Budget resolution FY2009

Mr. President, I would like to be informed when I have used 45 minutes.

Mr. President, we come to the floor with a budget resolution that came out of the committee last week. I think it is important to set the stage in recognition of the fiscal condition of the country as we present this budget.

We have seen a dramatic deterioration in the budget situation under this President. As we all know, he inherited a budget that was in surplus; in fact, a budget that was estimated to have a future of surpluses so large that the head of the Federal Reserve said we were in danger of paying off the Federal debt. That is a danger I would like to have.

The President then took us on a fiscal course that has produced four of the five largest deficits in our history. In fact, it may turn out to be five of the largest deficits in our history, depending on how events unfold this year.

We can see in the previous years we were having budget surpluses, and then the President took us into deficit and deepened those deficits until we reached a record deficit in 2004 of $413

billion. Now we see those levels being challenged in this year and perhaps next as well.

The result of these massive deficits is this President has built a wall of debt that is unprecedented. When President Bush came into office in 2000, the debt at the end of his first year--we do not hold him responsible for his first year because he is working on the budget he inherited--the debt stood at $5.8 trillion. At the end of last year, the debt had reached over $9 trillion. And by the end of 2009, which will be for the 8 years for which he is responsible, we will see the debt will have risen to over $10 trillion. This President will almost have doubled the debt of the United States in just 8 years.

Not only will he have almost doubled the debt of the country, the gross debt, all of the money we owe, but he will also have more than doubled what we owe to foreign nations. It took 42 Presidents, all the Presidents pictured here, 224 years to run up a $1 trillion of U.S. debt held abroad. This President has more than doubled that amount-- much more than doubled that amount--in just 7 years. The result of that is we now owe Japan almost $600 billion. We owe China almost $500 billion. We owe the United Kingdom over $150 billion. We owe the oil exporters almost $140 billion, and so it goes.

That is a warning sign to all of us about the fiscal condition of our country. The long-term projections are sobering as well. Partly as a result of this tremendous buildup of debt, the value of the dollar has shrunk rather dramatically. This chart shows the dollar against the Euro. It has gone down 40 percent since 2002. Anybody who has traveled has seen that in what they buy abroad. We see it in the prices of goods that are being imported. We also see it in terms of the kinds of reactions we are getting in the marketplace to further American indebtedness. We are hearing warnings from people who are saying: United States, you have to get your fiscal house in order. You cannot keep running up these massive debts and deficits.

We see that during this period of the Bush administration that economic growth has lagged previous recoveries. We have gone back and looked at all of the major recoveries since World War II. There have been nine previous recoveries. At the same point in the business cycle, the economy had typically grown at an average pace of 3.4 percent a year during those previous recoveries.

Look at what is happening here. In this recovery, the average GDP growth is only 2.5 percent, well short of what we have seen at the same point in previous economic cycles.

Now we have a new element to consider, and that is a housing slump with new home building falling dramatically. We have seen this pattern which comes to us from the Census Bureau, U.S. Department of Commerce. This is monthly data through January 2008. These are housing starts in millions of units, and we can see that housing starts have plunged, and plunged dramatically. We also have word that inventories of unsold homes are growing, and growing dramatically; that foreclosures are running at a very alarming rate. And all of this signals trouble in the economy.

There are other indicators as well. If we look at business investment in this economic period versus what we have seen in the nine previous recoveries since World War II, that growth of business investment is lagging in this business cycle by 52 percent. That should tell us there is something amiss in the economic policy of this administration. Something is not working. Certainly by comparison with previous business cycles, the nine significant business cycles since World War II, this one is showing much more weakness than the previous nine.

That is also true in job creation. If we look at the nine previous business cycles--that is the dotted red line on this chart, and this business cycle is the black line--we are now 9.6 million private sector jobs short of the typical business cycle, going all the way back to World War II.

There are a lot of alarm bells that are ringing, warning signs to which we need to pay attention and need to respond to in a budget. We have seen real median household income decline by almost $1,000 under President Bush, from $49,163 in 2000 to just over $48,000 in 2006, the last year for which we have complete statistics.

Mr. President, these numbers cry out for a response. And the first way that we respond is in a budget because the budget sets the policy priorities for the coming year. And we have attempted to do that in this budget by emphasizing strengthening the economy and creating jobs by doing the following: investing in energy, education, and infrastructure.

Those are the top three priorities to help strengthen the economy. Invest in energy. Why? To reduce our dependence on foreign oil. We are now spending $1 billion a day buying foreign oil. How much better off would our country be, how much stronger would the economy be if we were generating our own energy rather than importing it from around the world?

So part of this budget is designed to reduce our dependence on foreign energy and to strengthen our education and our job training because if we are not the best educated and best trained, we are not going to command the strongest economy for very long.

Also, to build our infrastructure. We all remember the incredible sight of the 35-W bridge collapsing last year. I think we all recognize that our airports, our rail lines, our highways and bridges need serious investment if we are going to be competitive globally.

We also need to expand health coverage for our children, provide tax cuts for the middle class, and restore fiscal responsibility by balancing the budget in 4 years and maintaining balance in the fifth.

Mr. President, we also want to make America safer by supporting the troops, by providing for veterans health care, by protecting the homeland, and rejecting the President's cuts in law enforcement. For example, he eliminates the COPS Program. He cuts first responders' grants by 78 percent. We don't think that makes sense, and we reject those cuts in this budget.

Mr. President, we now anticipate that economic growth is going to slow sharply in this year. We can see it all around us--more job layoffs announced today, dramatic slowing of the economy. Economists today are saying they believe our country is already in recession. Of course, we will not know for several months, but it has all the appearance of a reduction in economic growth. The Congressional Budget Office is forecasting for this year an economic growth of only 1.6 percent, down from the 2.5 percent pace over the course of 2007 and 2.6 percent in 2006.

And, by the way, these were already weak economic growth numbers. 2006 was weak, 2007 was weak, and CBO is expecting even weaker growth in 2008. So in this budget resolution we provide for a second stimulus package. We have already had one stimulus package to try to increase aggregate demand in the economy, to give a lift. We believe it is prudent to provide the room in the budget for a second stimulus package, some $35 billion of standby authority, so if this economy does continue to shed jobs and to weaken that we are prepared to respond and prepared to respond in these ways:

Housing relief. We have legislation on the floor now to provide relief for what is happening in the housing market. That package is a $16 billion or $17 billion package that could be accommodated in this $35 billion of standby stimulus relief.

Also, we may need to extend unemployment insurance and provide for additional funding for food stamps or perhaps State fiscal relief. We know 21 of the States are increasingly in difficult financial straits, so we may need to extend some relief to them.

This budget also provides room for additional funding for low-income heating assistance and the WIC Program, the women, infant, and children's feeding program, and/or infrastructure spending in 2008.

When we did the last stimulus program, we asked the agencies of the Government if they had construction projects that were ready to go-- where the engineering has been done, the design has been done, the land acquisition is finished--and all they need is money to begin construction and to begin hiring people. And they told us, yes, they do have projects like that. So we have provided for taking up some of those projects as part of the stimulus package.

Why? Because we know in road building, highway construction, and bridge

construction that for every $1 billion, there are about 45,000 jobs created. And, Mr. President, we think it is very important that standby authority be ready to go if indeed this economy weakens further.

We also provide for tax relief in this budget resolution: the alternative minimum tax. If something is not done, it will affect 20 million more American families this year--the alternative minimum tax. So we provide an additional year's relief from that levy.

We also provide the energy tax incentives necessary to reduce our dependence on foreign oil, education tax incentives to make college more affordable for American families, and we provide the stimulus package, where I previously described some of the provisions, and they help the housing industry. Our tax provisions would fit in that $35 billion package; for example, extending net operating loss provisions to home building companies so they aren't buffeted by further write- downs of their assets at the worst possible time.

And, of course, the important tax extenders, those permanent provisions that are about to expire that provide for the research and development credit, the wind energy credit, and the like, those are provided for in this budget resolution as well.

The first amendment that will be offered to this budget will be to extend the middle-class tax provisions previously enacted. Those provisions are about to expire, and we want to extend them. Those are the marriage penalty relief, the child tax credit, and the 10-percent bracket. There is room in this budget to extend them all and still balance the budget in 4 years.

There is also room in this budget for estate tax reform along the lines of what we advocated last year. As you know, we faced this unusual situation where the exemption per person, the $3.5 million next year but the year after, in 2010, there will be no estate tax. In 2011, the estate tax comes back with only $1 million per person exemptions. So we provide the continuation of the $3.5 million exemption per person and have that indexed for inflation.

Mr. President, there is not an American family who doesn't know what is happening to gas prices. I was just talking to my staff this morning about what they are experiencing. One of my staff--who was caught up in a horrendous traffic jam yesterday coming from Baltimore and took 2\1/ 2\ hours to get here--filled up, and it cost $3.18 a gallon. I filled up the other day, and it was over $3.20 a gallon. There are some projections now that gas is going to go to $4 a gallon. Look what is happening just since 2001 when gas was less than $1.50. It has more than doubled in just those 7 years, and we see it continuing to jump. I am told oil prices today are also rising on world markets. There was some speculation that oil might reach $108 a barrel today on the world market.

So to address this continuing problem of energy dependence, we are proposing in this budget to invest in energy, to create green jobs, to reduce our dependence on foreign energy, to strengthen our economy, and to help with high home heating costs. We have to do that a package of energy tax incentives of over $13 billion, $3.5 billion over the President's budget in discretionary funding for energy, and an energy reserve fund for investing in clean energy and the environment.

We all know there are global climate change initiatives coming before Congress. If any of those are adopted, we are going to need a reserve fund like this to prepare for it.

Education is also a great challenge to us. We see from the National Science Foundation a chart that compares what is happening to bachelor's degrees in engineering in the thousands in China versus what is happening here. You can see we are pretty well flat, with about 75,000 engineers a year being produced. But look what has happened in China. China is now up to a rate of producing more than 350,000 engineers a year. That should serve as another alarm to us because we know engineering is critical to economic growth. And if you are producing many more engineers, you are laying the foundation for stronger economic growth in the years ahead.

I chose that as just one example. We know there are many others where we face global competition for doing the best job of educating our young people. So this budget resolution invests in education. It does it to generate economic growth and jobs, to prepare the workforce to compete in the global economy, and to make college more affordable and to improve student achievement.

We seek to do that by providing some $13 billion in education tax cuts, some $5.7 billion in funding over the President's budget in discretionary money for the Department of Education and Head Start, and a $2 billion education reserve fund for school construction and higher education reauthorization.

But it doesn't end with energy and education, Mr. President. It also extends to the challenges in infrastructure. We all remember this very striking picture from last year when the bridge on 35-W collapsed between Minneapolis and St. Paul. That is a bridge I traveled over many times when my wife was in medical school at the University of Minnesota, and I think all of us, our hearts went out to those people. Imagine the horror of driving home from work and having the bridge fall out from under you. We know there were lives lost and people injured. That should not happen. That should not happen anywhere in America. It shouldn't happen anywhere in the world.

Mr. President, we know there are deficiencies in the infrastructure funding for highways, for bridges, for airports, and for rail, and all of those are going to have to be strengthened and improved. This budget begins the process. It begins the process by creating a reserve fund to allow for major infrastructure legislation.

We have had a group of the country's business leaders come to us and tell us they have a plan they think could generate a multiplier effect in terms of matching public sector investment with private sector investment to build infrastructure in this country. We have created a reserve fund to allow for the adoption of such legislation if the committees of jurisdiction proceed, and if they pay for it, if they provide offsets for it.

We also provide $3.9 billion more than the President for key discretionary transportation accounts in 2009, and we provide another $6.5 billion to fully fund highways, fully fund transit, increase funding for airport improvement, and fund ready-to-go infrastructure projects.

Those are projects that are ready to be built; they only lack the money. We also fix the highway trust fund shortfall that exists. I think that is roughly $1.4 billion that needs to be dealt with.

We not only have challenges and opportunities in education and energy and infrastructure, but we also have them in health care. We can see the number of uninsured children in our country has jumped by 700,000 just in the year 2006. We went from 8.7 million uninsured children to 9.4 million. So this budget seeks to make wise and careful investment there to improve health care, to expand coverage, to increase health research, and to promote food and drug safety. We do that by again providing for a reserve fund that will allow the $35 billion children's health insurance compromise that was adopted last year but vetoed by the President to once again proceed this year.

We also provided $4.4 billion over the President's budget in discretionary funding for health and a reserve fund to address the cut in Medicare physician payments and make other improvements to Medicare. We know the doctors of the country are scheduled for a very sharp cut in Medicare payments. I think that is rejected here virtually universally. But we have to do something about it. We provided a reserve fund to address that, so later this year Congress will be able to act.

The budget resolution also provides $3.2 billion above the President's for our veterans. We know that veterans funding in the President's budget is $44.9 billion. We have provided $48.2 billion in funding for our veterans. This is focused on veteran health care, primarily in terms of veterans because we all recognize that is an area in which we simply must do better if we are going to keep the commitment that was made to our veterans.

In terms of war funding and defense funding, we match the President's request. He has asked for $2.9 trillion over the next 5 years, and we matched

that amount in this budget--$2.9 trillion.

The budget also provides $2.3 billion more than the President's budget for law enforcement and first responders. This is an area which I find utterly inexplicable in the President's budget. President Bush sent this Congress a budget that eliminates the COPS Program-- eliminated it. He did not just cut it, he eliminated it. The COPS Program has put 100,000 police officers on the streets in this country, put over 250 police officers on the street in my State of North Dakota. Why the President would eliminate the COPS Program eludes me.

He has also proposed cutting the first responder grants; that is for emergency medical personnel, that is for our firefighters and our other first responders. He has proposed cutting these grants 78 percent. We have rejected those cuts in this budget at a cost of $2.3 billion.

While we have restored funding in certain key priority areas and made targeted investments in reducing our energy dependence and promoting education and in building our infrastructure, we have also sought to be fiscally responsible by balancing the budget by the fourth year and maintaining balance in the fifth.

Those are the numbers that are in the budget resolution, but this is before we extend the middle-class tax cuts. When we extend the middle- class tax cuts, these numbers will drop dramatically, but we will still be in surplus, we will still be balancing by 2012, by the fourth year, and be maintaining balance in the fifth. But we do think it is critically important to extend the middle-class tax cuts and to reform the estate tax, which previous legislation has left in a chaotic state, I think would be a fair way to say it.

We also, under this budget resolution, bring down the debt as a share of gross domestic product each and every year. Again, this is before the amendment to extend the middle-class tax cuts, but you will see the same pattern after we extend the middle-class tax cuts--the debt as a share of GDP going down each and every year of the 5 years--because we think that is critically important for the long-term economic health of the country.

This is a comparison of spending under the resolution and the President's budget. The red line is the President's spending line, the green line is ours. You can see there is very little difference. That is a difference of 2.1 percent in overall spending over the 5 years. So we do have some additional spending to meet these priorities in education and energy and infrastructure and reducing the cuts the President proposed for law enforcement, weatherization, and other priorities.

Spending as a share of GDP under the resolution goes down each and every year, from 20.8 percent of GDP in 2009 to 19 percent of GDP in 2013, applying the spending discipline that I think is necessary, that I think most of us would say is necessary if we are going to address these problems of deficit and debt. The first thing we have to do is bring down the deficit, and this budget seeks to do that.

We also, for this year, for 2009--this shows the overall spending difference for this year. I have showed the spending comparison for 5 years showing that we are spending 2.2 percent more, but I think it is also important to look at 2009, the first year of this 5-year budget, on overall spending. We are spending 1 percent more than the President--1 percent more.

Some say: Well, you should not spend more than the President did. But the problem is, he had cuts that I do not think are broadly embraced by the American people. I do not think they think we should eliminate the COPS Program. I do not think they think we should eliminate weatherization. I do not think they believe we should cut the grants to first responders, our emergency personnel, by 78 percent. I do not think the American people think we should fail to invest in reducing our dependence on foreign energy. I do not think that is what the American people want. I do not think they believe we should continue to dramatically underfund infrastructure, which leads to bridges collapsing in our country. So we have spent more than the President--in total for 2009, 1 percent more. That 1 percent will go to those high- priority areas of energy, education, and infrastructure.

On the revenue side, this is the comparison when the middle-class tax cuts are extended. We will have 2.6 percent more revenue than in the President's budget--2.6 percent more revenue than in the President's budget.

Now, this shows that difference in revenue. The President's budget has $15.2 trillion over the 5 years, and our budget is $15.6 trillion-- a 2.6-percent difference. Because we have more revenue, of course, we have the ability to fund in those high-priority areas but still balance the budget in the fourth year and maintain balance in the fifth. According to the Congressional Budget Office, the President's budget does balance in the fourth year but then promptly falls back out of balance in the fifth year. Our budget not only balances by the fourth year but stays in balance in the fifth.

Now, this is where we get into the question of, Well, how do you come up with 2.6 percent more revenue than the President has? I believe you can come up with the 2.6-percent more revenue than the President has by looking at three areas: the tax gap--that is the difference between what is owed and what is paid. The Internal Revenue Service tells us that for 2001 the tax gap was over $300 billion; that is, the vast majority of us pay what we owe, but some do not. Before we ask for a tax increase from anyone, I think we ought to go to those who are not paying what they owe. Now, I think that is the first thing we ought to do before we ask for a tax increase from anyone.

But it is not just the tax gap, it is also those offshore tax havens that are proliferating and costing us a lot of money. There is a report from the Permanent Subcommittee on Investigations from February of last year. This is what they said:

Experts have estimated that the total loss to the Treasury

from offshore tax evasion alone approaches $100 billion per

year, including $40 to $70 billion from individuals and

another $30 billion from corporations engaging in offshore

tax evasion. Abusive tax shelters add tens of billions of

dollars more.

Shame on us for allowing this kind of abuse to occur. Let me say, there have been some in this Chamber who have made a serious effort to close this kind of scam down, and I would be the first to recognize the ranking member of the Finance Committee, Senator Grassley of Iowa, who has been very serious about going after not only abusive tax shelters but offshore tax havens.

Here is an example of what is going on. There is a little five-story building in the Cayman Islands called Ugland House, a nice little building; 12,748 companies call it home. Mr. President, 12,748 companies say they are doing business out of this little five-story building. Can you imagine having 12,000 companies conducting business out of that little building? Of course they are not conducting business; the only business they are conducting is monkey business because what they are doing is cheating all of the rest of us who pay our taxes. They are engaged in very ambitious tax scams and tax schemes to avoid paying what they owe in this country.

Here is a picture of a building that was in the Boston Globe. Let's put up the Boston Globe story. This was a building that is also in the Cayman Islands where shell companies allowed KBR to avoid Medicare and Social Security deductions.

This story says:

Kellogg, Brown and Root, the nation's top Iraq war

contractor, and until last year a subsidiary of Halliburton,

has avoided paying hundreds of millions of dollars in

Medicare and Social Security taxes by hiring workers through

shell companies based in this tropical tax haven.

So what they were doing is hiring people paid for by American taxpayers, hiring them for contracts, and they were running them through these shell operations down in the Cayman Islands, and by doing that they were avoiding paying their Medicare and Social Security taxes to this country and saved hundreds of millions of dollars, according to this story in the Boston Globe from March 6 of this year. This is just days ago that this story appeared.

They point out:

More than 21,000 people working for KBR in Iraq, including

10,000 Americans, are listed as employees of two companies

that exist in a computer file on the fourth floor of a

building on a palm-studded boulevard here in the Caribbean.

Neither company has an office or phone number in the Cayman

Islands.

They do not even have a phone number. They do not even have a real office. What they have is a scam. This is the kind of scam we ought to shut down.

Here is the building, a very nice building. On the fourth floor of this building, apparently 21,000 people are supposedly employed, at least for the purpose of records.

Now, it does not stop there. This is a story from late last month in the New York Times:

U.S. among countries investigating tax evasion.

This is in Liechtenstein. I have never been to Liechtenstein. I am sure it is a lovely place. But the Internal Revenue Service says:

It was beginning enforcement action against more than 100

U.S. taxpayers on suspicion of evading taxes through

investments in Liechtenstein.

They have the Deputy Director of the Center for Tax Policy and Administration at the OECD saying Liechtenstein is the tip of the iceberg. Indeed, it is.

This kind of scam is going on down in the Cayman Islands, going on in Liechtenstein, going on in other tax haven places, but it is also happening with abusive tax shelters. Last year, I showed pictures of European sewer systems. People might ask: What does a European sewer system have to do with revenue in the United States? It turns out it has a lot to do with it because it turns out U.S. companies are buying European sewer systems. Later on in this debate I will show a picture of one of those. It may not be the most welcome picture on the Senate floor, of a European sewer system, but, nonetheless, this is part of an incredible scam that is going on in which U.S. companies buy European sewer systems, write them off on their books in the United States for tax purposes, and lease them back to the European cities that built them in the first place. That should not be allowed. That is not fair to the rest of us who pay what we owe.

Last year, when we went after some of these scams, the President threatened a veto. He said that would be a tax increase. I guess it would be a tax increase on those who are getting away without paying what they fairly owe, but I don't consider it a tax increase to make people pay what they already owe. I don't consider it a tax increase to shut down a tax scam. I don't consider it a tax increase to shut down these abusive tax shelters.

We tried to codify economic substance, prohibiting transactions with no economic rationale, done solely to evade taxes. We tried to shut down schemes to lease foreign subway and sewer systems and depreciate assets. We tried to end deferral of offshore compensation by hedge fund managers trying to evade current taxation. We tried to expand broker reporting. We tried to tax people who use expatriation to evade taxes. Over and over the President said: No, I will have to veto because that would be a tax increase.

I think the President has it entirely wrong. Those are not tax increases. Those are just making those folks pay what the rest of us are already paying.

In this budget we provide a number of enforcement mechanisms to try to help restore some fiscal discipline. We have discretionary caps for 2008 and 2009. We maintain a strong pay-go rule. We have a point of order against long-term deficit increases. We allow reconciliation for deficit reduction only, and we have a point of order against mandatory spending on an appropriations bill. These are important enforcement mechanisms that ought to be part of any budget resolution. They are part of ours. I hope they are adopted by my colleagues.

Finally, this budget resolution has provisions addressing long-term challenges. More daunting than any of our short-term problems is where this is all headed. We can't pay our bills now; that is, before the baby boomers retire. What is going to happen then? What is going to happen to the commitments that have been made in Social Security and Medicare? What is going to happen with this tremendous imbalance between spending and revenue? We have offered these three elements as part of an approach, understanding that the larger plan to deal with our fiscal problems is going to have to come in some sort of special process, a process that Senator Gregg and I have offered our colleagues to create a task force with 16 Members--eight Democrats, eight Republicans--and ask them to come back with a plan as to how to deal with long-term imbalances.

In this resolution, we have comparative effectiveness reserve fund and cap adjustment to deal with health care. One of the things we know is that lots of different health modalities are being used across the country to address illness. Some of them work and some don't. We have to know which ones work.

Second, we have program integrity initiatives to crack down on waste, fraud, and abuse in Social Security and Medicare. In fact, I received a letter from the Secretary of Health, Secretary Leavitt, thanking us for the program integrity funds that we have included so that he can continue his important investigations to shut down these Medicare fraud operations that he found in Florida and other parts of the country last year and that he is continuing to crackdown on.

He found a circumstance in which you go to these strip malls, and half of the offices in the strip malls are front organizations collecting Medicare payments. You go to the door and nobody is there during the day, during work time. They are just billing mills. They are sending out Medicare bills. Goodness knows if any service is actually being extended or not. But these are scams that are operating that need to be shut down.

We also have a point of order against long-term deficit increases which is important to any strategy to contain burgeoning deficits and debt.

Before yielding the floor, I want to ask our colleagues for their cooperation. This is going to be an especially challenging budget. The numbers are very close on the two sides. We have two Presidential candidates on this side. They have a Presidential candidate on the other side. We know they may not be here for all of the deliberations. That means we are going to have to coordinate and cooperate. We also have a Member on our side who is ill. That means we will have a special challenge getting the budget done this year, but we must do it. We must get it done. I will be asking for all of our colleagues' cooperation as we proceed.

I yield the floor.

Mr. President, first of all, I wish to say, while I disagree with some of the observations of the Senator from Iowa, I have enormous respect for him. He has earned that respect by the way he conducts himself as a Senator. While we have policy disagreements, I have absolutely no disagreement or question about his motive because he has proved to me repeatedly that he is trying to do the very best for this country, as am I.

I want to go back to some basic facts. We heard the Senator talk about a 9-percent increase in spending that is in this budget. I don't know how they came up with that calculation, but there is no 9 percent increase in spending in this budget. If you look at the spending that is in this resolution over 5 years and compare it to the President's budget, it is 2.1 percent more. That is total spending. That is over 5 years. If we look at just the next year, 2009, the Bush budget calls for $3.04 trillion of spending. We call for $3.08 trillion. That is a difference of 1 percent. That is total spending.

I think what the Senator's staff has done is to look at one small part of Federal spending, just nondefense domestic discretionary spending, which is about one-sixth or one-seventh of the budget. But if we look at total spending, there is a 1-percent difference total spending for 2009. OK? The difference between our President's budget and our budget is 1 percent--1 percent. That is a fact.

On the comparison of revenues, the President's revenue line we see is the red line, ours is the green line. What is the difference? The difference is over 5 years, the President calls for $15.2 trillion of revenue; we call for $15.4 trillion. That is a difference of 2.6 percent.

I believe this revenue can be achieved without any tax increase. I believe that. Why do I believe that? Because of the three things I mentioned before. The tax gap--the Senator put up a chart that shows what the tax gap was in 2001. The net tax gap in 2001 was $290 billion.

The Senator correctly says very little has been done in the last year to do anything about it. In fact, very little has been done over the last 10 years to do anything about it. My belief is the tax gap has done nothing but grow from 2001. So it is not $290 billion a year anymore. I believe over 5 years the tax gap is probably in the range of $2 trillion. I say this as a former tax administrator of my State, a former chairman of the Multistate Tax Commission. I believe the tax gap over 5 years is likely to be $2 trillion. But it doesn't stop there.

I put up what the Permanent Subcommittee on Investigations says is the loss to the tax havens. They say $100 billion a year without any growth over 5 years, that would be $500 billion. So with the tax gap and the tax havens, that is $2.5 trillion over 5 years. Then abusive tax shelters over the 5 years, I believe, based on the Permanent Subcommittee on Investigations' work, is another $200 billion. That is a total of $2.7 trillion of leakage over 5 years in the revenue system--$2.7 trillion. If we got 15 percent of it, 1-5--15 percent of it, $1 in every $7 in the tax gap, the tax havens, the abusive tax shelters, $1 in every $7--we can't do that? If we can't do that, then the Revenue Commissioner ought to be replaced and all the rest of us ought to be replaced if we have designed a tax system that has that much leakage in it, in which the vast majority of us pay what we owe but we are letting a bunch of scoundrels escape? Shame on us. That is exactly what our own Permanent Subcommittee on Investigations has told us.

All this talk about, well, we are going to have a trillion dollars of tax increases--let's look at the record. Let's go to the record. What has this Congress, controlled by Democrats, done? It has cut taxes $194 billion so far, with $7 billion of revenue raisers and loophole closers enacted for that period.

I say to my colleagues, these are just the facts. What is most of this? Most of this is the stimulus package we just passed. Most of it was bipartisan. The reference was to Democratic control of the House and the Senate, $194 billion of tax cuts and $7 billion of revenue raisers. That has been the record of this Democratic Congress: $194 billion of tax cuts and $7 billion of revenue raisers. That is not a projection, that is not sitting around conjuring up how we can make the other side look as bad as we can make it, that is a fact of what has been done.

The other side talks about the miracle of the tax cuts producing more revenue. We don't need to look at a projection there either. Let's just look at the record.

In 2000, the tax base of the United States was $2.03 trillion. Now, adjusted for inflation, it is $2.05 trillion. The revenue base of the country has basically been static for 8 years. The spending, most of it controlled by our colleagues on the other side because they were in charge until last year, has gone up 50 percent. Again, we don't have to look at some projection or some guess or some economists' estimates. Let's just look at what happened on the record: revenue flat, spending up substantially when our colleagues controlled everything, the House, the Senate, the White House. What happened to the debt? The debt exploded. This is not a projection, this is not guessing ahead, this is what is happening. And my friends across the aisle controlled everything--they controlled the Senate, they controlled the House, they controlled the White House--and here is their record. The debt exploded, not some projection, not some guesstimate of the future. That is what has happened. The revenue was flat, the spending went up dramatically, went up about 50 percent, and the debt exploded as a result. That is not a projection, that is not a claim, that is a fact.

I yield the floor.

Mr. President, Senator Akaka is here. He would like to speak on the budget. I will give him time off the resolution. How much time does the Senator wish?

I provide 5 minutes off the resolution to the Senator from Hawaii, Mr. Akaka.

Mr. President, I thank the Senator from Hawaii for his kind remarks. I also thank him for the enormous contribution he made to the work of the Budget Committee, especially with respect to funding for veterans affairs, and specifically veterans health care. One of the things I am most proud about in this budget is we are showing a $3.2 billion increase over what the President requested for veterans health care because I think the vast majority of us recognize the extraordinary ongoing need for improvements to veterans health care. Our veterans have made an enormous commitment to this country, and we must keep our commitment to them.

Last year, as the Chair will recall, the budget contained the largest increase for veterans health care in our history. This year we have another significant increase that largely parallels the budget proposed by the veterans organizations themselves in recognition of the extraordinary need that exists.

I yield the floor.

Madam President, Senator Menendez, who is a very valuable member of the Budget Committee, as is the occupant of the Chair, is here and is available for his opening remarks.

How much time would the Senator desire?

I yield such time as the Senator may consume.

Again, I thank the Senator from New Jersey, who is truly an outstanding member of the Budget Committee. He has made an incredibly valuable contribution there, and I very much appreciate the leadership he has brought to the committee.

Madam President, the Senator began by quoting me about the need for more revenue and was kind enough to indicate he did not know the context of it. I just thought I would provide the context because this was a ``60 Minutes'' program interview, and they were asking me in the context of the Comptroller General of the United States warning the American people we are on an utterly unsustainable fiscal course because the debt is soaring before the baby boomers retire, and that we face a very serious consequence if we do not deal with it.

So one question put to me was:

Do you think taxes ought to be raised?

Senator Conrad:

I believe, first of all, we need more revenue.

The next sentence, which the Senator did not provide:

We need to be tough on spending.

And the next sentence after that also the Senator did not provide:

And we need to reform the entitlement programs. We need to

do all of it.

Let me say, I am not alone in that view. The ranking Republican on the Budget Committee said this at a hearing on our long-term fiscal challenges. This is the Republican ranking member:

. . . [W]e also know revenues are going to have to go up,

if you're going to maintain a stable economy and a productive

economy, because of the simple fact that you're going to have

to have this huge generation that has to be paid for.

So the Senator's reference to my quote was in the context of dealing with the enormous imbalance between the revenues of this Government and the expenditures of this Government. My response was, yes, you are going to have to do something about revenue. Yes, you are going to have to be tough on spending, and you are going to have to reform the entitlement programs.

I also said in this interview, none of which aired, that the first place to look for revenue is not a tax increase. The first place to look for revenue is to go after the tax gap, the difference between what is owed and what is paid, to go after these offshore tax havens and abusive tax shelters. That was the context within which I said it.

Now, let me just indicate why this matters.

Yes.

I thank the Senator for his courtesy. I would say to him, I do not believe entitlement reform is ever going to happen--long-term entitlement reform--in a 5-year budget resolution. I think the only way we are going to get entitlement reform is a bipartisan effort, and that is what Senator Gregg, the ranking Republican, and I have offered, which is a task force of 16 members, equally divided, Republicans and Democrats, to come up with a long-term plan.

I would be very candid. I think the truth is, it is going to require more revenue. Again, I would say before any tax increase, the first place I would look are these places where people are not paying what they legitimately owe when the vast majority of us do.

Now, I must say, I used to be a tax commissioner. I was the elected tax commissioner of my State. I was chairman for several terms of the Multistate Tax Commission. Senator Dorgan and I are probably the only ones who have

audited the books and records of companies and individuals.

I can tell you, there is loads of money out there. One reason I was elected to the U.S. Senate is I found for my State lots of money that was not being paid over to the State of North Dakota because people were fudging. Large companies were fudging. Senator Dorgan and I in part made our reputations by going after them and very successfully collecting money from taxpayers who were not paying what they legitimately owed.

I could go through chapter and verse of what I found as I examined the books and records of major companies. I have shown some of it on the floor of the Senate: a little five-story building in the Cayman Islands that claims it is the home of 12,600 companies. Now, they are not doing business out of that little building in the Cayman Islands. They are doing monkey business. They are avoiding their taxes.

I showed earlier another building in the Cayman Islands: a five-story building we now know is being used by one company alone to dodge hundreds of millions of taxes they owe to the United States. That is not right.

I would also say with respect to the tax cuts that have been promoted by this administration, overwhelmingly they have gone to the wealthiest among us. Here, in 2007, those earning over $1 million a year on average got a tax break of almost $120,000 a year. I do not think that is right. I have wealthy friends, as I think probably all of us in this Chamber do, who have said to me: I don't need it. I don't need that $120,000 tax cut. I am much more worried about the debt that is being sent to our kids.

Will the Senator yield?

I thank the distinguished Senator from Michigan, who is an incredibly valuable member of the Budget Committee, and also incredibly important member of the Finance Committee and the Agriculture Committee. We are able to serve on three committees together, and that is rare around here. My admiration for her grows every day. In terms of her leadership, we could not have produced a budget resolution as responsible as this one, nor one that embraces the needs of the American people and their values as closely as this one without the leadership of the Senator from Michigan. I wanted to tell her how much I appreciate that.

Mr. President, the chairman spoke about his budget. For Senator Gregg, the ranking member of the Budget Committee, I would like to start this debate on the Republican side. Since we are on the budget resolution, Senator Gregg would usually open debate for our side of the aisle. He wanted to take the lead today but has a necessary conflict in his schedule. He asked me to substitute, and I am pleased to do so. Senator Gregg will be here tomorrow to give what is normally the opening statement by the senior member of the Budget Committee on the Republican side.

I am going to first talk about the process and recent history of the Senate budget resolutions. Almost all of the revenue side of the budget is Finance Committee jurisdiction. Most of the spending side of the budget is also Finance Committee jurisdiction. For those of us who sit on the Finance Committee, we need to pay very careful attention to the budget. Chairman Conrad, along with Senator Wyden of Oregon and Senator Stabenow of Michigan, are all Finance Committee Democrats. This Senator, along with Senators Bunning, Crapo, and Ensign are all Finance Committee Republicans.

When I was Finance chairman for part of the year 2001 and all of the years 2003 through 2006, there was coordination regarding the fiscal resources and fiscal demands on the Finance Committee. That coordination occurred with respect to revenue levels, spending levels, and reconciliation instructions. Did we always agree over those years? The answer is no. Did we compromise when we had disagreements? The answer is most often yes. We did have some different priorities, but we worked through those differences during this committee's budget process. We came up with compromises that largely held together. I might add, those compromises and the levels regarding revenue spending and reconciliation instructions were in sync with the administration. My point is that we hashed out the fiscal differences in the Budget Committee and

on the Senate floor. The committee and floor debate, amendment votes, both pro and con, made a very real difference. The product of that process, the budget resolution that we will vote on as the last vote probably this week, the product made a real difference.

Those budget resolutions, though not perfect, provided me, while I was chairman of the Finance Committee, with the budget resources to deal with the policy demands on the Finance Committee. Most often, I used these resources to guide the Finance Committee, usually in a bipartisan manner, to deal with short-term, midterm, and even long-term problems. Last year was different. After the people spoke in the November 2006 elections, control of the Senate changed from Republican to Democrat, and the budget resolution was basically a Democratic resolution.

This year we see some repetition of last year's dramatically different fiscal path. As with the rest of the Budget Committee Republicans, I learned about this resolution for the first time when the chairman of the Budget Committee put the markup document before the committee. Committee Democrats were consulted extensively, along with the Democratic caucus. Most of the Republicans' knowledge prior to markup was derived from what we read in the press. I don't say this to be critical of the Democratic leadership. It is unfortunate but perhaps necessary that budgets are usually partisan documents. So I would say, with all due respect to the chairman, the chairman's mark was developed exclusively by Democrats in a partisan fashion.

Republicans, during committee markup, used that markup to educate ourselves, others on the other side, and the public. We asked questions. I pursued questions about how this budget deals with the resources and demands that fall on Senator Baucus and me in our respective roles as chairman and ranking member of the Finance Committee. We offered a relatively small number of amendments. Most were defeated; some accepted.

On reforming farm program payment limits, I am pleased to say Senator Allard's amendment prevailed on a rollcall vote. That amendment improved this resolution, though not enough to gain the support of Senator Allard, this Senator, or any other Republicans.

Before I discuss the substance of the budget, I want to start off by complementing the chairman of the committee and his staff. They conducted the markup in a professional manner. The Democratic and Republican members have sharp, well-intentioned reasons for coming down in different places on the budget resolution. We were able to debate those differences in a full and fair manner.

I know if Senator Gregg were here speaking today, he would make these points as well. We are at the Senate floor stage of the budget on process. What I would like to do is step back and take a look at the budget from three vantage points. It is kind of like we farmers do before planting season. We look at the condition of the soil and prospects of various crops. The first vantage point will be looking at what the budget purports to do. From this angle, I am going to look at what the Democratic leadership says the budget is designed to do and whether those purposes make sense from a fiscal standpoint. The second vantage point will be looking at how well the budget carries out its stated purpose. The third vantage point will be looking at what the reconciliation would mean for the Senate. I will address the reconciliation in a separate speech later. I believe I will wait until tomorrow to do that.

Let's start off with the first question: What does the Democratic leadership say this budget is designed to do? Then, after stating what they say it does, we need to look at the fiscal consequences of that policy.

The budget's proponents claim it is all about fiscal responsibility. There are two basic parts to the Federal ledger: the revenue part and the spending part. If we spend more than we take in, then the Treasury sells more debt. This has been the pattern of much of the post-World War II period. If we spend less than we take in, then the Treasury buys back debt.

When we look at this budget over the short term, it contains a material increase in spending. Over the next fiscal year, the discretionary spending rises by 9 percent over last year's spending.

Now, how many Americans got a 9-percent raise? How many American families raised their discretionary household spending by 9 percent? On the spending side of the ledger, spending, then, goes up, and I say fairly dramatically. You would think proponents of fiscal responsibility would be looking at spending cuts, not 9 percent increases.

It is a different story on the other side of the ledger, the revenue side. Let me start off with one smidgeon of good news on the revenue side in this budget resolution. The alternative minimum tax patch expired the first day of this year. If that patch is not addressed, 25 million families, most of them middle-income families, would pay an average of at least $2,000 in AMT this year. The chairman reduced the revenue baseline by $62 billion, which is a revenue loss from extending that patch. All middle-income Americans ought to thank the chairman of the Budget Committee--and I thank him on the Senate floor right now-- for that provision.

Unfortunately, for years beyond 2008, pay-go still applies, so there is a big Senate hurdle built into this budget to patching the alternative minimum tax in years beyond 2008.

The rest of current law expired or expiring tax relief provisions will need to be offset with other tax increases. There are also several bipartisan tax bills that would require offsetting tax increases under this budget. That is a very large tax increase over the next fiscal year. My staff calculates that tax increase to be roughly $150 billion.

The definition of ``fiscal responsibility'' under this budget, over the fiscal year, is higher spending of $22 billion and higher taxes of $150 billion. Is that a legitimate fiscal goal? Is that the notion of fiscal responsibility the American people were looking for when they turned congressional power over to the Democrats in November 2006? Did we in Congress misread those results? Did the people really want us to increase spending and to raise taxes?

Now, that is not what I am hearing from back home. What I heard from folks across Iowa was: Rein in spending. Live within your means.

It seems to me if you are going to assume the mantle of fiscal discipline, you ought to treat a dollar of new tax relief the same as a dollar of new spending.

What do I mean by ``new spending?'' I mean spending above the Congressional Budget Office baseline. And what do I mean by ``new tax relief?'' I mean new tax policy that loses revenue. I do not mean extension of existing tax policy.

We see the same pattern over the 5-year period of this budget. Over 5 years, the tax hike and the spending increases grow exponentially. On the spending side, discretionary spending grows by $211 billion. When you throw in the special reserve funds, you can add another $300 billion in new spending on top of that.

Over the 5 years, the budget assumes a dramatic tax increase--at least $1.2 trillion. In 2011, the bipartisan tax relief plans of 2001 and 2003 will expire. Some folks will call these provisions the Bush tax cuts. It is true President Bush signed both bills, but the bipartisan compromises occurred in the Finance Committee. In 2011, President Bush will have been gone from office by more than 2 years. He will probably be hanging around his ranch in Crawford, TX. You can call this package of tax relief for virtually every American the Bush tax cuts, but for the taxpayer, if we let them expire, it will be a big tax increase, and it will be a big tax increase that will happen without even a vote of Congress.

So I have a couple charts in the Chamber. The charts use the analogy of a brick wall to show the ugly tax increases Americans are going to face.

On this chart, you see a family of four. That is the average American family. Here is the husband, his wife, and two children. The family makes $50,000 a year in income. That is right about the national median household income today. For example, the Census Bureau stated, for 2006, the national median household income was $48,200.

Under the Democratic leadership's budget, this family will face a tax increase of $2,300 per year. You see the figure $2,300 for that family of four. That is a loss in their paycheck of about $200 per month. It is a hit on

their yearly budget of $2,300. Where I am from, the Midwest--or anyplace in this country, I will bet--that is still a lot of money.

Now, I have another example. This next chart has the same brick wall but a different family: a single mom with two kids. Here we have a person earning about $30,000 a year. In 2011, under this budget, she and her family run straight into that brick wall--that brick tax wall. That is a brick wall of about $1,100 per year of taxes. That is almost $100 a month out of this family's budget.

So when you hear folks rail against the 2001 and 2003 bipartisan tax relief plans, you will hear a lot of talk about millionaires, you will hear a lot of talk about the death tax, but you will not hear the critics talk about these two families--a family of four: husband, wife, and two children; or a single mother with two children. You will not hear these critics--almost all of whom voted against these two tax bills--consider these two families.

Now, those on the other side will point to the Baucus amendment that will be upcoming--at least we have heard about the Baucus amendment--as the answer to the tax increases that I have pointed out. Isn't it ironic that my friend, our chairman, my partner from the 2001 tax relief bill, and several other tax relief bills, is the author of this key amendment?

The Senator from Montana, my friend, Mr. Baucus, took a lot of heat for working with me in a bipartisan fashion in 2001. He took a lot of heat from people in his caucus, quite frankly. Many on the other side who fought him and that bill were also denying tax increases in last year's budget. So they now turn to his amendment--this upcoming amendment--as they did last year, to try to deflect the tax increase charge because there is a real charge in what is in this budget. If something is not done to stop tax increases, they are going to happen automatically. And don't let anybody tell me something cannot be done about it.

At Budget markup, we were told the Baucus amendment would contain enough revenue room--$323 billion--to accommodate extension of several components of the bipartisan tax relief plans that go back to 2001. We were told the 10-percent bracket, the marriage penalty, the child tax credit, and some death tax relief would be covered.

There were provisions that were not intended to be covered. The excluded provisions were the lower rates for capital gains and dividends and other marginal rate reductions.

Now, some on the other side will describe this excluded group-- excluded from the Baucus amendment--as top-rate taxpayers and other high-income people. Now, I hope you will not believe it. The facts are otherwise.

Low-income folks, including millions of seniors, pay no tax on their dividend or capital gains income. If this budget stands, even with Senator Baucus's amendment, millions of these low-income taxpayers, especially senior citizens, will pay a 10-percent rate on capital gains and could pay as high as a 15-percent rate on dividends.

I have a couple charts to show how wide the dividend and capital gains tax increases would be. The chart that is up now deals with just dividends. It shows the number of taxpayers claiming dividend income. Nationally, over 24 million families and individuals reported dividend income--24 million Americans. There are 24 million Americans, all of whom you are not going to call filthy rich. Very few of them you are going to call filthy rich.

In my State of Iowa, for instance, over 299,000 families and individuals claimed dividend income on their returns. Now, there are not 299,000 millionaire families or even 299,000 people in Iowa you can call filthy rich.

As to capital gains, you can see the numbers not only for my State of Iowa, but you can see the numbers for all the other States in the United States. You can see them for the entire United States up there on the chart. Nationally, we are talking about over 9 million families and individuals. In Iowa, we are talking about 127,000 families and individuals when it comes to capital gains.

I want to emphasize, I went from dividends to capital gains. The chart has changed to tell you what there is in each of the respective States on capital gains.

There are many marginal rates, other than the top rate, that would rise if this budget stands, even with the Baucus amendment. The 25- percent rate, which for 2007 starts at $31,850 for singles and $63,700 for married couples, would rise 3 percentage points to 28 percent. The 28-percent rate, which for 2007 starts at $77,100 for singles and $128,500 for married couples, would rise 3 percentage points to 31 percent. The 33-percent rate, which for 2007 starts at $160,850 for singles and $198,850 for married couples, would go up to 36 percent. The top rate would rise from the current 35 percent level to 39.6 percent.

To sum up, even with the Baucus amendment--even with the Baucus amendment added to this budget, there would be marginal rate increases on millions of taxpayers, and not millions of millionaire taxpayers. Those marginal rate increases would go up, whether it is the 28 percent to 31 percent or the 33 percent to 36 percent or what have you. Those marginal rate increases would reach taxpayers with incomes as low as $31,850 for singles and $63,700 for married couples, and these people are not filthy rich.

Now, what I just described is accurate only if the Democratic leadership intends to follow the letter and spirit of the Baucus amendment. If you look at last year's track record, the House neutered the effect of the amendment in the conference agreement. They created a Rube Goldberg type of mechanism to impede the amendment. Of course, after the budget conference report was agreed to, all talk and action around the amendment ceased. So I wouldn't put much stock in the followthrough on the Baucus amendment, and things can only get worse for middle-income taxpayers beyond that point.

This budget asks a lot of the taxpaying population--about $1.2 trillion worth of a lot being asked of taxpayers. That is a big chunk on the revenues ledger. Compare that to what is going on on the spending side of the ledger. The answer is $211 billion more spending on the discretionary side. Nothing is proposed to rein in any entitlement spending. If the definition of fiscal responsibility is higher spending, no entitlement savings, and dramatically higher taxes, then this budget is fiscally responsible. Keep in mind that while ramping up $1.2 trillion on the taxpayers, the budget spends $775 billion of the Social Security surplus and grows the gross Federal debt by $2 trillion.

For those on our side, this budget is not fiscally responsible. We don't agree that the definition of fiscal responsibility is higher spending, no entitlement savings, and dramatically higher taxes. For those of us on the Republican side of the aisle, you can't solve all fiscal problems just on the tax side of the ledger.

Now I wish to go to the second part of my discussion and annualize the tax side of the budget. I am looking at how this budget will carry out its objectives.

Let's take a look at the short term. By the short term, I am referring to the fiscal year of the budget, and this chart here is for the fiscal year. This is the first fiscal year. That is the first fiscal year out of five fiscal years.

A lot of people from farm country get their water from wells. When the well water is low, you can either dig it deeper, cut back water use, or pay to have the water trucked in. This well shows the extra demands on the revenue side of the budget. That is the bucket: $152 billion. These demands reflect the extenders for this year and next year. The bucket contains next year's AMT patch because under this budget, that has to be offset. The bucket also covers pending bipartisan tax legislation, and that is bipartisan because it is generally agreed that we ought to do some of this tax legislation. All of these items are listed on the chart for my colleagues to add up.

The water in the well represents known, specified, and scored revenue-raising proposals supported by the Senate Democratic caucus. Included are $35 billion in Finance Committee-approved offsets and $29 billion that has been approved elsewhere. That total, then, is the $61 billion you see at the bottom of the well.

When you net the offsets against the demands, you find an offset shortfall of $91 billion. Somehow, you have to find a way to fill up that well if you are

going to offset everything where there is a bipartisan agreement of what ought to be offset. The upshot of the analysis in this chart is that known offsets cover only about 40 percent of the revenue needed to carry out pending time-sensitive tax legislation that there is a great deal of bipartisan support for and bipartisan agreement that it ought to pass and some of it ought to be passing very shortly.

Now, some on the other side will probably respond with three counterpoints, so I want to anticipate that--not that I am going to stop them from responding. The first will be that the committee tax staffs will find the additional $91 billion that is needed to fill up the well. The second will be a claim that offshore shelter activity is a vast, easily tapped revenue source. The third counterpoint will be that closing the tax gap can yield the necessary revenue.

As far as those three points are concerned, in the preceding presentation by the chairman of the committee, my colleagues heard some of these points expressed already.

On the first point, I would refer everyone to the track record of the tax staffs to the period 2001 to 2006. During that period, I chaired for 4\1/2\ years and Senator Baucus chaired for 1\1/2\ years. During that period, we changed the tax shelter rules and closed numerous corporate loopholes. If you don't believe me, then just go down and ask the K Street crowd of highly paid lobbyists who defended or fought every one of those. During that 6-year period, an active Finance Committee tax staff was able to achieve $51 billion in enacted revenue raisers. That figure should give everyone some perspective of what is doable. It is very hard to find that revenue.

Now, some on the other side will argue for my second point that the offshore activities will produce up to $100 billion a year. The anecdote alluded to usually referred to fraudulent activities. Of course, tax fraud is a crime now. Perhaps we could continue to make progress on this front with more enforcement, but the figures bandied around have no Joint Tax or Treasury scoring that I am aware of.

I will expand on this point in a separate discussion later on in this week when we have some more debate on it. But it is tough to get the revenue that is alluded to in the speeches we are going to hear this week.

The third counterpoint is that the tax gap will yield a readily available, easily tapped revenue source. As a preliminary matter, let me say that the tax gap is a serious tax policy and a serious administration issue. I have devoted a lot of time and energy to closing the gap over the last few years, as the chairman of the committee, Senator Baucus, is doing in his recent chairmanship.

Unfortunately, as IRS officials have told us in several hearings, the tax gap number currently estimated to be $250 billion net annually is not the same thing as a revenue estimate. They have cautioned us to be careful about designing tax gap closure measures that are driven by unrealistic revenue targets in unrealistic timeframes.

When we went through the tax gap discussion last year, these points were disputed by some on the other side. With a Senate Democratic majority in place for over a year, we may have a bit of a yardstick to use to see just how much revenue can come in. Let's take a look at the claims on tax gap revenue and how we have done.

We have three charts that I hope will help us understand. The first chart is the tax gap reality check. My colleagues can see it here. We see some big numbers. This chart takes the form of an inverted pyramid, as my colleagues can see. At the top of the chart is gross tax gap. That is what appeared in the budget resolution markup document, the last year that the IRS testified that the improvements in collections have brought the tax gap down by $55 billion to a net tax gap of $290 billion.

As we work our way down the inverted pyramid, we go to the tax gap proposals. There are two categories. The first is the Treasury tax gap strategy set of proposals. On an annualized basis, these proposals raised $3.6 billion per year.

Some of these proposals have proved controversial on both sides of the aisle. Many are complicated and wide-ranging and may need further work. It is not by accident that they are still a work in progress.

The second set of proposals comes from the Joint Tax Committee's white book. This pamphlet, requested by Senator Baucus and me--and we requested this a few years ago--was published in late January 2005. A note of caution is in order about the chart's figures. The $44 billion annualized figure includes many tax expenditure reform proposals. Some tax gap proponents have strongly opposed the mixing of these proposals with pure tax gap proposals. I will speak in more detail about these proposals as we go on in this week's debate. If one were to delete the tax expenditure reform proposals from this figure, it would drop considerably.

For purposes of this exercise, I am going to use the full set of Joint Tax proposals. If we do that and add them to the Treasury proposal, we come away with roughly $44 billion per year in tax gap- related proposals.

As a side note, a couple of recently enacted tax gap proposals have run into rough sledding with the new majority. The first proposal is from the 2005 Joint Tax book. It deals with withholding on contractor payments enacted in 2006. Ways and Means Democrats are seeking to delay it. In addition, many House and Senate Democrats are insisting on repealing another tax gap measure, this one dating from 2004, providing supplementary private debt collectors. If enacted, the Joint Tax scores that proposal as actually losing revenue.

As we work our way further down the inverted pyramid that I call the tax gap reality check, we total up enacted tax gap provisions. During the fiscal year of the new majority, we find $572 million of enacted tax gap provisions. The enacted provisions represent two-tenths of 1 percent of that great big, gigantic figure that we call tax gaps--just two-tenths of 1 percent. Now, that ought to give anybody pause when you are putting this year's budget together and you are anticipating a lot of money coming in from this source. What experience we have had hasn't produced a lot of revenue.

Let's look at the demands on the tax gap revenue in this budget. We have another chart. It totals up the proposed uses of the tax gap revenue. This chart is in the shape of a pyramid--the way a pyramid ought to be, not upside down.

Listed in the first category is annualized tax relief and spending demands in the budget that are assumed to be offset by, and among other things, this tax gap revenue. You can see that they total $314 billion per year. I have accounted for the Baucus amendment's annualized impact of $65 billion. So the net demand on the annual tax gap is about $249 billion. If you have been following the charts and the arithmetic, you can see that the budget uses almost all of the tax gap revenue, up to about 85 percent.

Keep in mind that the track record is that only $572 million of tax gap raisers were enacted last year. To give you perspective, you can look at the ratio of demands on tax gap revenue to the revenue raised from enacted provisions. That is what this chart does. The ratio is 435 to 1. There are $435 of proposed tax gap uses in the budget for every $1 of enacted tax gap revenue.

When you look over these numbers, it should lead to a healthy skepticism of using tax gap revenue as some sort of instant revenue source to accommodate all the spending this budget proposes to do. We ought to listen to the career statistics of income folks over at the Internal Revenue Service. When they tell us not to treat the tax gap number like a revenue estimate, they are on pretty solid ground. It doesn't mean we should not be aggressive about the tax gap. We should. But the thirst for quick-and-dirty revenue raisers should not drive the strategy for dealing with this important problem.

I wish to step back and summarize the last two major points.

The first point is that this budget does represent the priorities of the Democratic leadership. It is put forward with the stated objective of achieving fiscal responsibility. The budget dramatically raises taxes, increases spending considerably above the already generous baseline, and does nothing about entitlements. Most experts agree that entitlement spending, left unchecked, will cannibalize the

rest of the budget. From the perspective of the Republican caucus, this fiscal blueprint is not fiscal responsibility.

The second point is that an examination of the budget, even from the perspective of its own proponents, shows that it doesn't work. There is too much pressure on the revenue raising. We have raised revenue from closing corporate loopholes. We have raised revenue from anti-tax shelter measures. I am proud of the Finance Committee's track record in that regard. We have enacted $51 billion in loophole closers and antishelter measures for the period of 2001 to 2006. There are not, however, enough loophole closers to offset the time-sensitive tax legislation we face in the first fiscal year of this budget. We have, likewise, found revenue in policing offshore shelters and other activities, but it fits under the umbrella of loophole closers and other tax shelter oversight.

Finally, the tax gap is an important problem that needs to be tackled, but targeting revenue from closing the tax gap needs to be more realistic than it is in this document. This budget anticipates revenue that is incredibly out of line with our track record of bringing in money from the tax gap, as worthy as closing the tax gap is. There has to be a reality check between what is out there and what people at the IRS say we can collect, and they are much more aggressive at that because of the leadership of Senator Baucus. But will it bring in the revenue? We have shown that it will not, based upon the practice we have had.

When you step back from the differences across the aisle on this budget, you probably won't be surprised to find similar differences among the Presidential candidates of the two parties.

Generally, the candidates on the other side have proposed to take heavily from the taxpayer under the guise of fiscal responsibility. This is true when they are talking about ending the bipartisan tax relief plans of 2001 and 2003. It is true when they are talking about the same loophole closers for a myriad number of expansions of existing entitlements or creating new ones. Nowhere is there discussion of reining in spending. So the tax side of the Federal ledger is the only route to fiscal responsibility from the perspective of the candidates on the other side.

I want to give one telling example. I have a chart here that shows the revenue from the key revenue raisers from one of our colleagues on the other side. That proposal would repeal the bipartisan tax relief plans for taxpayers earning above $250,000 a year. This proposal raises $226 billion over 5 years and 10 years. A key fact is that the source of that revenue peters out over the next few years because under current law the tax relief sunsets at the end of 2010. You can see it right there. Let the tax laws work the way they want them to work, and the revenue doesn't come in.

Like the Democratic leadership's budget, the candidates on the other side oversubscribe the revenue sources from proposals that are popular with the Democratic base. The deficiency can only be made up in three ways: One, the undefined sources of revenue would need to be tapped. Taxpayers should rightly be worried about that revenue. Secondly, the proposed spending plan would need to be abandoned or curtailed. There is not much history on that side for doing that, taking that avenue. Third, add to the deficit for the cost of the new programs. Unfortunately, this avenue has been taken far too many times--by both political parties, I am sorry to say.

We will hear a lot of criticism of our candidate, Senator McCain, from those on the other side. They will argue, like the President's budget, that a continuation of current-law levels of taxation ``costs'' the Federal Government too much revenue. They will argue that the spending increases they propose are more important than the restrained levels of the President's budget. They will argue that, despite the record tax hikes in their budget, entitlement reform is a matter for another day.

I have a chart that I believe helps set the basis of this larger debate. It shows the glidepath for revenue under current law. It shows that trend in the post-World War II context. You will see revenues average about 18.3 percent of the economy. That is the dotted line across there, so for those years since 1968 until now. And what we propose would be a continuation of that policy; we have averaged, with what the Federal Government is taking in from all sorts of taxes and Federal Government levies, about 18.3 percent of gross national product. That means that 535 Members of Congress are going to decide how to spend 18.3 percent of the total economy of our country and that the taxpayers are going to spend the other 81.7 percent. You will also see that the state of the economy affects revenues more than anything else. There are dips when we have been in recession and peaks when growth was high.

Our side cares about keeping the revenue line at a reasonable level. We don't see the merits of an imperative behind a growing role for Government in the economy. I say that because a 40-year history of about 18 to 19 percent of the total economy being used by the Federal Government has been a level that has not been so high that the public has revolted against it. They might revolt at times, when it gets way high and we have tax decreases to bring it back down. Also, I think you can say that at that level of taxation, it hasn't been harmful to the economy. As you have seen each generation during this period of time, they have lived better than the generation before. Our economy has done well.

When you argue about 18.3 percent being the right figure, often the other side disagrees. If they don't disagree directly, their policies help us draw a different conclusion about whether they agree or disagree. They impliedly or explicitly reject our premise that the size of Government needs to be kept in check.

We have another chart. It is a copy of an editorial, dated October 22, 2007, from the New York Times. I suppose that is pretty small print for the public to read. The lead-off paragraph says it best:

President Bush considers himself a champion tax cutter, but

all the leading Republican Presidential candidates are eager

to outdo him. Their zeal is misguided. This country's meager

tax take puts its economic prospects at risk and leaves the

Government ill equipped to face the challenges from

globalization.

The bottom line of the editorial directly states the view behind this budget and the position of the Democratic candidates for President. From this perspective, the historical level of taxation is not appropriate as a measure.

The New York Times implies that the Federal Government must grow as a percentage of our economy by at least 5 to 8 percentage points. If we were to follow the path suggested by the New York Times, the Government's share of our economy would grow by one-third. The Democratic leadership's budget takes some big steps down that path. So do the campaign proposals of the Democratic Presidential candidates.

Our Republican conference takes a different view. America is a leading market economy. American prosperity and economic strength, in our view, is derived from a vigorous private sector that provides all Americans the opportunity to work hard, save, and invest more of their money. A growing economy is the best policy objective. It makes fiscal sense as well.

I have one more chart to back up the point that it makes fiscal sense. My last chart shows that despite criticisms to the contrary, the bipartisan tax relief plan drove revenue back up after the economic shocks we suffered in the early part of this decade because of a recession and because of 9/11.

I am referring to the stock market bubble, corporate scandals, and 9/ 11 terror attacks--all those events that were detrimental to this economy of ours and yet it bounced back. The revenue outperformed Congressional Budget projections by a significant margin, and all one has to do is look at what CBO said would happen, the blue line, and look at the red line of what actually happened.

People on our side, including our Presidential candidate, do not take this significant data lightly. We believe the bias ought to be against growing Government, not the other way around; another way of saying-- disabusing people who say that the way to bring more money in is to raise tax rates and if you lower tax rates, you bring a decline to revenue in the Federal Treasury. Not so. This chart shows that we can reduce tax rates, we can

enhance the entrepreneurship of the average American, particularly the small businesspeople in this country who create at least 70 percent of the jobs that are created, and we can expand revenue coming into the Federal Treasury. That is what, on this side of the aisle, we propose to do. Are we equipped to do it? The history of 2001 through 2006 is enough evidence for me and most Americans that it can be done and that we did it.

I yield the floor.

Mr. President, I would like to respond to the distinguished chairman. The Senator from North Dakota disputed the 9 percent increase I cited with respect to the discretionary spending.

Here's how the Republican staff of the Senate Budget Committee reached that figure:

1. Take the increase in the President's budget--6.5 percent over last year.

2. Add the amount of $22 billion the budget assumes over that request.

3. These additions in discretionary are not offset.

4. Add the two together and you arrive at a 9 percent increase in discretionary.

5. I said a 9 percent increase in discretionary and I reconfirmed the figure with our Budget Committee staff.

As to the tax gap figure of $290 billion, I say to the chairman, that is the figure that is derived from career statisticians at the IRS statistics of income--``SOI''--Division. I will reiterate that these statisticians have cautioned us to not treat that figure like a revenue estimate.

I reiterate my recognition of the tax gap problem. I am pleased that Chairman Baucus has made this a top priority. I have been his teammate in that regard and will continue to be. All I would say is be careful about realism about the revenue we can raise and its timeframe. My inverted pyramid chart is a yardstick of that realism.

We should close the gap, but the revenue raised is what it is.

I am pleased that the distinguished chairman agreed that 15 percent is the knowable tax gap-related offsets in terms of scored proposals. I would caution everyone that the $44 billion annualized figures is the celing on the tax-gap related offsets. I will discuss this data in more detail as the debate proceeds.

The distinguished chairman's final point was that revenues have been flat since 2001. In fact, 2000 was an anomaly. The stock market had not burst and the chairman knows capital gains and other nonwithheld revenue pushed that number up.

We had a triple whammy hit to the economy in the next year, 2001. The stock market bubble burst, the corporate scandals rocked Wall Street and

whacked main street businesses, and the terrorist attacks occurred.

Because the economny was rocked, revenues dropped for 2001 and 2002. Revenues steadily came back after the economic growth plan of 2003 was put in place. Any review of the revenue baseline data would confirm what I have said.

I yield the floor.

I yield whatever time Senator Alexander might consume.

I have an amendment I would like to send to the desk and ask that it be read.

I ask unanimous consent that further reading of the amendment be dispensed with.

Mr. President, this amendment is a reprise of what we did last year in offering to reform the estate tax, sometimes referred to as the death tax.

Now, in the budget itself, and in an amendment that has been offered by the other side, there is a provision to allow the death tax to be changed from the current law to a top rate of 45 percent and an exempted amount of $3.5 million, and there are some other features. My amendment, as with the proposal that had significant support last year, would reduce that top rate to no higher than 35 percent so that if you had more than one rate, at least the top rate could not exceed 35 percent, and both of the two spouses would have a $5 million exempted amount before the estate tax would kick in.

In addition, this provides for a step-up in the basis of the property. It would enable the estate tax to be paid over the current period of time, and the amounts of money in the exempted amount, or unified credit of the estate gift tax, would be indexed for inflation.

Now, the reason for my amendment is, I think most agree even in this body, either allowing the estate tax to continue under current law-- getting up to a high rate of 55 percent and an exempted amount of either $2 million or $1 million, probably $1 million--or the proposal of the Democratic chairman of the committee would result in a continued unfair burden on primarily America's small businesses and farms, but, in any event, anyone subject to the potential liability of estate tax for which there is a tremendous amount of money spent in attempting to get around the obligations of the tax or to plan against its eventual required payments.

As a result, we look for ways to further reform the estate tax so that burden would be limited to only a few estates--the very highest estates--and that most people without a huge estate would not have the burden of trying to plan around it--to buy expensive insurance and hire lawyers and accountants and estate planners and the like.

The object, in other words, is not simply to limit the estate tax liability but provide some certainty in the Tax Code so that most people realize, as their homes have gotten more valuable simply because of the increased value with inflation, and as their businesses have accumulated some capital wealth even though it may not be disposable in the sense of liquid income, they are not going to have to worry that their estate is going to be subject to a tax and so they are not going to have to worry about spending this money to deal with the tax.

That is why we need to increase the total for a couple that would be exempted from the tax to $10 million and provide that the upper rate, if that rate kicks in, could be no higher than 35 percent. Above that, you are going to find people feeling that they have to try to prepare for or to get around the payment of the tax. And the irony is, Mr. President, those we are most concerned about really don't have the assets to try to spend a lot of money, whereas those who have enormous wealth can hire all the accountants, estate planners, and lawyers they want and buy insurance so that the ultimate impact of the tax does not hit them.

Last year, when we proposed this same proposal of the 35-percent highest rate or an amount of $5 million exempted for both spouses in a motion to instruct conferees, 56 Senators, obviously both Democrats and Republicans, voted for that motion to instruct. Now, it was never carried out, but I think it demonstrates the will of this body that we want to have some reform that is more realistic and that exempts more estates from the payment of the tax and the consideration of the tax.

According to the Joint Tax Committee, in the tax year 2011, 131,000 estates alone will be subject to the estate tax--131,000. Mr. President, that is too much of a burden on too many people in this country who are not extremely wealthy. By 2015, that number goes up to 177,000 estates. The advantage of my amendment is that it would protect approximately 119,200 family businesses and family farms from the estate tax each year. It would dramatically reduce the number of estates that have to worry about paying the tax.

If we fail to act, in other words, about 131,000 families and family businesses and farms will be subjected to the tax in the year 2011 and thereafter. Under our proposal, we would, according to the Joint Committee on Taxation, reduce the impact of the tax so that only 11,800 estates would be required to file estate tax returns each year, if the exemption is set at $5 million each. So, that is a huge change. It is necessary to protect the folks I think everybody in this body would like to protect from having to worry about the estate tax.

Now, it is interesting that when public opinion surveys ask people what they think about the tax, almost uniformly the results come back that the majority of Americans believe the estate tax is unfair and it ought to be eliminated. I remember a Gallup poll, now 3 or 4 years old, that said 60 percent of Americans believed it should be repealed. That is my preference, to repeal it. We haven't been able to get enough votes in this body to repeal it, but that is where the American people think it should be.

Interestingly, there was a survey conducted after the last Presidential election, and people who supported both Senator Kerry and President Bush were asked what they thought about the estate tax. The interesting thing is that while 70-some percent of the people who voted said they thought the tax should be repealed, roughly 80-some percent of the people who voted for President Bush thought it should be repealed and 60-some percent of the people who voted for Senator Kerry thought it should be repealed.

So this is not a partisan matter among the American people. They believe, whether they supported Senator Kerry or President Bush in the last Presidential election, that the estate tax should be repealed. I daresay surveys even now, to this time, demonstrate the American public opinion remains the same. The interesting thing is even those who understand they will never be subject to the tax because their incomes are simply not such that they will accumulate the wealth necessary to have to worry about the tax believe the tax to be unfair and believe it should be repealed.

But even if you leave aside the issue of the morality of the tax and people's understanding that it is not a fair tax, it hits people at the absolute worst time--when a loved one in their family has passed away and they are having to consider whether pieces of the business or farm may have to be sold off to pay the tax--they recognize that, at a minimum, it should be reformed and that is all we are trying to do.

For years, we have been trying to get a reform that basically accomplishes two objectives: It would increase the amount of the estate that is exempt from the tax so you don't have to worry about filing forms or having to try to plan around it; and for those who would still be subject to the tax above that amount, it would at least put a lid on it at a maximum of 35 percent.

Now, again, the numbers in the current law, if we don't do anything, go up to 55 percent. And under the proposal of the chairman of the committee on the other side of the aisle, that would be reduced to 45 percent. That is still way too high, and the exempted amount would be $1 million, which is way too low. Because of inflation today, there are a lot of homes that have a value of over $1 million, especially in places such as California, New York, and some other places. So, clearly, an amendment along the lines that I will be introducing to make room in the budget for this kind of reform is necessary.

I would like to make just about three other quick points.

Last year, even though the budget could accommodate estate tax reform, the majority did not bring a bill to the Senate. And despite my best efforts, it wasn't possible to get anybody to allow consideration of a bill to reform the estate tax. As a result, in the Finance Committee at the end of last year, I asked that the chairman hold hearings and seek to have a markup this spring so we could actually pass a bill and not simply deal with it in the budget that we pass each year.

The American people need to understand what is really going on. Each year we pass a budget that, theoretically, allows for a reform of the estate

tax, but then we don't do anything about it. And the budget itself isn't law. The budget is merely a goal, a blueprint of where we want to go for the year. If you don't follow it up with a bill, you haven't done anything. But Members here pat themselves on the back and go back home and tell their constituents that they voted to cut the estate tax. Oh, that is wonderful, people say. But it is never followed up with an actual bill.

So the chairman of the Finance Committee said: Well, he would have the goal of marking up a bill this spring. He has since advised me he has no plans whatsoever for a real bill on estate tax, and said: It won't happen.

It is going to be in the budget. His amendment will provide for an estate tax reform in the budget, but he has advised that he has no plans to allow that to happen, to make it, in reality, a bill that would pass and become law. So all of this is an exercise in show, with apparently no real intent to follow through and provide relief for America's families and small businesses and farms and the like.

What I would like to do, Mr. President, with my amendment, is not only demonstrate in the budget that this is the level that we want to set it, at a $5 million exempted amount per spouse and no higher than a 35-percent rate, but also ensure that the rules of the budget enable us to consider the bill during the year and not have it subject to some point of order that would enable people on the other side to say: Gee, we wish we could do it, but we just can't do it under the budget rules.

My amendment will make it possible to consider such an amendment, and I serve notice on my colleagues that I intend to try to bring it up. We are not going to sweep this under the rug year after year. If we are honest with the American people about putting it in the budget, we ought to be honest about bringing it to the floor for a vote so that we can actually pass a bill, send it to the President, and get this job done.

It is interesting that compared to other countries the United States is one of the worst in terms of the amount of money it takes from estates. The rate in the Democratic version would be 45 percent. The average around the world is 13 percent. There are a lot of countries that don't have an estate tax, and they understand why.

The irony is, I had to leave a hearing of the Finance Committee just now, Mr. President, where an individual was testifying about countries such as Canada, Australia, New Zealand, and places such as that, where people have decided it is not a good idea to have an estate tax, and it has been repealed in many of these countries. The United States should take a leaf out the book of some of these countries that have found it is inimical to their development and their ability to compete with other countries.

We know it is not good in terms of savings. The irony is that a lot of my colleagues are concerned about reducing the fact that our savings rate in this country is too low and are concerned about the fact that as a result we have to end up borrowing from countries such as China, for example. Yet having a big estate tax is exactly what is allowing that to happen because it discourages savings. If you save the money, you are just going to get taxed on it when you die, so why not just spend it?

Incidentally, the Treasury Department estimates the estate tax reduces the amount of money that we contribute to charity. Treasury estimates that the estate tax reduces bequests by about 14 percent. Individuals are either choosing to save less or rely heavily on estate planning which, of course, is a deadweight loss to the economy unless you are in the insurance business, in which case you think it is a real nifty idea because people have to buy insurance against the estate tax obligation that they otherwise would have.

Finally, it is an irony that the amount of money the Treasury collects--something over 1 percent of our revenue comes from the estate tax--is actually an equivalent amount of money to what is spent by people to try to avoid paying the estate tax. So, in effect, the money is paid twice. People buy insurance, they hire accountants and lawyers, and they try to find ways to get around the payment of the estate tax, and the amount of money that costs each year is almost exactly the same as what we pay in the estate tax to the Federal Government. This was according to a study by Henry Aaron and Alicia Munnell who are economists who have made this point over and over.

The other interesting aspect of the cost of the estate tax is the amount of money it costs to try to plan around it. If you are a closely held business, the estate planning is estimated to range anywhere from $5,000 to $1 million. Again, if you are a lawyer or estate planner or you are selling insurance, that is probably a great thing. But it is not great for the people who have to pay the money, and it is not the best use of the money for the economy. The IRS estimates it takes 38 hours to complete the form, which is form 706. You may have an obligation, you may not, but you still have to fill out the form. The tax preparation fees can range from $5,000 to $50,000, and 52 percent of the estates that filed a return were required to incur a sizable legal and accounting expense and other expenses even though they owed no tax. Bear in mind, over half of the people who have to file the forms end up with no obligation.

What we should do is have a tax that is predictable and clear with a large enough amount exempted so you know whether you are going to have to file the form. Hopefully, you would realize you don't have to file it because we have adopted the reforms I am talking about. We would go from something over 130,000 filers down to something over 11,000 filers. You would be catching the people with the big estates, those people who can really afford to pay the estate tax, but you would not be requiring everybody else to have to engage in this expensive planning and have the potential of having to pay part of the tax.

Again, the summary numbers to remember are, under the amendment that will be filed--or has been filed, I gather--it would freeze the rates where they will be at the end of 2011, at 45 percent. That is only 10 percent less than the top rate of 55 percent under the previous law. And it will provide an exempted amount of $3.5 million. Far more estates will be caught in the estate tax trap with the amount at that level than they will be if both spouses subject to the tax have $5 million exempted as part of the unified gift and estate tax credit.

I hope as with last year when 56 of our colleagues, both Democrats and Republicans, supported instructing conferees to include in the budget the precise proposal on estate tax reform that I have identified, we will get that kind of support out of this budget as well.

The last thing I want to say is, I think it would be better for the debate and discussion if we had followed past practices and actually offered amendments and had debate on those amendments and then voted on those amendments. Instead, what is happening this year is the majority is not allowing any votes on any amendments until tomorrow, when we get into what we affectionately refer to around here as the vote-athon, when every 10 or 12 minutes we have a vote after 1 minute of discussion of the amendment, 1 or 2 minutes. I think it is 30 seconds per side, 1 minute equally divided. Great debate. Great debate.

We have time to talk about these things now, but what you can't do is offer an amendment, have a vote on it, and know whether you have won or lost so you can determine what you want to do next. If you win, then you don't have to do two or three other amendments. If you lose, you may have to do those amendments. But we are not going to do that because the majority decided it would like to put pressure on the Members of this body to offer fewer amendments because they will have to all be voted on on Thursday and, of course, everybody knows the Easter recess begins as soon as we finish our business. So there is great pressure to offer fewer amendments, to hurry up and get out of town, rather than, in my view, spending the time necessary to do the people's business.

One of the first things we ought to be willing to do is do what is necessary to both debate and vote on an estate tax reform that would be meaningful for literally hundreds of thousands of American citizens.

I will. I will conclude saying, I hope my colleagues will in a bipartisan way, as they did last year, support the proposal I have just laid down. And while we will be doing it on Thursday, I gather, they will be able to listen to a little of the debate if they are listening now.

I am happy to yield.

Mr. President, I appreciate that. In suggesting another reason for this, I do not think I am wrong in that, but I do acknowledge that certainly what the chairman of the Budget Committee has said is true. I appreciate his acknowledgment of our courtesy with respect to Senator Byrd. I know the Democratic side would do the same thing. That was done on a previous occasion last year as well. It is one of the better traditions of the Senate.

It is also true probably this is not the first time this year because, for the first time in the history of the United States, I am informed, two Senators will be running against each other for the Presidency so that there may be other occasions where, when there are very close votes, our schedule may to some extent need to accommodate their schedules. Of course, as Members of this body they need to be here to do business as well, but we understand that is not always possible. If we could adhere to a slightly more set schedule that might be possible, but since we don't and it is almost impossible to have that kind of schedule, that issue is one that has to be accommodated, and I appreciate what the chairman said.

I do hope the trend we have seen from 2 years ago to last year to this year of not having votes early on during the week that we consider the budget, but bunching them all at the end, a process which I don't think anybody in this body really likes, would not continue; that certainly the reason the chairman indicated will not pertain next year and that we can revert to the practice next year that we have traditionally followed, which is to try to have debate on amendments, votes, and then debate and then votes, and so on, hopefully, thereby minimizing the number of votes that we consider in this so-called vote- athon that, as I said, nobody in this body likes very much.

Than this year.

I ask the chairman to yield for a question. The additional $45 billion, would you have an estimate as to--well, first, what policy in the estate tax would be attached to that? And if it is to add to the exempted amount, what would that take the exempted amount up to?

Mr. President, if I might further, I had understood an amendment such as this might be offered. My understanding was it would accommodate both an increase in the exempted amount to $5 million per spouse, and I also believe to reduce the rate further from 45 down to 35, which would make it identical to my amendment. I might be wrong on that. If you can ask the author of the amendment here if that is true, it would conform it to the levels set in the amendment I have laid down as well.

I wonder, as long as I have interrupted the chairman, if I might make one or two other points.

Will the Senator yield?

I think it would be fair to let me answer.

Mr. President, I would be happy to have the ranking member of the committee make a comment. But I wish to correct some of the facts. I can do that either on the Senator's time or on our time.

Mr. President, I appreciate the fact that the chairman of the Budget Committee and the majority whip have done some extrapolation from the number of people who die and two-tenths of a percent of this and that and, therefore, they have come up with a number. Why don't I quote the actual numbers according to the Joint Tax Committee. These are the officials numbers we deal with every year when calculating the effect of our legislation. According to the Joint Committee on Taxation, if my amendment were to be adopted, 11,800 estates each year would be required to file at the exempted levels that are set forth in my amendment. If we fail to act, 131,000 families, not 7,000--family businesses, farms and so on--will be subjected to the death tax each year, starting in the year 2011.

The point is, these are not individuals. These are families or businesses with a lot more people affected by the tax than the number of filers. The filer represents all the members of the family or the employer of a company. That may be 50 or 60 or 200 people who may be out of a job. But that is how many will be subjected to filing this, 131,000.

You might make fun of this and say it is a small percentage of the number of people in the United States. If you are unfortunate enough to die and your heirs have to deal with this problem, it is a very real problem to every single one of them. Over a 10-year period, obviously, you are talking about way more than a million people. You may say that is not a significant enough number to worry about, but it is enough. We worry about a few people who suffer from all kinds of things that we try to deal with. If you have a million Americans over a 10-year period subjected to an unfair tax, it is a problem we ought to address and not just make fun of the fact that it is only a million instead of 50 or 60,000. So let's get the numbers right. You can argue, if it is only 131,000 people, should we be worried about it. I say yes, somebody on the other side might say no, but at least let's get the numbers right.

Yes.

That is correct, on the motion to instruct conferees, 56 Democrats and Republicans voted for this identical proposal.

That is correct. The rate would be reduced from 55 percent, if we don't do anything, to 35. I believe the majority proposal is 45. This would make the top rate no higher than 35 percent.

The answer is yes. If I could expand on that with a true story, some friends of my wife and mine in Phoenix had a printing business. The head of the household came out from New York in the late 1940s and from

scratch built this business which, at the time he died, employed about 200 people. They didn't take a great deal of money home because in this business, you have to plow all your profits back into buying the very latest laser printers and all the other equipment to keep it competitive. But they did all right as a family, well enough to be a major giver in the community. That is how we became friends with them because they were contributing to charities significant amounts, probably more than they could afford, boys and girls clubs and a variety of other charities. They were great contributors to the community, both in terms of their business, the people they employed, what they did, and how they supported the community. He died. When he died, his family found that despite the fact that they had spent millions on insurance and other ways to try to plan for his eventual death and the estate planning, in order to pay the tax, they had to sell the business. They did, and they got enough money to pay the tax. The company that bought it, to my knowledge, never contributed a dime to any charity in Arizona. It eventually closed the operation. So all the people who worked there no longer had a job, no contribution to the community. The family literally had to sell the business to pay the tax. While they were well off in terms of the average American, they were exactly the kind of people you want in your community to provide employment. That is the real story.

We can make fun by saying: Well, it is only 131,000 each year in that category. But these are real families who are contributors to the economy and to our communities, and we ought to give them a break. Most people, even though they know they are not subjected to the tax, still, when you ask them the questions in public opinion surveys, say they know it is not fair. They like families such as the one I mentioned and would like to see this tax either reformed or repealed.

If I may respond, as an expert in the Tax Code, the Senator from New Hampshire knows the technical name of the doctrine which applies in this case, except we have made an exception in the case of death. If you are robbed or if your house burns down and you collect insurance to pay for that unanticipated loss--not an economic activity; you didn't decide to invest and get a return on the investment when your house burned down--that is something you did not anticipate. It is noneconomic. The Tax Code treats that in a very good way for people, as one would expect. You get the insurance on it. You are not taxed on all that as income.

This is the third. Of the three areas that apply here of noneconomic activity with a tax consequence, this is the only place where we don't give people a break for these unanticipated activities, these noneconomic activities such as death. No, you do get taxed. And, yes, the Senator from North Dakota is absolutely correct. The dead person is not the person----

Mr. President, if I may conclude, I am answering a question of the Senator from New Hampshire.

My train of thought with regard to the answer to the question was interrupted.

As a matter of tax policy, I will answer my colleague, we can differ about the kind of taxes that should apply to economic activity, but we do agree that is the kind of activity that should be taxed, if it is on a sale, if it is on income, if it is on a return such as capital gains or dividends. But where the American people draw the line is with regard to death. I recall now the final point I wished to make. It is true the dead person doesn't pay the tax, but the people who are left to deal with his affairs at the worst time in their life do have to deal with this. What we are suggesting is, we ought to make it a little bit easier on these folks and not impose the kind of penalties that the current Tax Code, if it reverts to this because we don't act, goes to the 55 percent tax rate. I am talking about 131,000. According to the Joint Tax Committee, the number by the year 2015 will be 177,000. So this keeps increasing with respect to the number of estates each year that will have to be concerned about the tax.

It is actually not quite that. It is $5 million. The way this is written, if one spouse, let's say, the person who is not running the business, dies first, you can plan so you can get most of the effect of $10 million in the unified credit between the estate and the gift tax, but it is actually a $5 million exempted amount. So, for example, if a single person owns a business, it is only $5 million. It is not the amount that would relate to a couple of $10 million.

Of course.

I believe that is exactly the case. By the year 2015, it would be 177,000 estates.

Mr. President, I would say to the chairman he is correct. I cannot verify the number 7,000 the chairman is

talking about, but I can verify the number I am talking about. The Joint Committee on Taxation projects that 11,800 estates would be required to file estate tax returns each year. So that is a correct statement.

Of course, the additional point I made earlier was that not everybody knows exactly what their liability is and, therefore, you have about 10 times as many people who have to end up filling out the forms, going to the expense of anywhere between $5,000 and $1 million to complete the forms, the 38 hours it takes to do it, only to find some of them do have a tax liability at the end of the day. Some of them do not. The fact that you may not be subject to the tax does not diminish the fact that you will be obligated to spend the money to file a return and do all the work to try to figure out that, in fact, you don't owe the tax.

Mr. President, if I might respond with one final point, when you got to calculating how many--the lucky 7,000, and all that--I think there was some extrapolation going on, and I think the chairman is right, we should stick to the numbers from Joint Tax. That way at least we know exactly what we are talking about.

Mr. President, I thank the leaders for the action they have taken for a short-term extension of the farm bill so that we can conclude action on it. It has been a negotiation that has gone on well over a year. That is not unusual for a farm bill which is extremely contentious.

I wanted to comment briefly on the Republican leader's statements this morning about our budget. As I was driving in this morning, I heard another Republican on the air saying that we have a trillion- dollar tax increase in this budget. I don't know what budget they are talking about because it certainly is not the budget we have presented here. There is no trillion-dollar tax increase here. There is no tax increase assumed here. Honestly, if I would go down to the Senate dining room and come to this floor and introduce the dining room menu as the budget for the United States, our Republican colleagues would say it was a trillion-dollar tax increase.

This is what they said last year, and we hear the same mantra again this year: It is a trillion-dollar tax increase. When they said it last year, we didn't have a record of a Democratic Congress to refute their claim. Now we do. We can look back and see precisely what happened with Democrats in control. How much did taxes increase after the Republicans asserted repeatedly we were going to increase taxes a trillion dollars? What happened? What happened on the record, not a projection, not a forecast, not rhetorical, what is the fact? It is very interesting. Democrats controlling the House, controlling the Senate, cut taxes $194 billion--not a tax increase, a tax cut that overwhelmingly has gone to the middle class. That is the Democratic record.

Let me say about this budget, we don't have the vast spending increases they are talking about. For this year, if you look at total spending, we have 1 percent more than the President's budget. Where is that money going? We put it into energy, to reduce our dependence on foreign oil. We put it into education, and we put it into infrastructure because we don't want any more bridges, like the one in Minnesota last year, collapsing into the river with people driving home from work. That is a fact.

In terms of revenue, the truth is that over the 5 years, we have 2.6 percent more revenue than in the President's budget. We believe that can be obtained not with a tax increase--don't need a tax increase to get it--you can go after the tax gap, the difference between what companies and people owe versus what they are actually paying. You can go after these offshore tax havens which the Permanent Subcommittee on Investigations has told us are costing this country $100 billion a year. You can go after these abusive tax shelters where we have the spectacle of companies in the United States, banks buying foreign sewer systems and depreciating them on their books in the United States to reduce their tax bill here, and then they lease the sewer systems back to the European cities that built them. My goodness. We are better than that as a nation, better than letting people abuse the vast majority of us who are honest. That is not right. That is not fair.

I have shown on this floor many times a picture of a five-story office building in the Cayman Islands called Ugland House. That 5-story building is home to 12,800 companies. I would say that is the most efficient building in the world.

Mr. President, 12,800 companies claim they are doing business out of this little five-story building in the Cayman Islands. They are not doing business there. The only business they are doing is monkey business. What they are doing is evading their taxes.

Now we have seen, according to the Boston Globe, another building down in the Cayman Islands--this time a four- or five-story building too--and we know KBR, who is the biggest contractor for security forces in Iraq and additional workers in Iraq for the U.S. military effort there, is running an operation out of that building to evade the Social Security taxes and the Medicare taxes of thousands and thousands of workers they have employed for Iraq--another tax scam.

It is exactly the kind of thing we on this side think should be closed down. Over and over, when we have tried, this President said: No, you can't do that. That would be a tax increase. Really? Is that a tax increase? I do not think so. Making people pay their fair share, like the vast majority of Americans already do--I do not think that is a tax increase. I think that is making those folks pay like all the rest of us do. That is fair.

Mr. President, we have Senators on the floor ready to offer an amendment. I want to go to that at this moment.

I ask Senator Bingaman, how much time----

Mr. GREGG addressed the Chair.

Mr. President, I will withhold. Senator Gregg is seeking recognition.

Mr. President, I thank the ranking member for his continuing courtesy and graciousness. This is my 60th. As I left the house this morning, I told my wife and our son, who is there visiting, I have to question: What have I done wrong in my life to have my 60th birthday spent here managing the budget? But I will get over it.

I appreciate the many courtesies of the ranking member. This is a special day for me, and I am looking forward to a good debate.

With that, we want to go to the next amendment, unless the Senator--

Fair enough.

Mr. President, I say to the Senator, if you can give us a heads up at some point what your next amendment will be, that would be helpful as well.

Now we will turn to Senator Bingaman and Senator Alexander, who I think have a very constructive amendment. We welcome their description of it.

I ask unanimous consent that the time come off the resolution.

Mr. President, I think the amendment the ranking member has set up for Senator Specter doesn't actually have full repeal. Instead, what it does is change the individual alternative minimum tax from its current two-rate structure of 26 percent and 28 percent to the single 24-percent rate that was in effect prior to 1993. I believe that is what the Specter amendment does.

The first priority, of course, for dealing with the AMT is to protect families who have not been subject to it previously. So our resolution acknowledges this priority and provides a 1-year patch to prevent the alternative minimum tax from affecting another 20 million American households. That is at a cost of $62 billion.

I would prefer that cost be offset, but last year that was not the will of the body. It was not the will of the body in the very clear and compelling vote. So we don't have it offset in our resolution this year.

Our resolution acknowledges the political reality that the will of this body is to extend alternative minimum tax relief without paying for it. Restructuring the AMT, as Senator Specter proposes, is even more expensive. The Specter amendment would lose $185 billion in revenue, and it is not paid for in any way--by spending reductions or other revenue--and therefore it simply gets added to the deficit and debt. If it were adopted as is, the resolution would be in deficit in every year of the budget window.

Mr. President, I don't think that is fiscally responsible, so I am offering an amendment that accomplishes the same policy purpose but requires that it be offset, paid for, so that it is not

added to the deficit and is not added to the debt.

I inquire of the Senator, did he send up the Specter amendment?

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

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

Mr. President, I think it might be useful here that we enter into a unanimous consent agreement that when we go to a fuller debate, the debate on the Specter and Conrad amendments be limited to 1 hour. Is that acceptable?

Mr. President, I ask unanimous consent that there be a half hour each on the Specter and Conrad amendments, a total of 1 hour.

Then we will go to the Kyl amendment, and there would also be a side-by-side for that amendment. That would be, at this point, an amendment in my name or by my designee.

I also ask unanimous consent that there be a half hour on each for those amendments.

Our understanding is the same. Look, we are going to have to be flexible. We have other committees that are meeting, and other Members who are involved in these amendments are at other meetings. They won't be here until later. It is our intention to have that amount of time on these specific amendments, but it may not occur all at once.

Correct. Our amendments are side-by-sides. Our amendments would normally be second-degree amendments. They are not being offered as second-degree amendments here because we don't do that on the budget resolution. But those amendments that are the side-by-sides would be in the regular order. That means they would be voted on first.

We also have the Bunning amendment. Do we want to put that into the queue?

Maybe we should have a discussion and make sure we are on the same page with respect to that. Do we want to have the Bunning amendment next?

All right. That is an amendment that involves Social Security, correct?

There would be a side-by-side on our side. Would we want to limit debate on those to a half hour each?

All right. That will be the order. The colleagues who want to offer amendments and want to have floor time, it is a very good time to contact us to get time allocated because time is going to go very quickly. Please don't come tomorrow and say: Gee, where is our floor time? This is the time, this is the moment. If you want floor time, we urge you to come now.

Amendment No. 4191

Will the Senator yield on that point?

If I can address one of the concerns of the Senator, when we vote--this is a very awkward question, I say to my colleague. Let me be very direct about what it is. We are missing two of our votes. We have a third Member who is ill. So what we have said is we would defer votes on these major matters until at least some of our Members are back. The body is very closely divided. We are completely ready to have votes on other matters throughout this day. The problem is, with the major votes on these consequential issues where we are missing two of our Presidential candidates until tomorrow--they will be here Thursday and Friday--and we are missing Senator Byrd who, as you know, is ill, that is the reason we have asked to defer votes on these major amendments until tomorrow. It is a difficult situation. It has been throughout.

I do thank the Republican caucus for the extraordinary courtesy they extended to the Budget Committee by allowing Senator Byrd to vote--to allow proxy voting in our committee. Our committee does not allow proxy voting, and for a very good reason. We are the only committee that can report a fast-track vehicle to the Senate floor directly. But I do thank the Republican side for doing that. It was very gracious. I think it was in the best tradition of the Senate.

Here on the Senate floor, of course, there is no ability to allow that accommodation to a colleague who is ill. That is the circumstance. I regret it. I just say to my colleague, we are happy to have as many votes as you want to have. The reason we have deferred these major votes until tomorrow is for the reason I have given.

Mr. President, I would just say to my colleague, last year we did much better.

You remember last year we did more votes earlier. Just in line with what the Senator is thinking because that is the best way. I think all of us would agree that is the best way to do our business, to do the votes earlier. You will recall on the vote-arama on that Friday we actually finished at 2 o'clock in the afternoon because we did have more votes earlier. I am entirely, 100 percent in agreement with the Senator. I would far prefer to do it that way. I think it is easier to follow the debate and to have the votes then coincident with the debate.

(Mr. DURBIN assumed the Chair.)

Mr. President, if I might, just on the underlying amendment offered by the Senator, this amendment as we understand it-- we have just seen it--would virtually eliminate the estate tax. Let me say why. Let me first say there is no death tax in the country. Of course, if you poll people and you ask them: Do you want to eliminate the death tax? they will say sure. I had a baggage handler stop a colleague of mine, and he said: My No. 1 priority is to eliminate that death tax. My colleague, who is the current occupant of the chair, told him there is no death tax here. You are not going to pay any tax when you die unless you have $2 million.

The guy was very surprised about that because he heard all this talk about a death tax. There is no death tax in America. There is a tax on estates. At today's level you would have to have $2 million to be taxed. That affects only one-half of 1 percent of estates. When the exemption increases, as it does under current law, and reaches $3.5 million per individual, $7 million a couple in 2009, which is next year, only two-tenths of estates will be taxed.

If you are out there and you are hearing about this death tax, don't worry. It does not apply, next year, to 99.8 percent of people who pass away. It only applies to two-tenths of 1 percent of estates.

We already have a tax structure that has overwhelmingly benefited the wealthiest among us. The amendment by the Senator would cost an additional $478 billion over 10 years, and none of it is paid for. That means it goes on the debt. That means we have to borrow that amount of money, and where are we going to borrow it? We are now borrowing over half the money at our bond auctions from abroad--most of it from the Chinese and the Japanese. So we would have, if the amendment of the Senator is agreed to as is, the unusual situation of borrowing this money primarily from China and Japan to give a tax advantage to two- tenths of 1 percent of the people, but the borrowing would be in the name of all of the American people. So 99.8 percent of the American people would be borrowing this money, primarily from China and Japan, to give it to the Warren Buffets, the Paris Hiltons, and others of enormous wealth in this country.

I do not think that is a good policy. In the underlying budget, we have improved the estate tax situation, reformed it in what is, I think, a reasonable way. This is the bizarre circumstance that is in current law. The exemption now, in 2008, is $4 million--$2 million a person. OK? So if you are a husband or wife and you pass away at the same time, you have $4 million of exemption that applies today. You don't pay anything if you have estates of less than $4 million.

In 2009 that will go up to $7 million. Then in 2010, under current law, there is no estate tax, it is repealed. Then, in 2011--it is utterly bizarre--it goes down to $2 million per couple, $1 million a person.

In the underlying budget we are saying, no, that makes no sense at all to go back down to $2 million a couple, $1 million a person. It should be at $7 million a couple, as it is in 2009. If, in fact, we adopt those levels, virtually no one will pay the estate tax. That is a fact.

Here is what has happened under current law: The number of estates that are taxed is falling very dramatically. In 2000, there were 50,000 taxable estates. In 2006, that has been reduced to 13,000. In 2009, we are now expecting there will only be 7,000 estates that will pay anything. As I indicated, that is two-tenths of 1 percent; 99.8 percent of estates are completely exempt. That is a fact.

Now I am going to lay down an amendment.

I would be happy to yield.

No, this is this Tax Policy Center, I say to my colleague, and they estimate the number of estates in any year, and then they do a further analysis of how many would actually pay an estate tax, and what they have concluded is two-tenths of 1 percent.

I know the Senator is pulling my chain. Even as slow witted as I am, I can recognize when a Senator is pulling my chain, and here on my birthday, my friend and my colleague is doing that.

What we have tried to do is come up with an alternative. I will send this amendment to the desk to provide an alternative approach to that which the Senator from Arizona is offering, to go over and above what is in the Baucus amendment.

I say to my colleague, it provides another $45 billion, so that in addition to extending the estate tax exemptions of 2009, $7 million a couple, $3.5 million an individual, instead of dropping down to $2 million a couple or $1 million, we stay at the $7 million; index it for inflation.

But in this amendment I am sending to the desk, I say to my colleague, it also provides another $45 billion in a reserve fund, which means it would have to be offset either by a spending reduction or other revenue to further close the gap between what Senator Baucus provided in his amendment the other day, and the amendment Senator Kyl has laid down here.

That would be $45 billion in additional room in order to further reform the estate tax. I want to make clear that would be in a reserve fund, so it would have to be offset, it would have to be paid for.

I do not know. This is not my amendment. This is an amendment Senator Baucus and others have crafted. So I apologize to the Senator, I do not know how much more of an exemption that would permit. But others who have crafted this amendment hopefully will have an answer that can be provided when they are available.

Maybe I can conclude this part and go back to the Senator from Illinois who is also inquiring and answer his question.

Mr. President, I send this amendment to the desk. I have styled it Conrad No. 2. In fact, it is not my amendment. It is the amendment of the chairman of the Senate Finance Committee, who is at this very moment chairing a hearing on this subject, so he could not be here. That is why I am sending it to the desk.

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

I ask that Senator Baucus be permitted, when he is able, to further discuss his amendment. I know we have got time reserved for that purpose.

Yes, that is true, under the exemption rates for next year. Under the exemption rates for next year, it will be two-tenths of 1 percent. I believe this year it is five-tenths of 1 percent; there are 99.5 percent this year that are exempt. Next year it will be 99.8 percent exempt, as the rate goes up.

That is the correct math.

My understanding is--and the Senator might correct me-- that under the Kyl proposal the cost would be approaching $200 billion over--$458 billion over 10 years.

Well, first, in terms of the gross debt of the United States, under this President's watch, the gross debt has nearly doubled. The foreign holding of U.S. debt has more than doubled.

This is it. It took 42 Presidents 224 years to run up $1 trillion of external debt. Perhaps this is the chart the Senator is referring to. It took 42 Presidents, all of these Presidents pictured, 224 years to run up $1 trillion of debt, U.S. debt held abroad. This President, as you can see, has far more than doubled that amount in 7 years.

Well, if his amendment costs another $458 billion, it is not offset. And in a typical bond auction now conducted by the United States, over

half of the money, well over half now, is money from abroad. So you can take well over half of the $458 billion, and it would be added to this external debt.

Well, that is the unfortunate part of, as I see it, the amendment of the Senator from Arizona. What he is doing is saying--he is asking all of us, all Americans, to put our name on the bill. But the money is only going to two-tenths of 1 percent of us. I think that is unfortunate.

I think that is clearly correct.

Yes, I think that is undeniably the case. The problem this country confronts now is we have massive deficits and, under this President, a dramatic increase in the debt. So all of these provisions are based on borrowed money. So why would we go borrow this amount of money, which is increasingly from foreign countries, in order to give a benefit to two-tenths of 1 percent of the American people, when 99.8 percent of the estates in this country are already exempted from the taxation? That is lost on me.

No, this is all put on the tab. This is all borrowed money.

I still have the floor. The Senator from Arizona was seeking to ask me a question.

I am happy to yield to the Senator from New Hampshire if the Senator wishes to engage in this debate or any other debate.

I yield the floor.

Will the Senator yield for a question?

I would like to try to harmonize the numbers because I don't want to leave people with the misimpression that we have some difference on the numbers because I don't think we do. The Senator is talking about 131,000 estates possibly being affected. But that would be at the million-dollar-a-person exemption level; is that not the case?

But that is assuming we have a million-dollar-per-person exemption. Under what is in the budget, we would have $3.5 million per person--$7 million a couple--which, according to our figures, would give only 7,000 estates out of 3.5 million any tax. I think the difference between your 11,000 and my 7,000 was, you are talking about estates that have a filing responsibility. I am talking about estates that would actually have a tax liability. As the Senator well knows, there are some additional people who have a filing obligation even though they don't have a liability.

The numbers the Senator and I are using are actually quite close. We are using somewhat different assumptions. He is talking about if we went down, which current law does, to a million dollar exemption in 2011, 131,000 estates would be affected. What we are seeking to do is to make certain that does not occur, that the exemption amount be $3.5 million a person, $7 million a couple, which would exempt 99.8 percent of estates.

That is absolutely fair. I didn't want to leave some impression that you and I had some great difference on the numbers. I think our numbers are actually very close.

Mr. President, I say to the Senator, may I be recognized for a moment? I have a housekeeping item we need to address.

Mr. President, I ask unanimous consent that amendment No. 4196, which I sent to the desk, be restyled as being offered on behalf of Senator Salazar. I sent it to the desk in the name of Senator Baucus.

That should be in the name of Senator Salazar. He is the mover of that amendment.

Mr. President, why don't we do this out of courtesy to Senator Bunning, who is already here: If we could go to Senator DeMint--how much time would Senator DeMint require?

Could we reach an agreement on up to 25 minutes?

Because Senator Bunning was put on notice earlier he could come at roughly this time. I would be happy to withhold on Senator DeMint's amendment.

Maybe we could get him in the train as well so he would know when he was up.

How much time would the Senator from Kentucky require?

Well, shall we enter into an agreement: up to 25 minutes for Senator DeMint, followed by Senator Bunning for up to 15 minutes. And then, I say to Senator Specter, how much time would you like?

Up to 15 minutes there. That would take us another hour down the road. We will do it off the resolution. Is that fair?

Mr. President, I am going to spend a few minutes tonight on some observations. My hope is over the next couple of days to outline something that has never been done on the Senate floor before, and that is to discuss where we as a body fail. We are all the time telling the American people what we do great or how bad the other side is, but rarely do we take a look at ourselves and say: What is going on? What are the problems we face?

I had a great weekend this weekend in Oklahoma. Part of Oklahoma got snow, part of it had 65 degrees and Sun and no wind. But I had some experiences I want to share because I think they are pertinent and also poignant to the issue we are discussing.

I also note I have been listening to the debate all afternoon, and the debate is nothing but finger-pointing--one budget, the other budget, how bad somebody is, what somebody didn't do, what somebody wants to do. It strikes me that as I reflect on the people whom I saw this weekend and their hopes and dreams, most of this debate does not have anything to do with them. Most of this debate has to do with us, which is exactly the opposite reason of why we were sent here. What we have heard is a partisan debate, partisanship based on parties, not partisanship based on principles, not partisanship based on children, not partisanship based on the future, but who can twang it, who can manipulate it, who can create doubt and undermine someone else's position.

I traveled to Oklahoma City. My brother has been in the hospital for 16 days. He had a major operation called Whipple--it takes a long time to get over it--for pancreatic carcinoma. That is what they do the operation for. He has four kids and four grandkids and one on the way. I got to thinking, as he lay there with an NG tube in him and a feeding tube through his jejunum, what would he like for his kids? What would he like for us to be talking about for the future? Down the hall were a whole lot of other people just like him. He is 61 years old. He is not thinking about himself as he lays there in the hospital. He is thinking about what is the future for his grandkids.

I visited with one of my longest term friends this weekend. He is not thinking about himself right now. He is thinking about his grandkids. He has one and one on the way, going to be delivered this next weekend. He didn't mention one thing about himself. He mentioned about what the future was for his kids.

I think about the ladies whom I saw this morning in my medical office about to have babies. Their hopes and their dreams are about the generation that is to come, about how this miracle birth is going to take place over the next couple of weeks for both these ladies. One is named Natalie and one is named Brooke; one is a first-time mom, the other is a second-time mom. The things they are looking forward to with their children are totally dependent on whether we act as adults in this body.

I have just been struck at how far off the mark we are.

I think Kent Conrad is a great guy. I looked at what he did last year. He is a pretty fiscally conservative guy. Kent sponsored less than $20 billion worth of new spending over the next 5 years, total sponsorships. Many times in the last 3 or 4 years, we have had debates about how we handle the problems. The differences between us are not that great. What guides us, though, and what is destroying our country, I fear, is the fact that we are putting political parties and the benefits of the political budget ahead of the best interests of our kids.

One of the things I hope to do tomorrow is to outline for the American public and this body everything I found in the last 3 years in terms of waste on an annualized basis. I want my colleagues to hear that again. Everything I have found in terms of waste where we do not do it right, where we are wasting taxpayers' dollars every year, and I can conservatively, just on what I found and I can fully document--I want you to understand that, Mr. President; it is not Tom Coburn's opinion, it is the opinion of the GAO, the CBO, oversight committees, and other committees of Congress that are documenting what I am about to share.

What I am going to share tomorrow is how we fail because we are talking about a budget today--I told Kent Conrad, I am not out to game his budget. It will spend more money. That is not a whole lot different from what we have been doing. But how dare we spend another penny when I can document, and none of my colleagues can refute, $366 billion a year of waste or fraud, $366 billion a year. Let me explain what that means to the average consumer.

If you are at home today and you are in the 25-percent tax bracket in terms of income tax, what that means is that about 9 percent of the money you pay, we blow. So that is one-third, that is 9 out of the 28 percent, one-third of all the money you pay to the Federal Government, not counting your Social Security and Medicare taxes, but of your income taxes, one-third of it, we blow.

The interesting thing is that not since 1995 has the Congress done any rescission spending. Let me explain what that is. That is the Congress looks at our budget and says: Are there any areas where we can save money, where we are not doing well, where we can be more efficient, where we can improve things? We haven't had a rescission package since 1995. That is 13 years that we have not had a rescission package. There are lots of reasons for that, none of them good. It does not matter which party is in control. There has not been a rescission package for 13 years. So it is not about parties. It is not about gaming somebody because somebody is a Democrat or somebody is a Republican. Our problems in our Nation today are much more serious than partisanship. They are much greater than the beneficial effects of winning an election based on how you can make somebody else look lousy.

One of the important things I hope will come out as we go through this in the next couple of days is whether we really care about what is going to happen. We can look at the stock market--it has weak knees today; look at the price of commodities--it is rising. There is no secret we are in a time of economic weakness. Depression is described as two quarters successively. We are probably there. Nobody knows. Nobody has a crystal ball to know that. But the fact is, it is what we are leaving right now for these two, Brooke and Natalie's children who are going to be born in the next 3 weeks. What do we leave them? We are leaving them a gift, and the gift is debtor's prison.

Let me say that again. I don't say that lightly. We are leaving them a gift. According to the Government Accountability Office, if you are born tomorrow, you inherit $400,000 of unfunded liabilities. Does anybody know anybody who is working and struggling and making a middle- class income or even an upper income who is going to be able to afford that amount? Just paying the interest on it is $28,000 a year, and you have to absorb that by the time you get old enough to work. So we are talking about another $6,000 worth of interest before they start paying off any principal. So, in essence, the heritage through our incompetence, our bickering, our partisanship because we have to show somebody up, the heritage is every kid who is born, by the time they get a chance to work, is going to be accumulating about $1 million worth of debt. The question we have to ask ourselves is, What happens to them? What happens to the dream of a Brooke or a Natalie and their children? What is going to happen to them?

We are about this far from losing the triple-A credit rating on our country, on our bonds. At the same time, we see that in the last 8 years, the price of gold relative to the dollar is fourfold. What does that tell us? Is there a shortage of gold? No. Is there a fourfold increase in the demand for gold for industrial uses? No. It is a flight to safety because many people in the world do not believe we are going to be able to pay back the $79 trillion of unfunded liabilities we have left.

So as we come to a budget for the United States and we pass one-- which we will, probably--we do it absent the light of looking at $360 billion-plus that is wasted every year--$360 billion. People might say: What is that? It is pretty easy. How about Medicare fraud, $80 billion a year. How about Medicare improper payments? We pay people when they do not deserve to be paid--not fraud, just incompetency--$10 billion a year. There is $90 billion in one program. There is nothing in this budget that fixes that situation. There was nothing in the Republican budgets that fixed that. Why not? I know the answer to why not. The answer to why not is because we were too busy making political games, political strokes. We were too busy being partisan. The time for partisanship in our country is past. We may not believe that, but history is going to show it.

David Walker, the Comptroller General of the United States, one of the fairest, most openminded men I believe I have ever met in my life, on Wednesday is leaving that position. Why is he doing that? He has a guaranteed job until 2012, a great job, head of an agency that really is stellar in what it does in its performance. Why is he leaving that position? Because he is scared to death for our country because nobody is listening in positions of power. Nobody is paying attention to the unsustainable course on which we find ourselves. We are not. We haven't in the budget. We didn't in our budget. We are not. We don't on the supplementals that come through here to ``fund the war'' because we load up $20 billion to $30 billion more debt right on top of our kids.

We hear all these false numbers. Yes, I said false. The budget numbers are games. The President's numbers about the deficit are wrong. The Budget Committee's numbers about the deficit are wrong. They are not realistic. They do not take into account the fact that we are going to steal about $170 billion worth of Social Security money this year--I think $163 billion is the accurate number. We are going to write an IOU, and then we are not going to tell the American public that we increased the debt another $163 billion. We are just going to pass that along to our kids.

I have some little things for you to think about as we outline this. There is $2.5 billion a year in Social Security disability fraud. There is another $1 billion in improper payments. Think about this. Just $2.5 billion. Just $2.5 billion. Just 2,500 millions. Just 2,500 millions or 2,500,000 thousands. They are pretty hard numbers to get our hands on.

So anyhow, in the next few days, I am going to list out one by one, I am going to go through everything we have seen in the last 3 years that continues daily in this Federal Government that this body won't attack. When we offer amendments in this body, they are either accepted so they can be thrown out in conference when they actually do something, such as the census amendment that was in the Senate. We are now going to be asked for about $2 billion more for the census even though we have been saying all along there was a problem there. We ignored it, the House conferees with the Senate conferees ignored it, and now we are going to spend $2 billion more.

What we are going to do is outline thoroughly what just one office, just one Senate office, has found over 3 years, and it is all going to be fully documented, with footnotes, so you can see exactly where it came from. It is going to be indisputable.

Now ask yourself, if you are an American out there struggling to pay your gas and things are not looking great for the next 6 months for you, what would you think if all the Senators did that and we really did get rid of all the waste, fraud, and abuse in the Federal Government, or at least a meaningful component of it, and that we really probably could cut $600 billion out of our budget, which would mean we could either--if you wanted a bigger Government, you could do more, or if you wanted to pay fewer taxes, you could pay less? But most importantly, we could live up to the heritage that is ours, which is creating an opportunity for our children and our grandchildren in the future.

I am convinced that Americans aren't really asking for higher taxes. What they are asking for is smart spending, hard work by us to make sure what we spend is worth it. What they are asking for is no more earmarks. That is what 85 percent of them are asking for. And they are asking for no more bridges to nowhere and what it symbolizes in terms of excess, in terms of a lack of common sense or a lack of caring. I don't know which it is, but the fact is, we are on a collision course that is going to undermine the future of this country.

Will Durant, a historian, said that democracies never fail and are never collapsed from without until they have moral decay that causes the collapse from within. When we are spending the money of our grandchildren today and not doing anything about the waste we have in our budget, the question has to be asked: Are we already there? Have we already risen to the point where the political class, the political elites care so much about their positions--both

parties--that they are willing to throw the future of the next two generations of this great country under the bus?

The next year is critical for this Nation, as we see what happened today in the stock market, another lower earnings, as we see consumer confidence decline. Wouldn't it be nice if the Senate stood up to the challenge that is facing this country and did so without the first partisan word about parties and said: Let's fix it. Let's fix it.

I have had an ongoing study since I have been in Government to ask Federal employees this question, and I have never had a different answer. And the question is this: If you are a Federal employee, no matter where you work, what branch you work in, or what you do, if you had to, tomorrow, for the sake of our future, become 5 percent more efficient--in other words, not spend $1 out of $20--could you do it? Do you realize I have asked that question thousands of times, and I have never been told no. I have never been told no.

Well, if that is the case, why aren't we doing it, when we are going to have a $607 billion deficit? We are going to be at $10 trillion of debt at the end of this year. That is real debt. That doesn't talk about unfunded liabilities, which are $79 trillion. So we have $10 trillion worth of debt, $79 trillion under infinity, of unfunded liabilities, and we don't talk about that.

How is it that we find ourselves allowing such things as the military to continue to hang on to buildings they do not want to the tune of $2 billion to $3 billion a year just in maintenance costs? How is it that we have $18 billion worth of buildings we don't want but we can't sell because of the roadblocks we have put in the way to be able to sell them? How is it that the Pentagon pays performance bonuses of $8 billion a year to companies that don't meet the requirements of performance bonuses? How is it that we are allowing that to continue to happen? We have known of that for 3 years. Why is it happening?

By the way, what is the big stir right now? The big stir is Boeing didn't get the contract and Lockheed--or EADS did. Nobody is asking the right question on that. It doesn't matter who got the contract. It is a cost-plus contract. If we don't know what we want in a refueling tanker now after 8 years of studying it, we are never going to know. So a $35 billion contract is going to become a $45 billion contract, just like all the rest of them. Instead, we ought to be insisting, if you are doing business with the Federal Government and making money, you ought to take some risk. There ought to be no more cost-plus contracts on procurements like that. There ought to be none. Whoever has that contract ought to take part of the risk for the American people because they are having a great benefit in terms of the profits they are going to make.

So we have a lot in front of us. What is $350 billion in annual waste? What does that mean? Here is what it means. It means $3,000 for every family. That is what we are wasting. Three thousand dollars for every family in this country we are blowing, that we are throwing away because we care more about partisanship than we do the future. We care more about making the executive branch look bad than we do the future. We care more about our earmarks than we do the future.

There is a legitimate role for the Federal Government to have the Senate and the House direct spending. That is not the dispute. But the way you do it best is through oversight, not through earmarking. The way you do it best is to know exactly what is happening rather than earmarking it. The gateway drug to overspending since 1998 has been earmarks because when you earmark, you don't vote against bills. What happens is, the next time you earmark, the committee chairman comes up to you and says: You didn't vote for my bill last time. Sorry, I can't fill a thing. So we have this almost extortion-like process whereas earmarks are granted to you if you vote for a bill. You are not even looking at the total bill, you are looking at the earmarks.

Do our children deserve better? Are they worth our sacrifice? Is it really worth it for us to not necessarily get what we want if we can secure the future? I am having trouble knowing whether this body really believes that. We have outlined to appropriations committees, everybody has been sent a report of everything we have found in the last 3 years, and it has been essentially ignored because we are too interested in making sure we beat the path to looking good at home.

When you take an oath to be a U.S. Senator--and I don't think this is said often enough--there is nothing in that oath that says anything about your State. I am not here to represent the vital interests of Oklahoma. I was elected by Oklahomans to represent the vital interests of this country. And when I get confused about where my loyalties lie, our country suffers, and that is exactly what is happening to us right now.

We have gone from 600 earmarks in 1998 to a high of 14,870, almost 12,000 last year. What is going on? Where is the common sense? People from Vermont to Oklahoma to California to New Mexico to Montana, they know better. So the special interests of the few are being advantaged while we sacrifice those that come after us. Now, that is a firm indictment. But you can't continue to waste $360 billion a year, ignore oversight, not do anything about it, and then puff up and say-- Republican and Democrat--I am going to pass a budget and I am never going to look at any of that.

Well, that is exactly what my party has done. That is exactly what the party in charge today is doing. We are ignoring the very real fact that this Government needs hands-on management, it needs aggressive oversight, and it needs this $360 billion worth of waste eliminated in this budget. And if we pass this budget or any other budget--whether my party offered one or not, even the President's budget--if we pass any budget that doesn't take this into account, what we are doing is spitting all over the hopes and dreams of the youngest Americans in our country. We are saying: You don't count. We got ours, you will have to worry about getting yours. We will take, you will have to give. And, oh, by the way, we are sorry there is not going to be enough resources left for you to have a college education or to own a home or for us to defend ourselves or for you to have health care like many of us are going to have as we wander off at 65, knowing that you are going to be working hard through increased payroll taxes just to pay for the promises that we couldn't make efficient and that we overpromised.

So, Mr. President, I know I have carried on some tonight, but I think our problems are much more severe than what our behavior would deem. I think the degree of difficulty we find ourselves in today is directly attributable to our lack of courage.

We are more interested in not offending somebody than we are securing our kids' and grandkids' future. That is not something I want to be accused of. So I will take the ridicule of this body for being ``Doctor No,'' for saying: We are not going to spend more money on new things, we are not going to have more programs until we can pay for the programs we have.

And if it takes one person saying: I am not going to agree to pass bills under unanimous consent, I am not going to agree to not have the opportunity to amend them, then so be it.

The $3,000 per family per year is enough to make a difference, a big difference, in their future. I think Brooke's and Natalie's babies are worth it. I do not know about you all. I am ready to give up something. Most of all, I am willing to give up my seat in the Senate for doing what I think is right in the long term for our country.

If I do what is politically expedient and win reelection, what good is it if I have not fixed the very real problems that are facing our country? It is time for a gut check in this country. It is time for the American people to look at you, us, and say: Are you really doing for us, or are you really doing for you? My accusation is too often we do for us and not for the generations to come.

I will be back to outline in detail where this $360 million--billion; let me make sure everyone understands--$360 billion worth of waste, fraud, and abuse occurs every year in our budget, and we have done nothing. Let me say it again: We have done nothing about it.

How dare we talk about raising taxes. How dare we talk about anything except doing the business that should be at hand, which is being good stewards of our children's future.

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