Bipartisan Commission on Medicaid Act of 2005

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 President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, I rise in strong opposition to this budget. I believe it is a profound mistake for this country to stack additional debt upon already record levels of debt that I believe puts the long-term economic security of our country at risk.

The record is very clear. We now face record budget deficits, and we face them for as far as the eye can see. Those who have assured us repeatedly that deficits are being dealt with have failed the credibility test, and they have absolutely failed the test of fiscal responsibility. This budget bears no relationship to fiscal conservatism or fiscal responsibility, and this vote will be a defining vote on where Members stand with respect to fiscal responsibility for this country.

Here is the record on deficits. Since 2001 the deficits have soared to new records, levels we have never seen in the history of the country--$412 billion in 2004 and very little improvement anywhere in sight.

As we review back to 1980 the relationship between spending, here is what we see. The red line is the spending line of the United States, the green line is the revenue line. We can see spending has been brought down as a share of gross domestic product rather steadily until this administration. In fact, it is interesting, in the entire 8 years of the Clinton administration, spending came down steadily as a share of GDP. We have now had an increase, largely as a result of the attack of September 11 because 91 percent of this increase is defense, homeland security, aid to New York, and aid to the airlines.

Going forward, we see that spending will stay roughly at these levels going forward, with some slight additional increase as we get closer to the time when the baby boomers retire.

Look at the revenue line of the United States. Also during the Clinton administration, revenue rose each and every year so that finally we did away with deficits and, in addition, we actually stopped raiding the Social Security trust fund to use it for other purposes.

President Bush came to office, and the revenue side of the equation has collapsed. Last year, revenue was the lowest it has been as a share of GDP since 1959. The President said when revenue was high as a share of GDP, we must have tax cuts. Now that revenue is at a 50-year low, the President's answer is more tax cuts. The result is a huge ongoing gap between spending and revenue that means ever-increasing debt, and all of it at the worst possible time before the baby boomers retire.

Here is what the Comptroller General of the United States said in a speech to the National Press Club on February 2 of this year. He said:

The simple truth is that our Nation's financial condition

is much worse than advertised.

The Comptroller General of the United States had that exactly right. Our financial condition is far worse than advertised. In fact, my first chart showed the deficit at just over $400 billion in 2004, at $412 billion. But that is not how much was added to the debt that year. It was far more because the deficit understates the seriousness of our financial condition. So, too, does the budget that was sent to us by the President of the United States. The President told the American people that he is cutting the deficit in half over the next 5 years, but the only way he got there is just by leaving out things. He left out any war costs past September 30 of this year. Does anybody believe there is not going to be any war costs past September 30 of this year?

Here is what we have. The President sent up a supplemental. That passed the Senate and is in conference committee now. The supplemental is $82 billion for ongoing military operations in fiscal year 2005 but nothing past September 30. Look what the Congressional Budget Office tells us should be in the budget: $383 billion. That is their estimate of residual war costs.

Yes, I will be happy to.

It does not. We have this supplemental, as the Senator knows, that is going through the process. We passed it in the Senate. It is in conference committee now. It is $82 billion. Much of it will be spent this year; some of it will slop over to next year. This is what the Congressional Budget Office says should be in any realistic budget--not $82 billion, but $380 billion, and it is this gap which is part of the unrealistic nature of the budget that is before us and the budget the President sent us.

No, it really is not. I think any objective observer in reading this budget would have to say it is not

a realistic picture of our financial condition. It just leaves out things. In fact, when the President's people came to me and told me how they were going to cut the deficit in half, I said to them: Why don't you just leave out some more things and claim you balanced the budget because it would have about as much attachment to reality as this has.

There certainly are other items. One of the items that is left out is the true cost of the President's tax cut proposals because the President switched from 10-year budgeting to 5-year budgeting, and I think here is why. The dotted line shows the end of the 5 years, and this chart shows the cost of the President's tax cut proposals. As we can see, it is very interesting, right after the fifth year of this budget, the cost of the President's tax cut proposals takes off like a scalded cat. None of that is captured by the President's budget because his budget ends right here at this dotted line. But look what happens right past the dotted line. The revenue hemorrhage escalates dramatically, and it is not just there, but it is also with respect to the alternative minute tax, the old millionaire's tax that is rapidly becoming a middle-class tax trap.

Here is the trend line of the cost to fix the alternative minimum tax. It is straight up, and there is no funding in the President's budget to deal with it. So with 3 million people affected by the alternative minimum tax last year, 10 years from now it is going to be 40 million people a year. It costs $774 billion to fix. Last year, the President had 1 year of funding to deal with it. He has no funding in his budget this year to deal with it. And so, again, it is an unrealistic budget because it does not capture items we all know are going to have to be dealt with.

Perhaps most remarkably, the President's budget, as the budget before us, does not contain any money for the Social Security Program the President champions and that is championed by many on the other side of the aisle. There is no money. We know the President's proposal costs money. In fact, in the first 10 years, it costs $754 billion. There is no money in the budget. Over 20 years, the cost of the President's plan is $4.4 trillion--not a dime of it in the budget. This is not really a budget. It is a political statement, perhaps, but it is certainly not a budget.

When we go back and add back the items the President has left out, just the major items--the alternative minimum tax, the ongoing war costs, according to the Congressional Budget Office the cost of the President's privatization plan--instead of this trend line which the President is predicting, instead we see this hashed red line.

Over the next 10 years, this is where we see the deficits going under the President's plan. The budget before us has much the same pattern, exploding deficits for as far as the eye can see and at the worst possible time, right before the baby boomers retire.

As we see these deficits, we go back to this chart, and the President is saying they will be in the $200 billion range at the end of this 5-year period. We do not see that at all. As we can see, they will be in the $350 billion range. Of course, this, too, understates the real magnitude of our problem because it does not capture all that is being added to the debt.

Look where this goes the second 5 years--to deficits of $620 billion. In a moment I will get to how much is being added to the debt under this budget because I think that is critically important for people to understand. Our friends on the other side of the aisle talk a lot about deficits these days. They never talk about the debt. The debt is the accumulation of all the deficits.

Obviously we face a big demographic challenge going forward. I have indicated all of this is happening at a bad time because the baby boomers are about to retire. Here is what we see. We are going to go from about 40 million people eligible for Social Security and Medicare to 81 million eligible. That is a key reason we ought to be running more balanced budgets at this time.

The President told us back in 2002 that:

None of the Social Security surplus will be used to fund

other spending initiatives or tax relief.

That is what he told us. None of the Social Security money would be used to fund other spending initiatives or tax relief. Now we are able to have the benefit of several more years and we are able to look at the record and see what the President's budget will do going forward. The President said none of the Social Security surplus would be used for tax cuts, or other spending initiatives.

Under the budget that is before us from the President and under the budget before us by the majority party, every penny of the Social Security surplus is going to be used under the President's plan for the next 5 years and, by extension, the next 10 years, $2.5 trillion--$2.5 trillion of payroll tax money, which is supposed to be used to support Social Security, being used to pay for other things. In effect, it is being used to subsidize his massive income tax cuts for the wealthiest among us, and being used to pay for other things.

The irony of this is the President says Social Security is $3.7 trillion short over the next 75 years, but in his budget he is taking $2.5 trillion of Social Security money in the next 10 years alone and using it to pay for other things.

I think this whole picture becomes more clear if one puts it all together. This is the reason I so strongly oppose this budget that is on the floor. I say to my colleagues, anybody who votes for this budget should never make another campaign claim that they are fiscally responsible or fiscally conservative because this budget absolutely is a testimony to those who worship at the altar of debt. This budget builds debt on top of debt.

Going forward, this chart shows the Social Security trust fund surpluses, which are the green bars. The blue bars are the Medicare trust fund. The red bars are the President's tax cuts. What one sees is the Social Security and Medicare trust funds go cash negative at that very time the cost of the President's tax cuts explodes, driving us right over the cliff into massive deficit and debt. That is where this is all headed.

The President says Social Security is a problem and, of course, he is correct. The 75-year shortfall in Social Security is $4 trillion. The 75-year shortfall in Medicare is 7 times as much. The 75-year shortfall in Medicare is $29.6 trillion. This is according to the Social Security trustees.

One would say that is a big problem, that the President is not addressing this problem, not addressing these shortfalls. His proposals make it all worse. His proposals take more money out of Social Security. The budget that is before us takes $2.5 trillion of Social Security money over the next 10 years and uses it to pay for other things. Then the President comes with a proposal and says establish private accounts and divert more money out of Social Security, another $700 billion over the next 10 years. Over the next 20 years, he is talking about diverting over $4 trillion out of Social Security. That is real money. It is no wonder Social Security has a shortfall. The President is helping to create the shortfall.

The President told us in 2001:

. . . (M)y budget pays down a record amount of national debt.

We will pay off $2 trillion of debt over the next decade.

That will be the largest debt reduction of any country, ever.

Future generations shouldn't be forced to pay back money that

we have borrowed. . . .

These are not my words. These are the President's words. The President said:

. . . Future generations shouldn't be forced to pay back

money that we have borrowed. We owe this kind of

responsibility to our children and grandchildren.

Those are good words. The President was right to utter them. The problem is if one compares the record to the rhetoric, there is no connection.

I would be happy to yield.

That was made in March of 2001, when, the Senator will recall, he was assuring us we could afford to have a massive defense buildup,

deep tax cuts, that it would all add up and he would be able to protect Social Security and Medicare, not use the money for other purposes, and he would have maximum paydown of the debt. He was wrong on every single count. He was wrong by a country mile.

It is very interesting to compare this statement where the President says he is going to have ``the largest debt reduction of any country, ever. Future generations shouldn't be forced to pay back money that we have borrowed,'' but here is what has actually happened. There is no debt reduction. The debt is exploding. This is just the publicly held debt. The gross debt would be even a worse picture.

I have taken the debt that is the most restrained version of the debt of the United States. The President inherited $3.3 trillion in debt in 2001. Under his plan, we are headed for over $9 trillion of debt by 2015. Increasingly, this money is being borrowed from abroad.

I would be happy to.

The Senator is exactly correct. I think one of the things that is so disturbing about this is an increasingly large part of our budget is being consumed by interest costs to service this debt. It is going to do nothing but get worse. Part of the result of that is, not only are we borrowing money from ourselves but increasingly we are borrowing money from abroad. If we look at what we now owe abroad, here is what we see. These are stunning numbers, I might say, but this is the latest information we have on what we owe other countries.

We owe Japan over $700 billion. We owe China, now, almost $200 billion. We owe the United Kingdom over $171 billion. I am reading a book on George Washington. He would be turning in his grave to think our country owes Great Britain $171 billion. We owe the Caribbean Banking Centers over $100 billion. I don't know what the Caribbean Banking Centers constitute, or where they get their money, but we owe them over $100 billion. We owe South Korea over $67 billion.

The pattern that is so clear is the extraordinary increase in foreign holdings of our debt. The foreign holdings of our debt have increased almost 100 percent since President Bush took office. That is an utterly unsustainable course. Foreign holdings of our debt have gone up almost 100 percent since 2001.

Some people look at that and ask, what difference does it make? Isn't that just fine, someone is willing to loan us money? Shouldn't we take Japan's money? Shouldn't we take China's money? What is the difference it makes?

Here is the difference it makes: What happens when they decide to quit loaning us all this money? What happens if they decide they do not like the idea of loaning us this huge amount of money?

This was in the Financial Times in January of this year ``Central banks shun U.S. assets.'' ``Shifting reserves to eurozone will deepen Bush's difficulties in funding deficit.'' ``Actions likely to undermine dollar's value further.'' We can connect the dots.

Here is what has happened to the value of the dollar since 2002. Against the Euro, the dollar has declined 34 percent. If you were one of these countries holding all of these dollars and you see the value of the currency declining, might you get the idea it is time to put your money some other place? We have already seen the warning signs. South Korea, a month or so ago, indicated they might diversify out of dollar-dominated securities and the stock market went down 170 points. Weeks later, the Japanese Premier said they might diversify out of dollar-dominated securities and the dollar took a huge hit. In March of this year, perhaps the most successful American investor of our time, Warren Buffett, said he is going to bet against the American dollar again this year because of this pattern. The currency value is declining, and declining sharply. Warren Buffett tells us a key reason is these massive deficits we are running--trade deficit, budget deficit--are forcing us to borrow more and more money from abroad.

I say to those who might be listening, how does it make America stronger to borrow more and more money from abroad? How does that make us stronger?

Here we face these massive trade deficits. The trade deficit was over $600 billion last year. For the most recent month, after the dollar has declined dramatically, it is supposed to improve our trade situation. What happened to the trade deficit? Did it go down? No. In the most recent month, the trade deficit was $61 billion, the biggest ever. That is after the dollar has declined 34 percent. It makes our goods less expensive and makes foreign goods more expensive. That should have improved our trade position, and yet it did not.

We have a problem. The sooner we face up to it, the better. None of this adds up.

You can live beyond your means for a time. A family can do it. An individual can do it. A government can do it a lot longer because governments can print money. But there are consequences to that, as well.

Those who say deficits do not matter, go ask the German people about after World War I. Ask them whether they think deficits matter. We all know what happened in Germany after World War I. The currency collapsed because of their heavy foreign indebtedness after the war.

What did they do? You wanted to buy shoes? You filled a wheelbarrow full of the German currency because that is what it took to buy a pair of shoes.

We are not in that shape, and God forbid we ever get in that shape, but the trend lines are not favorable. They are not good.

Our foreign holdings of our debt have gone up almost 100 percent. In fact, that chart is a little out of date because the truth is, it is already over 100 percent. That is what has really happened. This debt is mushrooming every year, and under the budget that is before the Senate the debt of the United States is going to go up $600 billion a year each and every year of this budget.

They say they have the deficit going down, and yet the debt is going up. What kind of doubletalk is that? The deficit is going down, but the debt is

going up. It is going up $600 billion a year, every year. Anyone who votes for this budget is voting for it.

The budget before the Senate leaves out the full 10-year numbers because they know past the 5 years everything gets worse. It leaves out funding for the ongoing war beyond fiscal year 2006. It leaves out the alternative minimum tax reform. It leaves out the cost of Social Security privatization. When you add it all back, you get a very different result than our colleagues are showing the American people.

When you go back and create a real budget, here is what we find. Deficits, massive deficits each and every year going forward, never going below $572 billion. That is not the full increase in the debt. This leaves out things which we will get to in a moment.

Our friends on the other side say, well, we are reducing the deficit. In one meeting we had--in the conference committee Democrats were excluded, absolutely excluded from the negotiations on this budget. Let me repeat that: Democrats were not allowed or permitted to be in the room when these discussions were undertaken.

I am happy to.

Required by the rules.

That, in fact, is the case. We were excluded in every way. The only time we were included is at the meeting that is required by the rules. There is a requirement there be at least one meeting of the conference committee, and we were there. We made our statements. We were ushered out, and that was the end of the conversation. I said I do not think that is the way our Forefathers intended the process to work. One of our colleagues on the other side said: Well, our Forefathers never envisioned political parties. That is true; they did not envision political parties. But they did envision the abuse of power by a majority. That is one of the things that consumed them in writing the Constitution of the United States. They were deeply concerned that a majority would run roughshod over the rights of a minority. They did not see it in terms of political parties. They did see it in terms of majority power and minority rights. This majority has adopted the view that it is only about majority power. That is a mistake. That is not what the Founding Fathers intended.

Here are the results of that kind of mistake. When you look at the deficits, our colleagues say they are going to improve the deficit. But in fact, here, as shown on this chart, is a comparison of the budget conference report and the deficits it produces compared to what would happen if we put the Government of the United States on autopilot.

If we just used the CBO baseline, we would have lower deficits than is produced by the work of this conference committee and the majority. In fact, they have increased the deficits by $168 billion over 5 years, over the CBO baseline. So they have made the deficits worse by $168 billion in comparison to what would have happened if we would have just put the Government on autopilot. When our friends say they are going to cut the deficit in half over the next 5 years, here is the strongest answer in factual terms I know of. It is right here. This is the fiscal year 2006 budget resolution from the GOP conference report. This is their own document, their own calculation, of what is going to happen to the debt of the United States each and every year under this budget. Here is what it says. It is not my document. This is their document. They say that the debt is going to go up by $683 billion the first year, by $639 billion the next year, by $606 billion the third year, by $610 billion the fourth year, by $605 billion the fifth year.

Where is the deficit cut in half? Where is it? Every year the debt is going up by over $600 billion. Just visually, on this chart, this is what we see. They are building a wall of debt. Here is where the debt stood, debt subject to limit, and where it will stand at the end of this fiscal year in September. If this budget is adopted--and I pray it is not, for the good of this country. For the economic security of America, I hope this budget is not adopted. Why? Because it builds a wall of debt. Each year, each and every year, the debt climbs by another $600 billion under this budget resolution.

Anybody who votes for this budget ought never to again claim they are fiscally responsible or fiscally conservative because they are taking us on a path of deficits and debt and decline unparalleled in American economic history. That is where this is all headed.

I am happy to yield.

What is stunning here is who is it going to go to? It used to be America financed its own debt; that is, we borrowed the money from ourselves. Increasingly, we are borrowing the money from abroad. Increasingly, we are dependent on the decisions of foreign central bankers to finance our veracious appetite for foreign capital.

The Senator is exactly right. As the debt increases, even if interest rates remained unchanged, the interest cost would go up because of the increasing debt, the increasing borrowing that we are doing as a nation. On top of that, we know the increasing debt will put pressure to increase interest rates because people are going to keep making us these loans, especially when the value of our currency is declining.

The only way to offset that is to increase the interest rates. So then you get hit by a double whammy, the double whammy of increased interest because your debt has increased and also it is increased because interest rates are increasing.

Well, I was, in the sense that my colleagues chose me as a conferee, along with the distinguished senior Senator from Maryland, Mr. Sarbanes, as well as the senior Senator from Washington, Mrs. Murray, but we were not invited to any of the working sessions. We were not invited to any of the negotiations. We were not invited to be any part of any of the discussion, other than the one meeting that is required by rule. It was a public session of the conference committee in which we were permitted to make short statements, but we were not part of any negotiation or any discussion.

(Mr. ALLEN assumed the Chair.)

That would be the fact.

Here it is. This chart shows graphically precisely, according to their numbers--not my numbers; these are their numbers-- what they say their budget will do. It says they are going to increase the debt every year by $600 billion. They say they are going to cut the deficit in half over 5 years, but the debt goes up each and every year by over $600 billion. If that isn't doubletalk, I don't know what is. They say the deficit is going down, but the debt is going up. It is their own calculations. They are building a wall of debt that is unprecedented, and they are doing it right before the baby boomers begin to retire, and we all know what that means. They are going to present a future Congress and a future President with the most extraordinarily difficult choices that any Congress or any President has faced in this country's history because this is a complete lack of fiscal responsibility--deficits on top of deficits on top of debt, up, up, and away, no end in sight, and all of it at the worst possible time, before the baby boomers retire.

I say to my Republican colleagues: Any Republican colleague who votes for this budget ought to make a pledge here tonight that they will never again claim the mantle of fiscal responsibility, that they will never again claim to be fiscally conservative, because this is a borrow-and-spend budget of historic proportion. Our friends on the other side of the aisle have decided that the way to win elections is to borrow the money and use it to fund tax cuts and use it to fund spending and don't worry about anything adding up because they will be out of town before the bills come due.

In some ways, it is almost hard to place language on this document. The Senator says it has makeup. This isn't pretty with or without the makeup because the results of this are going to be a country that is deeper and deeper in debt, whose long-term economic security is put at risk, that more and more is dependent upon the decisions of foreign central bankers on our economic well-being. The harsh reality here is that you can live beyond your means for a while, but it catches up with you. And that is what this budget represents.

Our friends on the other side of the aisle want to spend money. Make no mistake about that. The spending is going up under this budget. They just don't want to pay for their spending. They prefer to borrow the money. They don't want to raise the taxes necessary to support their spending.

One could have more respect for their position if they did one of two things: if they either cut their spending to match their willingness to pay for it by raising revenue or if they were willing to raise the revenue to match their spending appetite. But our friends on the other side of the aisle are not willing to do either. They want to spend the money, but they don't want to raise the revenue to pay for it. Instead, their answer is, borrow the money. Borrow the money to fund tax cuts. Take the money from the Social Security trust fund, $2.5 trillion.

They say Social Security is short of money. So what is their answer? Their answer is to take $2.5 trillion out of it to pay for income tax cuts that go primarily to the wealthiest among us.

Here is the evidence of that because buried in this budget are additional tax cuts, dividends, capital gains that will give on average to those who are earning over $1 million a year in our society a $35,000 tax cut per year. For those who earn less than $50,000 a year, the vast majority of Americans, they will get $6 a year. This is our Republican friends' notion of a balanced plan--$35,000 a year for those who earn over $1 million a year, $6 for those who earn less than $50,000 a year. And for those who are fortunate enough to earn $50,000 to $200,000 a year, they would get $112. That is our Republican friends' notion of tax fairness.

It is.

Those who earn from $200,000 to $1 million a year get on average $1,480 under the tax cut plan that is contained here. Again, those who earn more than $1 million a year get, just on these tax provisions--by the way, these are just a couple of the tax provisions. This does not include the estate tax provisions that go overwhelmingly to the wealthiest among us. Just these two tax provisions would give $35,000 a year to those earning $1 million a year and $6 of tax cut to those who earn less than $50,000. It will give $112 to those who earn between $50,000 and $200,000.

I would just say that the priorities of this budget are also out of whack. This budget, in the year 2006, for those fortunate enough to earn over $1 million a year, the tax cuts going to that group of people will cost $32 billion in that year alone. That is the cost of the tax cuts for those earning over $1 million a year in that year alone: $32 billion. But they say there is not the money to restore the education cuts that are contained in this budget which would cost $4.8 billion. They say there is no money to do that. But there is eight times as much money to give tax cuts to those earning over $1 million a year. I guess one could say our Republican friends have said: It is seven times as important to give these tax cuts to those earning over $1 million a year as it is to restore these education cuts.

I don't share those priorities. I believe those are misplaced priorities. I don't think those are the priorities of the American people. They are profoundly wrong for the long-term economic strength of our country.

Yes.

That is for 1 year.

Actually, even more the next year.

It is very hard to understand this set of priorities. The Senator is exactly correct. This is the amount this budget would need to add to restore education programs to the 2005 level. It would require $4.8 billion. They say, no, they cannot do that because they have to give $32 billion of tax benefits to those earning over a million dollars a year. And it is not just with respect to education, although I argue that education is the clearest priority for our country. What is it that will allow us to compete in this global world economy? What is it that is going to allow us to compete and win? It is having the best-educated, the best-trained workforce, and having the most efficient system to disburse the resources we have, to employ them in the most competitive and effective way. That is what is going to make us dominant.

You can see we are slipping. We are running these massive trade deficits. Does anybody care? Is anybody paying attention? It is not just in education. It would cost $1.1 billion to maintain funding for law enforcement. But, no, they say you have to cut the COPS Program, shred the COPS Program. The COPS Program put 100,000 police on the street and helped reduce crime in this country. They say that has to go, we cannot afford it; but we can afford 30 times as much to give tax cuts to those earning over a million dollars a year.

A budget is a chance to make choices. That is what it is about. It is about priorities, about what is important. The choices that are being made by our friends on the other side are the choices to add to the debt, add to the deficits, take all the money from Social Security trust fund surpluses--every dime--and use it to pay for other things, including tax cuts that go overwhelmingly to the wealthiest among us.

Are those the priorities of the American people? You know, even wealthy people I talk to say these are not their priorities. I have had so many wealthy people say to me, ``I don't need another tax cut.'' A gentleman stopped me the other day--an enormously wealthy individual-- and he said: Look, what matters to me is how my country does. I have been very fortunate. I have done extremely well here. I want others to have the chance I had.

That means they have to have a chance to get a good education, and that means our country has to do well. I don't know of a country anywhere, ever, that has gotten stronger by becoming more dependent on borrowing from other countries. I would like some of our colleagues to come out here and tell me what country became stronger by borrowing more money from foreign countries. Where is it written in history that a country made itself powerful and strong by borrowing more and more money from other countries? You know, so many people have warned us we are on an unsustainable course. The Comptroller General of the United States warned us we are on an unsustainable course of deficits and debt. The Chairman of the Federal Reserve Board has warned us we are on an unsustainable course of deficits and debt. Another thing the Chairman of the Federal Reserve Board told us is, you ought to reinstitute the budget disciplines that helped this country in the past, those budget disciplines that apply to both the spending and the revenue side.

But this budget doesn't do that. This budget has pay-go provisions that apply on the spending side. Here is what Chairman Greenspan said:

A budget framework along the lines of the one that provided

significant and effective discipline in the past needs, in my

judgment, to be reinstated without delay. I am concerned

that, should the enforcement mechanisms governing the budget

process not be restored, the resulting lack of clear

direction and constructive goals would allow the inbuilt

political bias in favor of growing budget deficits to again

become entrenched.

He said that in 2003 before the Senate Banking Committee. The Chairman of the Federal Reserve Board was right about that matter. But that is not what our friends have done here. They have not restored the budget disciplines that worked in the past. No, no. They have taken half of the formula.

The New York Times ran an editorial on Wednesday: ``In Search of Budget Moderates.'' I would write a different headline. My headline would be: In Search of People Who Are Fiscally Responsible.

If you want to spend the money, raise the revenue to pay

for it. If you don't have the stomach for raising the revenue

to pay for it, cut your spending. Those are the choices that

were put before our Republican colleagues. They chose to do

neither. They chose instead to run up the debt of this

country, which is already at record levels, and they said:

Caution to the wind, let's add to the debt $600 billion a

year each and every year of this budget. That is what is

here. It is their own estimates. It is their own claims about

their own budget. It is not somebody else's calculations; it

is theirs and they are responsible. They will be held

accountable for their votes tonight.

Yes, I am happy to.

Yes, I will.

It is correct. Here we have a situation in which we are at war, and we have had very substantial tax cuts already. Last year the revenue was the lowest it has been as a share of gross domestic product since 1959. The deficits are at record levels. And the President's answer is spend more money and cut the tax base further, expanding the deficits, expanding the debt, and doing it all right before the baby boomers start to retire. It is truly a reckless course the President is taking us on. It is a reckless course. I hope at some point colleagues on both sides of the aisle will get serious about the long-term economic security of the country.

The Senator from Massachusetts has been extraordinarily patient. Mr. President, Senator Kennedy has very graciously offered to wait until the Senator from West Virginia has concluded his remarks. We certainly thank him for his consideration. I yield such time as the Senator from West Virginia may use.

How much time would the Senator like?

I am pleased to yield 30 minutes to the Senator from Massachusetts after the Senator from West Virginia has concluded.

Actually, we have Senator Akaka and then Senator Stabenow.

Can I suggest that Senator Hutchison had indicated to staff she would be more interested in a little later time slot.

If we went to Senator Akaka for 10 minutes and then Senator Stabenow for 15, we would then be very close to 9 o'clock.

Mr. President, I ask unanimous consent that notwithstanding the receipt of the House message and having the Senate papers at the desk, the Senate begin consideration of the conference report to accompany the budget resolution; provided further that the time from now until the arrival of the ranking member be under the control of the chairman; provided further that when the ranking member arrives, he be recognized to be in control of a like amount of time.

Mr. President, this order allows us to start opening statements on the budget. Senator Conrad should be available around 6 o'clock this evening, and his side will control the time after he arrives, which will be commensurate with the time we control, which I presume will be approximately an hour that we will use now until 6 o'clock.

Mr. President, we are now turning to the budget of the United States, which is pending in the House and being debated in the House. This obviously is a major item for us as a Congress. It is very hard to take the position that a government that spends $2.6 trillion should not have an outline as to how it is going to spend that money, should not have a proposal and a policy for spending that money. That is why a budget is important.

A budget doesn't get into the specifics of how the dollars are spent, but it does set out a very substantial and important blueprint as to how those dollars will be spent and what the policies are that will affect spending and taxes as we move into the future.

The budget that we bring today is a result of a lot of hard work. I want to especially thank my colleague from North Dakota, the Democratic ranking member of the committee, and his staff, who have been extremely courteous and extraordinarily professional in the way they have approached the process. Senator Conrad is someone I have enjoyed working with very much. We disagree, obviously, but the disagreements have been on policy, and certainly there has been nothing but a professional, cordial, and friendly relationship between us.

I also thank the majority leader and the assistant majority leader, Senator Frist and Senator McConnell, for their extraordinary effort. I especially thank members of my committee, all of whom have been very much engaged and who have been very involved in developing the budget.

In addition, I specifically thank Senator Smith from Oregon, who has been a critical player in developing what is one of the core issues of this budget, which I will get into in a few minutes.

Of course, I especially thank the staffs, both the majority staff and minority staff, and especially the staff on our side, led by Scott Gudes, and our colleagues across the aisle in the House who worked so hard to get us to this point.

The budget we are bringing forward today is the result of what I consider to be some serious public policy problems we confront as a nation, and they involve the amount of spending the Federal Government is doing in relationship to revenues, and specifically the rate of growth of our spending and the fact that we are confronting very significant deficits not only in the short term but in the long term.

I want to go through a few charts to explain the parameters of the problem. I think it is critical that people understand that and understand how this budget was developed. We received testimony in the committee from the Comptroller General of the United States that there are on the books today obligations of the Federal Government that exceed projected revenues of the Federal Government amounting to approximately $44 trillion. Now, a trillion dollars is an incomprehensible amount of money for anybody to understand. I will try to

put it into context. This means we already have obligations that we have committed to as a government that we have not figured out how we are going to pay for, which in their total add up to $44 trillion, which amount of money compared, for example, to all of the taxes collected by the United States since we became a nation--all of the taxes collected during that time, over 200 years, total $38 trillion. So we actually have on the books more in obligation than we have collected in taxes in the history of the Nation.

To try to put it in another context, if you take all the net worth of everybody in this country--everybody's car, house, savings account, stock, every asset that everybody has in this country--and add it all together, it adds up to about $47 trillion.

This chart reflects the problem. The chart here is $44 trillion in outstanding obligations of the Federal Government. Over here we have the present net worth of the United States, which is $47 trillion. The amount collected since the beginning of the country is $38 trillion. The larger part of the chart reflects $44 billion, calculated on the actuarial life of these programs. The larger part of the chart is what the cost would be if you projected these programs out into infinity, which would be 100 years, which is about $84 trillion.

So you can see that we are confronting a massive fiscal problem as a nation. The effects of this problem will be that somebody is going to have to pay this bill. Our generation is running up the bill and we are passing it on to our children, and our children will have to bear a huge cost in order to pay off this $44 trillion in debt that we have added up. To pay that off, basically, their quality of life is going to have to be reduced, unless we get started on addressing this problem now.

Where does the $44 trillion come from? What are the obligations that created this huge number? This chart reflects it. It is entirely almost what is known as entitlements, or mandatory spending; it is the orange line. If you look at the mandatory spending, these are programs on the books that say, if you are a citizen and you have certain physical or demographic or income characteristics, you have a right to payment by the Federal Government. The majority of these entitlements, the mandatory spending is Social Security, Medicare, and Medicaid. These three items make up the vast majority of the cost of the $44 trillion, which is unpaid for. In fact, Medicare and Medicaid--the health care items of those three entitlements--represents about $27 trillion of the total of $44 trillion--$27 trillion of unfunded liabilities. That means after taking all of the taxes you pay, your HI tax--the hospital tax which you pay out of your payroll every week--there is still a debt, an obligation on top of those taxes of $27 trillion--a huge amount of money.

Well, now, some would represent that if we raise taxes, we can solve this problem. But we cannot. I want to explain why and the next chart does that.

Historically, the Federal Government has spent about 20 percent of the gross national product. That is what we spend as a Federal Government. We take the gross national product--20 percent of it--and spend it to govern. That has been in our history for quite a while, since the 1960 period. That is the blue line that runs across the chart. If you take the top three--Social Security, Medicare and Medicaid--just the cost of that, as projected out into the future, you will see that by about 2028, 2031--depending on what happens around here--the cost of those three programs to pay the benefits that have been committed under those three programs will exceed 20 percent of the gross national product.

What is the practical effect of that? It is that if that were allowed to occur, you would have no money available to pay for national defense, education, environmental protection, the building of roads, or for anything other than those three programs. It gets worse. The line keeps going straight up--this is where the $44 trillion comes in--as those programs continue to demand more and more in order to support them because of the obligations that are on the books. So you can raise taxes almost endlessly and never catch up with the spending that we have on the books.

That is the point. You cannot tax your way out of this problem. You simply cannot do it. You have to address these major programs and try to control their rate of growth so they are affordable, while still maintaining a benefit structure that is fair, especially to low-income Americans. If you don't do it, the practical effect would be that you will have to double the taxes on our children in the area of withholding in order to keep up with these costs during the period 2020 to 2040. That would mean our children, instead of being able to buy a house, a car, expand their education, or send their kids to college, they will have to pay a radically increased tax burden in order to support our generation. What is causing this huge explosion in costs? It is the fact that the baby boom generation is so large, the demographic shift is so huge, when our generation starts to retire because we go from a generation that has changed the culture of America throughout our lifetime to when we retire we will change the dynamics of the demand on the Federal Government; we shift that so radically that we put all these new costs on our children and our children's children to support our generation when we retire.

People have heard me say this before. These retirement systems-- Medicare, Medicaid, Social Security--were structured on the concept that there would always be a pyramid, many more people paying into the system than taking out. In 1950, 16 people were paying into the system for every one person that was taking out. That is the pyramid concept, the genius of Franklin Roosevelt. Today, there are 3\1/2\ people paying into the system, and it is still affordable. But as we head into this next century and as this huge baby boom generation of which I am a member retires, there will only be two people paying into the system for every one person taking out. So we go from a pyramid to a rectangle, and you simply cannot support the system as it is structured.

The taxes on our children will far exceed their capacity to pay them in order to support the benefit structure. So how do we address this? Well, one way is to bury our heads in the sand and say it is not a problem and hope our children can handle the tax burden increase. But that is not acceptable. As leaders and as people charged with the responsibility of public policy in this country, we need to get ahead of this issue before we get to the problem. And that is where this budget comes into play.

The President sent us a budget which for the first time in 7 years stepped on the sacred ground of trying to address the entitlement costs of the Federal Government. Independent of the budget, of course, he has tried to address the Social Security issue. By law, the Budget Committee is not allowed to address Social Security. So that one is taken off the table for us as a committee. But we do have the capacity as a Budget Committee to step forward and try to do something about the issue of entitlements beyond Social Security, and that is what we are going to try to do in this budget. We are going to try to begin the process of relieving the pressure that is going to be put on the next generation.

This budget does three basic things. In the short term, it reduces the deficit in half over 4 years. It does this by aggressively controlling the rate of growth of discretionary spending that is nondefense. Specifically, we freeze it for 3 years. That is a very aggressive position. Nondefense discretionary spending is frozen for 3 years. But more importantly, we reestablish enforcement mechanisms known as spending caps. Members can come to the floor, and if a bill exceeds that freeze, they can make a point of order against that bill, and it will take 60 votes in the Senate to pass that bill. That is an important change, a very important change--not a change but a reinstitution of budget discipline.

What happened? Why don't we have caps today? We do, but they are very much at the margin. The problem is that because we did not pass a budget last year and because 2 out of the last 4 years we have not passed a budget, we have lost most of the really effective enforcement mechanisms or are on the verge of losing most of those enforcement mechanisms in the next budget cycle. So it is critical we get a budget to put those enforcement mechanisms back into place so we can control in the short term the rate of growth of a number of accounts but especially the discretionary accounts.

We put in place a budget which moves us toward reducing the deficit in half over 4 years. That is one deficit issue. More importantly, the big issue, which I have just discussed, which is this long-term fiscal catastrophe we are headed toward as a nation unless we do something about it, we begin to address that. We do not do radical steps in that direction. This is going to be a long and arduous process. It is difficult, and it is going to be a bumpy road, but what we do is we take some very significant steps down that road toward reintroducing fiscal restraint into the entitlement accounts that we have under our control and that we are willing to address.

We do this in two specific accounts that are critical: Medicaid and something called the Pension Benefit Guaranty Corporation. We can look at these three accounts--Social Security, Medicare, and Medicaid--as being the primary drivers of our problem, but there are other issues out there that are very significant in driving our fiscal problems, and one of them is the Pension Benefit Guaranty Corporation. It is a corporation that makes sure, if you have a pension, a defined benefit plan, and your company goes under, the Federal Government guarantees that pension.

The taxpayers end up with a bill for doing that, by the way. Mismanagement on a corporation's behalf, excessive benefits structure, poor management in the marketplace, a company goes under, and the taxpayers end up with the bill. That projected liability out there today, the contingent liability of the taxpayers of the United States for the Pension Benefit Guaranty Corporation, is estimated to be $25 billion to $30 billion, and it may be radically higher than that, to be very honest.

So we need to reform that system, and the budget we are addressing today begins that process. We try to address that niche issue of significant fiscal problems we have as a nation, which is correcting the Pension Benefit Guaranty Corporation.

Equally and even more important is we step forward on one of three entitlement accounts. We only have jurisdiction over two of the three, as I mentioned earlier. We step forward on the Medicaid issue, and we put in place--Senator Smith basically orchestrated this, and he is going to talk about it--a process to move to get substantive reform in the Medicaid accounts so they are affordable and continue to deliver a quality service to kids in need and people who have to go into nursing homes and cannot afford it, but at the same time they are affordable.

What we do is have an advisory committee or a commission set up which will study the issue. It must report by September 1. We have a reconciliation instruction which says the committee of jurisdiction has to come back and reduce the rate of growth of Medicaid by $10 billion. I will get back to that. And we limit that action on the $10 billion reduction, so we delay it a year. So there is a year to get ready to do that.

I want to put this $10 billion in context because this is a major savings item of the budget in the area of entitlement reform. Over the next 5 years, we are going to spend $1.12 trillion, a huge amount of money, on Medicaid. This budget is suggesting that we reduce that rate of spending over the next 5 years by $10 billion; $10 billion on a $1.12 trillion base, approximately 1 percent. One would think we were scorching the Earth when we initially proposed this. Obviously not.

The practical effect of this is we are taking a program that is going to grow at 41 percent over the next 5 years and reducing its rate of growth to 39 percent. We can do that. If we are halfway decent as managers of the tax dollars of Americans, we can do that, reduce 1 percent off a program that is growing so quickly, reduce its rate of growth from 41 percent back to 39 percent.

In fact, we can do that, and we can actually give more services to more kids and more people who are deserving of it. The reason is that Medicaid, unfortunately, has some problems right now in the way it is functioning. There is a fair amount of Medicaid money which is being shifted from the delivery of service to needy children and to people who need help going into nursing homes over to simply the general operation of State government. That should not happen anymore, and we can end that.

Unfortunately, there is a lot of abuse, where people are spending down in order to qualify for Medicaid and hiding assets and transferring over to the taxpayers costs which they should fairly bear.

There are significant savings which can occur in the way we purchase pharmaceuticals under Medicaid. There is a whole list of items which Governors are willing to consider in order to accomplish savings. But what the Governors need is more flexibility. We give the Governors more flexibility and a little less rate of growth in this program, and they are going to deliver more services to more people at less cost. It is that simple. A good Governor will do that, and there are a lot of Governors out there willing to try.

So there has been a compromise we reached on Medicaid which has been orchestrated and energized by Senator Smith of Oregon. I congratulate him for it. It is a good compromise because it will start us on the path toward looking at public policy which will start to address--it is not going to resolve the problem--will start to address the issue of this element of the entitlement problem, the Medicaid element of this chart, and it is one of the three major items.

In addition, as I mentioned, we have taken up the PBGC issue. This is the first budget in 7 years which has stepped on the sacred ground of entitlements and tried to manage them at least marginally. The total amount of entitlement for reconciliation savings--not all of it is entitlement--but the total amount of reconciliation savings in this bill is approximately $35 billion. That is a very reasonable number. That is a 5-year number. So it is something that can certainly be accomplished.

The third thing that this budget does is it continues to energize economic growth. When the President came into office, he was confronted with a very severe recession as a result of the burst of the Internet bubble. That was compounded, of course, by the attack of 9/11, which caused our economy to stumble severely as a result of the adjustment to what was a new world. Then we had to dramatically expand our commitment to national defense and homeland security in order to participate aggressively in finding the people who were responsible for this horrific act of 9/11 and making sure that we are as well prepared as possible in avoiding another attack.

So the President was confronted with an unfortunate set of facts relative to the economy, and there was a recession. But that recession's severity was significantly reduced because this President had the foresight to reduce the tax burden on America's workers early so that people were allowed to keep their money and there was incentive for entrepreneurship, an incentive to go out and work harder, and an incentive to create jobs. The recession was shallowed out as a result of that. Now we are seeing a dramatic turnaround in the amount of revenues the Federal Government is receiving because of that.

Revenues dropped precipitously, everyone knows that, but they dropped because we were in a recession and because we were attacked. The tax cut that was put in place has essentially helped us recover in the revenues area because people have gone out and they have become more productive as they have been willing to work harder, earn more, and create more jobs because the tax burden has been reduced. The function of that is that more incentive is created to be productive.

We are seeing the results. Last year, tax revenues grew at 9 percent. This year, they are going to grow around 7 percent or maybe even faster. The month of April, which has not been formally reported yet, looks like it is going to be one of the highest collection months as far as revenue goes in the history of the country, a dramatic jump in revenues as a result of the tax cut. For the foreseeable future it is expected under this budget, and I think under all economic assumptions, that tax revenues are going to continue to compound at a rate of about 6 to 6\1/2\ percent as a result of a strong economy, driven by a good tax policy.

We continue that tax policy in this bill. This bill does not assume any new tax cuts, but it does assume that tax

cuts that are on the books, that are very constructive, and which people use in their day-to-day life will be continued--tax cuts such as the R&D tax cut, the research and experimentation tax cut, the deduction for teachers' classroom expenses, the deduction for qualified education expenses, the deduction for State and local taxes, the welfare-to-work tax credit. These are tax credits that are continued.

We hear a lot of talk from the other side of the aisle that, oh, there are just not enough tax increases in this bill; we have to raise taxes. Which one of these deductions which is about to expire does the other side of the aisle want to allow to expire and put more burden on American workers? I doubt there are very many that would fall into that category that are on this list, and that is what this bill assumes-- that we will continue in place tax proposals which encourage people to be more productive, such as the R&D tax cut, or give people a benefit they deserve, such as teachers being allowed to expense classroom costs, and that are popular. So we will continue a tax policy under this bill which will continue to energize economic growth.

As we have brought this budget forward, it puts us on a path to accomplishing positive steps in the area of fiscal responsibility and fiscal restraint. It is a budget which reflects the President's initial budget which was a commitment to trying to begin to address the deficits in the short run and, more importantly, the long-term issue of the fiscal problems we confront because of the demographic boom which I mentioned, which is coming at us. For that reason, it is a very positive budget.

I wish to make one more point about the budget before I yield to the Senator from Oregon, whose thoughts are very important here because he is one of the key players in addressing this critical issue of Medicaid. This budget is critical because it also puts back in place and actually energizes new initiatives in the area of enforcement mechanisms. These are procedural things, yes, and they are arcane things, yes. Most people do not understand what they are, that is true. But it was interesting, when Alan Greenspan testified before the Budget Committee last week, he said the most significant thing that had happened in the area of disciplining Federal spending was that we had budget enforcement mechanisms in place through the late 1990s and early 2000 period and we needed to reinitiate those initiatives. By law, we cannot pick them all up because this is a resolution, not a law. The way this works, we cannot pick them all up. But to the extent that the budget resolution can put back in place and strengthen enforcement mechanisms to allow this Congress to be disciplined in the way it spends money, this resolution does that in an extraordinarily aggressive way.

So this is a good resolution. It is a positive step. It takes us on the right direction toward fiscal discipline. I certainly hope my colleagues will support us in moving it forward.

Now I yield to the Senator from Oregon such time as he may consume.

Mr. President, I thank the Senator from Oregon. His efforts have been immense. Quite honestly, the budget would not be on the floor and we would not have a chance if it were not for the Senator's courtesy and efforts. He had strong points and made them very effectively. As a result, we will make progress here not only on the entire budget but on what I consider to be the core element of this exercise, which is trying to get a reasonable approach to one of the major entitlement accounts.

I congratulate the Senator. He has had a huge impact. The Senator knows how to get things done around here. I appreciate his courtesy to me.

Mr. President, the time until Senator Conrad arrives will be charged to my account. When Senator Conrad arrives, he will take an equal amount of time to what we have used. That was the unanimous consent we entered into. After that, I ask unanimous consent time spent in quorum calls during the consideration of the bill be counted equally against both sides, the majority and the minority, for debate time.

Mr. President, the Senator from Oregon has made the point very well, but what is important is important to the majority, specifically, the essence of governance. You cannot govern unless you are willing to set out the principles by which you govern, especially the blueprint which is going to guide you in the governance activity.

Obviously, one of the most significant things done when you are the majority party and you have the presence, you make the decisions, basic decisions as to how the country's finances will be managed and how moneys will be spent and that they will be shepherded well.

These are tax dollars. People work hard. Every day people are putting in a full day's work and the Federal Government, every day, comes along and says, You worked all day long, we will take ``X'' percentage of the money you earned. We will take it right out of your pocket and we will spend it on a series of things.

What is important is that the American people first know what we are going to spend it on and how we will spend it--that is where a budget comes into play--and that we be good shepherds of those dollars and use them effectively so people can retain as much money as possible in their pockets to spend on what they know is important in their lives, and the Government does not take it and spend it for them and tell them how their money should be spent, and that we function in a way we get the type of government that delivers the services that are critical to making sure we can defend ourselves and take care of the less fortunate in this Nation, make sure we have strong education, make sure we have good health systems, that we can continue as a nation to have a vibrant and a strong economy.

This all starts with a budget. It is that simple. This is not the end of the product. This is the beginning of the exercise. If you do not have that blueprint in place, it makes the rest of the process extremely complicated and much more difficult.

It is critical we pass this resolution. I strongly believe this resolution is a responsible effort to try to bring our fiscal house in order and to make strides in the area of controlling the rate of growth in spending so it is affordable for our taxpayers, but, more importantly, so it is affordable for the next generations who will have to pay the burden we put on the books today.

It does, for the first time, take that step in the area of entitlement or mandatory spending which has become 59 percent of the Federal Government. A lot of people say, what about the appropriations bills? Appropriations bills are the discretionary side of the budget. They represent less than 30 percent of Federal spending. Half of that is defense, which we have to do today in a very aggressive way because we have been attacked and are at war and people are out there who want to harm us. I held a hearing this morning on terrorists relative to their desire to use biological and chemical weapons against us. It is very sobering, to say the least, but we have to defend ourselves and it will take a lot of money to do that.

Of about 30 percent, half is defense, and the other part goes to nondefense discretionary so it is not the large part of the budget, of the appropriations bills that come through. The most significant part of the budget is the part

of the entitlement accounts which never come across the Senate as individual spending items such as appropriations bills do. They simply are on automatic pilot. Absolutely the only way we can address policy effectively in mandatory accounts is through something called the reconciliation process.

To quickly explain, that allows for the committees that have jurisdiction over these entitlement programs that are already in place and that have grown radically over the years to take another look at those programs and see if they are working as well as they could work. Medicaid is a classic example of a program that needs another look, where if we adjust it so Governors have more flexibility, we have a slower rate of growth in dollars, they can probably do a lot more for a lot more people if we give Governors the type of powers they need to accomplish that.

Reconciliation is the only avenue for effectively doing that type of a review of the mandatory side of the ledger which represents 59 percent of Federal spending today. The reason it is the only effective way is because we all know nothing can go through this Congress--we have been shown that in the last few weeks--nothing goes through this Congress that is controversial without 60 votes. We also know any sort of mandatory change is going to be controversial. Reconciliation gives the opportunity to use a majority rather than a supermajority to review these programs and to make progress in restraining their rate of growth and making them more effective in delivering services. That is why this budget is a unique budget.

It is the first budget we have a shot at passing in the last 2 years. The last 4 years we have only passed a budget twice. More importantly, since 1997, there has not been a budget which is a step forward to try to address the very critical element of where the Federal Government stands and how it spends money in the area of mandatory entitlement accounts which represent 59 percent of Federal spending.

With that, I reserve our time, recognizing it is going to run against our side of the aisle, with the understanding the ranking member, Senator Conrad, will be here probably around 6 o'clock at which time I will yield the floor to Senator Conrad.

I suggest the absence of a quorum with the understanding the time will run against our side.

Mr. President, I yield to the Senator from Tennessee such time as he may consume or such time until the Senator from North Dakota gets here.

Mr. President, as I understand the Senator from North Dakota, Senator Sarbanes wishes to speak for 10 minutes. I would suggest that Senator Sarbanes speak for 10 minutes, then we to go Senator Grassley for 15 minutes, then we go to Senator Stabenow; however you want. We will go back to your side for a half or so, and then we will come back over here. The next speaker on our side, after we go from Senator Sarbanes to Senator Grassley to--

We may want to put Senator Hutchison between Senators Akaka and Stabenow. But if not, we will go with that sequence.

Yes, around 9. But I assume we will hit that hour by that time.

Why don't we plan to do it that way. Then move to Senator Hutchison. With that being the general lay of the land, let's proceed.

Mr. President, I thank the Senator for his generosity, but I look forward to listening to the Senator from West Virginia. I know we are going back and forth. I ask unanimous consent to proceed after the Senator from West Virginia.

I was asking for recognition after the Senator from West Virginia. I withhold.

If I could have a half an hour.

Mr. President, do I have it correct, I will have the opportunity for recognition after the Senator from West Virginia?

I believe I have up to 30 minutes; is that right?

Mr. President, I first want to congratulate the Senator from North Dakota and my two other colleagues, my old friend and colleague from Maryland, Senator Sarbanes, and Senator Dorgan, for their excellent presentation in terms of the budgetary impact of this budget.

I think they have explained very clearly, eloquently, and passionately the severe risks that this budget puts in terms of the economic future of this country and its relationships and dependency on other countries throughout the world.

I would like to address another aspect of this budget, and that is with regard to domestic priorities that are front and center for most families in this country. First, I would like to discuss the priority of education, and then, second, the budget cuts in Medicaid, which is a lifeline to millions of children and disabled people and women in our society, and third, the further undermining of our whole pension system, which has been included as part of this budget as well. We are having a great national debate on the issues of Social Security and the integrity of the Social Security fund. Under the provisions of this budget, we are going to find that the availability and the assurance of pensions is going to be seriously undermined and threatened as well.

But as an initial matter, I ask unanimous consent that an excellent statement by the Episcopal Church, the Evangelical Lutheran Church, the Presbyterian Church, the United Church of Christ, and the United Methodist Church, with regard to this budget, be printed in the Record.

I will just read a few lines from this statement.

We believe our federal budget is a moral document and

should reflect our historic national commitment for those in

our own country who suffer from hunger, lack of education,

jobs, housing, and medical care, as well as concern for our

global community. . . .

As we view the FY 2006 Federal Budget through our lens of

faith, this budget, on balance, continues to ask our nation's

working poor to pay the cost of a prosperity in which they

may never share. We believe this budget remains unjust. It

does not adequately address the more than 36 million

Americans living below the poverty line, the 45 million

without health insurance, or the 13 million hungry children .

. . Therefore, we ask Congress to reject this budget and

begin anew.

Mr. President, with a budget we have a chance to make a difference. We have a chance to make a difference for working families and for millions of Americans who work hard every day, who care for their families, who want the best for their children, their communities, and their country. This budget should make a difference for them. It should be a budget for America, a fair budget that improves the lives of average Americans. That is not this budget.

President Bush and the Republican Congress had a chance to make a difference and they failed. In this budget, they choose instead to lavish more tax breaks on the wealthy at the expense of poor Americans who rely on Medicaid and at the expense of parents who want to send their children to college. It is Medicaid, strike one; education, strike two; and this budget is strike three. We ought to throw it out.

Here is how this budget harms education in America. Education is the golden door to opportunity for our citizens. Parents know that education makes the American dream possible for their children. Education is essential to our future competitiveness and our strength as a nation. We cannot compete in the world without skilled workers. We cannot maintain a strong defense without a skilled and dedicated military.

The budget proposed by the President and the Republican leadership in Congress fails our future. It fails American families struggling to pay for their children's college education. It fails American workers seeking to improve their skills and secure better jobs to support their families. It fails our companies looking for the best workers. It fails our military looking for the brightest recruits. It weakens America as we strive to compete in the global economy and maintain our security in a dangerous world.

American workers are being battered by the tidal wave of globalization and this budget does nothing for them. Nothing. Since this administration has been in office, 2.8 million manufacturing jobs have been lost. By the year 2015, 3.4 million jobs are at risk of being sent overseas.

This chart demonstrates, according to Forrester Research, one of the most authoritative analytical groups in terms of jobs being outsourced, the job

outsourcing projections we are facing. Do you think there was any effort at all in this budget conference to take into consideration this flow line, to be able to take the remedial steps by providing additional skills to our workers, such as training, increasing vocational schools, commitment in terms of adult education, continuing the upgrading of our skills? Absolutely not.

The wages of average workers are going down at a time when the cost of living is going up. At the same time, other nations are producing increased numbers of workers with advanced skills. China, today, is graduating 300,000 engineers; India, 200,000 engineers; the United States of America, 50,000 engineers. Better than half of those foreign nationals who graduate in the sciences from American universities are going back overseas. How are we going to be able to maintain national security? How are we going to be able to maintain our economy with these flow lines?

Look at what has happened since 1975 with regard to American production of scientists and engineers. The United States in 1975 was third in the world. The United States today is 15th in the world and we are in a downward slide.

This Senate said we were going to change that flow line. This Senate went on record by supporting, Republicans and Democrats alike, $5.4 billion to make sure we were going to be able to graduate 50,000 to 60,000 more engineers and scientists a year.

What did this conference do? They said, no, no. Did they say, we will give you 15,000 or 20,000 engineers? No. Or 10,000? No. Or 5,000? No. Or 1,000? No. Zero. Effectively, they zeroed that amendment out that had Democratic and Republican support alike not only with regard to math and science but also with regard to the TRIO Program, the Upward Bound Program, the GEAR UP program, the vocational education program, adult literacy programs, all the programs that provide additional training and help and assistance.

For the first time in a decade, this budget cuts the education budget. Page 34 of this budget, two-thirds of the way down, are the projections of 2005 through 2010. It is cutting our education commitment by some $15 billion over the next 5 years--not increasing it, not even holding its own--cutting education. Rejecting the Senate amendment that added $5.4 billion, the conferees instead cut $15 billion in the discretionary education budget.

If our country is to remain strong in this rapidly changing world, if our economy must work for everyone, every American must have an equal chance at the American dream.

No Child Left Behind is not just a political slogan; it is a solemn pledge to every parent and every child in America. But this budget leaves 3 million children behind. In 2006, 3 million children are left behind. Remember our commitment, that all children were going to reach proficiency over the period of the next 12 years? Under this budget, by 2013, we will be leaving 4.8 million children behind on the projections we have.

This budget cuts student aid, helping young people who would be able to go to college. Where do we find that in this budget? In the reconciliation part, it talks about $13.6 billion in cuts; $7 billion will come from the student aid program and $6.6 billion will come from pensions. That means the companies are going to have an increased tax. Companies will have to pay more into the Pensions Benefit Guaranty Corporation, big companies and small companies. That will discourage companies from maintaining their pension programs. That is what the administration wanted.

We had offsets for our amendment of $5.4 billion. What were the offsets? Closing corporate tax loopholes. Imagine the Republican majority saying all right, Senator Kennedy, maybe you will close the tax loopholes you have identified, but not ours. But that is not the case. Those tax loophole closure provisions already had passed virtually unanimously in the Senate previously. The Senate voted for them and then did not use them, did not close them completely previously. Corporate tax loopholes to pay for education and training: That was the choice for the Budget Committee. And they said no to education, no to training, and yes to the corporate loopholes.

This budget with regard to education, is important not only for those who are going to college but for those who are trying to make it through K-12. Every child and every parent ought to understand the judgment made at the instigation of the leadership of the Republican Party--and this President--to make a reduction of $15 billion in education for the K-12 education; $13 billion in terms of higher education and the pension program; and the elimination of the $5.4 billion. We could have added funding for education. Instead this budget cuts education.

Money is not everything, but it is a clear indication of a country's priorities. What we are talking about with these investments, we were enhancing the Pell grant which would be available to 5.3 million young Americans who are qualified, are talented, and able to go to school but are having hard times making ends meet, and help and assistance to working families. That is what we were interested in doing. That is what was turned down.

I yield.

The Senator is absolutely correct. That was passed and accepted by Republicans and Democrats alike on previous legislation and was never incorporated, never utilized, as we say around here. So there had been an agreement that these were the most egregious loopholes and, therefore, we used that as an offset for the increase of the $5.4 billion in education funding.

The conference came back and said, no, we want those loopholes back and we are going to cut education for the neediest children, the TRIO Program, the Upward Bound Program, vocational education, and cut back on scholarship programs for the sons and daughters of working families in middle America. That is what is in this budget in education.

I was listening to the Senator's comments earlier about the foreign policy implications of debt. He has been active in areas of education. He knows from his own experience in the Foreign Relations Committee, the Banking Committee, the Joint Economic Committee, what is happening in the other countries.

What we saw on the front page of the Washington Post last week was that China was reducing their overall numbers in their military. What they are doing is enhancing their research and development and education and training programs because they are going to go smaller in terms of the total numbers of people in the military and go more into high-tech military equipment which require high level training and high skills.

Would the Senator not agree with me? They are graduating 300,000 engineers, and India is graduating 200,000 engineers. And General Electric has just moved its top research center over to--where? to Maryland or to Massachusetts? no--to India. And DEC, one of the leading, innovative companies in this country, has just opened their new research facility, hiring 3,000 Indian engineers. We are not just exporting jobs, we are seeing the export of research and technology. And what is our response? Cutting back on training young Americans and giving more tax breaks to individuals.

I say to the Senator, who has been here for years as a member of the Foreign Relations Committee, isn't he

troubled by these flow lines, not only with regard to our national security but in terms of our ability to be competitive?

The Senator is----

The Senator is correct.

Well, the Senator is exactly correct. If we think we are going to have the technological advantage in another 20 years, either commercially or militarily, with these kinds of flow lines, then we are dreaming dreams that never will exist. This is absolutely preposterous.

We have had an excellent presentation on the overall economic implications of this conference report, but we are talking about the human investment that makes the difference for us to be No. 1 competitively, both militarily and commercially.

The other point I want to mention to the Senator is that the loopholes we closed were the loopholes that were tax incentives for corporations to move jobs overseas. Do we understand? We, as a country, are concerned or should be concerned about outsourcing, sending jobs overseas. Now we are seeing that not only the jobs are going overseas, the research is going overseas, the education advantage is going overseas, the debt control is going overseas. And we are seeing the incentives to move those jobs overseas with the tax loopholes we closed.

But did the Republican budget conference keep the loopholes closed? No. They restored them. They restored them. They are back, now available to companies to go ahead and outsource American jobs. This is a performance that just defies reason--we heard over the course of the campaign, which was not all that long ago, how everyone was talking about--Republicans and Democrats--what we were going to do about outsourcing. They have given their answer, and they have given it to us tonight.

Yes.

That is correct. It is exactly right. And we had those agreed on, Republican and Democrat alike. I think it was by 76 votes here in the Senate on the FSC-ETI legislation.

So we had the offset of incentives that were moving jobs overseas. We were closing that loophole and investing in able, capable young Americans in higher education, in training teachers for math and science, of which we are in desperate need. No Child Left Behind has the guarantee that we are going to have a well-qualified teacher in every classroom by the year 2006. We are far behind. This would have given us an opportunity to meet that goal.

But most importantly, we would have given the helping hand to many other young people in the TRIO Programs and the Upward Bound Programs and the rest.

Mr. President, over 160 organizations representing students and educators supported our amendment. They generated thousands of calls to their legislators. Just in Massachusetts, I received more than 1,000 letters from adult education students and teachers urging that this amendment be retained, telling their stories about how adult education is changing their lives for the better. We have letters from colleges and universities across the country urging Congress to increase the Pell grants, to save the Perkins Loans Program. We have letters from students, counselors, and young adults urging us to save college preparation programs for first-generation students, such as TRIO and GEAR UP. Over 600,000 students have sought more information about this amendment.

On their own, five Republican Senators wrote the budget conference committee to tell them this President should support this amendment and the conference committee should support this amendment, and that the education and Pell grants needed their support. Yet this conference rejected all those pleas and cut education.

Now, the Republican leadership and the White House decided it was more important to maintain the loopholes to reward corporations that send jobs overseas rather than invest in our own young people here at home.

Our amendment embraced the hopes and dreams of millions of Americans. All parents want their children to have lives of fulfillment and opportunity, to raise strong and healthy families, and afford to live comfortably in safe neighborhoods.

When we first debated this resolution a little over a month ago, a majority in the Senate said no to the President's cuts in education. Today, a majority of the Senate should say no again. We should stop the raid on student aid and pass a budget that strengthens, not weakens, America.

Now, Mr. President, on another subject, just last month the Senate made it clear that cuts to the Medicaid Program were unacceptable. In a bipartisan vote, we agreed to not make any cuts until a bipartisan commission had time to examine the Medicaid Program and recommend possible reforms based on sound policy. Just this week, in an overwhelming, bipartisan vote, the House instructed the budget conferees not to cut Medicaid.

Yet the budget we will be voting on shortly not only cuts Medicaid-- despite consensus in both the House and Senate against cuts--its cuts to the program are almost as deep as those we voted down in March. The Senate rejected the $15 billion in cuts to the Finance Committee. Yet this budget report that was drafted in the dark of night behind closed doors forces the Finance Committee to cut $10 billion.

If these cuts were not bad enough, the bipartisan Medicaid Commission has turned into a partisan commission that the administration can stack with members they know will recommend the cuts they have determined. Instead of a real examination of the Medicaid Program so that we can modernize the program with needed reforms, we will have a commission whose agenda will be to recommend cuts.

It is not just Medicaid that is at risk. What does it say about Republican priorities if this Republican budget cuts a program that provides health care for 53 million low-income Americans--children, parents, the elderly, and the disabled--in order to provide large, new tax cuts for the wealthy?

Republicans say they are for a culture of life, but Medicaid sustains that life. One-third of all the births in America are covered by Medicaid. Medicaid sustains life for a third of our mothers and our babies. But this budget says the lives of poor mothers and poor children are not that important after all. Under this budget, tax breaks for the rich are more important than life itself.

I want to show you what has happened with regard to low-income children. Since 1997, 23 percent of children in America were not covered. Now we have reduced that to 15 percent. We are making very important progress in terms of providing some insurance for

children. But now with this budget, we are going to see this line go back up because of the following.

If you look at this chart, you will see what is happening to children and also to low-income parents. The total number of low-income children has increased by 6.7 percent and 5.5 percent in terms of low-income parents who have lost their health insurance. We have seen a 1.7- percent growth in the Medicaid Program and an increase of 8 percent to cover low-income children. So we are making some progress, but not with this budget.

This budget takes away those gains for children. Take them away from the elderly. Take them away from the services for expectant mothers who are delivering. That is what this budget does, and that is what is so incredibly wrong in terms of this budget.

We know the harmful consequences of the lack of access to health care. In the early 1960s, President Kennedy commissioned a study to find out why half of our young military draftees were rejected for service. The study, which was released in 1964 and provided the basis for Medicaid coverage policy for children, found these young men had physical and mental developmental problems that were highly treatable if they had had access to health care as children. As a result, the Medicaid program was set up. That is the basis for it. And we have made enormous progress. Now we are going to see the undermining of that program.

Finally, Mr. President, the budget also includes a reserve fund for the Grassley-Kennedy bill to provide health coverage for families with disabled children. The bill is titled the ``Family Opportunity Act.''

For the last 5 years, Senator Grassley and I have been fighting to get this legislation passed.

The Family Opportunity Act allows families of children with severe disabilities to buy health care coverage under the Medicaid program, without becoming poor, staying poor, or giving up custody of your child. It is legislation cosponsored by more than half of the United States Senate and over 200 disability, health care and other organizations.

Almost one in ten children in America has significant disabilities. But many do not have access to even the most basic health services they need because the private health insurance won't cover them.

In every one of these plans you read numerous exclusions that hurt children with disabilities--no coverage for hearing aids, for special health needs, for assistive technology, for services at school, and on and on and on.

These families aren't looking for a hand-out--just a helping hand. All they want is the opportunity to buy affordable coverage, because the private health insurance market won't offer it to them.

More than any other investment we can make in this budget, we should secure funding for these families who struggle everyday to afford the health care their children need to live healthy and successful lives.

I hope that we can finally see this profamily bill enacted into law this year.

The budget sets up a reserve fund for Senate action to bring the benefits of information technology to our inefficient health care system. Unfortunately, a similar reserve fund is not available for House action.

Information technology has revolutionized virtually every industry in America--only health care lags behind.

IT is critical to our efforts to bring costs down and improve quality. It can provide for more efficient delivery of care, and it can reduce errors and increase quality. HHS estimates that widespread use of IT can save as much as $140 billion a year.

The VA has implemented the most advanced IT system in the country over the past few years. The results have been remarkable. Since 1996, VA costs per patient have actually decreased 7 percent, while private sector costs per patient have increased by 62 percent. During this period, the VA has been widely recognized for improving its quality of care.

Obviously, not all of these successes have been due to information technology--but the VA system thinks that much of it has.

We have a tremendous opportunity to improve the ability of IT to make a real difference in the quality and efficiency of health care--but we have to act now.

I commend Senator Gregg and Senator Conrad for working with the chairman of our Health Committee, Senator Enzi, and me as well as Senator Grassley and Senator Baucus on the Finance Committee--to include this fund in the budget.

The fund is a small step in the right direction, but it will be a wasted step unless Congress enacts legislation to improve the use of health IT in America.

The two key components of any legislation, in my view are incentives for hospitals and health care providers to use IT to improve quality and in acquiring IT. Part of this effort is developing technical standards in partnership with the private sector to ensure that the money is spent on systems that really enhance quality.

Our economic competitors in Europe and elsewhere are making the investments needed to improve their health IT systems. The British are investing over $15 billion, yet we in this country continue to delay.

IT can cut costs in many ways. Our fragmented and uncoordinated health care system imposes high costs in duplication and waste. Patients with multiple chronic illnesses see as many as fourteen doctors a year.

Doctors repeat tests that have already been performed. Residents take histories that have already been taken. Patients show up for doctors' appointments that are essentially a waste of time because tests have been performed but the results have not been delivered.

It has been estimated that one in seven hospitalizations could be avoided if complete medical records were available for the patient. One out of five laboratory tests are duplicative of ones that have already been performed. This adds up to immense amounts of money. IT can reduce this needless duplication.

We as a nation cannot afford to miss this opportunity to make the investments needed to improve health care and cut costs.

My time is about up, but I must comment on how this budget resolution also attacks our defined benefits system. Pensions are more important than ever. We know of the assault that is on the very nature Social Security. Separate from Social Security, the number of secured, defined benefit plans is going down. This particular budget increases the premium tax on employers with a heavy burden on manufacturing companies. It will hurt small businesses. These premium increases will obviously hurt many workers and retirees, and it will also jeopardize long-term retirement stability. Pensions are important. They are a part of the quality of life for working American families. This budget does a disservice for them as well.

I hope this budget will be rejected.

Mr. President, Medicaid provides a critical safety net for 53 million Americans--low-income children, parents, disabled and elderly citizens who have nowhere else to turn for health care. Medicaid now provides health care for 1 in every 5 children. It pays for one-third of all births in this country, almost 40 percent of all long-term care expenses, a sixth of all drug costs, and half of the States' mental health services. It also is the largest payer of services for AIDS patients.

What does it say about the leadership of this Senate that it proposes to cut $15 billion from Medicaid? That program provides health care for 25 million children, 13 million low-income adults, and 15 million disabled and elderly Americans. These cuts are proposed at the very same time the budget once again proposes large new tax cuts tilted toward higher income households. Our colleagues say they have no choice but to make these cuts to Medicaid because of the large deficit. But the large deficit was created by the large tax breaks for the rich, not by Medicaid.

The budget is a blueprint of Congress' priorities for the Nation. This Congress once again shows that it cares more about those who have the most than it does about those who have the least. How can we possibly continue to give tax breaks each year to the wealthy, and reduce health benefits for the poor to pay for them. Those are not the values we stand for.

In fact, the budget cuts in the Senate resolution are even deeper than the cuts proposed in the administration budget. Even if the Finance Committee adopts every cut the President proposed to Medicaid, they will still need to come up with an additional $7 billion in cuts to meet the target in this bill.

We need to maintain the Federal commitment to medical care for the poorest of the poor. If we weaken the Federal commitment, these men, women, and children will go without care, or show up at the emergency room door. We know that lack of access to care causes harmful consequences. We cannot abandon our responsibility to provide for those among us who are less fortunate.

This budget will force the States to pick up costs that the Federal Government should be covering. It will result in a massive shift of responsibility from the Federal Government to the States. We already have shifted much of the cost of the elderly to the States, costs that should be covered by Medicare. More than 40 percent of all Medicaid expenditures are used to fill the gaps in Medicare. Medicaid pays for their long-term care, their prescription drugs, and their cost-sharing.

Medicaid is the largest source of long-term care today. The more than 7 million persons who are eligible for both Medicare and Medicaid are among the most vulnerable. Seventy percent of them have incomes below $10,000. Nearly one in four live in long-term care facilities. They are twice as likely to have Alzheimer's disease, and more likely to have diabetes and stroke than others on Medicare beneficiaries. They are a small proportion of the Medicaid population, but their costs are among the highest. Medicare will start paying for prescription drugs for the dually eligible next January, but the states will see little or no relief. In fact, because of the so-called ``clawback'' formula in the prescription drug law, many states will end up sending the federal government more money for picking up these drug costs than they would have spent without the drug bill. What kind of relief is that?

We can all agree that we need to improve Medicaid. We have an opportunity to improve the program, but that is not what this budget does. This budget is not driven by policy--it is driven by an arbitrary number that was picked by the leadership as their deficit reduction target. The Federal Government needs to maintain its commitment to health care, not try to weaken it and dump the costs on the states. We need to help the states provide health care, not cut federal funding and put a bigger burden on them. But that is exactly what this budget does.

Some on the other side describe these cuts as minor, or as reductions in growth, or as necessary Medicaid reforms. Don't believe a word of that. Nothing is further from the truth. There are no policy reasons for these cuts. They are large, harmful cuts that are being made so that they can say they are reducing the deficit. But if you look at the numbers, this budget doesn't reduce the deficit--it increases it over the next 5 years. Despite these harmful cuts in Medicaid, they add yet another round of tax breaks. Where is the fairness in that? It is Robin Hood in reverse steal from the poor to give to wealthy.

Our colleagues say we need to cut Medicaid because it is growing too fast. The reason is obvious. It is growing because over the past 4 years, more people are losing their jobs and their health care, falling into poverty, and finding themselves with no option but Medicaid. That is what is responsible for Medicaid's growth.

Over the past 4 years, the number of uninsured has climbed from 40 million to 45 million, and it is expected to continue growing for the foreseeable future. The number of uninsured would have been much greater without Medicaid. During the same time period that the number of uninsured increased by 5 million, the number of Americans on Medicaid grew by 9 million. If Medicaid had not been available to them, we would be facing 54 million uninsured. Is that the kind of policy the Nation wants to promote?

Medicaid enrollment grew 40 percent over the past 5 years, and it is projected to grow another 5 percent this year. Enrollment growth is causing Medicaid's rising cost, not inefficiencies, or fraud, or abuse. In fact, the cost of private employer-sponsored health insurance has grown at twice the rate of Medicaid. The percentage of Americans with employer-sponsored health insurance fell, but the number of Americans on Medicaid grew, and that growth was largely caused by the bad economy, the continuing decline of employer health insurance, and the soaring cost of prescription drugs.

Cutting costs is the wrong prescription for Medicaid. This amendment will give us time to assess Medicaid fairly, and base any changes on sound policy, not arbitrary budget cuts. These cuts will have a real impact on real people. Millions may lose their only hope for health care if we allow these cuts to stand. Emergency rooms will have more and more patients with nowhere else to turn, and the Nation's health care safety net will continue to fray. That is not the kind of budget we ought to be approving.

I urge my colleagues to vote for the Smith-Bingaman amendment. Our goal on Medicaid is to improve it, not dismantle it.

Mr. President, I strongly support the Sarbanes amendment, which will prevent one the greatest failings of this President's Budget--its elimination of more than $2 billion

from critically needed economic development and social service programs and the proposed consolidation of 18 valuable Federal programs into a single block grant under the so-called ``Strengthening America's Communities Initiative.''

I am heartened that so many of my colleagues have come together in opposition to these cuts--55 Senators wrote to the Budget Committee in an important show of bipartisanship 2 weeks ago.

Under the President's plan most American cities can expect at least a 35 percent cut in assistance from the Federal Government to help secure investment, house the poor, provide health care to the uninsured, and counsel the abused.

If the administration dislikes helping cities, they should have the decency to say so, instead of this charade where they try to hide massive cuts under the cloak of streamlining.

Their proposal insults the intelligence of mayors, community development officials, and social service agencies across the country-- by cynically suggesting that somehow these cuts are going to make life better and be helpful to cities across America.

What makes these cuts so objectionable is they come at a time of great stress and difficulty for Americans who live in poverty. 1We are the wealthiest nation on earth. We are blessed with great abundance. Yet despite our great wealth, too many of our fellow citizens remain in the shadows, the prisoners of persistent and increasing urban and rural poverty.

The numbers are alarming. Today, nearly 36 million Americans live in poverty, and 3 million more working Americans live in hunger or on the verge of hunger today than in 2000. One out of five American children goes to bed hungry each night. We have it in our power to eliminate so much of this poverty.

At the very least, we shouldn't do anything to make it worse which is exactly what this ``Strengthening America's Communities'' plan from the White House would do. In the powerful words of the Gospel, ``To whom much is given, much is required.''

We need to pass the Sarbanes amendment, so that the work of tens of thousands of public officials, health officials, educators, community development experts toiling to improve living conditions in our cities isn't made any more difficult.

Mayors across the country on the front lines every day are struggling to create new jobs and attract capital investment. They are struggling to educate and house the children of the poor, and they are not fooled by this administration's misleading slogan ``Strengthening America's Communities,'' because they know it is the exact opposite.

My friend, Mayor Clare Higgins of Northampton isn't fooled. She recently wrote me urging Congress to save Community Development Block Grants, one of the very few tools she has to meet Northampton's needs and one of the biggest programs on the President's chopping block.

Most recently, Northampton invested $300,000 of these Federal funds to acquire the Interfaith Cold Weather Emergency Homeless shelter--the only cold weather shelter serving Hampshire County. It is a collaborative effort between area church groups and ServiceNet Inc., a local human service provider. Without these funds, there would be no cold weather shelter in Hampshire County.

Mayor Higgins wrote:

Without CDBG funds, the City will be unable to develop a

planned senior center, public services that provide emergency

food, homeless services, child care and after school

programming, literacy skills and health care would not be

funded; the City's ability to promote and develop affordable

housing will be severely limited, parks and playgrounds will

not be improved, and the City's ability to provide funding

for the redevelopment of the former Northampton State

Hospital will cease.

Mayor Tom Menino of Boston--the former head of the U.S. Conference of Mayors--isn't fooled. He knows what's at stake and recently conducted an analysis of the budget cuts on his city.

Since 1998 alone--

Mayor Menino stated at a recent press conference--

the City of Boston has permitted almost 5,000 new units of

affordable housing and permitted more than 12,000 other

units. We have invested a total of $7.8 million in CDBG funds

in 19 large developments that have created a total of 1,175

apartments including 517 units for the formerly homeless.

He went on to say that this budget for housing, community development, and social services threatens to ``throw the nation into the dark ages.''

That doesn't sound like he believes his community will be ``strengthened'' by the Bush administration's cuts.

Mayor Menino believes the President's budget will mean the loss of $8 million in Community Development Block Grant funding for Boston and the loss of $5.5 million in Community Services Block Grant funding.

On any given night in the City of Boston, there are nearly 6,000 homeless men, women, and children in the city. Shelters in Massachusetts have been overflowing for 6 straight years, with 4 beds available for every 5 adults.

Yet the very support he has relied on to help build 133 units of affordable housing for homeless people, to help 500 low-income homeowners rehabilitate their properties, and to provide 130 first-time homebuyers with their down payments is now in grave danger.

How exactly is the mayor supposed to strengthen Boston when the support he needs to do it is getting the axe under this budget?

Other local officials tell the same story.

A letter I recently received from Elizabeth Cohen, Executive Director of Rape Crises Services of Greater Lowell, says:

Dear Senator Kennedy:

We need your help . . . We use CDBG Funds to support

multilingual sexual assault support services. We are the only

program in the Greater Lowell area and the only agency to

have certified rape crisis counselors who speak Spanish and

Khmer. With the elimination of this funding, we will have to

cut back on these services, which will result in 100 Khmer-

speaking clients being unable to have a counselor in their

language . . .

As you know, immigrants and refugees already have many

struggles when they move to a new city or new country. Having

to deal with the trauma of sexual violence on top of the

difficulties in housing, education, food and school can

paralyze a family . . . Please don't let the President take

away this funding for Lowell.

I ask the Senate, does this sound like we are strengthening communities with this budget?

In Lawrence--one of Massachusetts' and the Nation's poorest cities-- CDBG funds have been used to amazing effect to leverage nearly $110 million of investment in the remedation and redevelopment of an abandoned industrial brownfield site known as the Lawrence Gateway Project.

The city has invested nearly $6 million of its CDBG funds in the project and formed a model partnership with GenCorp, a private company that has invested $75 million so far in the redevelopment.

Today, Lawrence is continuing to use its CDBG funds to meet debt service payments on loans made to clean the properties.

Without these Federal funds, the partnership with GenCorp could not exist, and the City would not be able to do anything about this 15- acre, fenced-in, desolate property, which would stand as a stark reminder of the city's industrial past rather than as a symbol of the kind of innovative development needed to build a stronger future for the city.

How will we be strengthening Lawrence by eliminating one of the best ways they have to create investment partnerships with private businesses?

In addition to the community development block grant, the Sarbanes amendment will also preserve the community services block grant. These funds strengthen communities by funding local agencies, which provide services such as literacy, child health care, after school activities, low-income housing, food stamps, emergency shelter, and other support.

In Worcester, Patsy Lewis of the Worcester Community Action Council sent me a letter on just how devastating the President's plans to eliminate this program are.

Simply put, Patsy wrote, they would have to reduce or close their GED classes and partnerships for at-risk students in the public schools. The agency may even be forced to close.

Perhaps the President can explain how a community can be ``strengthened'' by eliminating GED programs.

Another person who isn't fooled about the effect of the President's devastating ``Strengthening America's

Communities,'' budget cuts is Steve Teasdale, executive director of the Main South Community Development Corporation in Worcester, which is doing incredible work attacking poverty in one of Massachusetts most economically distressed neighborhoods.

The Main South Community Development Corporation was formed in 1986, when concerned citizens came together to revitalize the neighborhood surrounding Clark University, which was reeling from the economic and social devastation wrought by the loss of Worcester's industrial base.

The obstacles in Main South's path are considerable:

Between 1960 and 2000, the population of the neighborhood fell 35 percent from 5,600 to 3,700. The housing stock fell by 29 percent.

Over 40 percent of the population lives below the poverty line--and 17 percent have incomes lower than 50 percent of the poverty level.

At 11.4 percent, unemployment is double the city's rate of 6.3 percent. Over half of neighborhood households are headed by single parents.

The challenges confronting the community are great, and Federal funds made available through the community services block grant, the community development block grant, and HUD's section 108 loan program have been absolutely essential to the extraordinary successes of Main South in recent years.

CDBG funds were used at the outset to match a challenge grant from the Ford Foundation that provided for the creation of the entity, and enabled Main South to attract outside investment. The result is numerous accomplishments for the neighborhood.

Since 1988, Main South has acquired and rehabilitated 246 units of low and moderate income housing--137 of which had been abandoned, and 78 of which were fire-damaged, many from arson. The new homes added $500,000 annually to Worcester's tax rolls.

In addition, as a direct result of Main South's housing rehabilitation, over $20 million of investment has flowed back into the community. Three ongoing private developments represent another $40 million of capital brought into the area.

Because of this Federal support, Main South has been able to be a true partner to Clark University, providing greater educational opportunity to neighborhood families--through a homework center, computer training classes, and career placement services.

In fact, because of the success of the partnership, Clark University lets neighborhood high school students take college classes and provides full tuition to neighborhood students who make the grade academically. This is extraordinary.

All of this has been made possible by the commitment and dedication of concerned community leaders--and the relatively modest sums of Federal support that are in danger with this budget before us.

Now Main South is taking on its greatest project, the Kilby-Gardner- Hammond Neighborhood Project.

This partnership between the Boys and Girls Club, the City, Clark University, and Main South will revitalize 30 acres of distressed industrial property consisting of over 40 vacant, trash-strewn lots.

It aims to transform the neighborhood through the construction of a $7 million new Boys and Girls Club, between 70 to 80 affordable housing units, and a new outdoor track and field complex for Clark University students and neighborhood children alike.

It is a transformative project, with a total investment impact of $30 million, much of that made possible by Section 108 loan guarantees that this budget would eliminate.

Without Section 108, Teasdale and Main South would never have been able to acquire the properties to put this project together. This fact alone should cause us to reject the administration's ``strengthening communities'' proposal--because it will do nothing of the sort.

The question has to be asked, [Teasdale recently wrote] is

what would happen in these neighborhoods if such funding was

severely restricted or cut back. The answer can only be

assumed to be that the current problems in these areas would

get worse as capital investment once again withdraws to safer

havens and the social service needs of the resident

populations are stripped away. Crime, substance abuse, lack

of recreational and educational opportunities for the youth

of these areas and the incidence of poverty can all be

expected to increase if CDBG funding is no longer available.

The long-term social and financial costs associated with

such cut backs would be deeply damaging and although the

immediate impact would be most severely felt in our poorer

urban communities the resulting social distress would

eventually affect everyone.

Steve Teasdale and the leadership of the Main South Community Development Corporation know more about the day-to-day challenges affecting our poorer urban communities and the difficulties associated with urban economic revitalization than any of us, because they live it every day.

I ask my colleagues to consider his words and vote for the Sarbanes amendment, so we can save these critically important poverty prevention and economic development programs.

The Senate has a moral obligation not to make it harder for communities to solve the complicated issues of poverty and community development they face. Without the Sarbanes amendment, that is exactly what the Senate will allow to happen.

Will the Senator yield for a question, and I will give him a minute to answer it?

Does this amendment raise taxes to pay for the $15 billion that would be called for to put in this budget, or does it increase the deficit with more spending?

To reclaim the time, the Senator did not answer the question. Maybe he is not familiar with the answer, but the answer is that this amendment increases the deficit by $15 billion.

Mr. President, I had the great good fortune when I went to college to be taught by one of the historically strongest history professors in our Nation, a man named David Truman. He went on to be president of Mount Holyoke. He wrote probably the definitive treatise on American Government. One chapter in that treatise was dedicated to committees and commissions. He said that the commission is the place where you send issues when you do not want to have to deal with them, when you want to ignore them, when you want to obfuscate the issue, and when you want to basically kick the can down the road.

He was a brilliant professor and usually right, and in this case obviously totally correct.

This amendment, if it is adopted, will guarantee that the issue of Medicaid is not addressed. That is a guarantee in this decade. It does not kick the can down the road, it kicks the can down the road a decade because we will not do reconciliation again for a long time, I suspect. Next year is an election year, and Congresses are not inclined to make tough choices in election years. It has been 10 years since we did the last reconciliation bill, so it is unlikely reconciliation will occur again. And we are not going to pass in this Congress a bill which reforms a significant program on the entitlement side without using reconciliation because the courage simply is not here.

So let's talk about why it is absolutely critical that this year we address the Medicaid issue and why it is not going to impact any children and why all this ``wearing your heart on the sleeve'' language we heard around here is a large amount of puffery.

We had some very disturbing testimony--and I believe that is the term used by the Senator from North Dakota, and it is accurate--from the Comptroller of the Currency as we talked about the liabilities already on the books that our children are going to have to pay because our generation put them on the books. They add up now to $44 trillion. That is ``trillion'' dollars. Mr. President, $44 trillion of liabilities is already on the books.

This chart shows that, $44 trillion. To try to put that in perspective because a trillion dollars is something nobody can understand. If you take all the taxes paid in America since the Revolution, it adds up to $38 trillion. So we have on the books more liabilities today than taxes paid in this country in the history of this country.

In fact, if you take the entire net worth of the United States today, and every American adds up all their net worth--all their houses, all their cars, all their jewelry, whatever they have, stocks, bonds, assets, real estate, it comes to $47 trillion. So we have on the books almost as much obligation as we have net worth.

The practical effect of that is that we are overwhelming the next generation with obligations which they will have to pay. Our children and our grandchildren are going to have to pay the taxes to support that $44 trillion worth of obligations we put on the books. So it is important that we look at from where those obligations come.

They come primarily from what is known as entitlement accounts, specifically three major accounts: Social Security, Medicare, and Medicaid. In fact, the vast majority of them do not come from Social Security, they come from Medicare and Medicaid. Health care represents $27 trillion of that $44 trillion of costs that are on the books that our children are going to have to pay because we have already committed them to do that to support the baby boom generation when it retires.

It is entitlements that are the issue. My colleagues have come forward and said: But we do not have to deal with Social Security, even though the President has been willing to discuss it. We do not have to deal with it, no; stiff arm Social Security. OK, that is off the table.

The President says he just amended the Medicare law, so he does not want to move on Medicare this year. OK, that is off the table.

That leaves one issue, one major program that should be looked at this year at least, and that, of course, is Medicaid.

The other side of the aisle and three speakers this morning have already said you can just address this problem by raising taxes. I note--it does not appear to be anybody has focused on this at all--but the amendment before us does not raise taxes, it raises the deficit. We heard all of yesterday, the day before, and the day before that how the other side of the aisle did not want to raise the deficit; they wanted to be the party that was opposed to deficit spending. Today they come forward and the vast majority of the people sponsoring and supporting the program, the bill before us, which dramatically raises the deficit by $14 billion in the 5-year period, something like $60 billion in the 10-year period.

But even if you accept the fact that they want to raise taxes to pay for it, the issue is, Could you solve this problem, this outyear liability that is caused by all these entitlement accounts, Medicare, Medicaid, and Social Security, by raising taxes?

You cannot do it. This chart shows it so clearly. The cost of Medicare, Medicaid, and Social Security is the red line here. The blue line is the historical amount that the Federal Government spends, 20 percent of GDP. That is what we have historically spent, since World War II, essentially. You can see that the red line crosses the blue line in about the year 2029, 2028, in that period. These three programs--Social Security, Medicare, and Medicaid--will actually cost the Federal Government more than 20 percent of the gross national product.

What does that mean in practical terms? It means you wouldn't be able to spend any money on education, any money on roads, any money on national defense, because the entire Federal Government would be absorbed by paying for these three programs. Or, alternatively, you could take the approach the other side wants to take, which is raise taxes.

If you did that, you would have to double the tax rate on Americans in order to pay for this program. Working Americans, young Americans, these pages who are here today and are going to get a job, would find their ability to have a decent lifestyle would be dramatically reduced because they would have to pay twice as much in taxes as our generation has paid in order to support these Federal programs which are already on the books.

You cannot tax your way out of this. I don't care if you confiscate all the income of the two top brackets, you cannot get this system under control through taxes. You have to address the other side of the ledger, which is spending responsibly on these programs. That is what this bill tries to do. That is what the budget tries to do.

In a most minor way, a minuscule way, almost, we suggest in this budget we want to save $15 billion in the rate of growth--not cuts--in the rate of growth of Medicaid over the next 5 years; $15 billion. You say $15 billion is a lot of money. It is a lot of money, but you have to put it in context. Over the next 5 years, the Medicaid system is going to spend $1.12 trillion--that is trillion with a ``t''--and $15 billion on that amount is 1 percent, essentially. What we are actually trying to save in this bill is $14 billion.

This chart shows it. Medicaid spending will go up dramatically. It will go up by 39 percent. It will not go up by 41 percent. That is what it would do. It would go up by 41 percent if this bill doesn't go into place, but if this bill goes into place, it will go up by 39 percent. A 39-percent rate of growth in this program is what we are planning.

We have heard people come down here, especially the Senator from Oregon, and say if this language passes, lives will be lost. I think he said that. Children will be lost. That is absurd, misleading, inaccurate, and a total gross exaggeration. I wish the Senator had been a Governor because he would know that the Medicaid system today does not benefit children as much as he thinks it does. There is a large chunk of the Medicaid system today which is being gamed out of the system by States and being used in the general operations by the States to build roads, to put police officers on the road--a large chunk of it. That could be saved.

There is a large chunk of the Medicaid system today which is going to pharmaceuticals to pay dramatically more than what we pay under any other program for pharmaceutical products. That could be saved.

There is a large chunk of the Medicaid system today which is going to people who are gaming the system by what is known as spending down. That is when you, in a rather fraudulent way, get rid of your assets-- give them to your kids or give them to somebody else in your family so that you can then come to the Government and say, Support me in a nursing home. So all the other Americans in this country who are playing by the rules end up supporting people who are breaking the rules and who are gaming the system through spending down. Huge amounts of dollars are pouring out of the system under those accounts.

A lot of money is being lost in this system simply because it is inefficiently run, because the Governors do not have the flexibility they need in order to get more service because they know how to deliver it, but instead they are hamstrung by all sorts of rules and regulations which make no sense to them and which undermine their capacity to deliver the service efficiently.

The President and innumerable Governors, responsible Governors in this country, have come forward and said you give more flexibility to the Governors and they can take a little less rate of increase in spending and deliver much more service to many more kids. So this concept that you cannot get to this 1-percent savings, that you cannot live on a 39-percent rate of growth in Medicaid without having children lose their lives and be not able to go to the emergency room for care, is scare tactics. Not only that, it is not right. Because if you cannot step up--especially as a Republican who supposedly is committed to fiscal responsibility, because that is what our party is supposed to be committed to--and say that you can deliver better service with more flexibility, then you are probably not a very good Governor. I doubt there are any Republican Governors, at least, and I suspect there are not a lot of Democratic Governors who don't believe they can do more with a lot more flexibility.

The President has listed seven or eight--actually, Governor Leavitt has--seven or eight different proposals, none of which impact services one iota and, in fact, some of which would significantly expand services to children, which could be accomplished if we reform the program and would slow the rate of growth in this program along the lines projected here.

So it is unconscionable that people would claim a $14 billion reduction in the rate of growth when you are having a $1.1 trillion expenditure, a reduction which represents 1 percent over 5 years, could not be accomplished in the context of a program where there are obviously so many problems which need to be addressed and which could deliver more efficient and more effective service.

It gets back to this point, of course. If we do not do this now, we are not going to do it. This is not an amendment to set up a commission, the purpose of which is to resolve the problem. This is an amendment to set up a commission to make sure the problem is never resolved. It is irresponsible because of that.

I do think it is important to note how this budget has been structured. A lot of people say this Federal budget is pretty meaningless and it is sort of a process we go through here. Of course, 2 out of the last 4 years we didn't even have one. To some degree they are correct, I regret to say.

We have in this budget three basic elements: discretionary spending, entitlement spending, and the other is taxes. On the discretionary side we set a discretionary cap. We have already seen 24 amendments or so offered on the floor that will affect that cap--in other words, Members not willing to accept the spending levels of this budget. They have to put money into this program or that program. We have another hundred or so amendments also pending which do exactly the same. So the willingness to discipline the discretionary side of the ledger is, to say the least, tepid. One would suspect there are going to be a lot of games played with that cap even if it gets into place before we get to the appropriations

process. But it does, hopefully, limit the rate of growth and it does have some impact. But regrettably I have to admit it is at the margin.

Then there is a tax side. Most of the taxes, in this budget at least, are taxes which most people are going to vote for. That point was made yesterday--whether there are reconciliation instructions, most of these tax cuts are going to be extended. They are very popular: R&D, spousal stuff, tuition tax stuff.

No, the essence of this budget is whether we are going to address the fastest growing function of the Federal Government, the function of the Federal Government which is going to bankrupt our children and give them much less of a quality of life than we have had; whether our generation, the baby boom generation, which is now the generation that governs, is going to be willing to stand up and admit that we put too much on the books for our children to bear. That is the essence of this amendment. This amendment knocks out the only significant effort--well, there is one other dealing with the PBGC--the only significant effort to bring under control the rate of growth in the Federal Government in the outyears; the major piece of fiscal discipline.

In the short term you can argue the discretionary caps may help. But in the long term, which is where our big problem is and where we all acknowledge it to be, the only thing that is going to address that is if we reconcile the Medicaid number. If we do not do it this year, it is not going to be done. That is why I find this amendment to be so pernicious, because it is put forward as if the people who support it are for fiscal discipline when in fact its practical implication is to gut the only thing in this budget which actually will generate fiscal discipline. And it is being done by Republicans. You have to ask yourself how they get up in the morning and look in the mirror.

In any event, that is where we stand. I am not going to deny that this isn't a crucial vote. This is a crucial vote. If the Medicaid language is passed, if it is knocked out of the bill, I think I put in context the effect it has on this budget. More important, I hope I have put in context the effect it is going to have on our kids and our grandkids, because we will have said that in none of the three areas where the explosive growth is occurring--in none of these three areas where we are headed to this disaster, where our children are not going to be able to afford the costs that we have stuck them with--that in none of these three areas is this Congress willing to act. That would be more than an unfortunate event.

I reserve the remainder of my time.

Do I have any time?

Mr. President, I reserve that time and yield the floor. I yield the remainder of the time on my side to the Senator from Mississippi.

I appreciate the appropriate comments of the Senator from Mississippi.

Madam President, I send an amendment to the desk.

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

I yield back such time as I have.

Madam President, what is the time?

Madam President, this amendment increases spending by $2.5 billion, exceeding the cap, and it increases taxes by the same amount of money. It is a tax-and-spend amendment. Therefore, I would oppose it. There are a lot of other reasons I would oppose it, but I wanted to give the Senator from Missouri an opportunity to say a couple of words on something else.

I yield to the Senator from Missouri, and I yield the remainder of my time on this amendment.

What is the time situation on Senator Sarbanes' amendment?

We do not have any time on this side.

We yield back.