be made permanent in budget resolutions. A lot of people say we want to make those tax cuts permanent. I said fine. We just have to do a tax bill outside of reconciliation.

I am happy to do the tax bill, I tell my friend and colleague. I think he knows that. I have the pleasure of serving with him on the Finance Committee. This Senate has done many tax bills, many inside reconciliation and many outside. By definition, if they are inside a reconciliation they are terminated. I do not like that. Frankly, I want to do something this year on the death tax or the estate tax. If we are going to do something on the death tax, it ought to be done outside of reconciliation so it is not temporary, so it is permanent, so tax planners and others can figure out what they want to do and they can count on it. So maybe we will have the opportunity to do that if we do bills outside of reconciliation.

I have looked at it more or less as a fallback, and I told Senator Grassley, who is the very able chairman of the Finance Committee, that we might have this as a fallback but hopefully we could do these things outside of reconciliation. That would be a couple of options.

That is $81 billion that we are assuming in reconciliation. We assume about $12 trillion in the next 5 years in revenues. So the amount of money we are trying to direct through the reconciliation process is very small in proportion to the total amount of money that is expected to be raised under current law. So I just mention those things on the revenue side.

What about on the spending side? I showed the chart where spending has gone up and revenues have gone down, mostly because of the economy, somewhat because of the tax cut. Expenditures have gone up rather dramatically.

We believe it is time to be responsible. We think it is time to make some reductions, to at least cap the growth on spending. So the resolution we have makes some tough choices. In many cases we have not made tough choices in the past.

I am sure I am going to hear from my colleagues: Well, too much is cut, too much is assumed. Basically, we still assume spending will grow, but it is going to grow by less. In some cases, for the assumptions we have that defense would grow about 5 percent, I have already heard--very strongly I might add from Chairman Stevens and Chairman Warner--that they want 7 percent. The President requested a 7- percent growth in defense. We have assumed 5.1 percent, and I expect there will be efforts to--I might even say I know there will be efforts that will be coming to increase that level.

We assume the President's number in homeland defense. I have heard people say that is not enough; he did not do enough on first responders; he did not do enough for port security, and so on. But we assumed a 15-percent increase in homeland security, according to CBO. If we take out the bioshield, which was actually funded last year, it is about a 10-percent growth. Again, 10 percent when looking at the rest of the budget, nondefense, nonhomeland security grows by basically a freeze. We could say .5 percent or a freeze. The President's budget said it would grow by about .5 percent. Our budget is very close to a freeze.

These programs are not used to a freeze. I can show program after program, going all the way back since 1990, that has been growing in annual expenditures in double digits continually. They are addicted to that kind of spending growth.

If we try to say, I am sorry, you may have to live with a freeze, that is not going to be easy. I know a lot of the appropriators are looking at it and saying: Whoa, we are used to having a lot more money than that. I know this will not be easy. I tell my friend and colleague from North Dakota, it will not be easy because I know there is a lot of demand to spend somebody else's money. Frankly, I do not think $500 billion deficits are acceptable.

The administration estimated the deficit for this year at $521 billion. I hope they are incorrect. We use the Congressional Budget Office. There are differences and they are legitimate. There are professionals both at the Congressional Budget Office and OMB, and I respect them all. They have different estimates, for different reasons. We can spend a lot of time on that, but the Congressional Budget Office estimates that this year the deficit will be about $477 billion.

The President said he wanted to get the deficit down by half over 5 years. That is very significant. The President is estimating $521 billion. To try and get that in half over 5 years is a very significant deficit reduction, not easily obtained.

Since we use the Congressional Budget Office, we start at $477 billion. Under our budget resolution, next year the total deficit will be $338 billion. That is a reduction of about $140 billion--actually $139 billion in 1 year. That is a very significant decline. The next year goes down again about $80 billion, a very significant deficit reduction, not easily done.

If we are successful in doing that, we will be very close to the halfway mark in 2006. We will be there in 2007. So we are bringing it down.

Looking at it as a percentage of gross domestic product, the estimate today of the deficit is 4.6 percent of GDP. In past years, even in the early 1980s or 1990s, we had deficit figures of as much as 6 percent of GDP. We are bringing it down in a couple of years to 2 percent, which is much more sustainable. In the year 2007, it will be 1.7 percent of GDP. So we are making significant progress in deficit reduction. We would meet this target either nominally through dollars or through a percentage of GDP in 3 years.

I know there are going to be a lot of amendments that say we are cutting too much too fast. Frankly, we are not cutting. We are saying we should allow defense spending to grow as much as necessary, but other than that we need to tighten our belts. We have not done that in the past. As a result, I know people are going to say we need more money, and we will be happy to look at the requests. In many cases we can fund more money, but we may have to cut other places to do it.

I have heard some people say, well, we need money for veterans, for education, for first responders, for defense, or the COPS Program, or whatever. Fine. They can have more money, but between us on the Budget Committee and the appropriators, we are going to have to reduce some money or spending in other areas to pay for it. That is making tough choices. We have not done that.

I remind our colleagues, and I think Senator Conrad would join me, in this budget we do not micromanage where

the money is going to be spent. We can assume that money will be spent in education or it might be spent for the COPS Program, but, frankly, we give a number to the appropriating committees and they have to live with that number.

They can change the number. So we might assume one thing for education--actually, we have assumptions in this bill for significant increases in several areas in education. We assume fairly significant increases in veterans programs. Somebody else could assume it differently, or they could say well, we want more money for veterans. Fine. They may have to make some reductions in housing or make reductions elsewhere in the budget to make it equal that total number.

I mention this for our colleagues' information. Doing this budget will not be easy. I am sure we will have lots of amendments. I concur with Senator Conrad, I would prefer to manage it in a way that we would be more direct in handling the amendments, trying to have more amendments throughout the course of the budget debate and not have so many stacked up at the end. I do not think that speaks well for the Senate and our management of this challenge.

This is a challenge. This is not easy.

I yield the floor, and I suggest the absence of a quorum.

Mr. President, I yield the Senator such time as he may consume.

Mr. President, I thank our colleague, Senator Sessions from Alabama, not only for his statement but also for the outstanding work he has done on this committee. It is not easy reporting out a budget resolution. It is not easy defending a budget. I encourage our colleagues who want to throw rocks at it all the time to put one together.

I compliment our colleague from Alabama. He has been an invaluable member of this committee. He has worked very hard. We touch every single dollar in the Federal budget in this committee. We review all those dollars. I compliment the Senator from Alabama for being an outstanding member of a challenging working committee.

Mr. President, I yield to the Senator from Colorado such time as he desires.

I thank our colleague from Colorado for not only his statement but the outstanding job he does as a member of the Budget Committee. He works hard. He does his homework. He is one of the more knowledgeable persons on our committee about a lot of issues on the budget. I compliment him for his statement and his contribution in putting this budget resolution together.

I note my predecessor as chairman of this committee, Senator Domenici, is seeking the floor. It is always a pleasure to work with him. I yield him such time as he desires.

Mr. President, I think we are coming closer to concluding the debate tonight. I urge our colleagues to be aware of the fact that this is going to be a busy week. I want to make a couple of comments. I have heard two or three of our speakers say this budget shortchanges veterans and education.

I will throw out a few facts about what this resolution does. Sometimes people say they are referring to the President's budget, or they are referring to something they read in the paper. I will just throw out a few facts. The total amount of money we anticipate spending in education, mandatory and discretionary, is $68 billion. That is a 9- percent increase over last year, mandatory and discretionary combined. People are acting as if there were significant cuts.

I also refer back to what we were spending in the year 2000. Today, it is at $97 billion. So it has almost doubled since the year 2000, and yet we hear a lot of people saying we are cutting education like crazy. Education has grown, and grown dramatically in the last few years. Those are just a couple of the facts. That includes mandatory and discretionary.

On the discretionary side, we are anticipating a little over $3 billion increase between 2004 and 2005. That is in the resolution, and people should know that.

I have also heard some comments on veterans. I will restate the facts. What we are assuming in our resolution is an increase of 14.3 percent for veterans, mandatory and discretionary, between 2004 and 2005. That is a big increase. Keep in mind, both in education and nondefense we are assuming very close to a freeze, but we are assuming a big increase for veterans, primarily on the mandatory side.

Congress did a lot of things last year to increase payments to veterans, including current receipts. So when we add all of these things together on the discretionary side, we are assuming over a $1.4 billion increase, most all of that for medical care. Again, medical care has risen dramatically over the last several years. We are looking at programs that have been expanding dramatically. Let me mention a few figures.

In the year 1990, on the discretionary side for veterans, we spent $13 billion. In the year 2000, 10 years later, we spent $20 billion. Today we are forecasting $30.5 billion. So it took 10 years, from 1990 to the year 2000, for discretionary spending for veterans to go up $7.9 billion. Now, from the year 2000 to the year 2005, 5 years, it has gone up another 50 percent.

People say you are shortchanging veterans. Maybe no matter what figure we had in the budget there would be those same complaints. Veterans, if you add discretionary and mandatory, we have a 14.3- percent increase, if you add the two. Combined, discretionary and mandatory, $61.45 billion to $70.2 billion, there is a 14.3-percent increase. Yet I have heard three or four speakers saying we are shortchanging veterans.

I heard one speaker a moment ago say, yes, there are going to be new fees. The budget we have before us did not assume there will be new fees. The President did recommend a proposal increasing the prescription drug copay on priority levels 7 and 8, from $7 to $15. Those are mostly nonservice-connected disabled and high-income veterans. I think a very good argument can be made they should have a higher copay. That is not assumed in our budget.

We also did not include the proposal to establish a $250 deductible, again on levels 7 and 8 nonservice-connected disabled and high-income veterans.

Those two proposals were not included; yet I have heard two or three speakers already allude to them, so I thought we should point that out.

We have significant increases for both education and for veterans. I urge our colleagues to become aware of that before they say they are going to offer amendments to increase funding because we are shortchanging education or shortchanging veterans. I think we are fair. Given the amount of deficit we have, I think we have very generous increases in both functions, and I urge our colleagues to look at that before they say, no matter what that figure is, they are going to be voting for more money. I think that would be a mistake.

I suggest the absence of a quorum.

Will the Senator yield for a question?

I want to clarify one point.

I understand this point the Senator is making is compounded by the fact that what we are looking at with this budget is just a 5-year projection.

It is my understanding it includes within it the idea of making these tax cuts that were passed permanent instead of temporary. Of course, the people who put the tax cuts in place were the ones who made them temporary. Now they are coming back, seeking a change in the law to make them permanent. They, in effect, are changing the tax structure. Otherwise, they would expire.

But they are only projecting a 5-year period. As I understand it, if you do the 5-year period, this is the increase in the deficit here, just this amount. But the full brunt of this doesn't hit home until the subsequent period. So if you take a 10-year period, which we have done in the past--we have used 10-year projections rather than 5--if you take the 10-year period, look what happens to the cost. There is a deficit explosion. It is just staggering.

Of course, we are only being shown this part of the picture instead of being shown all of the picture, which shows a $1.6 trillion 10-year cost. There is a $1.6 trillion 10-year cost to extending the tax cuts over this next 10-year period.

So the Senator is making one point about the understatement of the situation we are moving in, but this also dramatizes another very important point. We are being set on a fiscal course that spells disaster for the country, and we need to recognize that. It is one of the reasons I joined with the Senator in the Budget Committee in voting against this budget. This is not a sound, solid, steady course to be on, in terms of the Nation's fiscal policy.

That is right. Exactly.

You see it runs along here like this. This is as far as the chairman's budget projects it, right to there. Then it stays on that line a little bit and then look what happens to it--it is incredible. It is the shooting star deficit, the way this thing is going.

At least.

Will the Senator yield further?

I would like to pick up on the Senator's point about the cost of adjusting the alternative minimum tax. Of course, the alternative minimum tax was put in place in order to tax wealthy people who are using various deductions and exemptions, and so forth, not to pay taxes. The idea was, at a minimum you ought to pay a certain amount of tax. There was a huge public outcry about that--justifiably so in my opinion. So we put it into place. Of course, as the economy evolves, you have inflation and so forth and so on, and you have to keep adjusting it; otherwise, it is going to work its way down further into the middle class. It was never intended to do that. So it has been adjusted from time to time.

In fact, the President is proposing in his budget, as I understand it, a 1-year

adjustment--not projecting it out. Of course, that raises the question immediately in your mind: Why a 1-year adjustment? I think it is obvious why, if you do this, because it shows if you really adjust it as it ought to be adjusted, you are projecting out $658 billion in a 10-year cost to reform the alternative minimum tax. There is a $658 billion 10-year cost to reform the alternative minimum tax. Here you have $1.6 trillion to extend and make permanent the existing tax cuts, the sum total of which is $2.2 trillion.

You are telling me it is real money. Absolutely. The Senator is absolutely right. This budget is kind of you see this, but you do not see what is behind the scenes, what is coming. We cut off the picture and look at a certain point. It works pretty good. You cut it off here before this line takes off. You see what we are showing-- this part. It is an exercise in prudence to come along and say: Wait a second; let us see how that works in the outyears. All of a sudden, you see it just takes off like that.

The Senator is absolutely right.

Will the Senator yield?

It is interesting. If you deal with the first year of the 10-year period, it is $23 billion, as I understand it. But you can't assume, well, we will just project that out at $23 billion a year, each year. So the cost over 10 years would be $230 billion, which is what someone just coming to it at first blush might assume. The fact is that the cost escalates rapidly. So over the 10-year period, it is not 10 times $23 billion, or $230 billion; it is $658 billion, almost triple what you might suppose it would be.

Will the Senator yield for a further question?

The Senator enumerated the three concerns: a 10-year projection of the cost of the tax cut, the alternative minimum tax; the Senator mentioned the failure to reflect in the budget any cost for our involvement in Iraq or Afghanistan. I want to be clear on this point. Am I correct in understanding that the budget which the President sent to the Congress for the next fiscal year beginning on October 1 of this year, 2004--the budget he submitted to the Congress, the spending blueprint--has zero for the cost of Iraq and Afghanistan? Is that correct?

Absolutely. Yes.

They are already talking about that around town. The other day, the Chairman of the Federal Reserve himself talked about cutting back on the benefits under Social Security.

Here is what has happened. It needs to be understood. There is a direct connection.

These large tax cuts that primarily benefit very wealthy people-- there is some benefit for others, no question. The chairman talked about that today, but in the total picture of where the benefits are going, that is a relatively small portion. Most of the benefits go right up to the top group in society by income and wealth. They say we are running deficits, so to cover the deficits they have to use up the Social Security surplus. Then they say to correct the using up of the Social Security surplus, we have to cut Social Security benefits.

It must be understood, these things are linked. The reason they have the deficit which now says they must cut Social Security benefits is because they gave the very large tax cuts to the elite, producing the deficit, which resulted in drawing down the Social Security surplus which then leads them to say, we have to cut the Social Security benefits.

These are choices. This administration has made a choice. The choice the administration has made is to put tax cuts for the elite ahead of sustaining Social Security benefits. That is the choice they have made. It needs to be understood.

Does the Senator agree there is a direct connection in this regard?

In other words, a third of the Nation's retirees get at least 90 percent of their income from Social Security, another third get from between 50 and 90 percent of their income from Social Security. It demonstrates how dependent retired people are on Social Security to keep them out of poverty so they can lead a reasonable life.

Does that chart mean if one-third of the tax cuts that are being proposed to be made permanent, if only one-third of them remain not made permanent, that would more than cover the shortfall in Social Security?

Mr. President, I appreciate my distinguished colleague from North Dakota joining with me in this exploration of the implications of this budget.

I will talk about job creation for a moment, and to indicate any budget we deal with, which is the most important Government document we act upon, contains thousands of decisions that are critical to our national life. Those decisions reflect important choices in terms of the priorities for our country.

We have just been engaged in a discussion about tax breaks for the wealthiest among us. Are we more concerned with strengthening Social Security to make sure that people in retirement are adequately covered or making the necessary investments in education, transportation, and the environment? All of those decisions are involved in crafting the budget.

In its composite, the budget is a very important macroeconomic document because it sets the fiscal path for dealing with the overall economy.

We ask the question, Will the budget fund the programs, create jobs, and strengthen our economy? Will the budget have long-run structural deficits? What will be the impact of those deficits on our future economic performance? Will it move us toward full employment or away from it?

We talked about the credibility of the President's budget and the fact that it fails to account fully for what the projections should be. We talked about the budget's failure to project for 10 years to show the full cost of making these tax cuts permanent, the failure to adjust for the alternative minimum tax, and the fact that the budget has zero in it for our involvement in Iraq and Afghanistan.

Who are they kidding? Everyone knows that our involvement in Iraq and Afghanistan is going to cost something. Then they say: Well, we cannot really estimate. They should make a good-faith estimate for inclusion in the budget. We are confronted with these facts, and again and again we are not getting the full picture. It is a little bit like things are under shells. If you lift off the cover, all of a sudden you discover another problem.

When the President proposed his first massive tax cut, he told us, ``We can proceed with tax relief without fear of budget deficits.'' That is what President Bush said when he came into office.

In the first budget he submitted, he predicted, for fiscal year 2004--the year we are now in--that we would have a $262 billion surplus. This was the President's prediction.

The following year, with a budget already in deficit, the President advocated another tax cut. At that time, he said, ``Our budget will run a deficit that will be small and short term.'' And the President's budget at that time--that is, the next year--stated the deficit would be so short term that by fiscal year 2004--the year we are now in--the Government would be back in surplus by $14 billion.

Last year, on the brink of war with Iraq, the President proposed yet another tax cut. He also submitted a budget that did not include the cost of the war. He predicted that the deficit for fiscal year 2004 would be $307 billion.

Now, in 3 years, the President had shifted from predicting a surplus of $262 billion for 2004 to the next year when he predicted a surplus of $14 billion for 2004. Then, when he submitted the 2004 budget, he predicted a deficit of $307 billion. So over the 3-year period, we went from a $262 billion surplus, predicted for the year we are in, to a $307 billion deficit. That is a change of $569 billion.

It is pretty clear that although the President said, when he submitted the 2004 budget, he was predicting a deficit of $307 billion, it looks now as if the 2004 deficit will be about $520 billion. That is $780 billion more than the President predicted in 2001, $535 billion more than he predicted in 2002, and $214 billion more than he predicted when he sent this year's budget--the budget we are in--to the Congress.

So we are told we can do these big tax cuts and that it will not matter because we are not going to have a deficit. And here we are deeply in the hole.

What is the consequence of this? Some might say: Well, he is producing jobs. We had an economic slowdown, and now we are producing jobs. We are putting the country back to work.

Let's look at those predictions and what has actually happened.

In the 2002 Economic Report of the President, the administration forecasted that in 2004 the economy would have 138.3 million jobs. Last year, the President lowered that estimate to 135.2 million jobs. And in his most recent economic report, he lowered it again to 132.7 million jobs. In other words, in just 2 years, the forecast for jobs in the country has been lowered by 6 million.

When the President passed the 2003 tax cut, the administration predicted that by January 2004, the economy would create over 2 million jobs. In the fall of 2003, Secretary Snow predicted the U.S. economy would create 2 million new jobs from the third quarter of 2003 until the third quarter of 2004--an average of over 200,000 jobs a month.

What has happened? We just got the figures on Friday for the month of February. For the month of February, it was reported that the economy created 21,000 new jobs in February--21,000--none of them in the private sector, incidentally; zero private sector jobs were created.

When Secretary Snow made this prediction of just over 2 million new jobs last fall, we would have needed an average of about 200,000 new jobs a month in order to meet his prediction. The performance has been so dismal, we have only averaged 59,000 new jobs per month over the last 2 months. We have to produce jobs 444,000 a month from now until the third quarter of this year for Secretary Snow's prediction to be borne out.

The economy is not creating these jobs. We face a real difficult jobs situation.

Certainly.

The tax cut alone.

Well, I say to my colleagues it is classic trickle-down theory. It has been discredited before. Yet here it is back before us again, classic trickle-down economics. Every administration since Herbert Hoover, which was, of course, classic trickle-down economics, Democratic and Republican, has had a net creation of jobs over the course of its administration. In other words, over that 4-year period, every administration were able to have a net gain in jobs.

This administration is about 2.3 million jobs below where the Nation was when they came into office--down about 2.3 million jobs. It is the first administration since Herbert Hoover that will not show a net gain in jobs over the course of its 4-year tenure. That fact needs to be laid out before the American people.

This recession we experienced began 35 months ago, the first few months into the Bush administration. The economy today has fewer jobs than it did then. This is the first recession since the Great Depression in which the economy failed, over a 35-month period, to recreate all the jobs that were lost in that recession. In a typical business cycle, we long ago would have recouped those jobs and gone on from there. That has been the case--and this is a long time period--in every recession we have experienced since the Great Depression.

But here we have a situation in which jobs are not being created to close the gap, and there is no real prospect, in the few months remaining, of meeting Treasury Secretary Snow's prediction. To do so, we would have to average about 444,000 jobs per month out into the fall of this year. Over the last 3 months, we averaged only 42,000 new jobs per month, as opposed to 440,000.

This, of course, raises a number of difficult problems. We have seen manufacturing jobs continue to fall and they have now fallen for 43 consecutive months. We see temporary jobs increasing. We see people dropping out of the labor force. Last month, 392,000 people left the labor force. People come in and say, you know the unemployment rate didn't go up. But if people drop out of the labor force and are not looking for work, they are not counted as unemployed. One of the reasons is they become so discouraged they drop out. That helps to keep the unemployment rate flat, but the exodus from the labor market is reflected in the job figures.

If the Senator will yield, it is not only that we have not been able to get up to here, we have not been able to even get back to the jobs we had at the beginning of the recession. We are still well below, about 2.3 million jobs, where we were when the recession began in the early months of 2001, absolutely.

The last chart my colleague presented is an extremely important one because it shows the percent of long-term unemployed among the unemployed is at record levels, higher than it has been since 1984. In fact, close to 23 percent of the unemployed workers have been unemployed for more than 26 weeks. It has been above 20 percent now for 17 consecutive months. For a year and a half, the percent of unemployed who are long-term unemployed is above 20 percent, which is an important benchmark. The last time we had a period that ran that long was 20 years ago. The Senator's chart showed exactly that. That was back in 1984.

That is why this effort that has been repeatedly made on the floor of the Senate and in the committee just last week to address extending unemployment insurance benefits is so important. That effort has been turned back. I plead with my colleagues on the other side to move ahead on extending unemployment insurance benefits.

We still have a serious labor market weakness. We have not recovered the jobs. It is not as though you could say a lot of job opportunities have opened up and people can go back to work. That has not happened in this instance.

Long-term unemployment is at record levels. Nearly 2 million people have been unemployed for more than 26 weeks. Twenty-six weeks is the period that the traditional unemployment benefits cover. In the past, we have always extended unemployment insurance benefits so people can meet the problem of providing for their families. We have actually provided more benefits in the past than we have in this recession.

In the previous Bush administration, the program was extended and then extended again. We built up the unemployment insurance trust fund for this purpose: to fund these benefits when we encounter an economic downturn. There is over $15 billion in the unemployment insurance trust fund specifically collected for the purpose of paying unemployment insurance benefits in an economic downturn.

I joined with my colleague in the committee the other day to offer an amendment to make a provision within the budget for extending unemployment insurance benefits. Regrettably, it was turned down on a straight party-line vote. I anticipate that amendment will be offered again on the floor, and I hope my colleagues will reflect upon it before that occasion arises.

We need to do something. These are people who were working. You cannot collect unemployment insurance benefits unless you have a work record that entitles you to collect them. These are not, if you want to say, malingerers or people who don't want to work. These are people who had jobs. They lost their jobs through no fault of their own. If it is their fault, they cannot get unemployment insurance benefits. If they are to blame, if they have not performed on the job, they do not get unemployment insurance benefits. These are people who were working, in many instances had a long working career. They are out of a job. They are in a labor market where jobs are not being created, as my colleague dramatically illustrated with the chart he showed. How are they going to provide for their families? What are these responsible, hard-working Americans to do in terms of meeting the needs of their families?

Yet we have been turned back on the effort to extend unemployment insurance benefits, and I very much hope when the issue comes before us that Members will reflect and agree we need to do something about this pressing problem.

I will make a couple more points before I close.

This fiscal situation of the United States in which we find ourselves and the magnitude of it has drawn very sharp comment from objective observers. Listen to what the IMF said only recently:

U.S. Government finances have experienced a remarkable

turnaround in recent years. Within only a few years, hard-won

gains of the previous decade have been lost, and instead of

budget surpluses, deficits are again projected as far as the

eye can see.

Let me repeat that. This is the IMF commenting about U.S. Government finances:

Within only a few years, hard-won gains of the previous

decade have been lost, and instead of budget surpluses,

deficits are again projected as far as the eye can see.

The President says he is going to cut the deficit in half by 2009. My colleague pointed out, I think with great perception, that was not in the cards. It is not sustained by the numbers.

If we are going to have a debate, we cannot just play around with the numbers as though they do not mean anything. We have to have some hard facts upon which to work. These structural deficits that are built in this budget are extremely harmful to the economy as we move ahead--a promise to raise interest rates, reduce economic growth, decrease the number of jobs, increase our vulnerability to a sudden economic crisis. A responsible budget would not encompass a structural deficit, and if there is a structural budget deficit, a responsible budget would seek to correct the imbalance.

I could go on at some length about the choices made within the budget with respect to what our priorities ought to be, but I make this fundamental point: In every instance, there is a choice. You do not make one decision, for instance, to cut taxes for very wealthy people which then results in a larger deficit and then turn around and say to educators who say, We cannot carry through on the No Child Left Behind legislation, that there is no funding to address your complaint. That complaint is coming from all over the country. Out in the Rocky Mountain States, we have educational officials telling us they cannot carry through on that program. They are making that point very forcefully.

I was reading about it only today or yesterday in the paper. They said: We can't carry through on it. They are told, We can't carry through on it because we have this deficit to worry about. Why do we have the deficit to worry about? We have this big deficit because we are doing these big tax cuts for wealthy people. So the choice that was made in the President's budget was to do the tax cuts for the elite rather than fund the No Child Left Behind program. That was the choice.

I think that is a bad choice. I think the country thinks it is a bad choice. But there is a need to understand when you put this budget together, whatever you do on the one hand has an impact on the other hand. You cannot avoid that.

If you did not do these extensive tax cuts--which the President wants to make permanent--with those huge costs, the deficit would not run up; you would be able to hold the deficit down and do something about education and health care. But the President has put the Nation in an absolute deficit box.

I think that is less than 1 percent of the American public; is it not?

What that says is he could fund No Child Left Behind and he would still have $36 billion left of the tax cut; is that right?

There are other examples of this. I offered an amendment in the Budget Committee to fully fund the firefighter grant program. That amount is $900 million--not billions as we are talking here but just $900 million. Two years in a row, the Congress has appropriated $750 million. So we have not appropriated the fully authorized amount but we have gotten up fairly close to it at $750 million.

The President's budget submitted to the Congress had $500 million. In other words, it cut the program by one-third, $250 million, from the level it had been for 2 successive fiscal years. These are grants that go out to firefighters across the country to try to enhance their professionalism, upgrade their equipment, better prepare them to deal with the threats we confront.

One of the things we are very anxious to deal with is that one-third of all the firefighters in the country do not have the equipment, the breathing equipment to protect them in a serious fire, from smoke inhalation. That is one of the things we would like to take care of. Yet the President's budget proposed to the Congress cut the funding for this program by one-third.

The President is now running political ads showing firefighters on 9/ 11 moving out of the wreckage, and there is a stretcher with a flag on it. We know what the firefighters did. We know the heroism they have shown.

Every year, I go to the National Fallen Firefighters ceremony, which is held at the National Fallen Firefighters Memorial, which is in Emmitsburg, Maryland, the location of the U.S. Fire Academy. Families come from all over the country. There is a weekend of events and ceremonies to mark the memory and the heroism of fallen firefighters. The year after 9/11 we could not do it in Emmitsburg. There were too many people and so the ceremony was held at the MCI Center in Washington because the number jumped so tremendously as a consequence of those deaths in New York.

In money terms, that is not a big item, but in its significance and in what it stands for, I think it is very substantial. We know our first responders place themselves at risk. They are the first called upon.

There were firefighters going up the steps of the World Trade Center in an effort to rescue people when people in the building were coming down the steps in order to escape. In effect, they were placing themselves in further danger in order to save their fellow human beings. They did not know these people. They were all strangers to them but they were responding to their duty. It is extraordinary when we stop and think about it.

The impact of it is obviously recognized by some of the President's people because they are putting it in this political ad. But I would like to see them take the program up to $900 million to do the firefighter grants so we could provide firefighters across the country with the protective equipment which they need as they carry out this very dangerous occupation. That would require only $400 million. The President's tax cuts provide $45 billion for the top 1 percent. Will the top 1 percent, those making over $337,000, who are getting an enormous--what is the tax return they are getting? Does the Senator have that figure in his mind, $120,000 or something?

Those earning over $1 million get $127,000 per year. As a category, they get $45 billion. Would they be willing to reduce that to $44,600,000,000 in order that we could fund these firefighter grants at the full authorization level of $900 million instead of the $500 million that is in the President's budget, which itself represented a cut of $250 million from what Congress had appropriated in each of the other 2 years?

Is it unfair, inequitable, unjust to say that in the order of priorities, funding those firefighter grants should come ahead of a small portion of these tax cuts for those making $337,000 a year? I defy anyone to argue the equities of that case.

That is why this is not a good budget. That is why we voted against it in the committee and that is why over the coming days, under the leadership of our very able colleague from North Dakota, we will put before this body--I and others and certainly the Senator from North Dakota himself--amendments that will frame the choice in terms of priorities. Those are the choices we need to face. Let's put the choices out there.

Do my colleagues think it is reasonable to take a small portion of this tax cut and use it for this purpose, or must every single penny of what the President is seeking for the very elite go to the very elite, despite these other pressing needs?

As I understand it, in the coming days this week, opportunities will be presented to offer amendments which will frame those choices. The Senator has framed one. Everyone talks a good game about education, including the President. The question is, will you put the resources there to do the job?

As the Senator points out, fully funding education is more costly than the example that I have been citing. But nevertheless, for just over $9 billion we could fully fund No Child Left Behind, which would address what we are hearing from the States, who are saying now, We can't do this job. You have saddled us with a job without the resources. The $9 billion is one-fifth of this tax cut that is going to those making over $337,000 each and every year.

Those amendments framing those choices need to be put to this body. I look forward to the responses my colleagues will make to them.

I yield the floor.

Mr. President, I listened to this particular debate for a while. I have a few observations. I am not prepared to make a significant economic statement. I will be doing that at some point during the debate. But I think I will respond to a few comments that have been made.

If I may quote Paul Samuelson in a recent article in Newsweek and the Washington Post, he said most of the debate about jobs that is currently going on is bogus, and he makes the point that if a President could create jobs, the unemployment rate would be permanently at 3.2 percent. If a President could create jobs, every President would. If a Congress could create jobs, every Congress would. No one wants to go home and address his constituents at a time when jobs are difficult.

The fact remains, however, that the Congress or the President cannot, with a wave of the hand or the passage of legislation or the adoption of a political slogan, create jobs. Jobs are created in the economy. Jobs are created because of two things: There first must be accumulated wealth, accumulated capital of some kind, and then there must be someone who holds that capital who is willing to take a risk.

All wealth is created by the combination of accumulated capital and risk taking. When we tax people, we tax their accumulated capital. We have to do that. We should do that. I am not suggesting in any sense that taxes are not appropriate, but if we tax capital too much, capital flees. It goes some place else. If we regulate risk taking too heavily, it goes some place else or it is killed altogether.

As a consequence, if we are going to have jobs, we want an economic situation where accumulated capital is allowed to work and where risk takers are rewarded for their risk and where they receive the incentive necessary to compensate them for the risk they take.

I do not mean to be overly personal, but I hear people talking about two things. One, they talk about small business and how wonderful small business is, and then they talk about millionaires and how millionaires should be willing to sacrifice a little of their money so everybody else can have a job.

It is very interesting that those who talk about let's not make the tax cuts permanent then praise small business in the next breath. Perhaps they do not realize most of the tax returns that show income in excess of a million dollars are, in fact, the tax returns of owners of small business.

Let me give my own personal example to illustrate the point. I have done it before, but I have discovered since I have come to the Senate, there is no such thing as repetition in the Senate. We always give every speech as if it is brand new.

Before I came to the Senate, I was the president of a privately held corporation that filed its taxes under the S section of the Tax Code. Therefore, it was known as an S corporation. It used to be called a subchapter S corporation, but they changed the law a little and it is now just an S corporation.

When that phrase is used, people's eyes glaze over and they say, what does that mean? Well, it is very simple. If the corporation earns $1 million and it has 10 shareholders, instead of the corporation paying taxes on that $1 million, as an S corporation it pays no taxes, but each of its 10 shareholders, assuming their shareholdings are equal, pays taxes on $100,000. Why would any shareholder want to do that? Very simple. It avoids double taxation.

If the corporation made $1 million, had 10 shareholders and it paid taxes, it would pay taxes at 36 percent. The Federal Government would get 36 cents out of every dollar it earned.

At the time I was doing this, the top tax rate was 28 percent. By saying, all right, we are going to register as an S corporation so the corporation does not pay any taxes on the $1 million, it comes to the 10 shareholders and each one of us will pay taxes on our share of the earnings, which in my case was 28 cents, that is a very significant difference--the difference between paying

28 cents on every dollar you earn and 36 cents on every dollar you earn.

During the period of time Bill Clinton was President, that number went up to 42. I had said before if we had started that company at a time when the effective tax rate was 42 percent, we probably would not have survived, but because we started it during the Reagan years when the top individual tax rate was 28 percent, we got to keep 72 cents out of every dollar we earned.

What did we do with that? We put it back into the corporation and we created jobs, real jobs. The company had four full-time employees when I joined it as the chief executive--not a very big company, frankly, not a very big deal. It eventually grew to 4,000 jobs. The reason it had that kind of momentum as a small business is because we only paid 28 cents back to the Federal Government out of every dollar we earned. We put the 72 cents into growing the business and from a base of 4 jobs we created 4,000 jobs. If we add up all of the income taxes that were paid by those 4,000 employees and the corporate taxes that were paid by the company when it finally went public and ceased to be an S corporation, it became a C corporation, and the taxes that were paid by the suppliers of our company and the taxes that were paid by their suppliers and all the rest of it, we come up with a very large number that came into the Federal Government because that company was started.

As I said in the beginning, it was started because of two things: accumulated capital and risk taking. How much accumulated capital did we have? We borrowed $175,000 from the bank. It was the bank's capital. That was our accumulated capital. How big a risk did we take? Every one of us signed away everything we owned in the form of a personal guarantee to make that company go. After about 9 months of operation, I remember the principal shareholder of the company saying to me, Bob, are we going to make it? Are we going to survive?

I said to him, well, it depends on whether we get repeat business. We sold a product that had a year's life and the question was would the people at the end of the year come back and buy the product at the end of the year. I said, if we get 55-percent repeat business, we are going to survive. If we get less than that, your next phone call has to be to a real estate broker because you are going to have to sell your house. The bank is going to show up and take everything you own.

On that pleasant note, we went ahead with the business. It turned out we got more than a 55-percent renewal rate. We got a 95-percent renewal rate and the business doubled. It continued to grow and we funded it with internally generated funds because we were able to keep 72 cents out of every dollar we earned and put every dime of that 72 cents back into the business.

Because we were an S corporation and the profits we were earning showed up on our individual tax returns, I filed tax returns that showed I was earning over $1 million a year. Now, in fact, my salary as the CEO of that company was $140,000, but there was the other million that was added to it as my share of the company's earnings reported on my personal income tax return.

If we go to the chart that was shown by the Senator from Michigan, I would be one of those who would be earning $1 million a year. In fact, my take-home stayed exactly the same at the $140,000 figure. The rest of it was all a bookkeeping entry. We did it because we wanted to avoid double taxation and because we wanted to take advantage of the fact that the effective rate for individuals was lower than the effective rate for corporations. We built the business and we created the jobs because the tax situation was as I have described it.

We hear all of these comments about how wonderful small business is and how small business is the engine that is driving the economy, and they are right. We hear all of these comments about how small business is where the new jobs are, and they are right. It is interesting that almost unanimously those who represent small business are saying to us, keep the President's tax cuts in place. If you do not, you will stifle small business.

On this floor we are seeing our colleagues say, let's let the millionaires pay for the things we want to do, let's take a little off the top from the millionaires and then we can afford all of these wonderful Federal programs we want to fund, all of the time while we are saying, gee, we are spending too much money, but we should spend more money here and we should spend more money there and we should spend more money in the other place. And where are we going to get it? Well, we will let the millionaires pay it.

Then they say, all of this will help small business. The small businesspeople are saying, we are the millionaires and it is not coming to us in personal income, it is showing up on our tax returns in K-1 forms filed to deal with an S corporation, and you are stifling job growth, you are stifling small business if you do it this way.

We do not hear from the real small business man and woman. We hear from those who say, I am speaking for small business while I am saying small business is wonderful, and at the same time I am saying increase the taxes on those small business men and women who have sole proprietorships or S corporations or limited liability corporations.

The other point I want to make in this debate has to do with jobs. We are hearing over and over, where are the jobs? Once again, it is the President's fault. President Bush has presided over the loss of more jobs than anybody since Herbert Hoover. He must have done it deliberately is the implication. As I said at the outset, Paul Samuelson said if a President knew how to create jobs, we would never see the unemployment rate go above 3.2 percent.

What is the basis of the creation of jobs? Let me give a statistic. When economic activity goes up, obviously there is a need for more jobs. There is a need for more people to work at businesses, at firms that are involved in the economic activity growing. So the economic activity has gone up.

We had a great year in 2003. The gross domestic product grew by 4.3 percent, which in historic terms is terrific. The President said we will get good growth if we have these tax cuts, and we have gotten good growth. We have added something like $3 trillion to $4 trillion worth of wealth on the stock market--and that involves over 50 percent of our population.

The stock market is not just for the privileged few at the top now. Teachers' pensions, labor union pensions, veterans' pensions, people who have invested for their children's college funds--over half of Americans are now invested in the stock market. They have seen, since the President's program went into place, an increase in the overall value of the stock market in the multiple trillions of dollars. This is not a small accomplishment.

But where are the jobs if GDP is at 4.3 percent, historically a high position? The stock market has come back, creating a tremendous amount of accumulated wealth, and where are the jobs?

There is another statistic that answers the question we need to pay attention to. In 2003, once again GDP increased by 4.3 percent. Normally that is a time when you would see the creation of many jobs. However, in that same year productivity increased by 4.4 percent: a staggering number in historic terms. But the net effect is that it was higher than GDP.

Whenever productivity grows faster than the economy grows, something we don't like happens and that is we lose jobs. For all of the efforts on this floor and in the White House and in the Federal Reserve to get the economy growing, to get the traction in the recovery growing--and we produced a year of 4.3 percent growth in 2003--with that strong growth, we lost 60,000 jobs. The reason was productivity grew at 4.4 percent while GDP was growing at 4.3 percent.

Some will say the solution to the problem is to get productivity down, to have GDP growing and productivity falling. That, of course, is a prescription for long-term economic disaster. The most significant thing we want to do in our economy is keep it as productive as possible, to have productivity growing rapidly here so we can outgrow the rest of the world. That is what America has done for 100 years or more.

Go back to the middle 1800s and look at the productivity figures for the then leading economy in the world, which was Great Britain, and the productivity figures for the young upcoming

country in the world, which was the United States. You see that over the years the United States had a higher productivity than Great Britain by about a half a percent. That was enough, over the decades, and then the century, to see America eclipse Great Britain and see Great Britain ultimately disappear as a major world economic factor. America now stands as the strongest economy in the world. We do not want our productivity to go down.

The thing that has happened in this recession and recovery, something that has not happened before, is that through the quarters of recession and recovery productivity remained strong. Productivity simply means you are getting more value out what the workforce is producing. You are getting more goods; you are getting more services; you are getting more to sell. If you can get more out of the workforce in this fashion, it means ultimately your society has a higher standard of living and your consumers pay less for the goods they use. But if productivity is growing faster than the economy is growing, that means you are getting that result, higher standard of living and lower cost, with fewer people.

This is the real dilemma we are facing that is not being discussed when we talk about economics. The real dilemma we are facing is how do we get the GDP to grow faster than productivity

I believe productivity will come down from the high of 4.4 percent that we saw in 2003. I don't think that is sustainable. I think the GDP will eventually cross over the line so the GDP is growing more rapidly than productivity does, and when that happens the jobs will automatically come into play. They will appear. It will not be because of anything we do or not because of anything President Bush does or of anything that a potential President Kerry might do. It will happen because the economy is strong enough that the GDP will grow faster, that productivity will be passed by the GDP number. Whoever holds office at that time, be he or she, Republican or Democrat, will take full credit for it. They will say, since it happened on my watch, I did it.

But let us, at least for a moment, in the rhetoric of this election year, pause and recognize what is happening. We are in the midst of the information revolution. It is as fundamental to changing the economy as the industrial revolution was in the late 1800s. We have not yet learned quite how to cope with it and deal with it. But the potential for good for our citizens, and for the world, is enormous.

I don't want to peddle fear and pessimism because, in fact, we should be optimistic and excited about the future that this represents to us. It will be filled with challenges, just as the industrial revolution brought enormous challenges. But it will be filled with opportunity and it should be filled with optimism.

I close with this observation. If we had been having this debate 100 years ago, in 1904 instead of 2004, and some economist with a great, clear crystal ball had come before us and told us the following we would all have panicked, but it would have been true if he had said this 100 years ago. He would have said: Sixty-nine percent of America's labor force works on the farm; 69 percent of America's labor force is involved in agriculture, which is civilization's oldest economic activity. One hundred years from now, in 2004, that number will be two. Yes, you heard me, it is now 69 percent; 100 years from now it will be 2 percent.

If that were all he had said, the sense of panic would be enormous. Of course, he would have been accurate because agricultural jobs now have gone from 69 percent of the labor force to 2 percent.

What in the world have we done with all of those people who are out of work? The industrial revolution took hold and their productivity became greater and greater and greater, and today the 2 percent of Americans who are involved in agriculture produce more food and fiber than Americans can possibly eat or wear, even though obesity is our largest health problem. We have to export food to keep the farmers busy and only 2 percent of our working force is in agriculture.

We have enormous productivity.

Here is another statistic and cautionary tale in that same situation. The percentage of workers involved in manufacturing has been going down, just like the percentage of workers involved in agriculture for 50 years--not just in this country but all over the world. As we now see the percentage of workers going down in manufacturing and we get all excited because it is going down in one President's term, or in the 8 years of Bill Clinton, or in the first President Bush's term, or in Jimmy Carter's term, or wherever it might have been going down, it has been going down on a steady basis for over 50 years here and in Europe and in every other industrialized country in the world.

What have we done with those workers? How have we been able to find jobs for them? The son of the steelworker who no longer has a job because about 10 percent of the number of steelworkers is necessary to run a steel mill now compared to the number that was necessary when we had open hearth furnace steel mills, the sons and grandsons of those steelworkers who worked in the open hearth furnaces are now working for Microsoft, or Verizon, or in a startup that will become the next e-Bay, or whatever company you want to speculate. They are earning more money than their grandfather and their father earned, and they are providing for their families better. We are in the midst of the information revolution, as I said, that is transforming the economy as fundamentally as the industrial revolution did.

As we deal with this recession and this recovery and talk about what we need to do, let us understand the environment in which we are operating.

There are many things we don't know about the information revolution. There is much to understand before we can make sound policy. But we come back to a fundamental truth which was true during the agricultural age, which was true during the industrial age, and which is true now during the information age; that is, in order to get economic activity, growth, and wealth creation, you need two things--accumulated capital and the willingness to take a risk.

If we can always remember those two fundamentals--that all growth and all wealth comes from the combination of accumulated capital and taking a risk--we will make wise decisions.

If we fall for the siren song that says the way to deal with our problem is to share the wealth and take the accumulated capital and spread it all around in a way that nobody then has any risk--Karl Marx suggested that and we have seen what has happened to the economies that followed his economic advice--we will kill the goose that has been laying golden eggs in this country for over 240 years.

That is a dramatic condemnation of some of what I have heard on the floor, and it is over the top. But, frankly, much of what I have heard here on the floor is over the top.

Let us stay with the basics. Let us do our tax policy in a way that encourages accumulation of wealth. Let us do our regulatory policy in a way that encourages the taking of risks. Then as the wealth is created by the combination of accumulated capital and risk taking, let us devise a tax system that does not kill the golden goose but that does take out of the economy the money we need to deal with the proper role of government. I am not one who says we shouldn't have taxes. I am not one who says people shouldn't pay their fair share. I am not one who says just because you are successful you should be left alone. But my fundamental goal is a tax system that functions to raise enough money to pay for the legitimate needs of government, not one that picks winners and losers, not one that tries to set social policy by tax incentives. Let social policy be set by Congress. Let the taxes be drawn in a way that produces the greatest efficiency in the economy. Then the gross domestic product will grow more rapidly than productivity, even though the information age will keep productivity high. At that point the jobs will start to come and we will have done our jobs.

We cannot create jobs. The President cannot create jobs. But what we can do is create an economic circumstance where jobs are discouraged and economic activity is dampened. When that happens, we will all pay the price.

I yield the floor.

Mr. President, will the Senator yield for a question?

Mr. President, I agree with the Senator about the size and terrifying nature of what we are facing with retirement of the baby boomers. But I disagree with him about the connection between this budget and that kind of disaster. I feel even as we are running surpluses right now, the disaster that is facing us is exactly the same size regardless of where we are right now.

My question to the Senator is when he references the Chairman of the Federal Reserve Board, with whom he and I both have had this discussion--we know how strongly Chairman Greenspan feels--is the Senator not aware Chairman Greenspan is of the opinion that the President's tax proposals did indeed help produce the recovery in which we now find ourselves, and indeed Chairman Greenspan has endorsed making the President's tax proposals permanent? Is the Senator aware of the fact Chairman Greenspan, even as he warns about the same things the Senator and I agree upon in terms of the problems of the future, says in the present context making the President's tax proposition permanent is a good idea?

Mr. President, if I could respond, I have no idea if what I pay is what I legitimately owe or not because the Tax Code is so impenetrable I did not get an answer out of two different people as to what the amount is. I pay the amount my tax preparer tells me I owe and so far the IRS has accepted that as legitimate.

Give me a third opinion.

If I could make a quick comment without the Senator losing his right to the floor.

I recognize fully the level of revenue currently coming into the Federal Treasury is at a distressingly low historic point. But I go back again to a comment that Chairman Greenspan once made to a group of us. I am not sure whether the Senator from North Dakota was present. It fits in with the area of agreement that we have. He said to us: You can set the level of spending just about wherever you want. You can pass a law and be pretty sure spending will be where the law says it will be. You cannot set the level of income where you want. That is a function of the economy.

If we look at the period which we all look back on with such great satisfaction--that is, the years in which we were in surplus--one of the major reasons we were in surplus was that the economy unexpectedly, according to the computers at CBO, produced far more revenue than CBO scored. This came as a result of the balanced budget agreement, the agreement entered into with the Republican Congress and the Democratic President after the 1996 election, an agreement that the Speaker of the House in 1995 tried to enforce with heavyhanded political methods and got himself in trouble in 1995. But after the election, the leadership of the Senate and the House and the leadership in the White House with President Clinton sat down and we got the balanced budget agreement, the balanced budget proposals, and in that process the Congress insisted, the President resisted but finally agreed to cut the capital gains tax rate.

The CBO scored the amount of revenue we would get from that tax cut. The actual revenue, I believe, was five times as great as CBO scored it. No one had anticipated the rivers of cash that would come in.

Now, rivers of cash came in, in my view, because there was capital tied up in mature investments that wanted to find more entrepreneurial kinds of investment but believed that it could not move it--that is, the owners of capital believed they could not move it with the capital gains rate of 28 percent. When the capital gains rate came down to 20 percent, they figured that was enough to allow moving the capital out of mature investments and into entrepreneurial investments and we saw Federal revenue go above 22 percent of gross domestic production, which I don't think has ever happened before.

Now we are in a recession. There are no capital gains. The revenue has gone down into the teens in percentages of gross domestic production. The recovery, historically, can be depended upon to take care of that and the more the recovery persists, the more Federal revenue as a percentage of gross domestic production will rise.

I thank the Senator for his courtesy and will not continue this dialog because I am intruding on the good will of others, but I appreciate the opportunity to have engaged in this exchange.