Floor Statements

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 President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, I rise to offer an amendment on the agricultural portion of the bill to provide payment limitations on payment to farmers. The American people recognize the importance of family farmers in our Nation and the need to provide an adequate safety net for family farmers. That is what a farm program is all about.

In recent years, however, assistance to farmers has come under increased scrutiny, and it should. Take a look at some of the headlines that ran last year on the front page of the Washington Post. The first headline reads:

Farm program pays $1.3 billion to people who don't farm.

That is going to make any taxpayer, rural or urban, mad because the general assumption is that farm programs support family farmers and do not go to people who don't farm.

A second headline reads:

Federal subsidies turn farms into big business.

In other words, the Federal taxpayers are paying to help big farmers get yet bigger.

The article goes on to say:

The shift in subsidies to wealthier farmers is helping to

fuel this consolidation of farmland. The largest farm's share

of agriculture production has climbed from 32 percent to 45

percent, while the number of small- and medium-size farms has

tumbled from 42 percent to 27 percent.

These were just a couple of headlines from a series of articles from the Washington Post on waste and abuse in farm program spending.

Critics of farm payments have argued that the largest corporate farms reap most of the benefits of these payments. What is more, farm payments that were originally designed to benefit small- and medium- size family farms have contributed to their own demise. Unlimited farm payments have placed upward pressure on land prices and have contributed to overproduction and lower commodity prices driving many family farmers off the farm.

The law creates a system that is out of balance. This is pointed out in the chart I have, which shows that we have a system where 10 percent of the farmers--10 percent of the farmers--maybe I should say just 10 percent of the farmers get 72 percent of the benefits, and the top 1 percent of the biggest farmers get almost 30 percent of the benefits. I believe we need to correct our course and modify the farm programs before those programs cause further concentration and consolidation in agriculture and lose the support of urban taxpayers because without their support, we could not have a farm safety net.

Today, most commodities are valued off demand. Markets dictate profitability. When farmers overproduce by planning for, according to the farm program, whether its a loan or the LDP Program or whatever it might be, then markets are not functioning.

I mentioned earlier that the Federal farm programs are influencing land prices across the country. Iowa land is now selling for between $4,000 and $6,000 an acre in counties near my home of New Hartford, IA.

When I was chairman of the Senate Finance Committee, before the last election, I was also a member of the Budget Committee and the Agriculture Committee. I have used those committee positions as opportunities to file amendments that I believe will help revitalize the farm economy for young people across this country.

My amendment today will put a hard cap on farm payments at $250,000. The average taxpayer listening to me might say: What planet did you come from--$250,000 is an awful lot of support. But I am saying in comparison to limits that are now in the bill of $360,000 and legal subterfuge to get around the law to allow some farmers to get millions of dollars. So this is a $250,000 hard cap--still too high for some family farmers but a compromise that has gotten through this body in the past and I am counting on getting through this time.

No less important, this will close those legal subterfuges or loopholes--whatever you want to call them--that have allowed large operations to evade even the $360,000 limit and, as a result, receive benefits many times larger.

To remind everybody, I voted against the conference report of the present farm bill in the year 2002, and this was one of my many reasons, because it did not have this hard cap in there, even though it passed the Senate. I have been fighting to reduce large-scale subsidies for over 30 years. If one looks at the Congressional Record in the 1970s, it will show I was leading in that area. More recently, I worked with the good Senator from North Dakota, Mr. Dorgan, on a similar measure in the 2002 farm bill, and it passed with bipartisan support of 66 to 31. That amendment, as I said, was taken out in conference. So I urge my colleagues to check their past votes on this issue during the last farm bill debate.

One section that was added in the farm bill was section 1605, which set up a Commission on the Application of Payment Limitations for Agriculture. The purpose of the Commission, after the failure of our legislation in 2002 in the farm bill because it didn't come out

of conference, was to set up this Commission. The purpose of the Commission was to study this issue. The Commission also said that the 2007 farm bill is the time for these reforms to be made as part of the change to permanent law. So that is why it is legitimate to have it as part of this budget debate.

Congress enacted the Agricultural Reconciliation Act of 1987, called the Farm Program Integrity Act, to establish eligibility conditions for recipients and to ensure that only entities engaged actively in agriculture receive farm payments. To be considered actively engaged in farming, that act required an individual or entity to provide a significant contribution of inputs--capital, land, equipment--as well as significant contributions of services of personal labor or active management to the farming operation. But people have been able to find loopholes around this act, facilitating huge payments that our hard cap is meant to overcome.

I held a hearing through the Finance Committee on a Government Accountability Office report that was released about 3 years ago, April 24, 2004. The GAO report recommended that measurable standards and clarified regulations would better assure that people who receive payments are, in fact, engaged in farming.

Of the $17 billion in payments the USDA distributed to recipients in 2001, $5.9 billion went to just 149,000 entities. Corporations and general partnerships represented 39 and 26 percent of these entities respectively.

Here is an example from the March 2005 Washington Post article of someone who qualified for payments. I quote from the newspaper:

If the purpose of farm subsidies is to make family farms

viable, it's hard to see why payments of more than $400,000 a

piece should have gone to 54 deceased farmers between 1995

and 2003, or why residents in Chicago should have collected

$24 million in farm support over that period.

This type of arrangement, and others such as that, raises questions about the interpretation and enforcement of the 1987 act's requirements that each partner be actively engaged in farming. This is why I wrote the Government Accountability Office to conduct that study I referred to on which we held a hearing in the Finance Committee. I encourage Members of this body to take a look at that report as well.

During past markups of the Senate Budget Committee, I was able, with the help of the current chairman, Mr. Conrad, to include a sense-of- the-Senate amendment expressing support for stronger farm payment limits. The proposed amendment would cap Farm Commodity Program payments at $250,000 a year per person during any one year. This would encompass direct payments, countercyclical payments, loan deficiency payments, and marketing loan gains. Gains from commodity certificates will be counted toward limitations, closing another very abusive loophole, particularly those farming in cotton and rice.

By adopting this amendment, it could save the taxpayers over $500 million in savings over a 5-year period of time and more than $1 billion over 10 years. With these savings, the amendment that is being presented by Senator Grassley and Senator Dorgan would put money toward conservation, nutrition, research, value-added agriculture, and renewable energy programs.

The budget resolution before us provides a very much needed reserve fund for the farm bill of $15 billion. Every penny of this fund will be needed if we are to adequately respond to the major needs and opportunities to increase energy independence, restore cuts in conservation, improve farm income through value-added grants, reduce hunger, and invest in the future of food and agriculture through cutting-edge research.

However, the reserve fund is conditioned on offsets. The amendment I am offering is part of the solution to this reserve fund dilemma. A vote for this amendment, then, will help us get a better farm bill done, not just to help farmers but to help the entire society as it includes so much that benefits people just beyond agriculture.

Not only has the Senate previously agreed to payment limit reform, but the President, in his past budgets--I think at least the last 3 years--has supported a broad set of savings proposals recommending reduction in subsidies for larger, more financially secure farmers and promoting more efficient production decisions, although this year the administration proposed that no one should get farm payments if they have an adjusted gross income of over $200,000 a year. That is just another way, and not a bad way, but another way of getting what I am trying to get through this hard cap. So I don't find fault in what the administration is proposing in that area. I think the administration is proposing a very good bite and another bite at the apple.

I have been hearing directly from producers for years exactly what the Secretary of Agriculture heard at his farm bill forums. We are hearing that young producers are unable to carry on the tradition of farming because they are financially unable to do so because of high land values and cash rents.

Neil Harl, a distinguished agricultural economist at Iowa State University and one of the contributors to the Payment Limitation Commission, wrote this:

The evidence is convincing that a significant portion of

the subsidies is being bid into cash rents--

Making the cash rents higher--

and capitalized into land values.

All making it very difficult for new, young farmers to get started in farming. If investors were to expect less Federal funding or none at all, land values would likely decline, perhaps by 25 percent.

On March 20, 2005, the Atlanta Journal-Constitution printed this:

As time has gone by, smaller farmers most in need have

received less and less of the government's support and

corporate-like farms more and more.

By voting in favor of this amendment, we can restore the cuts that were made to conservation, rural and renewable energy programs during the markup of the Ag section of reconciliation. We can allow young people to get into farming and lessen the dependence on Federal subsidies. This will help restore public respectability for Federal farm assistance by targeting this assistance to those who need it, where it has traditionally been over the 70 years of the farm program.

Before I close, I wish to remind everyone who voted against a similar amendment during the 2005 reconciliation vote, the argument that we need to wait until the farm bill debate is not going to work anymore-- that was the argument some people who changed their vote used at that particular time--because this is the year of farm bill debate. This is the budget that contains the baseline for the farm bill that we are going to pass this year.

Let's stop kicking the can down the road and say we have to wait until the farm bill debate. The here and now is the here and now. How can you say you are for conservation or you are for renewable energy or you are for child nutrition--that you are for all those things and then come to the floor and vote the opposite way? This is an opportunity to show to the people of this country we are not going to subsidize the biggest farmers getting bigger, wasting taxpayers' money, keeping young people off the farms and out of the farming profession and bringing ill-repute to a farm program that it takes city folk, represented in the Congress, to vote for in order to sustain the safety net for farmers.

I will yield 10 minutes, yes.

I thank the Senator from North Dakota for his support, not only this year but over the long period of time we have been fighting this battle.

I send this amendment to the desk, and I would then like to make a unanimous consent request and also a request of some abeyance by my colleagues--if I could have permission in the 5 minutes I have left-- to, first of all, set the amendment I sent up to the side and then to call up another.

Amendment No. 464

I ask unanimous consent to set that amendment aside for the consideration of an amendment dealing with the Smithsonian.

Mr. President, this amendment, as I said, focuses on the Federal Government's support for the Smithsonian Institution. The American people, I believe, have been shocked and outraged to read in newspapers and see on their TVs a story about the out-of-control spending at the Smithsonian by the Secretary of the Institution: First- class air travel for the Secretary and his wife, a palace for an office, and hundreds of thousands of dollars spent on the Secretary's own home for things such as chandelier cleaning and pool heaters are impossible to justify. As my colleagues know, the Federal Government provides over 70 percent of the Smithsonian's approximately $1 billion budget. Most of the rest of the budget comes from tax-preferred charitable donations. Directly or indirectly, the Federal taxpayers pay for almost everything in the Smithsonian.

My amendment is very straightforward. The budget resolution provides for a $17 million increase for the Smithsonian. I commend the chairman of the Budget Committee for increasing the spending for the Institution, and I support that action. As a report issued today from the Smithsonian Arts External Review Committee made clear, there are very significant problems at the Smithsonian in terms of maintaining and protecting the Smithsonian infrastructure and exhibits. The Smithsonian is the keeper of America's treasures, and we want a museum we can all be proud of. So I support the additional $17 million.

But similar to many Americans, my reaction to the Secretary's spending is I want to make sure we are not having new money used to order another round of champagne. My amendment basically fences the $17 million increase but allows the chairman of the Senate Budget Committee to revise the allocations--effectively to release the $17 million in new spending--once and only after the General Accounting Office has certified the following:

No. 1, that no one at the Smithsonian is getting paid more than the President of the United States, as was proposed by the House Appropriations Committee last year; no more paying for French doors at the Secretary's home, in other words. There are many fine museums and charities that receive the same amount of charitable donations as the Smithsonian that are able to hire very able directors for what we pay the President of the United States.

No. 2, the Smithsonian must follow the travel expenditure guidelines of the Federal Government. No more first-class flights with wife and Secretary to Hawaii to enjoy Thanksgiving.

No. 3, the Smithsonian must have ethics rules similar to the ethics rules of Federal Government employees. No more sitting on corporate boards, making big, big money--corporations that have contractual relations with the Smithsonian and possible conflicts of interest.

The amendment also makes clear that the actions of the Secretary are not in keeping with the public trust of the office.

Finally, the amendment states that a priority should be given to funding for repairing and maintaining the Smithsonian and to fully fund the Office of Inspector General at the Smithsonian so the American people and the Congress can have renewed confidence that the $700 million-plus in Federal funds the Smithsonian has is used properly and appropriately.

I am still working with the chairman and with Senator Gregg to make certain this amendment is drafted in a manner that meets their concerns. I am confident we can do that.

I yield the floor.

We do not need a rollcall vote.

We do not need a rollcall vote.

I am sure we will be able to work that out.

Madam President, I appreciate very much that the Senator from Texas has offered his amendment. I support it. I supported it during the Budget Committee's markup of the legislation that is before us right now, and I am happy to support it on the floor.

This amendment adds a new reserve fund which identifies some very important priorities that complement the reserve fund in the legislation that has come out of the Budget Committee.

The reserve fund in the budget stipulates the legislation reported out of the Finance Committee must ``maintain coverage for those currently enrolled in [the State Children's Health Insurance Program].''

As my colleagues in the Senate know, this current population includes children, pregnant women, parents, and childless adults. The cost of extending coverage to these populations has been roughly estimated by the Congressional Budget Office to require a net increase of budget authority of approximately $8 billion.

The Cornyn amendment would put kids first--after all, wouldn't you think that is what the State Children's Health Insurance Program ought to do, put children first--prioritizing lower income children and limiting the use of State Children's Health Insurance Program funds for nonpregnant adults unless States are covering those children.

We will have to make some very difficult choices when it comes to the limited funds available for the SCHIP. The cost of covering children who are uninsured but eligible for SCHIP continues to rise.

According to the Center on Budget and Policy Priorities and their analysis--and this was in a recent memo from the Congressional Budget Office--it will take $47.5 billion to cover the estimated 6 million children who are uninsured but eligible for either SCHIP or the Medicaid Program. To quote the center, even this figure is ``too low''--those are their words: ``too low''--because it does not include the cost of the policies necessary to increase enrollment in Medicaid and SCHIP.

Given the priorities placed on pay-as-you-go and the limited offsets available to pay for increased SCHIP spending, it appears some priorities have to be set. We are faced with that every day--setting priorities, that everybody cannot have everything they want.

Republicans have taken the position--and I emphasize that position-- we want to prioritize putting kids first. So I support Senator Cornyn's emphasis upon this key principle.

I also agree with the language in the budget that would support States in their efforts to move forward in covering more children. However, this language can be improved by emphasizing that reauthorization should make State flexibility a priority. With State flexibility, we can get more bang with the State's money, we can get more bang for the Federal dollars going into the program. We found that in Medicaid last year when a bipartisan group of Governors came to me, when I was chairman of the Finance Committee, and sat down and said: If you can give us more flexibility in Medicaid, we can save State tax dollars, we can save Federal tax dollars, and we can serve more kids who have need--because States know what their local situation is, they know better than we do in Washington to get the most bang for the taxpayers' dollars. So we can do the same thing for the SCHIP program by giving the States greater flexibility.

Much of the success we have seen relative to the SCHIP program is because the Congress gave States the authority to manage the SCHIP caseloads, to control costs, and to experiment with innovative strategies to increase access to health care.

This country is so geographically vast, our population is so heterogeneous that if you try to make all policy by pouring policy in the same mold in Washington, DC, it is not going to fit New York City the same way it might fit Des Moines, IA. But we ought to give those States in the case of New York, Albany, and in the case of Iowa,

Des Moines, give those leaders, Governors and State legislatures, some leeway so we get more bang for our buck.

Reauthorization then should build on the State flexibility that was already there and should be a key feature of the priorities set in the budget.

Finally, given my zeal for oversight, meaning congressional oversight of what our bureaucracy does and how the taxpayers' money is spent, I must also commend the Senator from Texas for including, as a priority for the SCHIP reauthorization, improving and strengthening the oversight of Medicaid and SCHIP to prevent waste, fraud, and abuse. We have made improvements to preventing waste, fraud, and abuse, but we can certainly do more. We can always do more.

I commend the Senator for his amendment. It builds on the language already in the bill, and I urge my colleagues to vote in favor of it.

I reserve the balance of the time on our side.

Madam President, a few minutes before the last speaker, you heard the chairman of the Senate Budget Committee say there is no tax increase in the budget that is before us.

Well, technically that is correct, if you consider allowing existing tax law to sunset on December 31, 2010. If you do that, we are going to have the biggest tax increase in the history of the country without a vote of Congress, without a vote of any of us, the biggest tax increase in the history of the country, January 1, 2011. This budget covers that period of time. I don't know how you can say there is no tax increase in this budget, if we are going to have the biggest tax increase in the history of the Congress without a vote of the people, if you have an opportunity to do something about it and keep taxes where they presently are. That is what is in this budget. There is not going to be an attempt to keep taxes where they are so the existing tax laws sunset and we have the biggest tax increase in the history of the country, January 1, 2011.

We have a budget by the majority party, the Democratic Party, before us because the people spoke in November. For the first time in 12 years, the Democrats are in the majority and, consequently, control the congressional budget process. As ranking Republican on the tax-writing Finance Committee, I was not consulted, nor did I expect to be, by the chairman of this year's budget resolution. Unfortunately, after reviewing this resolution, which was presented 5 days ago, it is abundantly clear it does not realistically address the possibilities of the Finance Committee carrying out what are its supposed responsibilities under this budget resolution.

Despite claims to the contrary, this budget does not provide for even 1 year of alternative minimum tax relief, let alone 2 years, or even a 1-year extension of provisions of various tax laws that expire from time to time and that we normally reinstitute. It does not provide for that as well. So this budget puts the burden on the Finance Committee to come up with the offsets to pay for the alternative minimum tax relief and for what we refer to as extenders, things that are normally extended by the Congress because they are things the economy demands be extended.

Press reports have largely echoed the defenders of this resolution on the needs of the Finance Committee. I strongly suggest the media folks take a very careful look at the claims of the Democratic leadership and see how they stack up against the cold, hard fiscal numbers and the operating history of the Finance Committee in these policy areas. They would find it does not square with the reality of what is possible for the Finance Committee.

I back up that statement with these numbers. Over the 5-year budget window going out to the year 2012, keeping existing policies in place will have a revenue effect of about $916 billion. This includes alternative minimum tax relief, extension of bipartisan 2001 and 2003 tax relief, and extending other broadly supported expiring provisions. In the aggregate, this budget provides no resources for extending these policies over the 5-year window. In so doing, we end up with the biggest tax increase in the history of the country without Congress voting for it. Yet somehow the chairman of the Senate Budget Committee can say there are no tax increases in this budget.

I go back to the grassroots. As a family farmer, which I am, I like to think we country folk can teach city folk a lesson or two by referring to the country's sayings and metaphors. Although I am going to be using numbers, you will recognize some rural touchstones in the chart I am using, which is this chart of a well where you get water. The first chart involves the method a lot of us farmers use to get our water, through the well on our family farm. You will see the well in this chart.

Here is the top of the well. My colleagues can see it is a long well and a very deep well. There is some water way down at the very bottom, but most of this well in between is very dry. At the top of the well we see the number that represents the rough--and it is probably a bit on the low side--amount of the revenue raisers in this budget, and it assumes we on the Finance Committee will be able to find $916 billion. That is revenue we would have to find offsets for over a 5-year period to pay for extending existing tax policies that expire during this period. If we don't do it, that is where I continue to make the point we are going to have the biggest tax increase in the history of the country.

Of course, this is talking about existing tax policy. It doesn't even include any new starters such as tax relief to encourage renewable energy which most Members of this body are talking about, or tax relief to help education which a lot of Members of this body, including this Senator, have talked about, and a lot of new starters such as providing tax benefits to help the health care problem. A lot of us in this body talk about that. It doesn't include renewable energy, education, and health care. So this budget assumes the well of revenue raisers is full to the brim. We can see it is not.

As a farmer, I know something about the predictability of wells. You hope

you will get a lot of rain and it will give you a decent level of water. As former chairman and now, because we Republicans are in the minority, ranking member of the Finance Committee, I think I know something about revenue raisers and how difficult or how easy it might be to raise a certain amount of revenue. I have been there. I have done that. When I was chairman of the Finance Committee, I aggressively led efforts to identify and enact sensible revenue raisers and at closing the tax gap and shutting down tax shelters. As ranking member, I continue to look for ways to shut off unintended tax benefits. I consider myself to be a credible authority on what is realistic when it comes to revenue raisers.

This budget is not realistic. From 2001 through 2006, Congress enacted over 100 offsets with combined revenue scores of $1.7 billion over 1 year, $51.5 billion over 5 years, and $157.9 billion over 10 years. That figure is reflected on this chart. That would be the figure of $51 billion enacted over a 5-year timeframe.

To show I am not making this up, I ask unanimous consent to print in the Record a table that shows the track record on enacted offsets. These numbers are conservatively high because they include repeal of the FSC/ETI to comply with the ruling of the World Trade Organization which could not have been done without also providing tax relief with the manufacturing deduction.

The legislation that contains these provisions spans years so they don't correspond on a year-by- year basis. The point here is to look at what Congress was able to accomplish over a 6-year period as evidence of what it might be able to accomplish over the 5-year window of the budget resolution. Some might say it is comparing apples and oranges, because the House was under Republican control during that period. But as we are seeing, Democratic control does not seem to have changed the allergic reaction of the House of Representatives to revenue raisers. Because during the markup, while the chairman of the Budget Committee was holding up his chart, as he did today, with a picture of a German sewer system that U.S. companies are claiming phony depreciation deductions on through abusive leasing transactions, the chairman of the Ways and Means Committee in the other body was holding a hearing and somehow sympathizing with lobbyists about how it is bad tax policy to shut off these tax benefits.

The most significant package of revenue raisers over this period was in the American Jobs Creation Act of 2004. I took a lot of heat on those revenue raisers, as shown in the Congressional Daily article entitled ``Balance of Payments, A Closer Look at Tax Bill Losers.'' This article refers to the revenue raisers in the Senate passed JOBS bill as ``the most significant rollback of tax loopholes since 1986.''

I ask unanimous consent that that article be printed in the Record.

Looking then at the 5-year numbers, Congress has enacted $51 billion of revenue raisers since 2001. That happens to be only about 6 percent of the amount that is needed to make the budget we are debating now work, without regard to any new relief which will also have to be paid for.

What other revenue raisers have been identified and scored? Because we are always looking for them, because we are always getting scores for them, there is always going to be some need for them. The President's budget, for instance, contained a package of 16 tax gap measures that the Joint Committee on Taxation scores as raising $5.7 billion over 5 years. We can see that figure reflected on this chart. The Democrats have identified raisers that amount to $35.6 billion. So we have $42 billion of identified and scored revenue raisers. Let's look at how that figure compares to the budget before us. That is only about 5 percent of the amount that is needed to make this budget work. Based on these facts, the likelihood that the Finance Committee, the tax-writing committee of the Senate, will be able to come up with revenue raisers of this magnitude is remote at best.

If that is the case, what will then happen? The revenue side of the budget will be ignored, but the spending side will be followed. The net effect will be a massive tax increase, a bigger deficit, or both. I am letting my colleagues know the revenue-raising well is about 5 to 6 percent full, not 100 percent full, as it would take to do it. If we look at the Finance Committee tax staff's aggressive record on revenue raising as a guide, we might be able to fill the revenue of this well a little bit more, but there is no way we can get to where this budget purports to go.

In conclusion, this budget represents a dramatic step backward for the American taxpayer. For the first time in 6 years, this budget is a barrier, not a path, for bipartisan tax relief for virtually every American taxpayer.

I have another chart that uses a farm analogy. We farmers are frequently visited by Canadian geese as they fly south down the Mississippi ``fly-away'' for the winter, and as they come north for the spring. Geese are not like chickens in that they do not hang around to lay eggs. Here is a chart with a goose on it. This chart shows that the budget guarantees a goose egg for tax relief.

City folks know the term ``goose egg'' means zero. For the first time in 6 years, that is what the American public is getting in guaranteed tax relief--a goose egg. That is what they are getting--zero, zip, nothing. So take a look at our track record. Take a look at the revenue offsets Senate Democrats have identified and scored. What you will see is a minimal amount, as the well chart showed. This budget, then, puts an unrealistic demand on the revenue offsets that are possible. The well of offsets cannot be filled to the level the budget assumes. It is so unrealistic as, in my judgment, to be fictitious. It means virtually every taxpayer gets a goose egg.

Now, for 6 years, we have heard the primary reason for partisan opposition to popular bipartisan tax relief is fiscal responsibility. Where is the fiscal responsibility on the spending side of the ledger in this budget? If you take a look, you will see that goose egg again.

So after 6 years of fiscal responsibility arguments, you would think if the American taxpayer was going to get a goose egg in tax relief, the party in power would show us more than a goose egg on the spending restraint side. Not so. As a matter of fact, spending goes up several hundred billion dollars.

As ranking member of the Finance Committee, I am sorry to say this budget does not even attempt to mesh the demands of the Finance Committee with the numbers in this budget. From my Finance Committee perspective, we might as well demand we have 60-vote bills. That is the only way you can ignore the budget resolution. There is no way for offsets of the size that is demanded here that are possible.

I hope deficit hawks on both sides of the aisle pay close attention. The only thing certain is new spending is going to occur. That is the only thing that is going to happen. The deficit impact of not realistically dealing with the tax, trade, and health policy priorities of the Finance Committee disguises the deficit built into this budget.

I am going to have more to say on this disconnect between the Finance Committee policies and this budget as we continue this debate in coming days. Today, I merely wished to show the Senate how the numbers on the revenue side do not work. As we take up amendments, I am hopeful we can make this budget mesh with what is possible for the Finance Committee to do and the policy demands before that committee.

I also wish to discuss another thing that is going to be heavily discussed, in fact to some extent has already been discussed with this budget; that is, the sources of revenue the chairman of the Budget Committee claims will help offset the 5-year $916 billion cost of extending existing tax policy. That happens to be something I like to talk about because I like to do things in this area--shutting down offshore tax havens.

I have been aggressive in combating abusive tax shelters offshore and otherwise. As chairman of the Finance Committee, I worked hard to shut down offshore tax evaders. I already referred in my remarks today to the 2004 JOBS bill, shutting down the tax benefits for companies that enter into corporate inversion transactions and abusive domestic and cross-border leasing transactions.

Yes.

Well, I could imagine so because they are a party that enjoys increasing taxes. So I can understand that.

Of course not. It is on the real Web site.

Well, I referred to this 2004 JOBS bill before in my remarks, shutting down the tax benefits for companies that enter into corporate inversion transactions and abusive domestic and cross-border leasing transactions.

The JOBS bill also contains a package of 21 antitax shelter provisions. That has been law since 2004.

As ranking member of the Finance Committee, I saw to it that the minimum wage and small business tax relief package also contained antitax loophole provisions--and that stuff is still before the Senate--including shutting off tax benefits for corporations

that inverted after Senator Baucus and I issued a public warning that legislation would stop these deals, shutting off tax benefits from abusive foreign leasing transactions that were not caught by the JOBS bill, and doubling penalties and interest for offshore financial arrangements.

But again, I refer to the Democratic chairman of the tax-writing committee in the other body, the Ways and Means Committee, who does not appear to be supportive of these provisions based upon a hearing he had last week, even though--even though--the same Member of the other body voted for many of them in the public JOBS conference in 2004.

So having studied these issues and having legislated in this area, I consider my views on tax policy directed at tax shelters and tax havens to be credible. From what I can tell, the distinguished chairman of the Budget Committee in the Senate views the problem of offshore tax havens in two categories: One, the ability of U.S. multinationals to shift income to these tax havens; and, two, tax evasion by U.S. individuals who hide assets and income in tax havens.

We have seen Democratic Senators, including the chairman of the Budget Committee, hold up a picture of the Ugland House, a law firm's office building in the Cayman Islands, as home to 12,748 corporations. I would like to give Senators some background on where that picture comes from and at what issue it is aimed.

That picture comes from an article published in Bloomberg Markets in August 2004, and it is titled ``The $150 Billion Shell Game.'' The article focused on the ability of U.S. multinationals to shift income to low-tax jurisdictions through transfer pricing. Transfer pricing is a term for how affiliated corporations set the prices for transactions between them. Transfer pricing is important because it determines how much profit is subject to tax in different jurisdictions involved in related party transactions.

The $150 billion figure is an academic estimate of the annual amount of profit that corporations shift outside the United States with improper transfer pricing. That is what the $150 billion figure is. Let me make that clear. It is an estimate of the annual amount of profit that corporations shift outside the United States with improper transfer pricing.

So this article is aimed at U.S. corporations that artificially shift their income to low-tax jurisdictions through improper transfer pricing practices. To illustrate this point, I have produced a few quotes from that article. The first one says:

Under U.S. law, U.S. companies can use Cayman subsidiaries

and transfer pricing rules to shift sales and profits from

other countries, thus reducing their overall tax burden.

Another quote:

A practice called transfer pricing may be the key to how

U.S. corporations avoid taxes in the U.S. and other

countries.

That last quote is from my colleague, the Senator from North Dakota, Mr. Dorgan.

One of the Democrats' revenue raisers, then, that is still on the shelf purports to target this transfer pricing problem. But you would not know it by looking at the language of the proposal because it does not make any changes to our transfer pricing rules. Instead, the proposal would eliminate deferral for income of any U.S. multinational's foreign subsidiaries incorporated in certain black- listed jurisdictions. It is called the tax haven controlled foreign corporate proposal. I am going to call it CFC for short.

Part of our Tax Code since 1918, ``deferral'' means that U.S. multinationals do not pay tax on active income of their foreign subsidiaries until that income is repatriated to the United States. Passive income is subject to tax on a current basis. Deferral only applies to active income.

I agree with the premise of this proposal that U.S. multinationals should pay their fair share of U.S. taxes. U.S. multinationals that use improper transfer pricing do so to obtain the benefits of deferral on profits that, economically, should be subject to tax in the United States on a current basis. Here is my quote from the Bloomberg article:

We have to get on top of corporate accounting and

manipulation of corporate books for the sole purpose of

reducing taxes.

Nobody is going to disagree with that.

So my view is that stronger transfer pricing rules and stronger enforcement of those rules is the right way to target this problem in our current international tax system. The Internal Revenue Service is taking steps to tighten our transfer pricing rules.

In 2005, that agency proposed regulations that would overhaul the rules for so-called cost-sharing arrangements. These are arrangements by which U.S. multinationals are able to transfer intangible property to subsidiaries in low-tax jurisdictions. Based on the volume of complaining I have seen lobbyists level at the Treasury and the IRS, the proposed IRS regulations would go a long way to prevent artificial income shifting. I hope to see these regulations finalized very soon.

Others have different views. They would eliminate deferrals altogether. So another quote in the Bloomberg article succinctly states this view. This is a quote from Jason Furman, a former aide to Senator Kerry of Massachusetts. It says:

American companies should pay taxes on their profits in the

same way whether they earn them in Bangalore or Buffalo.

Now, that might sound simple enough, but that is where these proposals to eliminate or curtail deferrals on a piecemeal basis are headed--headed in a way that is going to be harmful, to completely eliminate deferral for U.S. multinationals. Without a significant corporate tax rate reduction--and I would be in favor of doing that-- eliminating deferrals would have the effect of exporting our high tax rates and putting U.S. multinationals at a competitive disadvantage in the global marketplace. When I said I would be in favor of reducing our corporate tax rates, that is because other countries are doing it and if we don't soon do something along that line, we are going to lose a lot of business and particularly a lot of manufacturing here in the United States.

The Senate is on record as wanting to protect the competitiveness of U.S. businesses in the global marketplace. That is what the American Jobs Creation Act of 2004--an act I referred to several times today which contains several international simplification provisions, and with a vote of 69 Senators, including 24 Democrats, we passed that bill. The Senate version of the JOBS bill passed with a more bipartisan majority--92 Senators, including 44 Democrats.

There has been a longstanding debate about whether our international tax system should be fundamentally changed. Some advocate taxing all foreign income on a current basis; others argue for completely exempting active foreign income under a territorial system, as many of our trading partners do. If we want to have that debate, that is a very fair debate to have, but piecemeal cutbacks on deferral for active foreign income would do nothing but complicate the Tax Code and create opportunities for tax planning around those cutbacks.

The other offshore issue identified by the chairman of the Budget Committee is U.S. tax evasion by individual taxpayers who hide their assets and income in foreign bank accounts and foreign corporations. Since 1913, our Tax Code has subjected U.S. citizens to taxes on their worldwide income. No matter what the Internet purveyors of tax evasion say, this principle cannot be avoided by putting passive assets and income into a foreign corporation. The Tax Code has rules to prevent this. Taxpayers who do that willingly violate these rules and, of course, are guilty of tax fraud and, in some instances, may even be guilty of criminal fraud.

So the problem of offshore tax evasion isn't that our laws permit it; the problem is there are some taxpayers who are intent on cheating, intent on hiding their income from the Internal Revenue Service. The Service has been successful in catching many of these, but more can be done, and I will help do it.

The Service has difficulty detecting tax evasion and obtaining the information necessary to enforce our laws. One important tool for the IRS is information exchange with other jurisdictions. Our double tax treaties contain an article on information exchange designed to help the IRS obtain quality information to enforce our tax laws. In addition, administrations past and present

have entered into over 20 tax information exchange agreements with jurisdictions that are often referred to as tax havens. Sensible solutions to this problem should aim to improve on our tax information exchange network and not put it at risk.

Underreported income is the largest piece of the tax gap. We should keep in mind that hiding assets and income from the IRS isn't just an offshore tax haven problem; it may also be an onshore problem. A recent article in USA Today noted that there is:

A thriving mini-industry that has capitalized on real or

perceived gaps in domestic incorporation laws and virtually

nonexistent government oversight to promote some U.S. States

as secrecy rivals of offshore havens.

The picture of the Ugland House in the Cayman Islands makes for good grandstanding, yes, but there are also office buildings in some States that are listed as addresses for thousands of companies which are incorporated in those States for similar reasons as corporations may be incorporated in the Cayman Islands; that is, secrecy of ownership and a permissive regulatory environment.

Whatever additional solutions the Finance Committee comes up with to shine sunlight on tax evaders will need to consider both offshore as well as onshore evasion.

To conclude, I wish to emphasize that I am all for shutting off inappropriate tax benefits from offshore arenas. The chairman has said he thinks we could get $100 billion a year from this source. I haven't seen any proposals scored by the Joint Committee on Taxation that come even close to bringing in that kind of money. The last score I have seen for the tax havens CFC proposal is $7.7 billion over 5 years. Senators Levin, Coleman, and Obama have recently introduced a bill which contains several proposals aimed at offshore tax havens, but I haven't seen a Joint Committee on Taxation score on it yet.

So once again, it will be the Finance Committee's responsibility to come up with real, sensible, effective proposals to combat offshore and onshore tax havens, and I am glad to do it, as I have over the last several years. But the likelihood that they will be scored by the Joint Committee on Taxation to bring in the kind of money assumed in this budget resolution is remote at best, and it borders on, I believe, blue smoke.

I yield the floor.

Those are 10-year figures.

I am glad to answer that question because I think, if you look at what this budget assumes, raising this much money--

I think it is about like this, maybe $30 billion, $35 billion at best.

Five-year number, yes.

Let me say, if I could raise the amount of money which is assumed to be raised here, I would have done away with the alternative minimum tax a long time ago because you need that kind of offset to get that job done over the long haul.

I agree, yes. I emphasize that we are told by the chairman of the Budget Committee time after time that there is no tax increase in this budget. But if you do nothing--and doing nothing is not an excuse to have the biggest tax increase in the history of this country go in without even a vote of Congress. If you are going to raise taxes, you ought to at least vote them up, it seems to me, so you can be held responsible. It seems to me to be very irresponsible to say that you can have the biggest tax increase in the history of the country and not think you can do economic harm and strike a blow against economic freedom for individuals.

Mr. President, every year hundreds of thousands of Americans come to our Nation's Capital for what will be for many a once-in-a-lifetime vacation. A highlight of that visit for most families is seeing the Smithsonian museums.

The Smithsonian, as everybody knows, is home to many of our Nation's treasures, from Lincoln's top hat to the Hope Diamond. I have a picture of the Hope Diamond here. The Smithsonian receives over 70 percent of its support from the Federal taxpayers, over $700 million a year of taxpayers' money just in the last year. In addition, the Smithsonian receives over $200 million in donations each year. These donations are tax deductible, so the taxpayers also subsidize these charitable gifts as well. Thus, Federal taxpayers either pay for or subsidize almost the entire Smithsonian budget. Given that money is fungible, when taxpayers' dollars are paying for one thing at the Smithsonian, that frees up other money for the Smithsonian to spend elsewhere.

Despite the strong support the Smithsonian receives, the Government Accountability Office recently found in a record that there was significant damage to Smithsonian buildings and some exhibits because of water leakage. In fact, one of the Smithsonian buildings on the Mall, the Arts and Industry Building, has been closed to the public because of damage to the roof.

The Smithsonian seems, on one hand, to have recognized the need to tell their employees they need to pinch

pennies. The Washington Post, in a story in this morning's paper, cites a Smithsonian memo sent to employees urging them to save energy by turning off decorative and accent lighting.

Unfortunately, while the rank-and-file at the Smithsonian and the strength of this great institution were told to count the pennies and turn off the lights, the Secretary of the Smithsonian, Mr. Lawrence Small, was throwing hundreds of thousands of dollars out the window. Money was thrown at his house, his office, and first-class travel for Mr. Small and his wife.

One of the great treasures in the Smithsonian is Dorothy's ruby slippers from ``The Wizard of Oz,'' as shown in this picture. What Dorothy learned in that classic movie is that ``there is no place like home.''

Just like for Dorothy, for Mr. Small, there is no place like home. The Secretary of the Smithsonian has taken that sentiment to heart, spending hundreds of thousands of dollars on paintings, repairs, house cleaning, lawn service, even his cable, and presenting the bill to the Smithsonian for payment.

The Smithsonian Board of Regents wants to justify the million-dollar- plus in expenses paid for at Mr. Small's house, which he owns, because the Board of Regents claims he does official Smithsonian entertainment at his home.

What are some of the expenditures at Mr. Small's house? Perhaps most incredible is that the Smithsonian has paid for roof repairs for the Small's house at a time when the Smithsonian can't find the money to fix the roof at the Smithsonian museum. But along with the roof, let me list some other items we are paying for: a chandelier cleaning for $2,535; a pool heater for $4,225.77; three new French doors for $14,525.

Having the taxpayers and the Smithsonian donors pay for what I describe as a champagne lifestyle? Priceless.

Let me turn now to Mr. Small's office at the Smithsonian castle because he has turned that castle into a palace. Again, the Smithsonian tells its hard-working employees that they need to save every cent possible by turning down the lights but wasted every dollar possible on Mr. Small's office suite.

We have just one example here. These chairs reported in the Washington Post this morning are ``probably some of the best quality chairs you can buy.'' Those are the words of the Washington Post. These chairs are $2,000 each. There is a conference table for $13,000, thousands of dollars on carpeting and upholstery, and even finding the money to spend $1,502 on a wall sconce. I don't know if they turn that off, as he has told the employees to turn off lights.

In addition, Mr. Small has decorated his office suite with enough paintings and artifacts from the Smithsonian collection that it would be the envy of many museums. Making one's personal office a museum annex goes against the best practices of museum directors. The Smithsonian's collection is for the people's enjoyment, not for private enjoyment.

It is a sad statement of the Secretary and the board's priorities when one of the newest rooms at the Smithsonian is the Secretary's office--this at a time when the Smithsonian is struggling to keep the buildings open.

In addition to spending on his house and office, what hasn't been reported yet are the enormous amounts of funds spent on top-of-the-line travel by both Mr. and Mrs. Small. The accountant hired by the inspector general found example after example of Mr. Small and his wife traveling with expenses that far exceeded what Federal employees are allowed to spend. I will highlight just two trips for my colleagues, but I want you to know there are many more about which I could speak.

Mr. Small and his wife decided to take a trip to Las Vegas in 2002. The reason ostensibly was to attend the opening of a portrait and a press conference. That, of course, meant a $3,464.50 first-class airline ticket for each. They then stayed at one of the best hotels in Las Vegas, the Venetian, at nearly $500 a night, and enjoyed a $170.79 dinner for two at the Belaggio.

They say what happens in Vegas stays in Vegas, but I am going to make an exception. I posted on the Finance Committee Web site these travel vouchers.

While the Vegas getaway is bad enough, I think the trip to California in 2001 shows a real window into the problems at the Smithsonian. Mr. Small spent over $2,800 in chauffeured limousine service in 4 days, including a whopping $1,319 in 1 day. I want everybody to know I have a car I would be glad to sell to the Smithsonian for what they paid for that car service.

What is even worse, if that is possible, is the excuse given for this out-of-control spending.

In a memo justifying the car service in California, the claim is made that there would be ``a safety risk for [Small] to carry as much cash as would have been needed to pay for a taxi. . . .'' Even children who claim dogs ate the homework are embarrassed by that excuse. These are very serious problems, and I would say the more we look, the worse it gets in regard to the leadership at the Smithsonian.

I am pleased that the Smithsonian Board of Regents is announcing today the creation of two boards: one a group of outsiders to review the work of the board, and a second group, comprised I understand mostly of Board of Regents members to look at board governance at the Smithsonian.

I am pleased that the Board of Regents is taking these needed steps. I may not agree with the members of the board and how they have handled things, but let me say that I have looked at the governance setup, established over 100 years ago for the Board of Regents, and I feel that architecture is one of the biggest dinosaurs in the Smithsonian. We have to look at that architecture of that governance. The board structures and duties have clearly not kept up with the times in terms of the best governance practices in the nonprofit sector.

In addition, the board's actions of blessing, after the fact, of Mr. Small's expenditures and actions is extremely troubling. In my State of Iowa, we call this the legislature passing a ``legalization act,'' and it raises very real concerns in my mind of whether the board is running the Smithsonian and its secretary or whether the Secretary is running the board.

The actions of the Smithsonian Board of Regents calls to mind my work with some problems with the American Red Cross. This is another organization on which I have conducted oversight. I am pleased that the Senate recently passed legislation that I sponsored that reforms the governance of the American Red Cross. The Red Cross is a great American institution that also needed to modernize its governance, and I worked closely and successfully with the Red Cross leadership and was pleased that they recognized the need for fundamental change. I hope the Smithsonian Institution will look at the Red Cross's experience for guidance.

While the board has much to account for, that does not excuse where the responsibility lies--with the Secretary of the Smithsonian, Mr. Small. While the board should have been more vigilant in its work and overseeing its public trust, make no mistake, it is Mr. Small who ordered the champagne and handed the bill to the Smithsonian.

So let's put to rest this argument that I have heard from some that Mr. Small should not be held accountable for his actions because the board allowed it to happen. I think that excuse is way beyond the pale. We have a right to expect the Secretary of the Smithsonian to have the common sense to know if he wants Dom Perignon, he needs to pay for it out of his own pocket.

The other argument I hear is that Mr. Small should be excused of his taxpayer-supported lifestyle because he has raised money. First, let's remember that 70 percent of the dollars come from the Federal Government. Secondly, I think it is insulting that Mr. Small's supporters are trying to give him credit for every dollar raised at the Smithsonian. There are dozens of people being paid top dollar at the Smithsonian, including the museum directors, to help raise money as well. They are all helping to pull that very big weight.

Finally, Mr. Small's supporters act as if no one raised a dime before he showed up. The Smithsonian is our Nation's great museum. Many patriotic Americans want to show their support and give to this institution regardless

of who is in charge, if they have the confidence that the money is going to be spent wisely. For example, the Smithsonian received $123 million in donations in 1999, and that was more than double the amount the year before in 1998. This included, by the way, $60 million from Steven Udvar-Hazy to build the new Air and Space Museum near the Dulles Airport, as well as $10 million from Ralph Lauren to preserve the Star- Spangled Banner. All of this fundraising was done before Mr. Small's arrival.

Thanks to the growing economy and new tax laws that I have helped champion that encourage greater charitable giving, it should be expected that charitable giving will be up at the Smithsonian. In fact, charitable giving is up across the country.

The supporters of Mr. Small who want to point to fundraising to wash away the thousands of dollars spent painting Mr. Small's own house reminds me of the rooster who crows and thinks he caused the Sun to rise.

The Smithsonian is the people's museum, and it contains America's treasures. The American people have a right to have someone as a Secretary of the Smithsonian who enjoys their confidence. I believe the Secretary of the Smithsonian has lost the confidence of the American people with his actions, actions that have been contrary to the public trust that he has been given. It is proper and needed for the Board of Regents to take a hard look at itself and the actions from the board. More immediately, however, I would suggest the Board of Regents needs to consider whether the Secretary of the Smithsonian should continue in his position, a position that he should continue in only if he has the trust and confidence of the American people and their representatives.

I think the board itself has learned a lot recently, and if the Board of Regents looks closely at the facts and listens to what the people are saying, it will have to consider very hard whether the time has come to turn off the lights in the Office of the Secretary of the Smithsonian.

Mr. President, I yield the floor.

Mr. President, I am pleased to join in cosponsoring the Alzheimer's Family Assistance Act of 2007 introduced by my colleague, Senator Mikulski.

As much as we all would like to think that we will remain healthy and strong throughout our lifetimes, many of us will need long-term care. The cost of that care, whether provided in a nursing home, assisted living facility, or in one's own home with the assistance of health aides, can quickly add up. That is why we should do everything we can to make people aware of long-term care insurance and to ensure that policies are affordable.

We need to encourage people to include long-term care insurance in their planning, especially when people are younger and premiums would be lower. The Deficit Reduction Act of 2005, DRA, made good progress in that regard by expanding State long-term care partnership programs. In addition, the DRA established an information clearinghouse to help individuals learn about long-term care insurance options in their states.

We also need to encourage older individuals to purchase long-term care insurance. By establishing a deduction for long-term care insurance premiums, this legislation will help accomplish that goal. In order to qualify for the deduction, the policy must include several important consumer protections recommended by the National Association of Insurance Commissioners, NAIC. The DRA incorporated the same protections plus some additional NAIC consumer protections into the State long-term care partnership policies. As this bill moves forward, I look forward to working with Senator Mikulski to ensure consistency in the application of these consumer protections to long-term care policies. Specifically, I hope we can expand the consumer protections in this bill so they are in line with those included in the DRA.

Finally, this legislation recognizes that individuals and their caregivers may need assistance in paying for medical supplies, nursing care, and other long-term care expenses. The tax credit called for in the bill, which increases from $1,000 to $3,000 in 2011 and beyond, will help defray these costs.

Mr. President, I have long supported the policies included in this legislation and commend my colleague for her work on this important issue.

Mr. President, I am pleased to join in cosponsoring the Alzheimer's Family Assistance Act of 2007 introduced by my colleague, Senator Mikulski.

As much as we all would like to think that we will remain healthy and strong throughout our lifetimes, many of us will need long-term care. The cost of that care, whether provided in a nursing home, assisted living facility, or in one's own home with the assistance of health aides, can quickly add up. That is why we should do everything we can to make people aware of long-term care insurance and to ensure that policies are affordable.

We need to encourage people to include long-term care insurance in their planning, especially when people are younger and premiums would be lower. The Deficit Reduction Act of 2005, DRA, made good progress in that regard by expanding State long-term care partnership programs. In addition, the DRA established an information clearinghouse to help individuals learn about long-term care insurance options in their states.

We also need to encourage older individuals to purchase long-term care insurance. By establishing a deduction for long-term care insurance premiums, this legislation will help accomplish that goal. In order to qualify for the deduction, the policy must include several important consumer protections recommended by the National Association of Insurance Commissioners, NAIC. The DRA incorporated the same protections plus some additional NAIC consumer protections into the State long-term care partnership policies. As this bill moves forward, I look forward to working with Senator Mikulski to ensure consistency in the application of these consumer protections to long-term care policies. Specifically, I hope we can expand the consumer protections in this bill so they are in line with those included in the DRA.

Finally, this legislation recognizes that individuals and their caregivers may need assistance in paying for medical supplies, nursing care, and other long-term care expenses. The tax credit called for in the bill, which increases from $1,000 to $3,000 in 2011 and beyond, will help defray these costs.

Mr. President, I have long supported the policies included in this legislation and commend my colleague for her work on this important issue.

Mr. President, the subject today is the tax gap. The tax gap is the difference between what is paid voluntarily in taxes by 85 percent of the American people and what is actually owed by people who do not pay all of the taxes that are legally owed.

The tax gap does not include things that are in the underground economy, nor does it include illegal earnings. The tax gap is certainly not a new issue. We have discussed it on the floor of the Senate many times. It has been an issue for previous administrations as well as this administration. In fact, I suspect the tax gap has been an issue for as long as there has been taxes. However, I would say in recent years the Finance Committee, on which I serve, has certainly brought a new focus to the issue of the tax gap. This has been very much a bipartisan effort. I believe the level of attention given to the tax gap certainly reflects the energy and focus of the new chairman of the committee, Senator Max Baucus from Montana. Chairman Baucus should be commended for his work in this area.

I also want to praise the chairman of the Budget Committee, Senator Conrad of North Dakota, for putting an additional spotlight on the tax gap topic. The Finance Committee has been doing the hard work in this area, encouraging greater research by the Internal Revenue Service, asking for detailed reports and recommendations from the Treasury Department as well as the Congressional Joint Committee on Taxation, investigating specific aspects of the tax gap, holding hearings to explore the details of the tax gap.

Finally, the Finance Committee has been doing the most difficult work of all, actually passing significant legislation that would reduce the money that is not coming in because of the tax gap. This has not been easy. I find the tax gap is one of those issues here in Congress that is a little bit like the weather: Everyone talks about it but no one is doing as much as should be done about it. But the way people talk around here, they view the tax gap as somehow a cure-all for all budget problems. The tax gap can be used to pay for the alternative minimum tax problem; if we want to expand spending on health care, tap into the tax gap; if we want to balance the budget, tap into the tax gap.

Given the amount of faith people have put into it, the tax gap has suddenly become one of those magic elixirs the peddlers used to sell in the Old West. You know how they said it will cure all that ails you. That was the slogan used by those slick salesmen 100 years ago. So the tax gap has become the elixir for all fiscal problems. I am surprised folks do not think the tax gap would cure baldness, as an example. So let's get behind the dreams and get to the real story of the tax gap.

I want to talk about three issues dealing with the tax gap. First, what is the estimate of the tax gap? Second, what are the elements of the tax gap? Finally, what do we actually do in addition to all of those things we have been doing to reduce the tax gap; in other words, to go after that final dollar we know is legally owed but not collected.

First, how is it the tax gap is estimated, and what is it? The Senate Finance Committee's Subcommittee on Taxation and Internal Revenue Service Oversight held a hearing 9 months ago, July 2006. It was chaired by the then-chairman of that subcommittee, Senator Kyl. We heard extensive testimony from senior IRS officials about how the tax gap is estimated. The tax gap has been based on reporting compliance efforts known as the Taxpayer Compliance Measurement Program.

As many colleague will recall, these efforts were viewed as too intrusive into the lives of the taxpayers. So the last taxpayer compliance measurement program that was done was back in 1988. Senator Baucus and I recognized the need for the updated research and encouraged the Internal Revenue Service to look at research that could provide useful data, useful information, without unduly burdening the honest taxpayer.

The Internal Revenue Service then responded with a national research program. It is important to realize that the national research program only dealt with a portion of the entire tax gap, primarily focusing on individual income taxes and not dealing with corporate tax. There are still significant portions of the tax gap that are then based on that very old material going

back to some studies 20 years ago, particularly in the area of passthrough entities.

I have a chart here that will make reference to some of these portions, significant portions of the tax gap. This is easily brought to focus on the Internal Revenue chart we have here. Remember, this is for tax year 2001, the latest available information. You can see it is only those items in bold that have been updated from the recent national research program, primarily in the area of individual income taxes and self-employment taxes; these areas right here.

It would be nice to have an update on all of this. But in order to get on top of it and get it done quickly, we asked the IRS to focus on these areas. With the colors, you can see it is only the green-- underpayment of taxes--that we have high confidence in. The light blue has been recently updated. We have some better sense of what the costs are.

Unfortunately, it is the yellow--the bigger parts of the chart--that is dependent upon the older numbers sometimes going back years and years. That is the yellow portion I have already referred to.

In terms many can better understand, think of the yellow estimates as being the broad side of the barn in terms of accuracy. So there we have it. At the end of the day the tax gap, based on many old estimates, is thought to be $345 billion for tax year 2001. That reflects a noncompliance rate of 16 percent. So basically, 84 percent of the tax dollars are coming in as required by law. We have a tax gap then of a remaining 16 percent.

Now I will turn to what are the elements of the tax gap. Again the chart from the Internal Revenue Service provides a useful blueprint. Nonfiling is about $27 billion. These are the people who do not even file their taxes. Then there is the underreporting of $285 billion. The Internal Revenue Service divides that into four categories: individual taxes at $197 billion; employment taxes, $54 billion; corporate income taxes at $30 billion; and estate tax and excise taxes of $4 billion.

Underpayment of taxes, which is the amount people admit they owe on their tax returns but do not pay on time, happens to be $33 billion.

Clearly individuals make up the biggest part, with individuals underreporting nonbusiness income and business income, and overstating adjustments, deductions, and exemptions being the elements of the tax gap for individuals. A good deal of this is concentrated in the areas of self-employment and schedule C of the tax return.

Now that we have gone through how we measure the tax gap and what makes up the tax gap, the most important thing people want to know is-- they do not want a definition of the problem--what can be done to close it? That is what my constituents ask me.

I believe the real question is one I would state this way: What steps can be taken that are effective and will not unduly burden taxpayers? We have to bear in mind most taxpayers do comply, and a significant amount of noncompliance is unintentional. I think all Members recognize that in the zeal to get at the tax gap, we cannot wreck the lives of the honest taxpayers. Most of the taxpayers, 85 percent, are not a problem. We cannot be like the fellow who tears down his house to get at the mouse. Members on the other side should be particularly sensitive to the mindset of not taking on the honest taxpayer when trying to take care of the problem of the 15 percent, given this was effectively what was being promoted in 1994 with the wholesale reform of health care. Proponents in 1994 wanted to change the health care system for 85 percent of the people for whom the system worked to help the 15 percent of the people who did not have health insurance. The voters were right in telling political leaders at that time in 1994 that this did not make any sense. First we need to recognize that the Internal Revenue Service is already, through enforcement, doing quite a bit to deal with the tax gap.

This chart reflects the Internal Revenue Service's testimony before the Budget Committee and estimates the IRS activities will reduce the tax gap, the $345 billion total, by nearly $70 billion by the year 2007. This reflects $17 billion in direct enforcement revenue and the rest in direct compliance effects. So we start with that as the base, the work of the Internal Revenue Service, which is already reducing approximately 20 percent of the tax gap, with Commissioner Everson's statements last year that the Internal Revenue Service could bring in somewhere between $50 billion and $100 billion a year without dramatically changing the relationship between the IRS and taxpayers; in other words, not being more egregious against the honest taxpayer. Well, the IRS is already doing that, according to its Commissioner.

Mr. President, I have to have 10 more minutes, maybe less than that.

Mr. President, I will complete my statement later, but I wish people would get it straight. If I were told I could come over here and finish my statement, and do it in morning business, I would like to be able to do it; otherwise, I would have waited to do it tonight.

Indeed, we have. Near the end of the 108th Congress we passed S. Res. 445, which created the Committee on Homeland Security and Governmental Affairs as the principal point of oversight and review for homeland security in the Senate.

Indeed, I do. This is an issue that goes back to the creation of the Department of Homeland Security and passage of the Homeland Security Act of 2002. The Finance Committee held a hearing in July 2002, followed by a letter to the chairman and ranking member of the Governmental Affairs Committee. We stressed the importance of preserving the revenue collection and trade facilitation functions of the U.S. Customs Service, even as that agency moved into the Department of Homeland Security with an added national security focus.

Yes. And I believe we can both agree that our efforts were successful in preserving the revenue functions, commercial functions, and commercial operations of the Customs Service within the Department of Homeland Security, including oversight of those functions and commercial operations within the Committee on Finance.

That is right. In fact, we can point to the enactment of the Security and Accountability For Every Port Act of 2006, otherwise known as the SAFE Port Act, as an example of that.

Indeed. The enactment of that legislation demonstrates that the retention of Finance Committee jurisdiction over customs revenue functions and commercial operations does not in any way diminish the effective oversight of other functions within the Department of Homeland Security by the Committee on Homeland Security and Governmental Affairs, nor does it detract from the Homeland Security and Governmental Affairs Committee as the principal point of oversight and review for homeland security matters in the U.S. Senate. In fact, by drawing on the focus and expertise of both committees, we improve overall Senate oversight of the homeland security interests and economic security interests of the United States.

I agree with my colleague and note the same. However, since it is merely a sense-of-the-Senate resolution, and is not binding in any way, I think it is sufficient to note our objections for the record at this time. The provision is not worth objecting to any more than that. We have already established a principal point of oversight and review for homeland security in the U.S. Senate. The current balance reflected in S. Res. 445 has been proven to work and need not be disturbed.

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

Mr. President, I ask to speak as in morning business for such time as I might consume, and if there are other Members who are wondering how long that might be, it wouldn't be probably for more than 15 minutes at the most.

Mr. President, I wish to finish the discussion I started earlier today about the tax gap and efforts to close it. As I said this morning, the tax gap is the difference between what is paid in taxes and what is actually owed. While more reliable and timely data on the tax gap is greatly needed, the tax gap was thought to be $345 billion for the tax year 2001, which seemed to be the year that the IRS had the latest information where they could put together something that was fairly solid for that year.

I also pointed out this morning that many of my colleagues in the Senate see the tax gap as a sort of magical tonic that can be used to cure all sorts of ailments. Some people see $345 billion in AMT relief or health care spending or national debt reduction without thinking about what would be involved in actually collecting the money. So I am raising the question: Do people think through whether every dollar will be brought into the Federal Treasury?

The IRS is already making some progress in closing the tax gap. This morning I mentioned the Internal Revenue Service told the Budget Committee it could reduce the tax gap by nearly $70 billion, of that $345 billion, in the year 2007.

So where does that leave us? Can we do more in enforcement? The administration has proposed an increase in funding for the Internal Revenue Service. That increase looks toward the tax gap with funds directed toward increased data matching, improved research, as well as more auditors--auditors to make sure that more money comes in. I suggest my colleagues might also want to make certain that if we consider adding more Internal Revenue Service employees, we have greater confidence that the Internal Revenue Service is utilizing current resources effectively. In other words, before we hire more people, we ought to make sure the existing employees at the Internal Revenue Service are being used in the most efficient way to bring in the most money possible.

That doesn't preclude more money, but that is a necessary first step before we automatically think of more money and more employees.

For instance, the IRS has hundreds of employees, according to a Treasury inspector general for tax administration report, that do part- or full-time union work. This is thousands and thousands of work hours that could be spent going after the tax gap. What could we gain if we directed all those union hours to actually working on the tax gap before we appropriate more money to hire more employees?

So we have proposals then for increased enforcement. Let me remind my colleagues, though, that the Joint Committee on Taxation--that is a congressional committee that specializes in watching the Tax Code and making estimates and studying all ways to make the Tax Code more efficient and bring in more money--that committee will not give us a score for additional dollars based on increased enforcement. So we can talk all we want about hiring more people to bring in more revenue, but until that revenue is in the bank, the Joint Committee on Taxation isn't going to give us any credit for it.

As we are looking at budget debates over this week and next week, keep that in mind. That isn't going to get Senators anywhere in terms of reducing projected deficits or paying for tax cuts or bringing in more money to spend someplace else.

It is important to emphasize the Commissioner of the Internal Revenue

Service made it clear to the Budget Committee a few days ago at a hearing that we cannot audit our way out of the tax gap. The Commissioner also warned about increasing the IRS budget too quickly if we decide to go the route of hiring more people by giving more money because he said a big increase in staffing would harm taxpayers' rights if the IRS was not able to grow in a managed way to control the outcome.

We can look at what we can possibly do legislatively beyond greater enforcement. The Democratic leadership hasn't proposed anything new, but the administration has put forward some proposals in the budget--in its own budget, meaning the budget of the executive branch. Many of the administration's proposals deal with information reporting. Information reporting is an important way to improve tax compliance. This is very clear from all the work that has been done so far on the tax gap.

However, information reporting places additional burdens on taxpayers, and it is very frustrating that we often find the Internal Revenue Service is not doing enough to match or review the documents taxpayers are already providing the IRS as a paper trail to make sure all taxes are paid. Needless to say, this greatly limits the benefit information reporting provides.

Setting these concerns aside, the administration in their budget has proposed, one, information reporting on payment to corporations; two, basis reporting on securities sales; three, broker reporting; four, reporting of merchant payment card reimbursement; five, increase information return penalties; six, taxpayer identification number verification for independent contractors; and seven, information reporting on certain Government payments.

The administration has proposed other proposals, including increased penalties, expanded IRS access to information, and required electronic filing as some of the other new proposals.

This is a very comprehensive list of proposals coming from the administration. Is it everything? No, but it seems to me this is a serious start and shows that people within Treasury, within the Office of Management and Budget, and maybe even within the White House, are very concerned about closing the tax gap.

If Senators who have attacked the Secretary of Treasury and the Internal Revenue Service believe more can be done, I suggest they should come forward with their own proposals and add to the multitude I read coming from the executive branch of Government.

I think Senators will find that while it is easy to complain about what is coming out of the Treasury's kitchen, it is a lot harder to get in there and do it themselves. I think Senators need to be careful-- very careful--at putting out pie-in-the-sky numbers for what can be achieved by reducing the tax gap without at the same time putting forward their own detailed, concrete, Joint Tax Committee-scored proposals that show how it can be done.

That brings me to a chart. This chart shows there is a lot of smoke and mirrors when it comes to the tax gap, in other words, all the people who are saying they are going to use the tax gap to reduce the deficit, to fund tax cuts or even to take the money and spend it on some new program or increase spending on existing programs. There are a lot of ideas out there.

What I want this chart to demonstrate to us is that there is a lot of smoke and mirrors when it comes to the tax gap. We can't use smoke and mirrors to pay for tax cuts or to decrease the deficit; we have to have proposals that are in detail, black and white, and are scored by the Joint Committee on Taxation, our experts who are on top of the Tax Code and how much money will come in or how much money we lose if we cut taxes.

Tax gap proposals shouldn't be used for spending. The tax gap is appropriately viewed as unfairly placing a heavier burden on compliant taxpayers, 85 percent of the people who pay what they owe and file accordingly.

If we enact tax-gap closers, they should be used to reduce taxes or reduce the deficit, not to increase spending.

Let me conclude my discussion of the tax gap by saying you can have a blue Moon, you can have blue cheese, you can have blue-suede shoes, but when it comes to balancing the budget, you can't do it with blue smoke and mirrors. That, unfortunately, is what so much of the tax gap is right now: blue smoke.

I strongly encourage the Budget Committee chairman and other Senators not to use blue smoke during the upcoming budget resolution debates. That is going to happen Wednesday and Thursday in the Budget Committee this week. It is going to happen all next week on the floor of the Senate.

Now I will review some of the issues we must consider as the Senate works on its budget resolution. In an earlier visit with my colleagues in the Senate, I discussed the importance of preventing a tax hike on the American people. Anyone who considers themselves a deficit hawk needs to do more than raise taxes. So I challenge the new Democratic majority to also examine the spending side of the ledger; that is, if they are truly serious about deficit reduction.

In another visit with my colleagues from the floor of the Senate, I highlighted a study prepared by Goldman Sachs. That study shows that the likely result of letting tax relief expire could lead to a recession. Since tax relief was enacted, Federal revenues have increased, employment has increased, household wealth has increased--in fact, household wealth has increased to the highest level it has ever been in the history of our country--and the S&P 500 index has consistently moved upward. Again, a failure to extend tax relief or make it permanent puts all this at risk, and at risk for nothing.

Anyone serious about deficit reduction needs to also look, then, at the spending side of the ledger. In a third visit that I had with my colleagues from the Senate floor, I pointed out that Democratic revenue raisers did not come close to covering new spending contained in Democratic amendments when we had the budget up exactly 12 months ago this month. In many cases, I showed the same offset was used in multiple amendments to pay for multiple projects, just like every dollar coming into the Federal Treasury could be spent two, three, four times, and somehow just multiply and, like blue smoke, solve all of our problems.

If the Democratic leadership is serious about pay-go, and that is short for pay as you go, and if they are serious about deficit reduction, they need to be realistic about where the money is going to come from to cover any new spending proposals. The budget plan advocated by the other side last year would have either increased the deficit or gutted tax relief that was passed in 2001 and 2003, including items such as the alternative minimum tax fix that we did, and all of these things the other side of the aisle claims to support and yet have proposals that would gut them or increase the deficit.

I want to state my intention to fully cooperate with my colleagues of both parties to produce a budget that preserves our growing economy while addressing the needs of our government. I am particularly looking forward to exploring ways to use the Tax Code to help more Americans acquire health insurance. I am also looking forward to using the budget resolution to ensure, on a revenue-neutral basis, that we continue to pursue tax simplification and tax reform. In order to produce the best possible budget, we must be careful not to endanger our growing economy. We must be willing to examine spending. We must not just focus on revenues, and in the whole process, we have to be intellectually honest about how far we can push revenue raisers and other offsets. In other words, avoid the smoke and mirrors.

Mr. President, I yield the floor.

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

Mr. President, are we in morning business?

I ask unanimous consent to speak as in morning business.

Mr. President, today, as I did a couple days last week, I continue with my discussion on the issues the Senate will face as the Democratic leadership draws up its budget resolution, and that is going to be 2 days next week in the Budget Committee and then I think the week after next, depending on what the

Democratic leader decides to do, we generally will have a whole week of debate on the budget and adoption of the budget.

We face an important milestone because the Democratic leadership controls the Senate for the first time since the 2002 election. Over the past 4 years, there has been a lot of passionate debate over the fiscal policies the Republican leadership proposed and implemented over the last 4 years. In November, the voters sent a Democratic majority to Congress. The budget debate we are about to enter provides Democrats with their opportunity to chart a fiscal policy path for the Nation.

Before the budget arrives, I have taken to the floor to recap and evaluate some of the consistent themes we have heard from the Democratic leadership over the past 4 years. Since the Finance Committee has jurisdiction over nearly all of the revenue side of the budget, I focused on the issues on that side of the ledger, the revenue side.

Since the position of the Democratic leadership has been to let the bipartisan tax relief plans of 2001 and 2003 expire, I talked about the effects of that automatic tax increase--yes, automatic tax increase-- that happens without even a vote of the Congress if we don't continue this tax policy that was adopted in 2001 and 2003 beyond the year of 2010.

It is a very important consideration. For the last 4 years, Republican budgets on Capitol Hill have made it clear that our priority was to ensure that virtually every American taxpayer would not see that automatic tax increase come in their earnings of 2011, and that still is our policy. That is a policy reflected in the budget the President of the United States has sent to the Congress. So the year 2011 is the year the bipartisan tax relief sunsets.

I emphasize that 2001 was the year of bipartisan tax relief. I had the good fortune of working that year, 2001, with Senator Max Baucus helping me get that bipartisan tax relief passed. He is now chairman of the committee, being that the Democrats are in the majority. I have the good fortune of maintaining a close working relationship with him.

The President's budget, as I already said, maintains the assurance that these tax policies of the last 7 years will continue in place beyond the year 2010. During the 4-year period 2003 to 2006, the Democratic leadership was harshly critical of this policy which was passed in 2001 and 2003; that is, the Democratic leadership opposed the fiscal policies of preventing a tax increase on virtually every American taxpayer automatically because Congress wouldn't even have to vote on it.

My first speech defined the tax increases built into that fiscal policy. My second speech highlighted some of the macroeconomic risks of that widespread automatic tax increase. Last week, I remarked to the Senate and discussed with the Senate potential omissions in the Democratic leadership's budget; that is, the discussion was about fiscal policy that was present in prior budgets. If the Democratic leadership's past criticisms of those budgets were carried out, the fiscal policy of continuing tax relief would end. This week, I am going to focus on the track record of the Democratic leadership and discuss potential problems from proposals that might be contained in that budget. You could say, from our standpoint, I am examining errors of commission this week, whereas last week I examined errors of omission.

Today, I wish to refer to the use of revenue-raising offsets in the budget context. As any budgeteer can tell you, the budget resolution is not a law. It doesn't amend the Internal Revenue Code or Medicare law or appropriations. The budget resolution is like a blueprint for a building. The actual construction of tax and spending policies will occur later on this year.

The budget resolution is, however, critical to actual tax, actual spending, and actual deficit decisions the Congress will undertake. The matter of offsets is critical in this respect: If additional spending is proposed in the resolution without real offsets, then deficits are more likely. Likewise, if popular tax relief is proposed but not offset with real proposals, then deficits could appear and be larger--though, on this last point, the track record of the last 4 years shows tax relief grew the economy and record levels of Federal revenue came into the Treasury as a direct result.

My basic point is that if a proposed offset is not realistic and the proponents succeed, budget discipline could be undermined. In other words, phony offsets, if incorporated into the budget, can lead to deficits.

Today, I am just going to follow the numbers. Just follow the numbers. I am not going to make any judgments or make any assumptions about the revenue-raising proposals. I am going to analyze these proposals strictly from a fiscal standpoint.

I analyze two categories of offsets from the standpoint of whether the budget arithmetic adds up, and I am going to examine last year's record of the Democratic leadership on offsets but look at it as if they were in control at the time. It is not a pretty picture.

I am going to take a look at proposed offsets from a series of amendments, real amendments that were debated here on the floor of the Senate during last year's budget resolution debate. During that debate, virtually all Democratic members had a common theme in their purported offsets for their amendments to this resolution. That purported theme was that they would close tax loopholes to pay for whatever popular spending program they wanted to propose. Closing corporate tax loopholes was the common refrain to pay for spending.

I will list the amendments and the popular spending proposals:

Senator Kennedy, Vocational Education and Pell Grants;

Senator Akaka, Veterans Medical Services;

Senator Murray, Community Block Grants;

Senator Stabenow, Emergency Responders;

Senator Menendez, Port Security;

Senator Byrd, Amtrak;

Senator Reed of Rhode Island, LIHEAP;

Senator Sarbanes, Corps of Engineers and other Federal

services;

Senator Dorgan, Native American programs;

Senator Stabenow, Veterans' Health Care;

Senator Akaka, Title I Education Grants; and

Senator Lincoln, Agriculture.

These are all here, and more than what I gave are here.

Mr. President, at this point I ask unanimous consent that a list of these amendments by vote and by amendment number, so that they are there for people who aren't listening to what I am saying to consider, be printed in the Record.

Mr. President, as you can see, the proposed spending is popular and has a nice political edge. Democrats could record themselves as voting for the amendment, and they could criticize Republicans for voting against those amendments. From a political calculation perspective, these were profitable efforts on the part of the Democratic leadership. The fiscal consequences, however, were another story.

If Democrats had been in the majority, as they are now, the fiscal effect of these amendments would have been a very big problem, and here is why. One-time spending increases, even if for 1 year, are built into the CBO baseline, and they are built in forever. This is explicitly the case for increases in discretionary spending. It is also implicitly the case with entitlement spending. If anyone disputes that point, I would ask them to show me the last time we reversed new entitlement spending. It just never happens around here is the best thing to say.

Let's take a look at the Kennedy amendment on vocational education and Pell grants to which I have referred. The amendment was purported

to be $6.3 billion, but that was for 1 fiscal year. That $6.3 billion, if adopted, would probably be extended in later years. It is in the baseline. So Senator Kennedy found his offset by closing $6.3 billion in what he referred to as corporate tax loopholes. I am not going to find fault with closing those tax loopholes. I have been involved in things like that for a long period of time, and successfully so. The fiscal and political effect, though, of Senator Kennedy's amendment was to identify specific popular spending and offset it with a nondefined tax increase. From a realistic standpoint, Senator Kennedy's amendment identified less than 10 percent of the gross spending burden it would have placed on future budgets to the extent the unspecified revenue offset was duplicative or not realistic. The real effect was that the $6.3 billion additional spending would have been added to the budget for that fiscal year.

All 12 of these listed amendments used the same undefined offset.

Several Members referred to revenue raisers in a Democratic substitute amendment to the 2005 Tax Relief Reconciliation bill, and they kept trying to spend the same money over and over again. Let's take a look at the list of revenue raisers in the substitute amendment.

Mr. President, I ask unanimous consent that a Joint Committee on Taxation estimate of the revenue offsets to the 2005 substitute be printed in the Record.

That substitute amendment is an overinclusive inventory of offsets. I say ``overinclusive'' because it included the universe of revenue raisers that the Democratic caucus supported. Republicans supported many, but not all, of these offsets.

Joint Tax scored these revenue raisers during last year's budget debate. According to the Joint Tax experts, that universe of Senate offsets raised $53.6 billion over 5 years. That is this chart right here: $53.6 billion. At that time, I noted that the budget resolution assumed several billion in revenue raisers to cover part of the reconciliation bill. Indeed, in the reconciliation conference, we used eight of these revenue raisers. They accounted for about $9 billion-- and I should say only $9 billion over 5 years. I had hoped to use additional raisers accounting for about $7.5 billion over 5 years, but the House rejected that, and we then found some offsets someplace else. So we will take a look at them.

If you account for the revenue offsets left over, you can subtract out another 10 revenue-raising proposals that are in the Senate's small business minimum wage bill. Those revenue raisers--and those are things which had just been before the Senate--those revenue raisers included $8.7 billion over 5 years. That is this figure here.

Of the raisers in the 2005 substitute amendment, about $18 billion of those were enacted or are in play in discussions between the House and the Senate. So if we review the Senate Democratic inventory of identified as well as scored revenue raisers and net out current law and Senate-passed tax legislation, we find 18 revenue proposals available. These are proposals the Democratic caucus has advocated that are left over. They raise approximately $36 billion over 5 years.

Everyone should know there are revenue raisers in that total I just recited that the administration doesn't support. You don't have to let that detract you from it, but those would be issues which would be subject to, I suppose, a Presidential veto.

Let's forget that for the moment. There are many in this total that the House and Senate Republicans don't support. As we have found in the small business tax relief discussions, House Democrats aren't keen on some of these proposals either. Nevertheless, to bend over backward and to be fair to the Senate Democratic leadership, I am going to tally the proposals they have supported as a caucus.

Let me repeat the total corporate loophole closers and other offsets Democrats have defined. It is $36 billion over 5 years. Put another way, I would like to say it is only $36 billion over 5 years, but I want you to see what they want to use that $36 billion for--presumably to cover a lot of other expenditures they can't do because the numbers don't allow it. That total of $36 billion, then, provides a ceiling of offsets to compare to the spending amendments.

Let's go back and match the spending amendments with the universe of Democratic revenue raisers. The revenue raised is a far cry from the cumulative demand of the amendments that were filed. The amendments that have been filed that propose to use those tax loophole closers as offsets total $105 billion in new spending. So the Senate Democrats propose $36 billion in revenue raisers that were supposed to offset $105 billion in new spending, but it doesn't add up. That means the spending exceeded revenue raisers by $69 billion.

Mr. President, I ask unanimous consent that a list of the Democratic amendments to the fiscal year 2007 budget resolution be printed in the Record.

Mr. President, this list was prepared by analysts and was based upon filed amendments printed in the Congressional Record. I think it is interesting that only one filed amendment on this list would decrease taxes over 5 years, and only one amendment would result in decreased spending over 5 years. The amendment decreasing spending was filed by New York's junior Senator and would reduce spending by $1 million. That is one-thousandth of a billion dollars.

Put another way, if you subtract the $36 billion from the $105 billion in new spending proposed, it means the other side's amendments were short $69 billion--short $69 billion. Right here. This figure. This money proposed for offsets, add up all of the amendments put before the Senate, and you come out short. Revenue neutrality? No. Budget neutrality? No.

Now, that $69 billion needs to come from someplace. If the other side had prevailed, it would have wiped out the tax relief of last year's budget, including what we do to keep more Americans from paying that horrible tax, the alternative minimum tax. You can't have it both ways. Either the other side, if they had prevailed, would have added $69 billion in deficit spending or they would have gutted the tax relief they claim to support.

Budgets are about choices. In this case the choices are clear. If the Democratic leadership would have controlled the Senate last year, we would have no tax relief in that budget or we would have added $69 billion in deficit spending. Neither choice would be the right choice from the standpoint of the American people.

Defining offsets is very important. It is very important because we need real numbers if we are going to have intellectually honest budgeting. My analysis of corporate loophole closers and other revenue- raising proposals shows the Democratic caucus has supported at most $36 billion in specific revenue-raising proposals. By the way, that is about the revenue loss for last year's AMT patch. So the alternative minimum tax would have hit another 7 or 8 million Americans.

Using unspecified revenue-raising proposals is not realistic. If Democrats intend to live by pay-go, short for ``pay as you go,'' the Finance Committee will need those revenue-raising proposals to handle a portion--and just a portion--of the demand of the tax system.

There are two other categories of revenue-raising proposals identified by the Democratic leadership. One is repealing tax relief for higher income taxpayers. The other is reducing or closing the tax gap. I will talk about the tax gap in a later speech.

When folks in the Democratic leadership talk about raising taxes on higher income taxpayers, it sounds as if all fiscal problems can be solved as long as you want to look down the road. Liberal think tanks and sympathetic voices in the east coast media tend to echo that sentiment. As a matter of intellectual honesty in budget debates, we ought to have an idea of how much revenue is there. Since the most popular proposal is to repeal the bipartisan tax relief for higher income taxpayers, I have asked the Joint Tax Committee to provide updated estimates of those proposals--such as the corporate loophole closer. I do not expect the revenue would cover the spending demands. I was pleased to see the Budget Committee chairman make a public comment last week that seemed to address these proposals. According to the March 1, 2007 edition of Congress Daily AM, the chairman indicated he intended to put forward a budget with ``no tax rate increases.'' I will have to see the budget resolution and hear the chairman's explanation, but I read that comment to mean the Democratic leadership will not, at a minimum, propose to roll back current law tax rates.

This would be especially interesting in light of the so-called millionaire's tax amendment put forward in the past by members of the chairman's party. The millionaire's tax amendment filed for the fiscal year 2007 budget would have increased taxes by about $105 billion. Of course, those same amendments spent that money, so deficit reduction would not have been received.

Today I have examined the question of revenue-raising offsets. The inventory of available, defined, specific revenue-raising offsets is relatively small. Last year, Democratic amendments overspent the available revenue offsets by $69 billion. The Democratic leadership has indicated a desire to apply pay-go, pay as you go, to the current law tax relief. If pay-go is to be observed with respect to the alternative minimum tax and other popular expiring tax relief provisions, the Democratic leadership will need those revenue raisers and even more to offset the revenue lost from these time-sensitive provisions.

When we start to examine and debate the budget resolution, we will need to use intellectually honest numbers. Using the undefined corporate loophole closer is fiscally dangerous. It enables even more spending at a time when Government is at record levels as far as real dollars. Runaway spending is at the root of our current or future fiscal problems. Using phony revenue-raising offsets sets up two negative fiscal outcomes, an undefined tax increase and/or deficit spending.

All Members, whether Republican or Democrat, ought to agree to be transparent with all these numbers and all these figures in the amendments that are posed in the upcoming budget debate.

I yield the floor.

Mr. President, I urge my colleagues to support Judge John Jarvey, who has been nominated to serve as a U.S. district judge for the Southern District of Iowa. The Judiciary Committee unanimously approved Judge Jarvey some time ago, and I am glad that now we are moving expeditiously on his nomination.

I would like to give my colleagues a little background on this stellar nominee. Judge Jarvey comes from Cedar Rapids, IA. Since 1987, he has been the chief U.S. magistrate judge for the U.S. district court, Northern District of Iowa. He also has been a trial advocacy instructor at the University of Iowa Law School since 1993.

I received many letters from the Iowa legal community praising Judge Jarvey's judicial temperament, courteousness to litigants, and respect for and commitment to our judicial system. He has been praised for his judicial ethics and abilities as an administrator. Many letters commented on

Judge Jarvey's intelligence, command of the law and rules of evidence, and his fairness.

Judge Jarvey has been given a unanimous rating of ``well qualified'' by the ABA. I am confident that this man possesses the skill, integrity, commitment, intellect, and temperament that we expect of all good judges. So I urge my colleagues to vote in support of Judge Jarvey's nomination.

Madam President, I would like to offer another amendment to S. 4 that seeks to strengthen our Nation's homeland security by closing a loophole in our securities laws. My amendment would amend section 203(b)(3) of the Investment Advisers Act of 1940 and would narrow an exemption from registration for certain investment advisers. There is a homeland security element to this fix because it can sometimes be important to know who is managing large sums of money for wealthy foreign investors. For example, it was recently reported that a Boston-based private equity firm, Overland Capital Group, Inc, is under investigation by the IRS and DOJ counterterrorism division. Such firms, which manage hundreds of millions of dollars for wealthy investors in total secrecy, ought to have to at least register with the

Mr. President, it's time we put a stop to wasteful, abusive, and fraudulent use of government credit cards. In fact, it's overdue. For several years, I have been working with the Government Accountability Office (GAO) to investigate misuse of government credit cards and the lack of internal controls in agencies that breeds such activity. We have found shockingly flagrant abuses like $2,443 in taxpayers' money going to pay for a down payment on a sapphire ring at a place called E-Z Pawn and $1,935 in taxpayers' money used to purchase two LA-Z-Boy reclining rocking chairs with full lumbar support and vibrator-massage features, all using government purchase cards. Government travel cards, which are only to be used for legitimate travel-related expenditures, have been used to pay for everything from women's lingerie from Frederick's of Hollywood to tickets to the Phantom of the Opera to a seven night Alaskan cruise for two. In each report it has issued, the GAO has made recommendations about what kind of controls need to be implemented to prevent such abuses from occurring in the future. Our oversight work has helped shine a light on this problem and has led to some improvements. Some agencies have moved to fix the specific shortcomings highlighted by the GAO, and the Office of Management and Budget has issued a circular to agencies that seeks to bring about an improved control environment. However, I believe a more comprehensive approach is needed. There is considerable commonality between the control breakdowns the GAO found in the agencies it investigated. The same controls were often missing or inadequate, and therefore the same recommendations are repeated in report after report. The OMB circular does not address many of these recommendations and it makes no sense for the GAO to visit every agency and bureau in the Federal Government to point out where they fall short. We know what is needed to prevent waste, fraud, and abuse of government credit cards and we must ensure that these internal controls are implemented consistently across the federal bureaucracy. That is why I am reintroducing the Government Credit Card Abuse Prevention Act, along with Senators Lieberman, Collins, and Coleman. I should also mention that Representative Joe Wilson will be reintroducing companion legislation in the House of Representatives and I appreciate his help and assistance as we've worked together on this legislation.

Based primarily on the recommendations of the GAO in numerous reports, as well the work of agency inspectors general and my own oversight work, my bill seeks to curtail waste, fraud, and abuse of government purchase cards, government travel cards, and centrally billed accounts. By way of background, government purchase cards are essentially credit cards held by an agency that authorized individuals use to purchase items necessary for the work of the agency. Since the agency pays the bills directly, the American taxpayer is on the hook when improper purchases slip through the cracks. That means hard working American citizens are paying for someone else's Christmas shopping, or at the very least items with little or no legitimate public interest. Just like the parents' credit card in the hands of an undisciplined teenager, government purchase cards in the hands of poorly trained bureaucrats with inadequate oversight can lead to rash and ill-considered impulse buys. Take for instance an incident uncovered by the GAO when an individual at the Air Force Academy found a dead deer alongside the road and decided to use a government purchase card to pay for mounting the mule deer head to hang on the wall at the office.

Centrally billed accounts are another credit product that federal agencies use, primarily for purchasing transportation services. Like purchase cards, the bill is sent to the government so it's the taxpayer who pays when the bureaucrats let things slip through the cracks. For instance, we've had repeated cases where government employees had airplane tickets purchased on their behalf directly from a centrally billed account, and then they sought and received reimbursement as though they had paid for the ticket. In other words, the ticket was paid for twice with the employee pocketing the cost the second time, and no one would be the wiser if it weren't for the GAO. The GAO has also found millions of dollars worth of fully refundable, unused airline tickets that no one bothered to cash in. I was pleased to work with Senator Coleman, then the Chairman of the Permanent Subcommittee on Investigations, to bring these issues with centrally billed accounts to light, as well as Senator Collins, who was at the time the Chairman of the Government Affairs Committee. In addition to being co-requesters of the GAO reports, they held hearings in their respective committees and were kind enough to invite me to testify about our work.

Government travel cards, on the other hand, are not paid directly with taxpayers' money like purchase cards and centrally billed accounts, but they are only supposed to be used to pay for legitimate expense while on official government travel. Failure by employees to repay these cards results in the loss of millions of dollars in rebates to the Federal Government. Also, when credit card companies are forced to charge off bad debt, they raise interest rates and fees on everyone else. Nevertheless, government travel cards with high credit limits have been handed out like candy at a parade to individuals with abysmal credit ratings who ordinarily would never be issued that kind of credit. It's no surprise then when we learn that certain government employees have abused their government travel cards to buy jewelry, take in a New York Yankees game, or to fuel an internet gambling habit. Such abusive charges often occur when the cardholder is not even on travel at all. In fact, government travel cards have been used to provide cash advances in employees' hometowns. There are even examples of charges at so called ``gentleman's clubs'' like Cheetah's Lounge and Deja Vu Showgirls, and even at legalized brothels. Suffice it to say that the GAO was able to determine that these charges were not for food or other approved travel expenses. It also comes as no surprise when the GAO found that employees issued government travel cards despite bad credit often bounce checks when their bill comes due, sometimes repeatedly and fraudulently. Common sense then leads us to the same conclusion that the GAO came to through empirical analysis, namely that a significant relationship exists between potential travel card fraud, abuse, and delinquencies and individuals with substantial credit history problems. That is why my legislation requires agencies to perform credit checks for travel card holders and issue only restricted cards for those with poor or no credit to reduce the potential for misuse.

My bill would also require a series of common sense internal controls, which the GAO has found to be lacking in many cases, to be implemented in every federal agency. These include: maintaining a record of each cardholder, including single transaction limits and total credit limits so agencies can effectively manage their cardholders; implementing periodic reviews to determine if cardholders have a need for a card; properly recording rebates to the government based on prompt payment; providing training for cardholders and managers; utilizing available technologies to prevent or catch fraudulent purchases; establishing specific policies about the number of cards to be issued, the credit limits for certain categories of cardholders, and categories of employees eligible to be issued cards; invalidating cards when employees leave the agency or transfer; establishing an approving official other than the purchase card holder so employees cannot approve their own purchases; reconciling purchase card charges on the bill with receipts and supporting documentation; submitting disputed purchase card charges to the bank according to the proper procedure; making purchase card payments promptly to avoid interest penalties; retaining records of purchase card transactions in accordance with standard government record keeping polices; utilizing mandatory split disbursements when reimbursing employees for travel card purchases to ensure that travel card bills get paid; comparing items submitted on travel vouchers

with items already paid for with centrally billed accounts to avoid reimbursing employees for items already paid for by the agency; and submitting refund requests for unused airline tickets so the taxpayers don't pay for tickets that were not used.

My bill would also provide that each agency Inspector General periodically conduct risk assessments of agency purchase card and travel card programs and perform periodic audits to identify potentially fraudulent, improper, and abusive use of cards. We have had great success working with Inspectors General using techniques like data mining to reveal instances of improper use of government charge cards. Having this information on an ongoing basis will help maintain and strengthen a rigorous system of internal controls to prevent future instances of waste, fraud, and abuse with government charge cards.

In addition, my bill requires penalties so that employees who abuse government charge cards will not get away scot free. In fact, in cases of serious misuse or fraud, the bill provides that employees must be dismissed and suspected cases of fraud will also be referred to the appropriate U.S. Attorney for prosecution under federal anti-fraud laws. It is essential that we send a clear message that misuse and fraudulent use of government credit cards will not be tolerated. The lack of consistency in the past in applying punishments to those caught abusing government charge cards has sent the wrong message and led to an environment where misuse of government charge cards is more likely. My bill will change that.

The American people expect us to be good stewards of their money and their cynicism about government only builds when they read about bureaucrats saying, ``Just put it on plastic'' willy nilly with their hard earned dollars. Unfortunately, such incidents persist. In the wake of Hurricane Katrina, Congress hastily passed a supplemental spending bill containing an ill-advised provision to dramatically raise the micro-purchase threshold for purchase cards. I worked with Senators Collins and Lieberman, the leaders of the Homeland Security and Governmental Affairs Committee, to reverse what amounted to an invitation to misuse government purchase cards. Then, because of our concerns and the concerns of other members of Congress about the potential for fraud and abuse of purchase cards in the response to the hurricanes in the Gulf Coast region, the GAO conducted an investigation of purchase cards at the Department of Homeland Security. Just last September, the GAO issued its report finding instances of abusive or questionable government charge card transactions, including the purchase of a beer brewing kit, a 63-inch plasma television with a price tag of $8,000 that was found unused in its original box 6 months later, and tens of thousands of dollars for training at golf and tennis resorts. Clearly the abuse of government credit cards remains a problem and Congress needs to act. My bill will establish the discipline needed in government agencies to keep those credit cards in the wallet unless needed. I am particularly glad to be joined in introducing this bill by Chairman Lieberman and Ranking Member Collins as well as Senator Coleman. Their leadership on this issue will continue to be invaluable. I urge the rest of my colleagues to join us in this effort and put a stop to the bureaucratic shopping spree.

I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, it's time we put a stop to wasteful, abusive, and fraudulent use of government credit cards. In fact, it's overdue. For several years, I have been working with the Government Accountability Office (GAO) to investigate misuse of government credit cards and the lack of internal controls in agencies that breeds such activity. We have found shockingly flagrant abuses like $2,443 in taxpayers' money going to pay for a down payment on a sapphire ring at a place called E-Z Pawn and $1,935 in taxpayers' money used to purchase two LA-Z-Boy reclining rocking chairs with full lumbar support and vibrator-massage features, all using government purchase cards. Government travel cards, which are only to be used for legitimate travel-related expenditures, have been used to pay for everything from women's lingerie from Frederick's of Hollywood to tickets to the Phantom of the Opera to a seven night Alaskan cruise for two. In each report it has issued, the GAO has made recommendations about what kind of controls need to be implemented to prevent such abuses from occurring in the future. Our oversight work has helped shine a light on this problem and has led to some improvements. Some agencies have moved to fix the specific shortcomings highlighted by the GAO, and the Office of Management and Budget has issued a circular to agencies that seeks to bring about an improved control environment. However, I believe a more comprehensive approach is needed. There is considerable commonality between the control breakdowns the GAO found in the agencies it investigated. The same controls were often missing or inadequate, and therefore the same recommendations are repeated in report after report. The OMB circular does not address many of these recommendations and it makes no sense for the GAO to visit every agency and bureau in the Federal Government to point out where they fall short. We know what is needed to prevent waste, fraud, and abuse of government credit cards and we must ensure that these internal controls are implemented consistently across the federal bureaucracy. That is why I am reintroducing the Government Credit Card Abuse Prevention Act, along with Senators Lieberman, Collins, and Coleman. I should also mention that Representative Joe Wilson will be reintroducing companion legislation in the House of Representatives and I appreciate his help and assistance as we've worked together on this legislation.

Based primarily on the recommendations of the GAO in numerous reports, as well the work of agency inspectors general and my own oversight work, my bill seeks to curtail waste, fraud, and abuse of government purchase cards, government travel cards, and centrally billed accounts. By way of background, government purchase cards are essentially credit cards held by an agency that authorized individuals use to purchase items necessary for the work of the agency. Since the agency pays the bills directly, the American taxpayer is on the hook when improper purchases slip through the cracks. That means hard working American citizens are paying for someone else's Christmas shopping, or at the very least items with little or no legitimate public interest. Just like the parents' credit card in the hands of an undisciplined teenager, government purchase cards in the hands of poorly trained bureaucrats with inadequate oversight can lead to rash and ill-considered impulse buys. Take for instance an incident uncovered by the GAO when an individual at the Air Force Academy found a dead deer alongside the road and decided to use a government purchase card to pay for mounting the mule deer head to hang on the wall at the office.

Centrally billed accounts are another credit product that federal agencies use, primarily for purchasing transportation services. Like purchase cards, the bill is sent to the government so it's the taxpayer who pays when the bureaucrats let things slip through the cracks. For instance, we've had repeated cases where government employees had airplane tickets purchased on their behalf directly from a centrally billed account, and then they sought and received reimbursement as though they had paid for the ticket. In other words, the ticket was paid for twice with the employee pocketing the cost the second time, and no one would be the wiser if it weren't for the GAO. The GAO has also found millions of dollars worth of fully refundable, unused airline tickets that no one bothered to cash in. I was pleased to work with Senator Coleman, then the Chairman of the Permanent Subcommittee on Investigations, to bring these issues with centrally billed accounts to light, as well as Senator Collins, who was at the time the Chairman of the Government Affairs Committee. In addition to being co-requesters of the GAO reports, they held hearings in their respective committees and were kind enough to invite me to testify about our work.

Government travel cards, on the other hand, are not paid directly with taxpayers' money like purchase cards and centrally billed accounts, but they are only supposed to be used to pay for legitimate expense while on official government travel. Failure by employees to repay these cards results in the loss of millions of dollars in rebates to the Federal Government. Also, when credit card companies are forced to charge off bad debt, they raise interest rates and fees on everyone else. Nevertheless, government travel cards with high credit limits have been handed out like candy at a parade to individuals with abysmal credit ratings who ordinarily would never be issued that kind of credit. It's no surprise then when we learn that certain government employees have abused their government travel cards to buy jewelry, take in a New York Yankees game, or to fuel an internet gambling habit. Such abusive charges often occur when the cardholder is not even on travel at all. In fact, government travel cards have been used to provide cash advances in employees' hometowns. There are even examples of charges at so called ``gentleman's clubs'' like Cheetah's Lounge and Deja Vu Showgirls, and even at legalized brothels. Suffice it to say that the GAO was able to determine that these charges were not for food or other approved travel expenses. It also comes as no surprise when the GAO found that employees issued government travel cards despite bad credit often bounce checks when their bill comes due, sometimes repeatedly and fraudulently. Common sense then leads us to the same conclusion that the GAO came to through empirical analysis, namely that a significant relationship exists between potential travel card fraud, abuse, and delinquencies and individuals with substantial credit history problems. That is why my legislation requires agencies to perform credit checks for travel card holders and issue only restricted cards for those with poor or no credit to reduce the potential for misuse.

My bill would also require a series of common sense internal controls, which the GAO has found to be lacking in many cases, to be implemented in every federal agency. These include: maintaining a record of each cardholder, including single transaction limits and total credit limits so agencies can effectively manage their cardholders; implementing periodic reviews to determine if cardholders have a need for a card; properly recording rebates to the government based on prompt payment; providing training for cardholders and managers; utilizing available technologies to prevent or catch fraudulent purchases; establishing specific policies about the number of cards to be issued, the credit limits for certain categories of cardholders, and categories of employees eligible to be issued cards; invalidating cards when employees leave the agency or transfer; establishing an approving official other than the purchase card holder so employees cannot approve their own purchases; reconciling purchase card charges on the bill with receipts and supporting documentation; submitting disputed purchase card charges to the bank according to the proper procedure; making purchase card payments promptly to avoid interest penalties; retaining records of purchase card transactions in accordance with standard government record keeping polices; utilizing mandatory split disbursements when reimbursing employees for travel card purchases to ensure that travel card bills get paid; comparing items submitted on travel vouchers

with items already paid for with centrally billed accounts to avoid reimbursing employees for items already paid for by the agency; and submitting refund requests for unused airline tickets so the taxpayers don't pay for tickets that were not used.

My bill would also provide that each agency Inspector General periodically conduct risk assessments of agency purchase card and travel card programs and perform periodic audits to identify potentially fraudulent, improper, and abusive use of cards. We have had great success working with Inspectors General using techniques like data mining to reveal instances of improper use of government charge cards. Having this information on an ongoing basis will help maintain and strengthen a rigorous system of internal controls to prevent future instances of waste, fraud, and abuse with government charge cards.

In addition, my bill requires penalties so that employees who abuse government charge cards will not get away scot free. In fact, in cases of serious misuse or fraud, the bill provides that employees must be dismissed and suspected cases of fraud will also be referred to the appropriate U.S. Attorney for prosecution under federal anti-fraud laws. It is essential that we send a clear message that misuse and fraudulent use of government credit cards will not be tolerated. The lack of consistency in the past in applying punishments to those caught abusing government charge cards has sent the wrong message and led to an environment where misuse of government charge cards is more likely. My bill will change that.

The American people expect us to be good stewards of their money and their cynicism about government only builds when they read about bureaucrats saying, ``Just put it on plastic'' willy nilly with their hard earned dollars. Unfortunately, such incidents persist. In the wake of Hurricane Katrina, Congress hastily passed a supplemental spending bill containing an ill-advised provision to dramatically raise the micro-purchase threshold for purchase cards. I worked with Senators Collins and Lieberman, the leaders of the Homeland Security and Governmental Affairs Committee, to reverse what amounted to an invitation to misuse government purchase cards. Then, because of our concerns and the concerns of other members of Congress about the potential for fraud and abuse of purchase cards in the response to the hurricanes in the Gulf Coast region, the GAO conducted an investigation of purchase cards at the Department of Homeland Security. Just last September, the GAO issued its report finding instances of abusive or questionable government charge card transactions, including the purchase of a beer brewing kit, a 63-inch plasma television with a price tag of $8,000 that was found unused in its original box 6 months later, and tens of thousands of dollars for training at golf and tennis resorts. Clearly the abuse of government credit cards remains a problem and Congress needs to act. My bill will establish the discipline needed in government agencies to keep those credit cards in the wallet unless needed. I am particularly glad to be joined in introducing this bill by Chairman Lieberman and Ranking Member Collins as well as Senator Coleman. Their leadership on this issue will continue to be invaluable. I urge the rest of my colleagues to join us in this effort and put a stop to the bureaucratic shopping spree.

I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, Senator Feingold and I have in the past sponsored the Transparency for Independent Livestock Producers Act, or what we have generally referred to as the ``Transparency Act.'' Today we are once again working together in a bipartisan fashion to reintroduce this important legislation.

My sponsorship of the packer ban this Congress is based on the belief that independent producers should have the opportunity to receive a fair price for their livestock. Over the years we have seen widespread consolidation and concentration in the packing industry. Add on the trend toward vertical integration among packers and there is no question why independent producers are losing the opportunity to market their own livestock during profitable cycles in the live meat markets.

The past CEO of a major packer in 1994 explained that the reason packers own livestock is that when the price is high the packers use their own livestock for the lines and when the price is low the packers buy livestock. This means that independent producers are most likely being limited from participating in the most profitable ranges of the live market. This is not good for the survival of the independent producer.

This bipartisan legislation would guarantee that independent producers have a share in the marketplace while assisting the Mandatory Price Reporting system. The proposal would require that 25 percent of a packer's daily kill comes from the spot market.

By requiring a 25 percent spot market purchase daily, the mandatory price reporting system, which has been criticized due to reporting and accuracy problems, would have consistent, reliable numbers being purchased from the spot market, improving the accuracy and transparency of daily prices. In addition, independent livestock producers would be guaranteed a competitive position due to the packers need to fill the daily 25 percent spot/cash market requirement.

The packers required to comply would be the same packers required to report under the Mandatory Price Reporting system. Those are packs that kill either 125,000 head of cattle, 100,000 head of hogs, or 75,000 lambs annually, over a 5 year average.

Packers are arguing that this will hurt their ability to offer contracts to producers, but the fact of the matter is that the majority of livestock contracts pay out on a calculation incorporating Mandatory Price Reporting data. If the Mandatory Price Reporting data is not accurate, or open to possible manipulation because of low numbers on the spot market, contracts are not beneficial tools for producers to manage their risk. This legislative proposal will hopefully give confidence to independent livestock producers by improving the accuracy and viability of the Mandatory Price reporting system and secure fair prices for contracts based on that data.

It's just common sense, when there aren't a lot of cattle and pigs being purchased on the cash market, it's easier for the Mandatory Price reporting data to be inaccurate or manipulated. The majority of livestock production contracts are based on that data, so if that information is wrong, the contract producers suffer.

This legislation will guarantee independent livestock producers market access and a fair price. It will accomplish these goals by making it more

difficult for the Mandatory Price Reporting System to be manipulated because of low numbers being reported by the packs. The Transparency Act is crucial legislation to guarantee livestock producers receive a fair shake at the farm gate and I am looking forward to working on this legislation in a bipartisan fashion.

I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, Senator Feingold and I have in the past sponsored the Transparency for Independent Livestock Producers Act, or what we have generally referred to as the ``Transparency Act.'' Today we are once again working together in a bipartisan fashion to reintroduce this important legislation.

My sponsorship of the packer ban this Congress is based on the belief that independent producers should have the opportunity to receive a fair price for their livestock. Over the years we have seen widespread consolidation and concentration in the packing industry. Add on the trend toward vertical integration among packers and there is no question why independent producers are losing the opportunity to market their own livestock during profitable cycles in the live meat markets.

The past CEO of a major packer in 1994 explained that the reason packers own livestock is that when the price is high the packers use their own livestock for the lines and when the price is low the packers buy livestock. This means that independent producers are most likely being limited from participating in the most profitable ranges of the live market. This is not good for the survival of the independent producer.

This bipartisan legislation would guarantee that independent producers have a share in the marketplace while assisting the Mandatory Price Reporting system. The proposal would require that 25 percent of a packer's daily kill comes from the spot market.

By requiring a 25 percent spot market purchase daily, the mandatory price reporting system, which has been criticized due to reporting and accuracy problems, would have consistent, reliable numbers being purchased from the spot market, improving the accuracy and transparency of daily prices. In addition, independent livestock producers would be guaranteed a competitive position due to the packers need to fill the daily 25 percent spot/cash market requirement.

The packers required to comply would be the same packers required to report under the Mandatory Price Reporting system. Those are packs that kill either 125,000 head of cattle, 100,000 head of hogs, or 75,000 lambs annually, over a 5 year average.

Packers are arguing that this will hurt their ability to offer contracts to producers, but the fact of the matter is that the majority of livestock contracts pay out on a calculation incorporating Mandatory Price Reporting data. If the Mandatory Price Reporting data is not accurate, or open to possible manipulation because of low numbers on the spot market, contracts are not beneficial tools for producers to manage their risk. This legislative proposal will hopefully give confidence to independent livestock producers by improving the accuracy and viability of the Mandatory Price reporting system and secure fair prices for contracts based on that data.

It's just common sense, when there aren't a lot of cattle and pigs being purchased on the cash market, it's easier for the Mandatory Price reporting data to be inaccurate or manipulated. The majority of livestock production contracts are based on that data, so if that information is wrong, the contract producers suffer.

This legislation will guarantee independent livestock producers market access and a fair price. It will accomplish these goals by making it more

difficult for the Mandatory Price Reporting System to be manipulated because of low numbers being reported by the packs. The Transparency Act is crucial legislation to guarantee livestock producers receive a fair shake at the farm gate and I am looking forward to working on this legislation in a bipartisan fashion.

I ask unanimous consent that the text of the bill be printed in the Record.