Floor Statements

Mr. President, I am introducing today with my colleagues Senators Conrad, Bill Nelson, Sanders, Shaheen, and Whitehouse, the Stop Tax Haven Abuse Act, legislation which is geared to stop the $100 billion yearly drain on the U.S. treasury caused by offshore tax abuses. Offshore tax abuses are not only undermining public confidence in our tax system, but widening the deficit and increasing the tax burden on middle America.

People are sick and tired of tax dodgers using offshore trickery and abusive tax shelters to avoid paying their fair share. This bill offers powerful new tools to combat those offshore and tax shelter abuses, raise revenues, and eliminate incentives to send U.S. profits and jobs offshore. Its provisions will hopefully be part of any deficit reduction package this year, but should be adopted in any event.

The bill is supported by a wide array of small business, labor, and public interest groups, including the Financial Accountability and Corporate Transparency, FACT, Coalition, American Sustainable Business Council, Business for Shared Prosperity, Main Street Alliance, AFL-CIO, SEIU, Citizens for Tax Justice, Tax Justice Network-USA, U.S. Public Interest Research Group, Global Financial Integrity, Global Witness, Jubilee USA, and Public Citizen.

Frank Knapp, president and CEO of the South Carolina Small Business Chamber of Commerce, has explained small business support for the bill this way:

Small businesses are the lifeblood of local economies. We

pay our fair share of taxes and generate most of the new

jobs. Why should we be subsidizing U.S. multinationals that

use offshore tax havens to avoid paying taxes? Big

corporations benefit immensely from all the advantages of

being headquartered in our country. It is time to end tax

haven abuse and level the playing field.

The Stop Tax Haven Abuse Act is a product of the investigative work of the Permanent Subcommittee on Investigations which I chair. For more than 10 years, the Subcommittee has conducted inquiries into offshore abuses, including the use of offshore corporations and trusts to hide assets, the use of tax haven banks to set up secret accounts, and the use of U.S. bankers, lawyers, accountants and other professionals to devise and conduct abusive tax shelters. Over the years, we have learned a lot of the offshore tricks and have designed this bill to fight back by closing obnoxious offshore tax loopholes and strengthening offshore tax enforcement.

The 112th Congress is the fifth Congress in which I have introduced a comprehensive bill to combat offshore and tax shelter abuses. A number of provisions from past bills have made it into law, such as measures to curb abusive foreign trusts, close offshore dividend tax loopholes, and strengthen penalties on tax shelter promoters, but much more needs to be done.

The last Congress made significant progress in the offshore battle. We finally enacted into law the economic substance doctrine which authorizes courts to strike down phony business deals with no economic purpose other than to avoid the payment of tax. My past bills supported the economic substance doctrine, and its enactment into

law is a victory many years in the making.

Last year also saw enactment of the Baucus-Rangel Foreign Account Tax Compliance Act or FATCA, which is a tough new law designed to flush out hidden offshore bank accounts. Foreign banks are currently engaged in a massive lobbying effort to weaken its disclosure requirements, but U.S. banks have had it with foreign banks using secrecy to attract U.S. clients and want those banks to have to meet the same disclosure requirements U.S. banks do. The Administration is so far resisting calls to water down the provisions.

President Obama, who when in the Senate cosponsored my bills in 2005 and 2007 to end tax haven abuses, is a longtime opponent of offshore tax evasion. He knows how fed up Americans are with tax dodgers who hide their money offshore, use complex tax shelters to thumb their nose at Uncle Sam, and offload their tax burden onto the backs of honest Americans.

The bottom line is that each of us has a legal and civil obligation to pay taxes, and most Americans fulfill that obligation. It is time to force the tax scofflaws, the tax dodgers, and the tax cheats to do the same, and end their misuse of offshore tax havens.

The bill I am introducing today is a stronger version of the Stop Tax Haven Abuse Act introduced in the last Congress. In addition to preserving the provisions from last year that have not yet been enacted into law, it contains several new measures to stop tax dodgers from taking advantage of middle Americans who play by the rules.

Among the bill's provisions are special measures to combat persons who impede U.S. tax enforcement; establishment of legal presumptions to overcome secrecy barriers; the treatment of offshore corporations as domestic corporations for tax purposes when controlled by U.S. persons; closing a tax loophole benefiting credit default swaps that send money offshore; closing another loophole that allows corporate deposits of foreign funds in U.S. accounts to be treated as nontaxable, unrepatriated foreign income; disclosure requirements for basic information on country-by-country tax payments by multinationals; and stronger penalties against tax shelter promoters and aiders and abettors of tax evasion.

Probably the biggest change in the bill from the last Congress is that it would no longer require Treasury to develop a list of offshore secrecy jurisdictions and then impose tougher requirements on U.S. taxpayers who use those jurisdictions. Instead, the bill would build on the Foreign Account Tax Compliance Act of 2010, by creating tougher disclosure, evidentiary, and enforcement consequences for U.S. persons who do business with foreign financial institutions that reject FATCA's call for disclosing accounts used by U.S. persons. By focusing on non- FATCA financial institutions instead of offshore secrecy jurisdictions, the bill relieves Treasury of a difficult task, while providing additional incentives for foreign banks to adopt FATCA's disclosure requirements.

Mr. President, I ask unanimous consent that a section by section analysis and a bill summary be printed in the Record.

Mr. President, I am introducing today with my colleagues Senators Conrad, Bill Nelson, Sanders, Shaheen, and Whitehouse, the Stop Tax Haven Abuse Act, legislation which is geared to stop the $100 billion yearly drain on the U.S. treasury caused by offshore tax abuses. Offshore tax abuses are not only undermining public confidence in our tax system, but widening the deficit and increasing the tax burden on middle America.

People are sick and tired of tax dodgers using offshore trickery and abusive tax shelters to avoid paying their fair share. This bill offers powerful new tools to combat those offshore and tax shelter abuses, raise revenues, and eliminate incentives to send U.S. profits and jobs offshore. Its provisions will hopefully be part of any deficit reduction package this year, but should be adopted in any event.

The bill is supported by a wide array of small business, labor, and public interest groups, including the Financial Accountability and Corporate Transparency, FACT, Coalition, American Sustainable Business Council, Business for Shared Prosperity, Main Street Alliance, AFL-CIO, SEIU, Citizens for Tax Justice, Tax Justice Network-USA, U.S. Public Interest Research Group, Global Financial Integrity, Global Witness, Jubilee USA, and Public Citizen.

Frank Knapp, president and CEO of the South Carolina Small Business Chamber of Commerce, has explained small business support for the bill this way:

Small businesses are the lifeblood of local economies. We

pay our fair share of taxes and generate most of the new

jobs. Why should we be subsidizing U.S. multinationals that

use offshore tax havens to avoid paying taxes? Big

corporations benefit immensely from all the advantages of

being headquartered in our country. It is time to end tax

haven abuse and level the playing field.

The Stop Tax Haven Abuse Act is a product of the investigative work of the Permanent Subcommittee on Investigations which I chair. For more than 10 years, the Subcommittee has conducted inquiries into offshore abuses, including the use of offshore corporations and trusts to hide assets, the use of tax haven banks to set up secret accounts, and the use of U.S. bankers, lawyers, accountants and other professionals to devise and conduct abusive tax shelters. Over the years, we have learned a lot of the offshore tricks and have designed this bill to fight back by closing obnoxious offshore tax loopholes and strengthening offshore tax enforcement.

The 112th Congress is the fifth Congress in which I have introduced a comprehensive bill to combat offshore and tax shelter abuses. A number of provisions from past bills have made it into law, such as measures to curb abusive foreign trusts, close offshore dividend tax loopholes, and strengthen penalties on tax shelter promoters, but much more needs to be done.

The last Congress made significant progress in the offshore battle. We finally enacted into law the economic substance doctrine which authorizes courts to strike down phony business deals with no economic purpose other than to avoid the payment of tax. My past bills supported the economic substance doctrine, and its enactment into

law is a victory many years in the making.

Last year also saw enactment of the Baucus-Rangel Foreign Account Tax Compliance Act or FATCA, which is a tough new law designed to flush out hidden offshore bank accounts. Foreign banks are currently engaged in a massive lobbying effort to weaken its disclosure requirements, but U.S. banks have had it with foreign banks using secrecy to attract U.S. clients and want those banks to have to meet the same disclosure requirements U.S. banks do. The Administration is so far resisting calls to water down the provisions.

President Obama, who when in the Senate cosponsored my bills in 2005 and 2007 to end tax haven abuses, is a longtime opponent of offshore tax evasion. He knows how fed up Americans are with tax dodgers who hide their money offshore, use complex tax shelters to thumb their nose at Uncle Sam, and offload their tax burden onto the backs of honest Americans.

The bottom line is that each of us has a legal and civil obligation to pay taxes, and most Americans fulfill that obligation. It is time to force the tax scofflaws, the tax dodgers, and the tax cheats to do the same, and end their misuse of offshore tax havens.

The bill I am introducing today is a stronger version of the Stop Tax Haven Abuse Act introduced in the last Congress. In addition to preserving the provisions from last year that have not yet been enacted into law, it contains several new measures to stop tax dodgers from taking advantage of middle Americans who play by the rules.

Among the bill's provisions are special measures to combat persons who impede U.S. tax enforcement; establishment of legal presumptions to overcome secrecy barriers; the treatment of offshore corporations as domestic corporations for tax purposes when controlled by U.S. persons; closing a tax loophole benefiting credit default swaps that send money offshore; closing another loophole that allows corporate deposits of foreign funds in U.S. accounts to be treated as nontaxable, unrepatriated foreign income; disclosure requirements for basic information on country-by-country tax payments by multinationals; and stronger penalties against tax shelter promoters and aiders and abettors of tax evasion.

Probably the biggest change in the bill from the last Congress is that it would no longer require Treasury to develop a list of offshore secrecy jurisdictions and then impose tougher requirements on U.S. taxpayers who use those jurisdictions. Instead, the bill would build on the Foreign Account Tax Compliance Act of 2010, by creating tougher disclosure, evidentiary, and enforcement consequences for U.S. persons who do business with foreign financial institutions that reject FATCA's call for disclosing accounts used by U.S. persons. By focusing on non- FATCA financial institutions instead of offshore secrecy jurisdictions, the bill relieves Treasury of a difficult task, while providing additional incentives for foreign banks to adopt FATCA's disclosure requirements.

Mr. President, I ask unanimous consent that a section by section analysis and a bill summary be printed in the Record.

Mr. President, as we discuss the need to bring down the deficit, we should acknowledge a few basics. First is cannot achieve the deficit reduction we need with spending cuts to nondefense discretionary programs alone. They simply aren't large enough to make the difference we need, and the damage we would do to American families from drastic cuts in those programs is simply too great.

Second is that in light of those facts and in the interest of basic fairness, a balanced solution to deficit spending must include revenues as well as spending cuts. If we ask college students relying on Federal aid, workers in need of Federal job training, seniors in need of health care to sacrifice in the name of deficit reduction, so, too, should those who benefit from loopholes and handouts in the Tax Code, including loopholes that often benefit only highly profitable corporations, one of those huge loopholes that benefits corporations that dole out large stock option pay to their executives.

Current law provides an unwarranted tax subsidy to executive stock option compensation thereby increasing the tax burden on working families and increasing our deficit. According to the Joint Committee on Taxation, closing this loophole would reduce the deficit by about $25 billion.

Today, under tax rules for reporting stock options, corporations report stock option expenses on their books when those stock options are granted but use another method to claim a different and a typically much higher expense on their tax returns when the stock options are exercised. The result is, corporations can claim larger tax deductions for options on their tax returns than the actual expense they show on their books for those same options.

Stock options are the only type of compensation where the Tax Code allows a corporation to deduct more than the expense shown on their books. For all other types of compensation--cash, stock, bonuses, and others--the tax return deduction equals the book expense. In fact, if corporations deducted on their tax returns more than their books showed as compensation, it could constitute tax fraud. The sole exception to that rule is stock options. It is an exception we can no longer afford.

The Permanent Subcommittee on Investigations, which I chair, held a hearing in June of 2007, when we examined the stock option tax gap in detail at nine companies. We found that those nine companies claimed tax deductions that were a combined $1 billion greater than the expenses shown on their books. Let me repeat, just nine companies, $1 billion in excess tax deductions.

We were shocked by that finding, and we asked the IRS to calculate the stock option tax gap for the country as a whole. Using actual data from tax returns, the IRS found that for the first full year in which data was available, U.S. companies claimed an excess of $61 billion in stock option tax deductions compared to their book expenses. Since then, IRS data shows that the stock option tax gap has persisted for 5 years. They looked at 2005 to 2009, which was the latest year for which data was available, with the size of the excess tax deductions varying from $11 billion to $52 billion per year. These excessive deductions mean billions of dollars in reduced taxes for corporations wealthy enough to provide substantial stock option compensation to their already well-paid executives and all at the expense of ordinary taxpayers and an increase in the deficit.

It is a tax loophole that is fueling excessive executive pay, increasing the pay gap between millionaires and the middle class, and enabling profitable corporations to avoid paying their fair share to reduce the deficit.

I will soon be reintroducing the same legislation I have introduced in past years to end this misalignment of the Tax Code.

The bill would cure the problem simply by requiring the corporate stock option tax deduction to equal the stock option expense shown on the corporate books. It would not affect the taxes paid by individuals who receive the stock options. It would not affect so-called incentive stock options which receive favored tax treatment under section 422 of the Tax Code and are often used by startup companies.

In addition, the bill would make stock options pay subject to the same $1 million cap on corporate tax deductions that applies to other forms of executive pay. Congress established that $1 million cap so that taxpayers would not have to subsidize enormous paychecks for executives. But the cap can't end that tax subsidy without including stock options. Even if included under the cap, stock options could still be awarded in excess of $1 million, but not at the expense of ordinary taxpayers.

I do not know of any Senator who does not want to reduce the budget deficit. I do not know of any Senator who believes it is wise to subsidize executive paychecks at the expense of working families. But as it now stands, the excessive corporate tax deduction for stock option pay widens the deficit while increasing the tax burden on ordinary taxpayers. By closing this tax gap, by ending the illogical treatment of corporate stock options in current law, we can reduce the budget deficit and bring much-needed fairness to the Tax Code.

Mr. President, I ask unanimous consent that I be allowed to proceed as in morning business for 8 minutes.

Mr. President, the Department of Justice announced earlier this week that Ahmed Abdulkadir Warsame, an accused member of the terrorist group Al-Shabaab, has been indicted on charges of providing material support to Al-Shabaab and al-Qaida in the Arabian Peninsula, conspiring to teach and demonstrate the making of explosives, possessing firearms and explosives in furtherance of crimes of violence, and other violations of Federal law. He will be tried for these offenses in Federal court in New York.

Warsame is a Somali national who was captured in the gulf region in late April and taken to a U.S. Navy vessel for detention and interrogation. The Department of Defense has stated that the interrogation was conducted by an interagency team comprised of U.S. military personnel, with assistance from the High-Value Detainee Interrogation Group. After the completion of this interrogation and a hiatus of several days, Warsame was turned over to a team of FBI officials for law enforcement questioning, and in that he waived his Miranda rights and continued to talk.

This case appears to be an example of our national security and law enforcement teams working together in the manner we would hope they would toward the twin objectives of collecting critical intelligence information and ensuring a successful criminal prosecution of the detainee.

Published reports indicate that Warsame was captured by American military forces on a boat in international waters between Yemen and Somalia after the United States acquired intelligence indicating that a significant terrorist figure was on board the vessel. Under these circumstances, it was appropriate for the military to detain and interrogate Warsame to obtain actionable intelligence. The United States is currently engaged in military operations pursuant to the 2001 Authorization for Use of Military Force. As the Supreme Court held 7 years ago in the case of Hamdi v. Rumsfeld, the capture and detention of both lawful and unlawful combatants is a ``fundamental and accepted . . . incident to war.'' I understand these interrogations were conducted in a manner fully consistent with the interrogation techniques authorized under the Army Field Manual on interrogations.

Once our national security team determined that the collection of actionable intelligence had been completed, a separate decision was made, on the basis of the specific facts of this case, as to the best forum in which to prosecute Warsame for his alleged crimes.

The indictment sets forth evidence that Warsame violated a number of Federal statutes, including sections of the Criminal Code prohibiting trafficking in explosives, use of dangerous weapons, acts of international terrorism, providing material support to foreign terrorist organizations, and receiving military-type training from foreign terrorist organizations--making him a candidate for prosecution in a Federal court with jurisdiction over such violations.

Warsame also appears to have engaged in acts of terrorism and material support to terrorism, both of which are crimes under the Military Commissions Act, if they are committed ``in the context of and associated with hostilities'' against the United States. What has not been resolved is whether Warsame meets the jurisdictional threshold in the Military Commissions Act of having acted in the context of hostilities against the United States and having engaged in or materially supported such hostilities.

The administration's national security team unanimously agreed that prosecution in Federal court was the better option and the one most likely to lead to a conviction under the facts of this case. Our Federal prosecutors and Federal courts have a proven track record in prosecuting terrorists. Two years ago, the Justice Department informed us that there were 208 inmates in Federal prisons who had been sentenced for crimes related to international terrorism and an additional 139 inmates who had been sentenced for crimes related to domestic terrorism. By contrast, prosecution of the Warsame case before a military commission would have raised a difficult jurisdictional issue that could have resulted in dismissal or even acquittal.

Critics of the decision to try Warsame in Federal court apparently would prefer that he be tried before a military commission, even though he might be less likely to be convicted there due to the jurisdictional issue. I disagree with that position. In my view, the most appropriate forum for trial should be determined, as it was here, on the basis of the nature of the offense, the nature of the evidence, and the likelihood of successful prosecution. The executive branch officials who made the determination in this case are in a much better position to weigh those factors and make that judgment than is the Congress.

By the way, the approach taken by the administration in this case is consistent with the bipartisan detainee provisions included in the National Defense Authorization Act, as reported by the Senate Armed Services Committee last month.

Those provisions would authorize military detention for enemy belligerents captured in the course of hostilities authorized by the 2001 Authorization for Use of Military Force. That authority appropriately encompasses the detention of an individual like Warsame, who is suspected of participation in such hostilities, until such time as the military has been able to interrogate the detainee and make an appropriate status determination. While we may not have enough evidence to prove beyond a reasonable doubt that Warsame participated in hostilities against the United States, we undoubtedly had sufficient evidence to hold him for the time required to interrogate him and obtain the intelligence that our military needs.

The provisions in the Senate Armed Services Committee-reported bill would also expressly authorize the transfer of such a detainee ``for trial by an alternative court or competent tribunal having lawful jurisdiction.'' Indeed, an amendment to delete this authority was defeated in committee by a bipartisan vote of 7 to 19. We decided, in other words, to leave it up to executive branch officials to determine on a case-by-case basis, as they did here, the most appropriate forum for prosecution, whether it be a Federal court or a military commission.

By contrast, the House version of the defense authorization bill includes a provision that would expressly prohibit the trial in Federal court of any alleged foreign terrorist who might be subject to trial by a military commission--even if he is arrested inside the United States. This provision may well be unconstitutional, given that article III of the U.S. Constitution expressly states that:

The judicial power shall extend to all Cases, in Law and

Equity, arising under this Constitution, the Laws of the

United States, and Treaties made, or which shall be made,

under their Authority.

Under the plain language of this provision, Congress would appear to lack the authority to exclude the prosecution of violations of the laws of the United States in the Federal courts.

The effort to direct all terrorist cases to military commissions could also be highly counterproductive, providing jurisdictional arguments that defendants could use to seek the dismissal of charges against them. If the House language were adopted, a case in Federal court on a terrorism charge would be at risk of being dismissed on the grounds that it could only have been brought before a military commission, while at the same time, because of the limited jurisdiction of military commissions, the military commission might not have jurisdiction either. In such a case, it would be impossible to prosecute an alleged terrorist in any

forum. The critics of the Department of Justice decision should end their effort to score political points here. The stakes are too high, and if the critics get their way, we might not be able to try some terrorists at all--anywhere.

Some may contend that holding alleged terrorists in the United States for trial could needlessly subject Americans to retaliatory attacks by terrorist organizations. There is no basis for that argument. We have tried hundreds of alleged terrorists in our Federal courts over the last decade. We are currently holding many more--including the Christmas Day bomber, who is being held in my hometown of Detroit. So far as I know, none of these cases have led to retaliatory attacks by terrorist organizations. In any event, we know that al-Qaida and its allies are already seeking avenues to attack us on American soil and would do so if they could. Moving the location of a trial to Guantanamo or some other foreign location is unlikely to deter such an attack.

Last month, ADM William McRaven--the President's nominee to be commander of U.S. Special Operations Command--testified before our Armed Services Committee that a suspected enemy belligerent detained outside the war zones in Afghanistan and Iraq would likely be put on a naval vessel until ``we can prosecute that individual in a U.S. court or we can return him to a third party country.'' Admiral McRaven made it clear later in his testimony that such an individual could also be transferred for trial by a military commission. In other words, we have a choice. We should preserve that choice.

In summary, the Warsame case demonstrates that we do have the capacity to detain and interrogate suspected terrorists in military custody for the purpose of obtaining actionable intelligence, and then to transfer them to an appropriate forum for trial--whether it be a Federal court or a military commission. This case demonstrates that we do not have to sacrifice actionable intelligence for law enforcement purposes, and that we do not have to sacrifice criminal prosecution in order to collect intelligence information. And it demonstrates that we can pursue both of these objectives without being pushed to what Admiral McRaven described as the ``unenviable option'' of having to release the detainee.

The only ``unenviable'' outcome is the one that the critics of the Department of Justice decision would lead us to--prohibiting the criminal trial of suspected foreign terrorists in Federal court and requiring them to be tried by military commissions, even in cases like the Warsame case, where a jurisdictional problem might lead a military commission to dismiss the case.

The action of the administration in the Warsame case is sound. The prosecutorial discretion they exercised as to the best forum for the trial should be preserved and should not be interfered with by the Congress.

I yield the floor.

Mr. President, we must raise the debt ceiling, period. This is not an opinion, it is a fact. The consequences of failing to act are simply too catastrophic to consider any other course. Negotiations are underway now to seek an agreement to raise the debt ceiling as part of a larger agreement on deficit reduction. But there is a major obstacle to agreement: a refusal on the part of the Republican leadership to compromise, a refusal to understand that sacrifice must be shared.

The sacrifice, they say, must come from middle America--those struggling to pay for a college education or for health care for their kids or for long-term care for their parents. The Republican leader demands that this sacrifice be made by the middle class in order to protect the Bush tax cuts and other tax breaks for the wealthiest among us--despite the huge and growing gap in the distribution of income in our country between the wealthy and the middle class.

One example of the kind of tax breaks and tax loopholes that we Democrats seek to change is the unconscionable tax break given to hedge fund managers. Hedge fund managers generally make their money by charging their clients two fees. First, the manager receives a management fee, typically equal to 2 percent of the assets invested. Second, the manager typically receives 20 percent of the income from those investments above a certain level. This 20-percent share of the investment returns from hedge funds is known as ``carried interest.'' Under current law, most hedge fund managers claim that this carried interest qualifies as a long-term capital gain, currently subject to a maximum tax rate of 15 percent, rather than being taxed as ordinary income, currently subject to a maximum tax rate of 35 percent.

But a moment's analysis shows that this money is ordinary income by any fair definition and should be treated that way. The 20-percent fee is not capital gains, because it applies not to capital that the hedge fund manager

has invested, but to the payment he receives for investing capital that other people provide. Pretending that the 20-percent fee is capital gains when, in fact, it is payment for a service is an ``Alice in Wonderland'' argument that elevates fiction over fact.

We Democrats seek to end this fiction. We are ready to call carried interest what it is--ordinary taxable income. Recognizing carried interest for what it is would increase tax fairness for working Americans who pay their fair share of taxes. They have the right to expect that the wealthy do the same. It would reduce the deficit--if we did this--by an estimated $21 billion over the next 10 years.

Republicans seek to protect this loophole. They say the income of investment managers is at risk from year to year and, therefore, deserving of a lower tax rate. Well, ask the factory worker, who just saw his or her job move overseas; ask the store clerk, who saw his employer close because of the damage from the financial crisis; ask the part-time worker, whose hours and earnings go up and down from week to week--ask all of them just how much risk working Americans face right now.

Republicans say taxing this income as ordinary income would discourage investment in job creation, and that is absurd. The people who are actually risking their capital--investors in these funds--will continue to see their profits taxed at the lower capital gains rate. The issue in this case is income that these managers receive for serving their clients. If you are a hedge fund manager, your job is to manage a hedge fund. The income you receive for that job is no different than the income a waitress receives for waiting tables, or a janitor receives for scrubbing floors. The idea that the income of millionaire fund managers should be taxed at a lower rate than that of their staff or other workers is an absurdity.

This nonsensical loophole is deeply unfair at a time when working families are struggling, while the wealthiest among us continue to prosper greatly. Recent decades have seen a massive and growing prosperity gap between ordinary Americans and the wealthy. How wide has that gap become? In 1980, the top 1 percent of American earners took home about 10 percent of our Nation's total income. A few decades later, that figure had increased to 24 percent of our Nation's total income. That is just the wealthiest 1 percent that now have over 20 percent of our total income. It is hard to argue that properly taxing their income will impose great hardship on investment fund managers, who have done awfully well in recent years.

How well have those investment fund managers done? According to a survey by a magazine covering the hedge fund industry, the top 25 hedge fund managers earned $22.7 billion last year. The two managers who topped the list earned $80 billion each--that is billion with a ``B.'' The typical American household earned perhaps $60,000 or $62,000 in 2008. Those hedge fund managers earned in about 4 minutes what it took a typical working family a year to earn. Yet they paid drastically lower rates on those massive incomes than the low-wage worker who cleaned their office. The Republicans would protect these unconscionable tax breaks while, at the same time, wanting to cut programs that provide an education for our kids and provide health care for our seniors.

It gets worse. Adding insult to injury, Republicans are protecting another tax loophole--one that many of these hedge fund managers, by the way, use to avoid taxes entirely. This loophole allows corporations and wealthy individuals to take income earned here in the United States and shift it to overseas tax havens, dodging U.S. taxes that they rightly owe.

I have long sought to end this abuse, because these offshore tax havens increase the tax burden on those who pay the taxes they owe. In the last Congress, I introduced the Stop Tax Haven Abuse Act, which would seek to recover tax revenue now lost to offshore tax dodging.

Ending this loophole is significant if we seek to properly tax the income of hedge fund managers. At one hearing of the Permanent Subcommittee on Investigations, which I chair, three well-known hedge funds that claim to be based in the Cayman Islands admitted under questioning that they did not have a single employee in the Cayman Islands. Closing the offshore loophole would make our effort to equitably tax carried interest all the more effective, by shutting off a major avenue that hedge funds and other investment funds use to dodge taxes.

Democrats have rightly proposed addressing the carried interest loophole and offshore tax havens and other unfair tax loopholes as part of a balanced deficit reduction strategy. We believe it is grossly unfair to cut programs that help young Americans get a college education or help train working Americans for new jobs in order to protect tax loopholes that benefit the wealthiest Americans.

The Republican response? To walk out of negotiations and say they will not accept any deficit reduction package if it includes revenue measures.

Mr. President, what is the time situation?

If there is no other Senator waiting, I ask unanimous consent to be permitted to continue for 3 additional minutes.

I thank the Presiding Officer.

What the Republicans have done is to walk out of negotiations and say they will not accept any deficit reduction package if it includes revenue measures. So let's call this what it is. If Republicans refuse to consider compromise solutions, they are threatening all of us, the whole country, with economic catastrophe in order to protect the sky- high income of millionaire hedge fund managers and offshore tax avoiders. Those are two of the loopholes--two of many loopholes--we have identified that should be closed that Republicans refuse to consider closing. So what they are doing--and we should make no mistake about this--is holding the well-being of all Americans hostage to the tax breaks of a wealthy few.

We all agree we must act to reduce the deficit. We have acknowledged, as Democrats, the need for spending cuts, even painful cuts to programs we support. That is why I am so troubled by the utter refusal of the Republicans to consider even modest compromises in the direction of new revenue.

There is an overwhelming consensus among budget experts that we cannot achieve serious deficit reduction with spending cuts alone. There is an overwhelming consensus among economists that drastic cuts in Federal outlays will threaten our economic recovery--just as such cuts have throttled recovery in other nations. And despite the fantasies of some in Congress, it is abundantly clear a failure to raise the debt ceiling would do incalculable harm to the recovery and to our standing in the world. Drawing lines in the sand, as the Republicans have done, and refusing to compromise by walking out, has no place in the situation we face.

I urge the Republican leadership to abandon their uncompromising positions, to embrace solutions to the deficit and recognize that we all must sacrifice to address the deficit problem. The well-being of all of us, of all Americans, should not be held captive in the service of the most fortunate few.

Mr. President, I suggest the absence of a quorum.

Mr. President, I would like to pay tribute to Henry G. Marsh, a tireless and dedicated community leader in Saginaw, MI, who passed away on May 11, 2011. Mr. Marsh was an important figure in the civil rights community in Saginaw, as well as in politics, for many years. He accomplished much throughout his professional life and has forged an impressive legacy that will surely inspire many for years to come.

Henry G. Marsh was born on October 11, 1921, to Thomas and Saidye Marsh. Upon graduating from Greenwood High School, Mr. Marsh joined the Army. After his military service, Mr. Marsh earned a degree from Knoxville College in Knoxville, TN, and later a law degree from Wayne State University.

In 1954, Mr. Marsh moved to Saginaw and quickly became actively involved in community affairs in the city. He would soon accept a position as legal counsel for the NAACP, and would eventually become chairman of the Human Relations Commission. Henry Marsh was committed to serving the needs of the Saginaw community and served in various positions and as chairman of many committees and boards throughout his adult life in Saginaw, MI.

In 1961, Mr. Marsh became the first African American to be elected to the Saginaw City Council, and in 1967, became Saginaw's first Black mayor. Shortly after becoming mayor, he formed a 220-member Committee on Civil Rights, made up of homemakers, factory workers, ministers, business owners and members of civil rights organizations, that sought to bring the city together to solve the many issues the city faced at the time. Reflecting on his stint as mayor, he was quoted in the Saginaw News in a 2000 interview as saying that the commission was ``the most important thing I ever did. We discussed the legitimate concerns of this city.''

Henry Marsh was a devoted husband and family man. He was married to his wife Ruth for 63 years, and they were blessed with three children, Michael, Walter and Teresa.

This is, indeed, a great loss to the many people who knew Henry Marsh and to the many more that have benefited from his life's work. I know my colleagues join me in paying tribute to the life and work of Henry G. Marsh. I am sure his family takes comfort in knowing that his accomplishments will be honored and remembered for years to come.

Mr. President, I have long sought to bring attention to the dangerous gaps in U.S. gun laws, hoping the exposure would lead to the passage of commonsense firearm legislation. To those of us who feel that Congress can and should play a role in protecting American neighborhoods from the scourge of gun violence, enacting laws to ensure firearms stay out of the hands of dangerous people seems like a no- brainer. Unfortunately, the National Rifle Association, despite broad support for sensible gun safety laws among Americans across the political spectrum, has successfully blocked much-needed legislative changes.

Recently a startling new voice joined the discussion highlighting the weaknesses in our gun laws, most notably how we administer firearm background checks. Consider the following quote describing the so- called gun show loophole:

America is absolutely awash with easily obtainable

firearms. You can go down to a gun show at the local

convention center and come away with a fully automatic

assault rifle without a background check and, most likely,

without having to show an identification card.

While this quote does not break any new ground regarding the dangers of the gun show loophole, it is noteworthy because of the person who said it. These were not the words of a Member of Congress, advocating for legislation, nor were they the words of a spokesperson of groups like Mayors Against Illegal Guns or the Brady Campaign. This quote is taken from an Internet video message recorded by Adam Gadahn, an American-born, confirmed al-Qaida operative.

In the video, Gadahn speaks to al-Qaida followers and sympathizers, describing the ease with which a person can purchase a firearm from a private seller without a background check, often with no questions asked. In fact, this video is not merely a description of the loopholes in U.S. gun laws, it is an exhortation to would-be terrorists to exploit these loopholes and kill innocent Americans. To wit, the video ends with Gadahn asking his viewers, ``What are you waiting for?''

This video is a chilling reminder that dangerous loopholes exist in U.S. gun laws, weaknesses that terrorists are actively trying to exploit. While Gadahn is not entirely accurate--a person cannot purchase a ``fully automatic assault'' rifle at a gun show without government knowledge--he correctly describes just how simple it is for dangerous individuals to acquire deadly weapons in the United States, including semi-automatic assault rifles.

I urge my colleagues to take up and pass two gun safety bills introduced by Senator Frank Lautenberg: the Gun Show Background Check Act, S. 35, which would close the loophole that makes it easy for criminals, terrorists and other prohibited buyers to evade background checks and buy guns from private citizens at gun shows; and the Denying Firearms and Explosives to Dangerous Terrorists Act, S. 34, which would close the loophole in Federal law that hinders the ability of law enforcement to keep firearms out of the hands of terrorists by authorizing the Attorney General to deny the sale of a firearm when a background check reveals that the prospective purchaser is a known or suspected terrorist.

Congressional action should not require such stark evidence that al- Qaida and like-minded criminals are trying to use weak U.S. gun laws to carry out terrorist attacks against Americans. But the evidence--clear, explicit and terrifying--is here nonetheless. The time to act is long overdue.

Mr. President, for the Committee on Armed Services I report favorably the following nomination lists which were printed in the Records on the dates indicated, and ask unanimous consent, to save the expense of reprinting on the Executive Calendar that these nominations lie at the Secretary's desk for the information of Senators.

Mr. President, today Senator Blunt and I have introduced the Near East and South Central Asia Religious Freedom Act of 2011. The purpose of this legislation is to establish within the State Department a special envoy to promote freedom of worship for religious minorities in this important region of the world.

It is a tragic fact that in many of the nations of the Near East and South Central Asia, this universal human right, the freedom to worship in keeping with one's conscience, is in doubt. I would point my colleagues to the State Department's most recent Report on International Religious Freedom, published late last year. The report concludes, among other things, that: in Iran, ``government respect for religious freedom in the country continued to deteriorate''; in Iraq, ``violence conducted by terrorists, extremists, and criminal gangs restricted the free exercise of religion and posed a significant threat to the country's vulnerable religious minorities''; in Afghanistan, respect for the rights of religious minorities deteriorated; in Pakistan organized violence against religious minorities had increased; and in Tajikistan the government passed new laws restricting religious practice.

The legislation we introduce today seeks to combat such abuses by placing a high-level official within the State Department to focus the Nation's diplomatic efforts on promoting freedom

of worship. The special envoy would be tasked with promoting religious freedom within the Near East and South Central Asia; monitoring and combating intolerance and incitements to violence against religious minorities within the region; and working with the region's governments to address laws and practices that infringe on religious freedom.

It is in the interest of the United States to promote freedom of worship and the rights of religious minorities around the world, and especially in nations where those freedoms are under threat. Such violence is a threat to regional stability in a part of the world where U.S. interests are great. Moreover, our support for these universal human values affirms the principles upon which our own Nation was founded.

I thank my colleague from Missouri for joining with me in introducing this important legislation. I urge my colleagues to support our efforts to protect the lives and freedoms of religious minorities, and to promote the universal values upon which our Nation is built.

Mr. President, today Senator Blunt and I have introduced the Near East and South Central Asia Religious Freedom Act of 2011. The purpose of this legislation is to establish within the State Department a special envoy to promote freedom of worship for religious minorities in this important region of the world.

It is a tragic fact that in many of the nations of the Near East and South Central Asia, this universal human right, the freedom to worship in keeping with one's conscience, is in doubt. I would point my colleagues to the State Department's most recent Report on International Religious Freedom, published late last year. The report concludes, among other things, that: in Iran, ``government respect for religious freedom in the country continued to deteriorate''; in Iraq, ``violence conducted by terrorists, extremists, and criminal gangs restricted the free exercise of religion and posed a significant threat to the country's vulnerable religious minorities''; in Afghanistan, respect for the rights of religious minorities deteriorated; in Pakistan organized violence against religious minorities had increased; and in Tajikistan the government passed new laws restricting religious practice.

The legislation we introduce today seeks to combat such abuses by placing a high-level official within the State Department to focus the Nation's diplomatic efforts on promoting freedom

of worship. The special envoy would be tasked with promoting religious freedom within the Near East and South Central Asia; monitoring and combating intolerance and incitements to violence against religious minorities within the region; and working with the region's governments to address laws and practices that infringe on religious freedom.

It is in the interest of the United States to promote freedom of worship and the rights of religious minorities around the world, and especially in nations where those freedoms are under threat. Such violence is a threat to regional stability in a part of the world where U.S. interests are great. Moreover, our support for these universal human values affirms the principles upon which our own Nation was founded.

I thank my colleague from Missouri for joining with me in introducing this important legislation. I urge my colleagues to support our efforts to protect the lives and freedoms of religious minorities, and to promote the universal values upon which our Nation is built.

Mr. President, I understand there is a time agreement on this nomination; is that correct?

I thank the Presiding Officer, and I yield myself 10 minutes.

Mr. President, the nomination of Leon Panetta to be Secretary of Defense is a wise and a solid nomination. Director Panetta has given decades of dedicated public service to this Nation, and we should all be grateful he is once again willing to answer the call and take the helm at the Department of Defense. We are also grateful to his wife Sylvia for her significant sacrifices over the last 50 years in supporting Leon Panetta's efforts in the public and private sectors.

When Mr. Panetta appeared before the Armed Services Committee at his nomination hearing, all of our Members commented invariably in the same way--reflecting the view that we are grateful Mr. Panetta is willing to take on this position. He is going to bring a reassuring level of continuity and in-depth experience. He has been a critical member of President Obama's national security team during his tenure as Director of the Central Intelligence Agency. The Department of Defense will need Director Panetta's skill and his wisdom to navigate the extraordinarily complex set of challenges in the years ahead.

Foremost among those demands are the demands on our Armed Forces, and these are exemplified by the ongoing wars in Afghanistan and Iraq. Between those two conflicts, we continue to have approximately 150,000 troops deployed. The U.S. military is also providing support to NATO operations to protect the Libyan people. In addition, even after the extraordinary raid that killed Osama bin Laden, we face potential terrorist threats against us and against our allies which emanate from Pakistan, Yemen, Somalia, and other places.

The risk of a terrorist organization getting their hands on and detonating an improvised nuclear device or other weapon of mass destruction remains one of the gravest possible threats to the United States. To counter that threat, the Defense Department is working with the Departments of State, Energy, Homeland Security, and other U.S. Government agencies to prevent the proliferation of nuclear weapons, fissile materials, and dangerous technologies. As Secretary of Defense, Director Panetta's leadership in this area will be of vital importance. Here again, it is that experience as Director of the CIA which will be so invaluable.

In the coming weeks, President Obama and his advisers will face a number of key national security decisions. While the drawdown of U.S. forces in Iraq remains on track, there have been recent signs of instability in that country. As a result, it is possible that Iraq's political leadership may ask for some kind of continuing U.S. military presence beyond the December 31 withdrawal deadline which was agreed to by President Bush and Prime Minister Maliki in the 2008 Security Agreement.

Another key decision point is looming in Afghanistan regarding reductions in U.S. forces starting next month. President Obama said the other day:

It's now time for us to recognize that we have accomplished

a big chunk of our mission and that it's time for Afghans to

take more responsibility.

The President also said a few months ago that the reductions starting next month will be ``significant.'' Hopefully, they will be. Director Panetta, while not assigning a specific number, agreed they need to be significant. A significant reduction in our troop level this year would send a critical signal to Afghan leaders that we mean it when we say our commitment is not open-ended and that they need to be urgently focused on preparing Afghanistan's security forces to assume security responsibility for all of Afghanistan. The more that Afghan security forces do that, the better the chances of success because the Taliban's biggest nightmare is facing a large, effective Afghan Army--an army which is already respected by the Afghan people, but now, hopefully-- and soon--in control of Afghanistan's security.

Another major issue facing the Department is the stress that 10 years of unbroken war has placed on our Armed Forces. Over the last decade, many of our service men and women have been away from their families and homes for multiple tours. Not only is our force stressed, so are our military families. We owe them our best efforts to reduce the number of deployments and increase the time between deployments.

The next Secretary of Defense will have to struggle with the competing demands on our forces while Washington struggles with an extremely challenging fiscal environment. The

Defense budget will not and should not be exempt from cuts. But Congress, working with the next Secretary of Defense, will need to scrub each Defense program and expenditure and make the tough choices and tradeoffs between our war fighters' requirements today and preparations for the threats of tomorrow.

Last week, the Armed Services Committee marked up the fiscal year 2012 National Defense Authorization Act. The committee cut about $6 billion from the President's budget request. However, the President has decided to reduce the national security budgets for the next 12 years by $400 billion. What we don't know is how much of that $400 billion he will recommend to come from the Defense budget and how much from the intelligence and homeland security budgets or how much is recommended to be in the first of that 12-year period--fiscal year 2012.

The Nation is fortunate that Director Panetta's compelling record of achievement and experience is well suited to the demands of the position of the Secretary of Defense. Mr. Panetta is the right person to help our military through the fiscal challenges that confront this Nation. His service as President Clinton's Director of the Office of Management and Budget is invaluable because he understands the budget process and because he shaped the decisions that helped achieve the budget surpluses of the late 1990s.

Leon Panetta has repeatedly demonstrated an ability to reach across party lines and work in a bipartisan spirit since entering public service 45 years ago. He worked on the staff of the Republican whip in the Senate and headed the Office of Civil Rights in the Nixon administration. He later won election to the House of Representatives as a Democrat, where he served 16 years, earning the respect of his peers and becoming the chairman of the House Budget Committee.

Throughout his time in public service, Leon Panetta has been guided by a clear moral compass. He has said:

In politics there has to be a line beyond which you don't

go--the line that marks the difference between right and

wrong, what your conscience tells you is right. Too often

people don't know where the line is. My family, how I was

raised, my education, all reinforced my being able to see

that line.

Leon Panetta has been intimately involved in the most pressing national security issues of our time. During his tenure as Director of the Central Intelligence Agency, President Obama turned to Director Panetta to personally oversee the manhunt for Osama bin Laden and the awe-inspiring operation that brought an end to al-Qaida's murderous leader and provided a measure of relief to the families and friends who have suffered since September 11, 2001. The raid on the bin Laden compound epitomizes the way in which the CIA and the Defense Department are finally working together to support each other in counterterrorism operations, and Director Panetta deserves credit for this close coordination.

Before concluding, I wish to pass along my gratitude and deep admiration for the man who is stepping down as head of the Department of Defense, Secretary Robert Gates. Secretary Gates has provided extraordinary service to this country, spanning the administrations of eight Presidents. Four and a half years ago, he left the comfort and rewards of private life, following a long career in government, to once again serve the critical post of President Bush's Secretary of Defense at one of the most difficult times in recent history. Throughout his tenure, across the Bush and Obama administrations, Secretary Gates' leadership, judgment, and candor have earned him the trust and respect of all who have worked with him.

Secretary Gates has combined vision and thoughtfulness with toughness, clarity and courageous decisionmaking. Secretary Gates established a direct and open relationship with Congress and with our Senate Armed Services Committee in particular. As chairman of that committee, I will always be personally grateful for that.

Secretary Gates' tenure as Secretary of Defense will be judged by history to have been truly exceptional. So our next Secretary of Defense will have enormous responsibilities but also big shoes to fill. I am confident Leon Panetta is the right person to take on that challenge, and I urge our colleagues to support this nomination.

Mr. President, I yield the floor, I suggest the absence of a quorum, and I ask unanimous consent that any time consumed during the quorum call be equally divided.

Madam President, first, let me thank the Senator from South Carolina for his analysis on Afghanistan as well as his great support for Leon Panetta and his comments about Bob Gates, which I very much share and commented about this afternoon in a very similar way.

I particularly wish to commend Senator Graham for his analysis of what has changed in Afghanistan in the last 17 or 18 months, so that the reductions which will be announced tomorrow are not based on getting tired but are being based, I am sure, on the conditions on the ground or in Afghanistan and on the critical changes which have taken place in Afghanistan.

I very much agree with his assessment about the surge in the Afghan forces. I was listening to his comments from a monitor, and when I heard his analysis about 90,000 additional Afghan forces, he is exactly right. The surge has not just been 30,000 of our troops but three times as many in terms of Afghan troops. And the importance of that is not just the numbers, not just the training, and not just the literacy, which the Senator pointed out, but also the mentoring and the partnering in the field with coalition forces.

We have tracked this very carefully, and there has been a significant increase in the number of Afghan units that consistently are in the field partnering with our troops and with other coalition members' troops, and that makes a huge difference too because when the Afghan people see Afghan troops in the lead instead of foreign nations' troops in the lead, they understand that, in fact, the Taliban's argument that they are being occupied is a false propaganda argument, and that weakens the Taliban tremendously as well.

Yes.

I want to first of all thank my good friend from South Carolina for those comments. He has been very perceptive of the importance of turning this responsibility over to the Afghans as soon as possible, and we are clearly on track to do exactly that. It is that improvement in the situation on the ground that will allow, hopefully, for a significant reduction that will be announced tomorrow. That is our hope--my hope.

But I think the Senator from South Carolina has seen this right from the beginning, that we wanted success and we could have success in Afghanistan. Indeed, we see some real evidence of that success in the military situation on the ground. If only that could be equivalent to the governance situation, we all would be a lot more comfortable.

I think we know our Presiding Officer, Senator Shaheen, is very much into the issue of putting some real pressure on Pakistan to end the Haqqani network's intrusions and excursions into Afghanistan. And I think we are all together on that essential goal of changing Pakistani behavior in terms of what they are allowing to occur on their soil, which is that safe haven, particularly for the Haqqanis.

I again thank my friend from South Carolina, and I am reminded by something he said of an earlier visit I made to Afghanistan, by the way, with a number of colleagues--I think Senator Reed and one other Senator were with me. We were with a bunch of Afghan leaders in a small town. This is what they call their Shura. It just happened that they were having this the day we were visiting. There were maybe 50 or 60, 70 guys--old guys, all guys--sitting on the ground on a dirt floor. We intruded, barged in, and I asked one question.

I said: Do you want us here?

The answer: We want you to train our army and leave, and then we will invite you back as guests.

You can't say it much more succinctly.

I thank my colleague.

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

Madam President, I ask unanimous consent that further proceedings under the quorum call be dispensed with.

We are prepared to yield back the remainder of our time and do so.

I ask for the yeas and nays.

Mr. President, I will vote to oppose both the amendments offered today.

I share many of the concerns of Senator Feinstein and others in this body about the impact of the volumetric ethanol excise tax credit. I am particularly concerned that this credit may increase the price that Americans pay for food, something few families can afford these days.

But I cannot support Senator Feinstein's amendment, for three reasons.

First, I fear that her amendment, while addressing tax credits for corn-based ethanol, would also remove support for other, non-corn sources. While I applaud Senator Feinstein for maintaining support for cellulosic ethanol production, we should not reduce support for other non-corn sources that have potential to help reduce our dependence on imported oil without affecting food prices. For example, companies in my state and elsewhere are working on production of biofuels from algae. I believe any attempt to address tax credits for corn-based ethanol should leave intact support for these non-corn sources.

Second, I fear that ending this credit now, more than 6 months before it is set to expire, would unfairly burden business that have made plans with the assumption that the credit would remain in place at least until then. These businesses have a right to expect that Congress will not pull the rug out from under them.

Third, I am concerned that by attaching this amendment to an important piece of legislation, we endanger passage of that legislation. I support the underlying bill, which would reauthorize the Economic Development Administration. The EDA is an important resource for communities across the country, and at a time when jobs should be our top priority, we should support programs with proven records of job creation. But by attaching a revenue measure to EDA bill, the House will almost certainly ``blue slip'' the bill and thereby doom it.

I also will oppose the amendment offered by Senator McCain. I believe that we should support the creation of infrastructure that will support alternative energy development. By prohibiting Federal funding for creating infrastructure to support ethanol production and use-- including cellulosic ethanol and other non-corn sources--Senator McCain's amendment would make it more difficult for us to develop these new sources of energy, sources we need to end our dependence on imported fossil fuels.

Mr. President I have supported regulatory reform since before my election to the Senate in 1978, to make regulations more sensible and efficient while protecting the public's health and well- being. The Snowe regulatory reform amendment would amend the Regulatory Flexibility Act, RFA, to require that Federal agencies consider all potential direct and ``indirect economic impacts'' of proposed regulations. I will vote against this amendment because it is so broad and undefined. Also, the Snowe amendment would give standing to seek judicial review and seek injunction of a rulemaking while the rule is still in its draft form and still receiving public comment. I am concerned that such a change could paralyze the regulatory process, not reform it.

Mr. President, today I wish to recognize the distinguished career of a highly decorated soldier and accomplished public servant. Following decades of unwavering service to our Nation, Dr. Malcolm Ross O'Neill recently retired as the Assistant Secretary of the Army for Acquisition, Logistics & Technology, AL&T. In his capacity as the Assistant Secretary and Army acquisition executive, Dr. O'Neill led the Army's 41,000-member acquisition workforce in its vital mission to equip and sustain the world's most capable, powerful, and respected Army.

Dr. O'Neill has made significant contributions to our national security over the course of a career spanning nearly five decades. He proudly served 34 years on active duty as an Army officer, both in peacetime and in combat. Dr. O'Neill was commissioned in the U.S. Army as a field artillery officer in 1962 and served with the 82nd Airborne Division; as an adviser with the 21st Reconnaissance Company of the 21st Army of the Republic of Vietnam Division; and assistant chief of staff, Ammunition, with the Danang Support Command in Vietnam. His first acquisition job was as a member of the source selection team for what was then called surface-to-air missile, development--now the Patriot missile system. His extensive military experience includes service as commander, U.S. Army Laboratory Command; deputy director of the Strategic Defense Initiative Organization; and director of the Ballistic Missile Defense Organization.

Under Dr. O'Neill's leadership as Assistant Secretary of the Army, the

Army acquisition community has honored its paramount commitment to meet the needs of soldiers in combat missions today. However, Dr. O'Neill also reenergized the Army's efforts to develop advanced soldier capabilities for tomorrow's conflicts. He reminded us that scientific and technical advancements play a critical role in maintaining the Army's unparalleled preeminence in the future. As the lead Army acquisition official, Dr. O'Neill made significant progress in developing a vigorous and robust science and technology portfolio incorporating the combined efforts of Army scientists, labs, advisory boards and other stakeholders. These accomplishments will leave an indelible impact on the Army's warfighting capabilities.

Dr. O'Neill's emphasis on sound management and execution of major weapon systems has helped the Army to prioritize capabilities and modify existing programs to achieve long-term success. He has played a critical role in bringing the Army requirements, resourcing, testing, and acquisition communities together to make informed decisions and adjustments within key programs. As the Army and Department of Defense continue to transform through an era of limited resources, Dr. O'Neill championed the importance of wise investments, competition, and sound acquisition strategies to ensure that more money was spent on the warfighting capabilities of our soldiers and less on overhead. The Army is in a better position to adapt to an ever-changing environment of competing needs as a result of his efforts.

Three words define this dedicated public servant: honor, integrity, and courage. The Nation is in his debt for his many accomplishments during the long and distinguished career of Malcolm Ross O'Neill.

Madam President, how much time is left?

I thank the Chair.

Madam President, I rise in opposition to the amendment of Senator Paul, No. 365. This amendment would effectively wipe out a critical tool used against terrorists and drug traffickers. I want to explain exactly what these suspicious activities reports are and why they are so essential to the FBI and other law enforcement people.

First of all, who uses them? FBI, organized crime units, drug trafficking task forces, border security, Secret Service, State and local police, and the intelligence community all use these SARs. Second, what are they used for? There was a report from the GAO in 2009 which said the following: How are SARs used? They gave a number of examples:

The FBI includes SAR data in its Investigative Data Warehouse to identify:

financial patterns associated with money laundering, bank

fraud, and other aberrant financial activities.

Second, Organized Crime Drug Enforcement Task Force's Fusion Center combines SAR data with other data to:

produce comprehensive integrated intelligence products and

charts.

Third, the IRS uses SARs to identify:

financial crimes, including individual and corporate tax

frauds and terrorist activities.

We received a letter just today from the Attorney General of the United States strongly opposing this amendment of Senator Paul, and this is what the Attorney General says:

SARs are a critical tool for our national security and law

enforcement professionals. SARs are used to alert

intelligence and law enforcement personnel to issues that

warrant further investigation and scrutiny. The purpose of

the SAR regime is to require financial institutions to report

on suspicious activities based on information that is solely

within their possession. Prior to the filing of a SAR, our

law enforcement and intelligence analysts often are not aware

that a particular bank account or individual may be

associated with criminal activity or may be engaged in

activities that pose a threat to national security, such as

the funding of terrorist activities.

Then the Attorney General goes on:

Conditioning the filing of SARs upon a request from law

enforcement would undermine this purpose. By definition, SARs

are designed to alert law enforcement to information not

otherwise within its possession.

The Paul amendment, No. 365, is very short, but what it does is say you must have a request of an appropriate law enforcement agency for the report before there is a requirement to file a suspicious activity report. As the Attorney General points out in his letter, that would totally undermine the purpose of the SAR requirement.

Finally, the Attorney General points out the following:

How much time do I have remaining, Madam President?

I thank the Chair.

The Attorney General further points out:

It is also important to note that SARs themselves are

confidential under law (i.e., not available to the public)

and cannot be used as evidence. They contain information

that, if used by law enforcement personnel, must be further

investigated and proven before adverse action is taken. The

reports are only made available to law enforcement,

intelligence, and appropriate supervisory agencies under

applicable authorities and are subject to the protections of

Federal law.

Madam President, I ask unanimous consent to have printed in the Record a copy of the letter from the Attorney General.

Madam President, the Paul amendment would throw out the window a legitimate and useful law enforcement tool. It has worked effectively. Three courts have said it is constitutional. I hope the Paul amendment is tabled, and I thank the Presiding Officer.