Floor Statements

Mr. President, it is with great pleasure that I join my colleagues Senators Bunning, Johnson and Talent today in introducing legislation that will repeal the special occupational tax on taxpayers who manufacture, distribute, and sell alcoholic beverages.

The special occupational tax is not a tax on alcoholic products, but rather operates as a license fee on businesses. The tax is imposed on those engaged in the business of selling alcohol beverages. Believe it or not, this tax was originally established to help finance the Civil War. That war is over, and this inequitable tax has outlived its original purpose. Repealing the SOT will also simplify the tax code for thousands of small businesses.

The SOT on alcohol dramatically increased during the budget process in 1988 and has unfairly burdened business owners across the country since. From Thompson Falls to Sidney, from Chinook to Billings, small businesses are burdened with yet another tax in the form of the SOT. According to the Alcohol and Tobacco, Tax and Trade Bureau, there are 426,193 locations nationwide that pay the SOT every year, including 399,657 retailers. These retail establishments account for $99 million out of $103 million collected in SOT revenues.

In Montana, there are 2,969 locations which together pay nearly $1 million in the SOT every year. Seasonal resorts in Whitefish and Yellowstone, ``mom and pop'' convenience stores in Butte, and bowling alleys, flower shops, and restaurants across Montana, and the United States, pay the Federal Government over $100 million per year for the privilege of running businesses that sell beer, wine, or alcoholic beverages.

The SOT is extremely regressive. Retailers must annually pay $250 per location; wholesalers pay $500; vintners and distillers pay $1,000. Because the SOT is levied on a per location basis, a sole proprietorship must pay the same amount as one of the nation's largest retailers, and locally-owned chains having to pay per location, would have to pay as much as, if not more than, the nation's largest single site brewery. This is not what Congress had in mind 150 years ago, and I don't believe it's a situation we want today.

Repealing the SOT on alcohol is supported by a broad-based group of business organizations and enjoys wide-spread bipartisan support on Capitol Hill. Last year, we made progress in ending this burdensome tax on small businesses. We repealed the tax for three years. More can be done. Business owners across the United States deserve assurance that they won't be hit with this antiquated tax down the line.

The legislation preserves the TTB's record-keeping requirements, while removing the agency's enforcement burden, and will save over $2 million per year. The GAO examined SOT efficacy several times, and found it fundamentally flawed. The Joint Committee on Taxation called for the elimination of SOT in its June 2001 simplification study.

More than 90 percent of all SOT revenue comes from retailers--a great majority of those are small businesses. Our small business sector is a great strength of our economy. President Bush has said that the best way to encourage job growth is to let small businesses keep more of their own money, so they can invest in their business and make it easier for somebody to find work. Repealing the SOT would provide an immediate and visible tax cut to small business owners.

In recent months, there has been much talk of tax reform inside the beltway. President Bush has made tax reform one of his key priorities and established a panel that will make recommendations to the Department of Treasury for a better tax system. Getting rid of a tax that has outlived its original purpose is one small step toward reform that makes sense for Montana and our country. We urge our colleagues to join us in this endeavor.

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

Mr. President, I strongly support the Smith-Bingaman- Coleman amendment to strike the reconciliation instruction to the Finance Committee to cut Medicaid by $15 billion. Some say this amendment is not important because the budget is just a blueprint and the Finance Committee would never make these cuts. That is just not true. A vote for this budget is a vote for cuts, plain and simple. If the reconciliation instruction is to cut, the Finance Committee is under instruction to cut.

Once we pass this budget, the reconciliation instructions are binding. The Finance Committee would be bound to find the $15 billion in savings. Although it would be difficult for the committee to reach agreement on these cuts, the committee would make the cuts. The Finance Committee has never failed to comply with reconciliation instructions. I do not believe that it would start this year. Those who say it is just a blueprint, that is a smokescreen. It is not accurate.

The administration says we need to address waste and abuse in Medicaid. They say these cuts will end the abuse of intergovernmental transfers. I urge my colleagues to not be swayed by these allegations. The administration has been negotiating reform of intergovernmental transfers on a State-by-State basis for the past 2 years. They have already squeezed significant savings through this new policy, and there will not be much further savings if Congress goes down this road. How do I know this? Because Montana is one of the States that was required to revise its intergovernmental program to comply with new State rules last year.

Keep in mind that the change in policy has never been published. There has been no notice, no invited comments, no rulemaking--never; no State Medicaid director's letter, none.

So how much in savings remains in reform of intergovernmental transfers? The Congressional Budget Office says zero, no savings. So let's not fool ourselves into thinking we are really cutting fraud and abuse in Medicaid with these cuts. Rather, these cuts will hurt people. In fact, in Montana, the proposed cuts would mean a loss of health coverage for 2,800 seniors or more than 12,000 children.

These cuts are definitely shortsighted. If Congress simply starts cutting Medicaid without considering the overall effects, it would force people to seek care in emergency rooms, and even higher spending would result, or even more people could lose coverage altogether.

Some say these are small and represent only a 1-percent cut in the program's growth over 5 years. But the President's $45 billion net Medicaid cut over 10 years is more than the $39 billion Congress has allocated to CHIP coverage for millions of uninsured children during the 10-year lifetime of that program.

I applaud the leadership of Senators Bingaman, Smith, and Coleman. I urge my colleagues to join me in supporting this important amendment.

This is important. I strongly urge our colleagues to do what is right, to not make these cuts. It is going to directly affect people. Support the Smith amendment.

Mr. President, I rise to speak in support of the amendment of my friend and to express my support of the Community Development Block Grant Program, the Economic Development Administration, and the 16 other economic and community development programs that are dramatically underfunded in this budget. It is no surprise to see this amendment coming from my distinguished colleague from Maryland. I thank him for his work on this issue, both now and in the past. Throughout his career in the Senate he has been a powerful advocate for CDBG and similar community development programs.

The CDBG Program has for 31 years provided vital funding to communities all over the United States and throughout my home State of Montana. CDBG is especially valuable to economically distressed communities that often lack basic public infrastructure. It funds a diverse range of projects. Just last year, CDBG dollars helped fund head start facilities in Havre and Kalispell, and money to help Dodson modernize their wastewater system.

A CDBG grant helped Big Horn County renovate Memorial Hospital. In Anaconda, where we have a Jack Nicklaus-designed golf-course, a CDBG loan helped renovate the Old Works Hotel, dramatically improving the region's tourism industry.

These CDBG investments leveraged millions of State and local dollars. In Montana, CDBG dollars are primarily administered at the State level, so local officials can direct the funding to the areas of greatest need. CDBG is a program that works. It is a good investment of taxpayer money that communities leverage to fund vital

projects they could not complete on their own.

And the CDBG Program has been supporting community development for the past 30 years with great success. Providing small infusions of Federal funding to jumpstart projects, CDBG has touched hundreds of Montana communities, and thousands of lives.

Unfortunately, CDBG isn't the only program on the chopping block. The Economic Development Administration is a small but crucial program that invests to help communities--particularly economically distressed communities--get ready for new businesses. EDA has a documented record of success. Since its inception in 1964, the EDA has created more than 4 million jobs and leveraged more than $18 billion in private sector investment in thousands of communities all across the country.

EDA investments in Montana have helped Montana farmers, suffering from years of draught. The Bear Paw economic development district in northern Montana used an EDA planning grant to help farmers study the feasibility of growing carrots and other vegetables in a region dominated by wheat growth for more than a century. The study demonstrated the viability of these crops, and farmers are excited to have a variety of crops to choose amongst.

Why, then, does this budget propose to eliminate it? At a time when it is critical for our country to maintain competitiveness in the global economy a proposal to eliminate a successful catalyst for economic growth is a mistake.

The growing budget deficit is a concern. But continued economic growth is central to everyone's plan to reduce the deficit. Why then are we cutting programs that spur economic growth? EDA creates jobs, more than 4 million in its history. It is essential that we preserve this job creating agency.

Our economy is in recovery, and as this recovery continues, EDA is working to make sure that all of America recovers. EDA targets its funding at economically disadvantaged communities. Areas that have recently experienced a factory closure, or a military base closure. The people who benefit the most from EDA are those who have been hurt the most by outsourcing.

States, counties, and cities are experiencing ever greater demands on their budgets. The choices they make, just like the choices we make here in the Senate, are tough, and getting tougher. The rising costs of health care, education, and other investments programs are straining local budgets to the breaking point. In some communities they have been forced to raise local taxes so high the benefits from recent tax cuts are all but gone.

We are robbing Peter to pay Paul. And it doesn't make sense to do it with agencies that have the ability to leverage their funds and ripple through their communities. For us here in Washington to eliminate Federal programs like the CDBG and EDA would devastate communities.

Cities will be forced to choose between school for our children or housing for our seniors, between improving decaying infrastructure needed to create new jobs and providing health coverage for our children. This amendment doesn't solve all of these problems, but it is a giant step to improving our communities.

Once again, I thank my colleague from Maryland, as well as all of our other cosponsors. I urge my colleagues to support this amendment. These programs create jobs and improve lives and communities all over our country. Let's not shortchange our communities that need this help the most.

Mr. President, I send an amendment to the desk and ask for its consideration.

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

Mr. President, this amendment is critical to my home State of Montana and to most States in the Nation. It is agriculture. Agriculture is the financial engine that drives, certainly, my State's economy. It brings in $2 billion of annual revenue plus benefits to rural communities and to our State generally. One in five Montana workers is employed in agriculture or a related field.

But this amendment is important not just to Montana; it is important to the Nation. America's agricultural producers provide us with the safest and highest quality food supply in the world. We all know that. It is worth repeating. It is worth remembering. Sometimes we take things for granted. Our agricultural producers in America provide us with the safest, highest quality food supply in the world. Americans are extremely fortunate to enjoy those benefits.

Agriculture is a small part of the Federal budget, but it is expected to shoulder huge cuts, very disproportionate cuts in this budget resolution.

The Senate budget resolution calls for a reduction in mandatory agricultural programs of $5.4 billion over 5 years. The budget resolution puts $2.8 billion of those savings on fast track through reconciliation.

I was one of the farm bill negotiators and supporters of that legislation, but I disagree with some of the provisions within the law. The 2002 farm bill represented a delicate balance between diverse interests. It was very tough to put that together. The 2002 farm bill was a 6-year bill, not an on-and-off bill but a 6-year bill, and people had reason to expect it settled farm policy for 6 years. People have to plan, to have a sense of what is going on. It is not just farmers, but bankers, equipment suppliers, and farm implement dealers. Producers and bankers who made financial decisions to enter into contracts with the understanding that the farm bill would not be renegotiated until 2007, that was their understanding.

If Congress proceeds with the agriculture cuts in this budget resolution, we will be cutting nutrition, not just the six basic crops in the farm bill, but cutting nutrition, conservation, and forestry programs. These cuts are not directed solely at the commodity programs. In fact, they are directed at many other segments of the whole agriculture bill.

The Senate should put off the policy discussions that are behind these cuts until we begin debate on the new farm legislation. That is the appropriate time to debate these policy discussions, not in the budget resolution to cut for the sake of cutting. The commitment

that Congress and the President made to farmers, to conservatives, and the neediest in our society should be maintained until a new farm bill is developed.

Proposed mandatory spending cuts will also unilaterally disarm our trade negotiators, especially our agricultural trade negotiators. The United States recently lost its appeal of the World Trade Organization dispute panel decision concerning domestic cotton. It is not widely known, but it should be well understood, the implications of that decision.

At the same time, we are negotiating a new global trade agreement with the WTO, of which agriculture is a critical part. That decision is going to put our agricultural producers and our agriculture program in jeopardy. We should, therefore, not commit to the substantial agriculture policy changes that this resolution would require while we are engaged in those trade talks. We should not unilaterally disarm. It makes no sense, and I cannot understand for the life of me why this budget resolution unilaterally disarms our farmers before we go into negotiations. Some argue the proposed cuts are good for our negotiators because they demonstrate to other countries that the United States is serious about agriculture reform.

I have learned through very hard, bitter experience that no country altruistically, out of the goodness of its heart, if it has any sense, is going to lower a trade barrier. They do not unless they have to. You have to provide leverage. There are many examples where the United States had to exercise leverage to get other countries to lower a trade barrier. It takes leverage. They just do not do it out of the goodness of their heart.

If we do that, think what the Europeans are going to do. They are going to say: Oh, those Americans, they have already eliminated their agriculture program, they have cut their supports, so we Europeans do not have to go quite so far. I tell you, it makes no sense, no sense whatsoever for this Congress to pass a budget resolution which cuts agriculture by such a dramatic amount.

In 2002, total EU domestic supports plus export subsidies totaled $37 billion. What was ours? What was the U.S. comparable figure? It is about $17 billion, and that is just actual spending.

Look at that: Europeans have twice the amount of agricultural support payments that we have, twice as much as the United States has--more than twice as much as the United States has. Yet we are coming before this body and saying we are going to cut agriculture even more, while the Europeans have close to three times the amount of subsidies we have. I do not think that makes much sense.

The total amount agreed to in the WTO Uruguay Round is $81 billion for the EU and $19 billion for the United States. Just think of that. That was the Uruguay Round. That was a mistake. Mr. President, 81 for them, 19 for us. These cuts contained in the budget resolution, to which I am opposed, are, therefore, clearly ill timed. This is the wrong time to do this. Developing countries, in particular, have offered very little in agricultural talks. If we pass this resolution, they are going to ask themselves: Why should they? They can keep their sky-high tariffs on agricultural products and still get the United States to cut its support of U.S. agricultural programs.

We also lose bargaining power to push for changes to the European's agricultural policy. That policy transformed postwar Europe from the world's largest food importer to one of the world's largest net exporter of agricultural products.

Let me state what happened. This pretty much demonstrates what happened in this country, why agricultural producers in the United States are in tough shape. In the 1970s, the European Union was the world's largest net importer of agricultural products. They decided that is wrong; we have to do something about it. So they did. What did they do? They implemented massive agricultural support payments for their farmers so that in a 10-year time in the mid-1980s, Europe became the largest net exporter of agricultural products. It was a big shift from the world's largest importer to the world's largest exporter in 10 years, and that is where they stayed. That is what we face. That is why it is wrong right now in this budget resolution to further cut agricultural payments which are disproportionate right now.

Our farmers and our ranchers can compete with anybody in the world just as long as the playing field is level, but we should not put American farmers and ranchers at a disadvantage by cutting U.S. programs just as we are seeking changes in other countries' programs. We should not unilaterally disarm. We should not unilaterally disarm agriculture just as the trade talks reach a critical point. They are upcoming. To do so would not just be unwise, it would be reckless.

Agriculture is being asked to make a substantial and disproportionate contribution to spending reductions. This is unjustified. There are other cuts in this budget not nearly as great as the ones agriculture will face. I just think it is sensible to support this amendment so we do not cut agriculture the way proposed in this resolution. It makes no sense.

I see some of my colleagues on the floor who wish to speak on this amendment. I see Senator Conrad. I yield 5 minutes to the Senator from North Dakota.

Mr. President, how much time is remaining on this side?

Mr. President, I ask the distinguished Senator from North Dakota if he might have time he can allocate to other Senators, insomuch as the time remaining on this amendment has virtually expired.

I wonder if I can impose upon the very gracious generosity of the Senator from New Hampshire and ask if perhaps he could give a little time on this side.

I thank the Senator. I yield 2 minutes to the Senator from North Dakota.

I yield 1 minute to the Senator from Arkansas, Mr. Pryor.

Mr. President, I yield 1 minute to the senior Senator from Arkansas.

Mr. President, is there any of my time remaining?

I yield that to the Senator from Arkansas.

Mr. President, I ask unanimous consent that the following Senators be added as cosponsors to my amendment: Harkin, Stabenow, Dayton, Pryor, Lincoln, Salazar, and Conrad.

Mr. President, the Senator from West Virginia is not here at this moment, so I yield myself a couple of minutes for the proponents of the amendment.

I strongly support this amendment. There are many Senators who are very distressed with the very low level in the amount of transportation obligation funds passed out of the Environment and Public Works Committee the other day. There are donor States that are very upset with the donor levels not being high enough, and the so-called donee States are concerned that they are not properly taken care of. There are States that believe the minimum obligation should be higher.

In my experience, I have never experienced such consternation among so many Senators so concerned we are not paying enough for our infrastructure and our highways as is the case now, compared with the previous highway bill we passed a few years ago; that is, with TEA-21, which was passed about 6 years ago.

In the meantime, the Finance Committee is working on a provision to administer money to the highway bill. Chairman Grassley and I are working diligently to find a way to administer money to the highway bill. We hope to bring that amendment to the floor. We will not raise gasoline prices. We will not raise gasoline prices. There will be

offsets, so it will be budget neutral. The offsets will be in the nature of fuel fraud, to prevent fuel fraud, and close corporate or tax loopholes which we all agree should be closed.

I strongly urge Members to recognize we do need more money. We all know that. We are finding ways in the Finance Committee to find more money. I do not know the exact amount, but it will not be a significant amount. It will help solve the problems that Senators have in meeting their legitimate concerns as we try to meet the formula and have enough money in the highway program to build our roads and streets. This amendment will not be a huge amount, but it will be helpful.

I urge Members to support the amendment that is offered by the senior Senator from West Virginia. Senator Byrd is in the Senate, and I highly compliment the Senator for his work. He has been a champion over the years. I am so impressed with the efforts he undertook about 6 years ago when they got TEA-21 up and passed. I thank the Senator.

Mr. President, could we have order, please?

Mr. President, this amendment strikes the cuts in the budget resolution with respect to agriculture. Two main points: Today, agricultural spending constitutes 1 percent of total Federal spending. These cuts here constitute 16 percent of the cuts in the budget resolution. It is just not right to single out agriculture 16 times more than other cuts in this resolution.

No. 2, the Europeans today spend $37 billion a year on agricultural price supports. We spend about $17 billion, half of what they spend. We should not unilaterally disarm now, before the Doha WTO talks.

Two points why the amendment should be agreed to. We should not make these cuts.

I ask for the yeas and nays.

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

Mr. President, this is very simple. It is to restore a cut in the HIDTA funding. HIDTA is called the High Intensity Drug Trafficking Administration. This is the major law enforcement mechanism. It covers lots of different law enforcement agencies, in the west, particularly rural areas, to fight methamphetamine. We need the resources to fight methamphetamine. Methamphetamine is probably the largest scourge in many rural parts of America. This is designed to enable us to have the resources to fight methamphetamine in our country.

Mr. President, the description of the intent of the reserve fund offered by my colleagues from Massachusetts and from New Hampshire also reflects my understanding of the intent of including this fund in the budget resolution. I commend the chairman and ranking member of the Budget Committee for their leadership in including this reserve fund in the Senate budget resolution. And I commend my colleagues from New Hampshire and Massachusetts and others for their willingness to work toward this signal of our bipartisan commitment to improving the quality and safety of health care in this country, and to addressing the problem of health care costs. These are critically important issues facing our nation today, and I look forward to continuing our bipartisan dialogue, making the best use of this important reserve fund, and working together on legislation to encourage the adoption of health information technology for quality improvement and to develop performance-based payment systems.

amendment no. 204

Mr. President, I rise today to speak to an amendment with my good friend and colleague, Senator Grassley, expressing the sense of the Senate on the High Intensity Drug Trafficking area, or HIDTA, program. My amendment assumes that the HIDTA program will be fully funded at $227 million in fiscal year 2006 and that the HIDTA program will remain with the Office National Drug Control Policy, ONDCP, where it was last authorized by Congress to be. Additional cosponsors are Senators Leahy, Bingaman, Murray, and Talent. I would also like to add Senators Gordon Smith and DeWine as cosponsors to this amendment. I thank my colleagues for their strong support.

I am proud to offer this much-needed amendment. The proposed budget would cut the HIDTA program by 56 percent, assuming only $100 million for HIDTA. The President's Budget also proposes to shift the program from ONDCP to the Organized Crime Drug Enforcement Task Force program within the Department of Justice. Both of these proposals could derail the highly successful HIDTA program.

As many of my colleagues know, methamphetamine is a powerful and highly addictive central nervous system stimulant that is associated with violence and crime. It can cause paranoia, aggression, and mood swings. The byproducts of making meth are highly toxic and flammable and require costly clean ups. They also endanger many children who are exposed when their parents cook meth within the home. Since its inception in 1990, HIDTA has become one of the most effective and comprehensive programs we have to fight meth.

Specifically, a HIDTA designation provides states like Montana with increased resources, information and intelligence to fight methamphetamine use and production. The Federal funding and increased cooperation among Federal, State and local law enforcement frees up state resources that allow, for example, the Montana Department of Justice to better support Montana's rural communities. It provides law enforcement officials with new technology to coordinate their efforts at the local, State, and Federal level.

Montana fought hard and successfully to join the Rocky Mountain HIDTA in 2002. Since that time, Montana has successfully cut the number of meth labs it busts in half. I have been told by law enforcement across my State that the proposed cuts to HIDTA, combined with cuts proposed by the President to other Justice assistance programs like the Byrne and COPS programs, would be a disaster for Montana. It would effectively end drug enforcement in rural Montana and would set the clock back years in our efforts to fight the rapid spread of meth in our state.

Yesterday, I was proud to cosponsor and support Senator Stabenow's amendment to restore funding for our first responder programs, Byrne and COPS. Sadly, that amendment failed. I also proudly supported Senator Biden's amendment to fully fund the COPS program. That amendment unfortunately also failed. We must do everything we can to make sure these programs survive and so far Congress is not holding up their end of the bargain.

Although my amendment specifically focuses on the HIDTA program, let me list again what the Montana Board of Crime Control has told me would happen to Montana if the President's fiscal year 2006 budget is enacted:

1. Montana will lose its multi-jurisdiction drug enforcement capacity, including seven multijurisdictional drug task forces. This means that already stretched local law enforcement agencies will have to do what they can to address drug enforcement at the local level, without broader support from the drug task forces.

2. Montana will lose 33 drug enforcement offices throughout the State.

3. Montana will experience a significant increase in drug availability, manufacturing and trafficking and drug-related crime.

4. Montana would experience an increase in clandestine labs that manufacture methamphetamine.

5. Montana would experience a reduction in the amounts of illegal drugs and guns removed from our communities.

6. Montana would experience the elimination of funds for rural law enforcement agencies' manpower, equipment and training.

Again, the above scenario is only the tip of the iceberg. The manufacturing, trafficking, drug addiction and crime will have a ripple effect throughout the State in our public health and correction systems and the courts, negatively affecting public safety and the quality of life in Montana and across the United States.

As the findings in the Baucus-Grassley amendment explain, the HIDTA program encompasses 28 strategic regions, 355 task forces, 53 intelligence centers, 4,428 Federal personnel, and 8,459 State and local personnel. In 2004, HIDTA efforts resulted in disrupting or dismantling over 509 international, 711 multi-State, and 1,110 local drug trafficking organizations. In 2004, HIDTA instructors trained 21,893 students in cutting-edge practices to limit drug trafficking and manufacturing within their areas.

The HIDTAs are successful drug enforcement coalitions that include equal partnership among Federal, State, and local law enforcement leaders. This is what Congress created the HIDTA's to do--to provide coordination of drug enforcement efforts in critical regions of the country. That's why full funding for the HIDTA's is so important, and that's what the first part of the Baucus-Grassley sense of the Senate addresses--assuming that Congress will fully fund the HIDTA program at fiscal year 2005 levels.

The second part of the Baucus-Grassley Sense of the Senate on HIDTA would address the administration's decision to shift the HIDTA program from ONDCP to the Organized Crime Drug Enforcement Task Force, OCDETF, program within the Department of Justice. Moving the program from ONDCP to OCDETF is a mistake. The OCDETF program has a different mission and purpose than ONDCP and the HIDTA's. The HIDTA program has worked well at ONDCP and is a complement to the OCDETF mission. I do not understand why the Administration would want to shift it from its Congressionally authorized home within ONDCP.

Montana law enforcement tell me that moving the HIDTA program to OCDETF will do nothing to improve law enforcement capabilities and will undermine the unique partnerships and innovation that the HIDTA program has helped to create nationwide and that have been so successful in curbing the spread of meth in Montana. HIDTA's are about coordination and collaboration. OCDETF is more centrally managed, with an assumed Federal lead, and with a focus on investigation and prosecution--an important mission, but not the same as the HIDTA mission. Additionally, according to the National Narcotics Officers Association, the vast majority of OCDETF's cases originate within HIDTA funded operational task forces. The current organization works; why change it?

I urge my colleagues to support this important amendment. I also hope that we can adopt one of the many amendments that would actually increase funding for all Justice assistance programs, like Byrne and COPS, but this amendment is an important step in the right direction.

Amendment No. 193

Mr. President, I rise today to support the United States Tax Court Modernization Act. I am pleased to be an original cosponsor of this important legislation along with Senators Hatch, Grassley and Lincoln.

In 1969, Congress elevated the U.S. Tax Court as a Federal court of record under Article I of the Constitution of the United States. Congress created the Tax Court to provide a judicial forum in which affected persons could dispute tax deficiencies determined by the Commissioner of the Internal Revenue Service prior to payment of the disputed amounts. That means that the Tax Court's jurisdictional requirements are, in part, a recognition that lower and middle income taxpayers cannot necessarily pay the tax deficiency before taking their dispute to court.

Congress also closely linked the legislation governing the Tax Court with the laws governing the Article III District Courts. Unfortunately, the Congress did not include the Tax Court in the changes made for Article III courts.

This legislation is designed to restore parity between the Tax Court and Article III courts, and to modernize their personnel and pension systems.

I thank Senator Hatch for sponsoring the legislation. I also want to thank former Senator Breaux, who sponsored the legislation in the last Congress and who was a strong advocate for the Tax Court as well as this package of modernization provisions.

This modernization package is non-controversial and long overdue. In the 108th Congress, the Finance Committee passed the Tax Court legislation three times: as a stand alone bill, as part of the National Employee Savings and Trust Equity Guarantee Act, and as part of the Tax Administration Good Government Act.

The Finance Committee intends to mark-up the United States Tax Court Modernization Act next month. I fully expect the Committee to once again unanimously pass the legislation. I also hope that, soon after Committee action, Majority Leader Frist and Minority Leader Reid will bring the United States Tax Court Modernization Act to the floor for swift passage.

The Finance Committee and the House Ways & Means Committee fought to retain jurisdiction over the Tax Court as an Article I, rather than an Article III court. The Committees recognized the benefit to the American taxpayer of having a court composed of technical tax law experts. History has proven the wisdom of this decision. The Tax Court is composed of dedicated, talented, nonpartisan tax experts. Their commitment to public service is noble. We should recognize the commitment of our Tax Court judges by acting upon the responsibility that the Members before us, our predecessors on the Finance Committee and the House Ways and Means Committee, fought to retain by ensuring that the Tax Court modernization provisions become law during the 109th Congress.

Mr. President, I rise today to support the United States Tax Court Modernization Act. I am pleased to be an original cosponsor of this important legislation along with Senators Hatch, Grassley and Lincoln.

In 1969, Congress elevated the U.S. Tax Court as a Federal court of record under Article I of the Constitution of the United States. Congress created the Tax Court to provide a judicial forum in which affected persons could dispute tax deficiencies determined by the Commissioner of the Internal Revenue Service prior to payment of the disputed amounts. That means that the Tax Court's jurisdictional requirements are, in part, a recognition that lower and middle income taxpayers cannot necessarily pay the tax deficiency before taking their dispute to court.

Congress also closely linked the legislation governing the Tax Court with the laws governing the Article III District Courts. Unfortunately, the Congress did not include the Tax Court in the changes made for Article III courts.

This legislation is designed to restore parity between the Tax Court and Article III courts, and to modernize their personnel and pension systems.

I thank Senator Hatch for sponsoring the legislation. I also want to thank former Senator Breaux, who sponsored the legislation in the last Congress and who was a strong advocate for the Tax Court as well as this package of modernization provisions.

This modernization package is non-controversial and long overdue. In the 108th Congress, the Finance Committee passed the Tax Court legislation three times: as a stand alone bill, as part of the National Employee Savings and Trust Equity Guarantee Act, and as part of the Tax Administration Good Government Act.

The Finance Committee intends to mark-up the United States Tax Court Modernization Act next month. I fully expect the Committee to once again unanimously pass the legislation. I also hope that, soon after Committee action, Majority Leader Frist and Minority Leader Reid will bring the United States Tax Court Modernization Act to the floor for swift passage.

The Finance Committee and the House Ways & Means Committee fought to retain jurisdiction over the Tax Court as an Article I, rather than an Article III court. The Committees recognized the benefit to the American taxpayer of having a court composed of technical tax law experts. History has proven the wisdom of this decision. The Tax Court is composed of dedicated, talented, nonpartisan tax experts. Their commitment to public service is noble. We should recognize the commitment of our Tax Court judges by acting upon the responsibility that the Members before us, our predecessors on the Finance Committee and the House Ways and Means Committee, fought to retain by ensuring that the Tax Court modernization provisions become law during the 109th Congress.

Mr. President, I thank my good friend from North Dakota and also say that I hope we can make some good sense out of this budget resolution. It is not the first time we have had a budget resolution, but I hope we can show that we are exercising leadership in getting one that makes sense.

I rise to speak about something that I hear more about at home than any other subject. It is astounding, frankly. I was home last weekend, home prior weekends. I hear more and more on this one subject than any other, and that is Social Security.

People in Montana walk up to me and say: Senator, please save Social Security. Don't adopt the privatization plan. It doesn't make sense.

In my experience as a public servant, I have never experienced such a broadside of reaction on Social Security compared to any other issue I have ever faced. It is that great.

Let me tell a little about what I think Montanans are really thinking. Here is what Montanans are telling me about Social Security.

A man from Helena, MT, put it this way:

I have been an employee and employer for 55 years. The

Social Security system is the only solid, dependable program

that I and everyone I have been involved with can rely on.

Laura from Baker, MT, says:

It seems to me that our Social Security system has worked

well for many, many years. I cannot understand the

President's desire to reform it.

Well, when it comes to trying to understand why the President wants to privatize Social Security, Laura is not alone. Let me talk a little bit about the President's plan to privatize Social Security and what it would mean in practical terms.

The first thing we have to do is to put aside the notion that privatizing Social Security has anything to do with strengthening Social Security and preserving Social Security for the long run. It does not. Privatization has nothing to do with preserving Social Security for the long run--nothing.

In fact, it undermines Social Security. Social Security's actuaries-- these are the Congressional Budget Office folks, and we all agree they are totally nonpartisan, straight shooters--agree that privatizing Social Security does not improve the solvency of the Social Security. In fact, they believe it makes it worse.

Bobby from Eureka, MT, put it this way:

I strongly oppose President George Bush's proposal to

privatize Social Security or any part of it. I feel this is

only the first step to dismantling Social Security all

together.

She is concerned about the first step to dismantle Social Security, and there is a real basis for her beliefs because the private accounts have nothing to do with solvency. Many of us are wondering whether Bobby might be right.

We have to start with the proposition that President Bush is looking somewhere else besides private accounts for the real answer to extending Social Security solvency. To be candid, none of us know exactly how the President wants to pay for extending Social Security solvency.

He hasn't given us a specific proposal. In the State of the Union speech, however, he mentioned five possibilities. What are they? One was limiting benefits for wealthy retirees. Another one he mentioned is indexing benefits to prices rather than to wages. He also mentioned increasing retirement age. Further, he mentioned discouraging early collection of Social Security benefits. Five, changing the way benefits are calculated. All of those options the President has mentioned have one thing in common: they all cut benefits.

Even if we do not know for sure how the President wants to cut Social Security benefits, the administration has not been all that subtle about their druthers. For months, President Bush and many in the administration hinted that their preference is one of the plans put forward by the President's Commission on Social Security. What is that? That plan would divert Social Security payroll taxes into new private savings accounts. As I said, that has nothing to do with solvency. I will come back to that later. But that plan would also deeply cut Social Security benefits for future beneficiaries by changing the way the benefits are calculated. The President's plan would cut benefits, in the President's words, by indexing benefits to prices rather than to wages. What does that mean? What is the effect of that? Let me explain.

Under current law, when the Government calculates a worker's initial Social Security benefit, the Government adjusts the worker's past earnings for the growth in wages and the economy. Under the President's plan, the Government would adjust the worker's past earnings for the growth in prices, not in wages but in prices. What is the effect of that? Most people don't realize it, but wages actually grow faster than prices. Wages actually grow faster in the long run. People see prices rising all the time, but folks do not always focus on how much their wages increase. Wages generally keep up and surpass the increase of prices. On average, over time, wages grow faster than prices. Why is that? That is largely because workers today are more productive than workers used to be. Workers today produce more than workers did years ago. Economists call that productivity. They are more productive, so workers today demand higher wages. They are more productive, so they have higher wages, even after adjusting for inflation. Even though inflation goes up, workers are more productive, so wages rise faster than inflation, even though prices are going up. So adjusting the initial benefits to a growth in wages makes sense. It is current law. It makes sure Social Security will replace roughly the same share of future retirement incomes as it did for previous generations of retirees.

What does the Commission plan to do about that? Their plan to move from wage indexing to a price index means initial benefits for retirees in the future would gradually start to get smaller and smaller than they would under current law. Because these reductions in benefits would accumulate over time, each new group of retirees would get that much more of a cut in their benefits relative to what the current law promises them.

This chart shows the story. It is very illustrative. I hope people pay attention to this. I daresay that every American concerned about Social Security would take a good long hard look at this chart and they would realize the deeper problems in the President's proposal. This chart shows under current law--talking about what the law is today-- succeeding generations of retirees can expect Social Security to replace a relatively constant amount of their income. This yellow line shows for people who start to retire today--when they retire, their Social Security benefits are going to be about 40 percent of their previous wages. As wages go up over time and people retire, they get about 40 percent of their wages just before they retire. That is called replacement income. That is the law, and it stays at about 40 percent out into the future.

On average, Social Security promises to replace about 40 percent of income year after year, represented by the yellow line. If we adopt the Commission's plan, what happens? That means the share of income Social Security replaced would go down. That is the red line here. So over time these cuts become very deep. For workers now in their midthirties, benefits will be cut by about 25 percent. For somebody born about now-- one of our children or grandchildren--benefits will be cut in half. You see this red line comes about half of where the yellow line is. So somebody who enters the workforce about now, under the President's plan, when he or she retires, is going to receive almost 20 percent of wages, not 40 percent. That is a 50-percent cut. So a person would get much less under the President's plan in the future.

I am looking at some of these pages on the floor. When they work, and if this plan goes into effect, their Social Security benefits will be half when they retire compared to what it would be today under current law if they could retire. I don't know if they would want that.

If the Commission's plan had been in place when Social Security began to pay benefits in 1940--reverse that. Say the President's plan was in effect then; benefits for average earnings would be 60 percent less than today. If the President's plan had been in effect in 1940--I was born in 1941--then the benefits I would receive today, or anybody my age, would be, under the President's

plan, much less than I would get today if I retired. How much less? You can tell by this chart. Today I would get about $1,278 a month. Under the President's plan, if I retired today, and this were in effect since 1940, I would get $515 a month. Let me state that again. Under current law, a worker with average wages who retires in 2005 will get about a $1,278 monthly Social Security check. Had the Commission's plan been in effect since 1940, that average worker would get only $515 a month in Social Security. That is $515 a month instead of $1,278.

Remember, this is kind of a startling statistic. For one-fifth of our seniors, Social Security is their total source of income. For 20 percent of seniors today, Social Security is all of their income. So no matter where you live, this is what you get in Social Security. If this plan had been in effect in 1940, seniors would be receiving $515 a month now, a lot less than they receive. That kind of cut in benefits would mean that a lot more seniors would be living in poverty. Had the Commission's plan been in effect since 1940, 7 million more seniors would be living in poverty today. Today, about 3.6 million seniors are living in poverty. That is not good. That is bad, but that is a fact. If the President's law had been in effect since 1940, then 10.5 million seniors would be living in poverty--more than three times that.

Someone might say: This isn't going to happen to me under the President's plan. Why? Because I am not going to participate in those private accounts. I will stay away from that. I will just do nothing and keep my payroll tax, which will still go into the Social Security trust fund. I don't have a private account, so this should not affect me. Then I won't have my benefits cut.

Guess what. That is not right. Under the Commission's plan, the President's proposed plan, these cuts would apply even if you did not choose to participate in private accounts. That may not seem fair, but that is a fact. These are the cuts you get irrespective of whether you participate in a private account. It makes no difference whether you do or do not participate in a private account.

Another question people might ask is, Will these cuts apply to people with disabilities, to survivors? To be candid, none of us knows for sure, but the Commission's numbers show that savings of people with disabilities and survivors were included. That means they are going to get cut, too. We are talking about widows or orphans here. Listen to the words of Linda from Great Falls, MT:

My father died when I was 13 years old. My mom went to work

as a bookkeeper making a little over $200 a month. Our entire

lives changed, and without the assistance of Social Security

benefits, I would never have been able to attend college.

Social Security is a vital lifeline for millions of Americans. We have to be very careful about how we change it. In addition to the cuts about which I have been talking so far, the President has a plan. It includes a second set of cuts; that is, a second set of cuts for anybody who signs up for the privatized accounts. Remember, I talked about the first round of cuts and benefits. There is a second round.

Under the plan, when workers retire, the Social Security benefits would be further reduced by, first, all of the contributions to the worker's private account. That amounts to an additional reduction in benefits. Then there is another reduction, and what is that? That is the interest that those contributions would have earned had they earned a 3-percent rate of return above inflation. Some people call it a ``clawback.'' I call it a privatization tax.

This next chart, number 4, shows the story. It shows a case of a typical worker born in 1990. So a person born in 1990 retires in 2055. I suppose that would probably apply to a lot of our younger people. After all, this has been pitched for our younger people. Under current law, that person would get $23,300 each year from Social Security. So under current law, someone who is born in 1990 and retires in 2055, at age 65, that person will get about $23,300 in benefits from Social Security.

Let's talk about the cuts. The first cut under the President's plan is in benefits, due to changing from wage indexing to price indexing, as I mentioned earlier. What is the effect of that? That would cut a worker's Social Security payments to $13,104 a year. That change alone--cutting all benefits of all retirees under the President's plan by moving from wage indexing to price indexing--means the benefits that person will receive in 2055, born in 1990, would not be $23,000, but a whole whopping roughly $10,000 a year less, a cut down to $13,000 a year.

Then there is a second cut. That is the cut due to the privatization tax. That would cut a worker's Social Security benefits further. How much further? Down to a mere $3,276 a year. Just think of this for a minute; suspend judgment and let this sink in. This is what is happening under the President's plan. Today, that person would get $23,000 in Social Security benefits. The first cut applies to everybody in the President's plan irrespective of whether you have a private account. So everybody will get a cut by $10,000 a year, down to $13,000 a year. What about those folks who say: Gee, I am going to beat the system and I am going to divert 3 or 4 percentage points of my payroll tax into my private accounts. I am going to beat the system.

Wrong. What is really the fine print of the President's probable plan? What is the effect? It is a further deep cut of another $10,000. So the benefit that a person is going to receive is going to be not $23,000 but, rather, only $3,000 a year. The proponents tell us that: Gee, if they keep their private account, that will be made up by the income they will get from the private account, earnings they will get from the private accounts.

Let me just say what the Congressional Budget Office says about this part here, the red part on the chart about earnings. What do they say? They say workers with average earnings will be back to where they were in this middle bar, up to close to $13,000. So that means that after all the shouting, workers who are now 25 to 35 years old will have total retirement income cut--Social Security benefits plus income from the private accounts--total income cut by about a quarter below what current law promises.

Think of that for a moment. What did people think when they learned about all this? Some know about this, but a lot do not. Do you want to know something, Mr. President? I found something very startling about 2 weeks ago. I hope you will listen to this point because it is pretty important. The point is this: I asked a Senator on the other side of the aisle about 2 weeks ago: Senator, I wonder, does your side understand the fine print of the President's proposal? Does it really understand it? His answer--this was a private conversation--his answer was: Not really.

I said to the Senator: Do you mind if I explain what it does, what the practical effect of all this is? I do not want to be pedantic about it.

He said: Sure; what is it?

So I explained all this to him. He was amazed. He did not know all that. I take him at his word. He said most of the other side did not understand it. Maybe he was being very generous and actually they did. But I was startled by this conversation. He said most do not understand it.

Second, it was a revelation to him when I explained what it actually does.

I mention all this because I think it is important for the facts to get out. Facts often speak louder than words. I hope the facts get out.

If I may have a few more minutes, I would appreciate it.

Mr. President, I thank the Senator.

I repeat, workers 25 to 35 years old will have total retirement income; that is, Social Security benefit cuts, plus their income from the private accounts--that is income, not the principal reduced by 3 percent--cut by about a quarter below what current law promises. Those with average earnings born in this decade who retire at age 65 will have their total retirement income cut in half--again, their total retirement income cut in half. For those who participate in private accounts, their total income will be cut in half. That is all based on CBO's assumption that the private account will

get a rate of return of 3 percent over and above inflation. It could get more, but it could get less.

Let me remind people that what goes up may also come down. In the late 1920s in America, people might have expected their stocks to go up at least 3 percent a year after inflation. As this chart shows, stocks went down nearly 90 percent between 1929 and 1932. From its high in 1929 of 381, the Dow fell to 41 in 1932.

Under the President's plan, what would happen to your Social Security benefit if the stock market crashed? You would still need to pay the full privatization tax on all the contributions to the worker's private account plus 3-percent interest above inflation. That is even if you did not earn that much. Under the President's plan, you still have to pay all that.

So under the President's privatization plan, your Social Security check will be reduced by more than what you have put in your private account. The only thing that would be guaranteed would be this little green bar at the end of $3,276 a year. I challenge anyone to explain to me how they can live on $3,276 a year. Under the President's plan, that is all you would be guaranteed. Under current law, you are guaranteed $23,000. If the stock market crashes and you are in a private account, your guarantee will only be $3,000. Come on, I do not think people want to do that. I do not think Congress wants to do that.

As Frederick from Great Falls, MT, asked:

[I]f the bottom falls out of the market, who takes care of

them then?

Some say we cannot sustain Social Security's current promises anyway. But the Commission's cuts would be deeper than if we did absolutely nothing to Social Security. If we did nothing to extend the life of Social Security--and no one is recommending that--but if Congress did nothing--again, no one is recommending we do nothing; we have to do something that makes sense--if we did nothing, then according to the Congressional Budget Office, in 2052, we would still be able to pay 80 percent of promised benefits. In contrast, under the Commission's plan--that is the President's probable plan--benefits would be cut before 2052 and benefits would be cut deeper than that in 2052 and after.

This chart puts it together. For that typical worker born in 1990, current law promises Social Security benefits to be $23,300, as I mentioned earlier. But even if we do nothing--again, I do not advocate doing nothing; we have to do something--Social Security would be able to pay that worker $18,100 a year. The Commission's plan would cut that to $13,104, and the President's privatization tax cut would cut the guaranteed benefit to $3,276. In all likelihood, the worker would get a total package of benefits--their Social Security plus their private account--in the neighborhood of $13,104.

We do not know how much the rate of return is going to be. That is why it is red with a question mark. It could go up; it could go down. It has to be a high level annual rate of return to equal, frankly, what one would get in total benefits, even after the cuts. As I said, this chart puts it altogether.

That is why the President's privatization plan does not make any sense. From the perspective of typical beneficiaries, it would leave them worse off than if we did nothing. Worse off than if we did nothing--let that sink in a little bit. The President's plan would leave people worse off compared to if we did nothing, at least over the next 40 to 50 years, through 2052. That is roughly the next 60 years-- worse off. That is before we take into account the $5 trillion in new borrowing that the President's plan requires in its first 20 years. I did not talk about that.

Let me summarize. We have demonstrated conclusively why people would be worse off under the President's plan than they would be under current law. Now we add another huge problem with the President's plan. What is that? That is the $5 trillion of new borrowing the President's plan would require in its first 20 years; $5 trillion of additional borrowing. We are already deeply in debt.

Jack from Kalispell, MT, wrote me of his suspicion on this:

President Bush is proposing a gimmick to take attention

away from plans to reduce future benefits. I believe the

Federal Government should solve its own solvency problems

and either stop borrowing from the Social Security trust

[fund] or actually pay back its loan with market rates for

interest.

Jack may have a point. The private accounts are a gimmick, and the benefit cuts are bad enough that anyone associated with them might want to divert their attention away from them.

The reason why the cuts are so deep is because the Commission's plan would place all of the burdens of securing solvency on benefit cuts-- all of the burden of solvency on benefit cuts, all of it, all. Within benefits cuts, the Commission's plan would place all the burdens of securing solvency on today's young people and future beneficiaries. He is passing the buck. First he says, OK, all of the solvency solution is on the back of the beneficiaries in terms of benefit cuts. And the $5 trillion, who is going to pay for that? That is going to be young people in future generations, future taxpayers. They are going to have to pay back that $5 trillion. That is the effect of switching from wage indexing to price indexing, and I do not think that is fair.

Look at this chart again. The President's plan would change Social Security from a guaranteed $23,300 in earned benefit to a guaranteed $3,000--23 down to 3, plus a gamble. That is a benefit you would get from the President's plan. You are guaranteed $3,000 and you are guaranteed a gamble. It may pay off and be big. The gamble may not pay off. You may lose your shirt. No wonder people wonder whether the President's plan is more about, as Bobby from Eureka, MT, put it, ``only the first step to dismantling Social Security altogether.'' She is concerned about that. When you look at the effect of the President's plan, you begin to think that maybe Bobby is on to something here.

That is why Democrats have called upon the President to disavow his plan for private accounts funded out of Social Security. We ask him to do so, why? Because we want to make sure these private accounts are not, in Bobby's words, ``the first step to dismantling Social Security altogether.''

Democrats want to address Social Security's solvency. You bet we do. There is a problem here. It is not a crisis. It is a problem we should address now rather than later. We want to strengthen and protect Social Security for the future. We do think there is a problem. But in order to do that, we need reassurance that the changes we agree to will strengthen Social Security, not dismantle it. The President needs to disavow privatizing Social Security. That is a necessary first step. He needs to state he does not want to dismantle Social Security and has to do that before we can agree on how to fix it. If he makes that statement, boy, you bet there would be a big rush in the Congress, on both sides of the aisle, to fix the solvency problem in Social Security.

That is the problem Americans worry about, solvency of Social Security. That is their concern, so let's address their concern.

Mary from Belgrade, MT, summed it up pretty well. She wrote:

The American Social Security system is one of the most

cost-effective pension plans ever devised. It costs a

pittance to administer, it is thoroughly honest, and it works

flawlessly. ``Privatizing'' it will almost certainly ruin it.

Privatizing will almost certainly ruin it.

It would add hugely to the crushing burden of national

debt, it would mean smaller retirement pensions for millions

of retiring Americans, and it would cost 20 to 30 times more

to administer. Congress has a duty to the American people to

protect this popular, inexpensive, highly effective program.

I implore you, Senator Baucus, to tell the President you

oppose privatization, and to legislate only a plan that will

fix long-term problems without changing the basic structure

and function of our Social Security system.

Nobody could have said it better. Mary knows what is going on here. She figured it out. I think a lot of Americans are also beginning to figure it out. And when more figure it out, we have no choice but to address solvency and to take privatization totally off the table.

Mr. President, you can help us a lot if you were to make that statement.

Mary has it right. We need to get beyond plans to privatize Social Security. And once we do, we can get about the business of ``fix[ing its] long-term problems'' and securing it for generations to come.

That is why I will support the amendment by the senior Senator from Florida, Mr. Nelson.

If I might have 1 more minute.

Mr. President, that is why the senior Senator from Florida, Mr. Nelson, is going to offer an amendment on Social Security later this week. It is why I urge my colleagues to support it. We want to keep Social Security, in the words of that man from Helena, as ``the only solid, dependable program that [we] can rely on.'' They want to keep it. They should keep it. We want to keep it. It is ``the only solid, dependable program'' seniors can rely on.

We want to keep it, in the words of Laura from Baker, MT, a ``system [that] has worked well for many, many years.'' And we want to keep a system that can work well for ``many, many years to come.''

I very much thank my good friend from North Dakota. I yield the floor.

Mr. President, I thank my friend. I might say, in regard to the recent statement by my good friend from Colorado with respect to privatization accounts--with all due respect, I want to point out, I don't know if he is quite accurate. I would like his response to this.

Isn't it true, though, that today Federal employees have both Social Security and private accounts? In addition to Social Security, that is, you have your Thrift Savings Plan. Federal employees have the Thrift Savings Plan, and they also pay into Social Security, which is not the President's program at all. The President's program is to take money away from Social Security and put it into a personal account. Even with the so-called personal account, they wouldn't be able to keep it, as we would our Thrift Savings. They have to give it back to Social Security. It is not even apples and oranges compared to the President's plan, it is watermelons and peanuts.

There is no comparison. The fact is, again to make it very clear, we Federal employees have both Social Security and the private accounts, separate, outside Social Security. We get to keep all we put into our private account because that is our money, whereas in the President's plan, money is taken away from Social Security into a privatization account and the person who

has that account is not able to keep very much of that money. So, as I said, it is not apples and oranges, it is really watermelons to peanuts. Isn't that accurate?

If I might respond?

I have 4 minutes, Mr. President. I don't know if I will be able to use my 4 minutes.

I might say with respect to State plans, most State plans have both Social Security and private plans, but there are a few States that do have only private plans. That is because in those few States they are so lucrative, the employees have a good deal compared with other States. But most States by far have both. Colorado is the exception, a State that has one, the main point being we are talking about choice, Thrift Savings, and choosing different kinds of investment equity that is in a private account today for Federal employees outside of and in addition to Social Security, not carved out of Social Security. We are talking about a carve-out. So it is totally different.

Mr. President, I rise today to express my strong support for Senator Stabenow's amendment to restore funding for our first responders, including local law enforcement. I am proud to cosponsor this amendment. We cannot continue to cut justice assistance program funding, particularly Byrne grant, local law enforcement block grants, and COPS funding.

The Byrne Grant Program, which was merged last year with the LLEBG program in a move I did not support, is vital to the efforts of local law enforcement in Montana to combat methamphetamine and other illicit drugs. I have heard this again and again and again, from local law enforcement agencies to the Montana Narcotics Officers Association to the Governor's office to the attorney general's office. The Byrne program helps communities hire additional local law enforcement, operate drug task forces, and send local law enforcement to drug training.

Unfortunately, the President's budget proposes an elimination of the Byrne Grant Program. This combined with cuts proposed by the President to the high intensity drug trafficking area HIDTA, program and other justice assistance programs, would be a disaster for Montana. It would set the clock back years in our efforts to fight the rapid spread of methamphetamine in Montana.

According to the Montana Board of Crime Control, this is what will happen to Montana if the President's fiscal year 2006 budget is enacted:

1. Montana will lose its multijurisdiction drug enforcement capacity, including seven multijurisdictional drug task forces. This means that already stretched local law enforcement agencies will have to do what they can to address drug enforcement at the local level, without broader support from the drug task forces.

2. Montana will lose 33 drug enforcement offices throughout the State.

3. Montana will experience a significant increase in drug availability, manufacturing and trafficking and drug-related crime.

4. Montana would experience an increase in clandestine labs that manufacture methamphetamine.

5. Montana would experience a reduction in the amounts of illegal drugs and guns removed from our communities.

6. Montana would experience the elimination of funds for rural law enforcement agencies' manpower, equipment, and training.

The above impacts translate to a complete loss of rural drug enforcement in Montana and are only the tip of the iceberg. The manufacturing, trafficking, drug addiction, and crime will have a ripple effect throughout the State in our public health and correction systems and the courts, negatively affecting public safety and the quality of life in Montana.

The Byrne program and similar programs support the majority of pro- active drug enforcement in the 56 counties of my State. This is because we are spread so thin across a vast area with a small population and an international border--Byrne is essential to us.

To protect our kids and our communities--our homeland--we have to continue aggressive drug enforcement across Montana. We have to continue teaching hundreds of classes to the good citizens helping to stop the spread of drugs like meth, including realtors, retailers, civil groups, and other local law enforcement agencies. Byrne funding is the difference between stopping a few street level drug sales and stopping drug manufacturing and distribution on a much larger scale.

Working hand-in-hand with Byrne Grant Program funding is the COPS Program. The COPS Program helps pay for all meth lab cleanups in Montana, protecting children and others from the harmful health impacts of the chemicals used to make meth. Additionally, the COPS Program helps provide for more law enforcement in drug enforcement units, while maintaining enough police officers patrolling our streets.

According to the president of the Montana Association of Chiefs of Police, COPS funding is necessary to maintain an adequate number of police in the field to protect our communities. He has told me that without COPS funding, the number of crimes,

especially violent crimes, will begin to rise again. And currently, there is no other alternative to the COPS Program. He tells me that the COPS Program is one of those programs that works, one of those programs that is directly responsible for protecting our communities, for getting the officers out on the street to protect us all.

In short, the Byrne and COPS Programs represent a relatively minor Federal investment in our local communities that pays huge dividends in terms of the health and safety of our citizens. We are also talking about communities that cannot foot the bill by themselves, particularly in a rural, low-population State like Montana. We just can't kid ourselves that the money will magically appear elsewhere.

I guarantee that Montana is not the only State that will suffer a dramatic loss in drug enforcement capability under the President's proposed budget. Therefore, I urge my colleagues to support the important amendment of the Senator from Michigan. We cannot shortchange our law enforcement--stopping the spread of illegal drugs is important to the security of our homeland, too.

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

Madam President, I very much appreciate that of the Senator from Colorado and also I beg the indulgence of my colleagues; I am going to speak on another subject for about 5 minutes. It is not the subject at hand. I ask consent my remarks appear apart from the debate on ANWR.

Madam President, I rise to oppose the reconciliation instruction in this budget resolution directing the Finance Committee to cut Medicaid by $15 billion over 5 years. These cuts will tear the fabric of our Nation's safety net at a time when Medicaid is needed more than ever. I plan to cosponsor an amendment to strike these instructions and instead establish a bipartisan Medicaid Commission.

Medicaid is just too important to be subject to arbitrary budget cuts. It is a critical public program that provides a lifeline of health coverage and long-term care services to more than 53 million of our Nation's most vulnerable individuals.

For example, Medicaid ensures access to health coverage for more than one in four children. Just think of that: one in four. It is the Nation's largest single purchaser of long-term care services and fills the gaps in Medicare's coverage for more than 6 million low-income senior and disabled individuals.

It is an essential provider of health care services for women, the leading purchaser of family planning services, and it pays for more than 40 percent of all births in America. Medicaid pays for more than 40 percent of all births in America.

Medicaid funding is a major source of support that keeps the doors open at thousands of community health centers, public hospitals, nursing homes, and other facilities.

While Medicaid is a critical component of our health care system, it is certainly not perfect. For that reason, I am open to talking about changes in Medicaid. I am open to talking about better accountability, the need for more State flexibility. And I am willing to consider any other area where improvements or clarification to existing Medicaid law is needed.

But we should not cut Medicaid for the sake of meeting an arbitrary budget number. That is clear. And we should not be cutting Medicaid under the guise of ``program integrity'' without a better understanding of what the States are doing--and what that really means--without knowing whether the activities singled out in the President's budget are truly abusive--we need to know that, too--and without knowing what impact these cuts will have on the people who depend on Medicaid--we don't know that either. So to enact these arbitrary cuts without knowing and having some semblance of the answers to those questions is just plain reckless.

Yes, Medicaid costs are growing. Recent cost growth at the State and Federal level is cause for concern. But most of this cost growth is due to an increase in enrollment and the same health care cost inflation that affects every insurance plan.

From 2001 to 2003--this is pretty important--during the last recession, Medicaid added 7.5 million people to the rolls. It was during the recession, because of the recession. Most of these people were insured but lost coverage because their employer dropped coverage or they could not afford the premiums. These 7.5 million would likely be uninsured if it were not for Medicaid. This growth in enrollment shows that Medicaid is doing its job, growing to meet the need when times are tough.

That is the whole point of Medicaid. And times were tough. We were in a recession. Employers laid people off. People needed health care, so they had to go to Medicaid.

Even though Medicaid costs are increasing, just as in Medicare and the private sector, it is important to keep in mind that Medicaid growth is lower on a per person basis. A recent study showed that Medicaid cost growth is 6.1 percent per person, compared to a 12.6-

percent cost growth for private coverage. The growth in the cost of health care in Medicaid is half the growth per person under the private insurance plans which most Americans are offered today. So Medicaid is not a wasteful program.

We also pay more for Medicaid because of the critical role it plays in filling Medicare's benefit gaps for seniors and people with disabilities.

More than 40 percent of all Medicaid spending goes to pay for long- term care, for prescription drugs, other coverage and cost-sharing for low-income individuals who are eligible for both Medicaid and Medicare. That is 40 percent of Medicare's costs, even though dual eligibles make up only about 14 percent of all Medicaid enrollees.

In essence, Medicaid picks up the tab for what Medicare should be covering. The new Medicare drug benefit should provide some new assistance with costs for the dual-eligibles. However, States will still be responsible for a substantial share of total spending in the form of so-called clawback payments.

Medicaid deserves its own policy debate, just like we had with Medicare. And whatever policy we support must address the root causes of the challenges facing Medicaid: the growth in enrollment; rising health care costs; and the increasing cost of providing long term care and other services to dual eligible beneficiaries.

We need the right diagnosis before we can get the prescription right. That is why I support creating a bipartisan Medicaid commission to advise Congress on how to sustain Medicaid well into the future.

By contrast, the budget resolution we are now debating would constrain us to finding savings that meet a target number--even if that means cutting services and benefits, shifting costs to states, or dramatically restructuring the program.

The budget resolution frames these cuts as the amount that is misspent on so-called waste and abuse in the system. Without a doubt, everyone wants to make Medicaid more efficient. And everyone agrees that we need to root out fraud and abuse in Medicaid. In fact, Congress has acted to root out fraud and abuse in Medicaid every time we have discovered it. Like with upper payment limits, disproportionate share hospital payments, and provider taxes.

And we stand ready to correct any misappropriation of federal funds.

But in the case of the administration's proposals, it is not entirely clear that there is evidence of abuse--or that the policy they have proposed will address the issue. For example, in the case of the President's proposal to limit intergovernmental transfers--IGTs--the Congressional Budget Office failed to score any savings. CBO lacked sufficient detail on the policy.

In fact, Senator Grassley and I have been asking the Administration for specific information--for over a year now--about which states are currently out of compliance with the IGT rules, and how their policy on IGT enforcement may have changed. But they have not provided the information that we have requested.

I caution my colleagues in the Senate against buying the administration's pig in a poke on this issue.

So let's be clear on what the President's proposal would do. It would change the rules of the game on how states can finance their Medicaid programs, pure and simple.

And the bottom-line impact on States could be devastating. In Montana, proposed cuts in the budget resolution would result in a net loss of more than $133 million Federal dollars from state's Medicaid program. In human terms, this funding cut could mean a loss of coverage for 2,800 seniors or more than 12,000 children.

Lost Federal funds could also mean State revenues and jobs created by Medicaid spending.

For every $1 million Montana spends on Medicaid, more than $4.7 million in new business activity is generated and just over 57 new jobs are created. Montana can ill afford to lose this business revenue and economic development.

Beyond the statistics and economic impact statements, there are real people who will be hurt if we cut Medicaid.

Last month I heard from Kaaren Rizor, director of the Ashland Community Health Center in Ashland, MT, who told a powerful story about how Medicaid has helped her community and what cuts might mean for her center's ability to serve those in need. She wrote:

I can't imagine what our population in Ashland, Montana

would do without Medicaid. Talk about impacting underfunded

Community Health Centers! [Medicaid cuts would] mean

accepting more patients for sliding fee scale discounts with

no means of recouping the cost of their care.

The concept of more Community Health Centers is noble and

good, but we aren't magicians. We can't pull money out of a

hat to survive.

Our clinic has tripled to quadrupled the number of annual

patient encounters. Along with that, we see more and more

families living at 100 percent of poverty. Without Medicaid,

we carry a tremendous burden to see all who come to us,

without the funds to provide quality care.

Let me reiterate that I am open to working on improvements to Medicaid. But we should not throw the proverbial baby out with the bath water. This program is too important to too many people. And program cuts or funding caps will have a real impact on real people.

Finally, I would note that the House budget includes reconciled cuts in these programs that are much deeper than those in the Senate. We cannot act as though all such savings can somehow be achieved by wishing away fraud, waste, and abuse. I am deeply concerned about conference deliberations on this matter.

The amendment to strike this reconciliation instruction and instead establish a bipartisan Medicaid commission enjoys widespread support from many Governors, health care providers, and more than 131 national organizations dedicated to helping the Nation's Medicaid beneficiaries, among countless others. I applaud the leadership of Senators Smith, Bingaman, and Coleman in proposing this amendment. I urge my colleagues to join me and Senators Smith, Bingaman, and Coleman in supporting this important amendment.

Madam President, I very much appreciate the indulgence of my good friends from Colorado and Alaska and others who have let me make this statement which is not on the subject at hand. I thank them all and yield the floor, and I particularly thank my friend from Colorado.

Mr. President, I rise today to congratulate the University of Montana, which for the first time since 1997 will watch both its men's and its women's basketball teams advance to the NCAA tournament, and we do so with Big Sky tournament championships fresh in hand.

The University of Montana men's basketball team will head to the tournament for the sixth time in school history. The Grizzlies now face a daunting task, facing the No. 1 seed University of Washington, and we are going to beat them.

Under Coach Larry Krystkowiak, we have a coach and a team that is going to win. Larry was a legendary basketball player for the Grizzlies in the 1980s, rising all the way up to the NBA, and now in his first year as head coach of the Grizzlies, he is a champion.

We won the tournament. We are going to beat those characters over in the State of Washington. We are going to win the next round.

The Lady Griz basketball team is leading to the tournament for the 16th time in school history. They will face Vanderbilt, and I am quite confident head coach Robin Selvig--just a terrific coach--will have his team ready to play.

Both teams represent that which is great about college athletics: fellowship, sportsmanship, and fair play. They are great kids. The student athletes conduct themselves with dignity and class, and I am very proud how well they have represented my home State, and we are very proud to see them compete on a national stage for the national championship.

All I have to say is, watch out, Vanderbilt; watch out, University of Washington. Montana is coming.

Mr. President, I rise today to congratulate one of Montana's fine educational institutions on its first national championship title. Rocky Mountain College, located in Billings, is Montana's oldest institution of higher education. Last weekend, the men's ski team became the overall national champions at the 27th Annual US Collegiate Ski Association Championships.

Montana's schools may be smaller than the ( average universities around the Nation, but Rocky Mountain College has again proven that smaller schools can achieve giant results.

Under Coach Jerry Wolf's leadership, the men's ski team made history for Rocky Mountain College by leading the men's ski team to their first national championship in the school's history.

However, the men were not the only ones from the Big Sky State to shine that day. The Women's ski team finished 10th overall. Both teams have made it to the national championships for the last 4 consecutive years but never with this excellent combination of results.

I want to recognize three students who finished events with times in the top 10: Pete Petry, Erik Willborg, and Johanna Aaker. I know how hard all of the students on the ski team worked to achieve these fantastic finishes, and I am pleased to represent such talented individuals.

To both the men's and women's ski teams of Rocky Mountain College, congratulations on your fantastic seasons.

Mr. President, I am pleased to again join with my friend, Senator Hatch, in introducing legislation to make a permanent commitment to research-intensive businesses in the United States. This legislation is bipartisan and bicameral. A companion bill will be introduced in the House of Representatives by Congresswoman Nancy Johnson and Congressman Ben Cardin.

Every morning we hear news of some new product or discovery that promises to make our jobs easier or our lives better. Many of these innovations started with a business decision to hire needed researchers and finance the expensive and long process of research and experimentation. Since 1981, when the R&D tax credit was first enacted, the Federal Government was a partner in that business endeavor because of the potential spillover benefits to society overall from additional research spending.

Research has shown that a tax credit is a cost-effective way to promote R&D. The Government Accountability Office, the Bureau of Labor Statistics, the National Bureau of Economic Research, and others have all found significant evidence that a tax credit stimulates additional domestic R&D spending by U.S. companies. A report by the Congressional Research Service, CRS, indicates that economists generally agree that, without government support, firm investment in R&D would fall short of the socially optimal amount and thus CRS advocates government policies to boost private sector R&D.

R&D is linked to broader economic and labor benefits. R&D lays the foundation for technological innovation, which, in turn, is an important driving force in long-term economic growth--mainly through its impact on the productivity of capital and labor. We have many times heard testimony from economists, including Federal Reserve Board Chairman Alan Greenspan, that the reason our economy grew at such breakneck speed during the 1990s stemmed from the productivity growth we realized thanks to technological innovations.

There has been a belief that companies would continue to increase their research spending and that the benefits of these investments on the economy and labor markets would continue without end. Unfortunately, that is not the case. According to Battelle's 2005 funding forecast, industrial R&D spending will increase only 1.9 percent above last year, to an estimated $191 billion, which is less than the expected rate of inflation of 2.5 percent. For the fifth year in a row, industrial R&D spending growth has been essentially flat.

Over recent years, industry-financed R&D declined from 1.88 percent to 1.65 percent of GDP in the United States between 2000 and 2003, while R&D performed by the business sector declined from 2.04 percent to 1.81 percent of GDP. Japan, in contrast, saw a steep increase in business-performed R&D--from 2.12 percent to 2.32 percent of GDP between 2000 and 2002--and modest gains were posted in the EU.

Moreover, just last week, the World Economic Forum released its annual Global Information Technology Report. The rankings, which measure the propensity for countries to exploit the opportunities offered by information and communications technology, ICT, revealed that Singapore has displaced the United States as the top economy in information technology competitiveness. As a matter of fact, the United States has dropped from first to fifth place in this ranking. Iceland, Finland and Denmark are the countries ranked two, three and four out of the 104 countries surveyed. Iceland moved up from tenth last year.

These numbers should be a wake up call for all of us. As research spending falls, so too will the level of future economic growth.

It is also important to recognize that many of our foreign competitors are offering permanent and generous incentives to firms that attract research dollars to those countries. A 2001 study by the Organization of Economic Cooperation and Development, OECD, ranked the U.S. ninth behind other nations in terms of its incentives for business R&D spending. Countries that provide more generous R&D incentives include Spain, Canada, Portugal, Austria, Australia, Netherlands, France, and Korea. The United Kingdom was added to this list in 2002 when it further expanded its existing R&D incentives program. The continued absence of a long-term U.S. government R&D policy that encourages U.S.-based R&D will undermine the ability of American companies to remain competitive in U.S. and foreign markets. This disparity could limit U.S. competitiveness relative to its trading partners in the long-run.

Also, U.S. workers who are engaged in R&D activities currently benefit from some of the most intellectually stimulating, high-paying, high-skilled

jobs in the economy. My own State of Montana is an excellent example of this economic activity. During the 1990s, about 400 establishments provided high-technology services, at an average wage of about $35,000 per year. These jobs paid nearly 80 percent more than the average private sector wage of less than $20,000 per year during the same year. Many of these jobs would never have been created without the assistance of the R&D credit. While there may not be an immediate rush to move all projects and jobs offshore, there has been movement at the margins on those projects that are most cost-sensitive. Once those projects and jobs are gone, it will be many years before companies will have any incentive to bring them back to the United States.

We continue to grapple with the need to stimulate economic growth and advance policies that represent solid long-term investments that will reap benefits for many years to come. Senator Hatch and I repeatedly have pointed to the R&D tax credit as a measure that gives us a good ``bang for our buck.'' I hope this year we can enact a permanent tax credit that is effective and more widely available. I encourage my colleagues to join us in this effort.

As we have in years past, our proposal would make the current research and experimentation tax credit permanent and increase the Alternative Incremental Research Credit, AIRC, rates. And, in this legislation we take one additional but necessary step.

We propose a new alternative simplified credit that will allow taxpayers to elect to calculate the R&D credit under new computational rules that will eliminate the present-law distortions caused by gross receipts. This revised and improved R&D credit did pass the Senate last year on a 93-0 vote, but a straight short-term extension of current law was enacted instead.

There is no good policy reason to make research more expensive for some industries than for others. While the regular R&D tax credit works very well for many companies, as the credit's base period recedes and business cycles change, the current credit is out of reach for some other firms that still incur significant research expenditures. To help solve part of this problem Congress enacted the AIRC in 1996 and now we propose a way to address the rest of that problem.

Under current law, both the regular credit and the AIRC are calculated by reference to a taxpayer's gross receipts, a benchmark that can produce inequities and anomalous results. For example, many taxpayers are no longer able to qualify for the regular credit, despite substantial R&D investments, because their R&D spending relative to gross receipts has not kept pace with the ratio set in the 1984-88 base period, which governs calculation of the regular credit. This can happen, for example, simply where a company's sales increase significantly in the intervening years, where a company enters into an additional line of business that generates additional gross receipts but involves little R&D, or where a company becomes more efficient in its R&D processes.

Our proposal would correct this by allowing taxpayers a straightforward alternative research credit election. Taxpayers could elect, in lieu of the regular credit or the AIRC, a credit that would equal 12 percent of the excess of the taxpayer's current year qualified research expenditures, QREs, over 50 percent of the taxpayer's average QREs for the 3 preceding years. Unlike the regular credit and the AIRC, this credit calculation does not involve gross receipts.

The R&D tax credit has proven it can be an effective incentive. We need to act to make it a permanent part of the tax code that U.S. businesses can rely on. The best thing we can do for our long-term economic well-being is to stoke the engine of growth--technology, high- wage jobs and productivity. I look forward to working with Senator Hatch and all my colleagues on this important issue.

I urge my colleagues to support this important piece of legislation.

Mr. President, I am pleased to again join with my friend, Senator Hatch, in introducing legislation to make a permanent commitment to research-intensive businesses in the United States. This legislation is bipartisan and bicameral. A companion bill will be introduced in the House of Representatives by Congresswoman Nancy Johnson and Congressman Ben Cardin.

Every morning we hear news of some new product or discovery that promises to make our jobs easier or our lives better. Many of these innovations started with a business decision to hire needed researchers and finance the expensive and long process of research and experimentation. Since 1981, when the R&D tax credit was first enacted, the Federal Government was a partner in that business endeavor because of the potential spillover benefits to society overall from additional research spending.

Research has shown that a tax credit is a cost-effective way to promote R&D. The Government Accountability Office, the Bureau of Labor Statistics, the National Bureau of Economic Research, and others have all found significant evidence that a tax credit stimulates additional domestic R&D spending by U.S. companies. A report by the Congressional Research Service, CRS, indicates that economists generally agree that, without government support, firm investment in R&D would fall short of the socially optimal amount and thus CRS advocates government policies to boost private sector R&D.

R&D is linked to broader economic and labor benefits. R&D lays the foundation for technological innovation, which, in turn, is an important driving force in long-term economic growth--mainly through its impact on the productivity of capital and labor. We have many times heard testimony from economists, including Federal Reserve Board Chairman Alan Greenspan, that the reason our economy grew at such breakneck speed during the 1990s stemmed from the productivity growth we realized thanks to technological innovations.

There has been a belief that companies would continue to increase their research spending and that the benefits of these investments on the economy and labor markets would continue without end. Unfortunately, that is not the case. According to Battelle's 2005 funding forecast, industrial R&D spending will increase only 1.9 percent above last year, to an estimated $191 billion, which is less than the expected rate of inflation of 2.5 percent. For the fifth year in a row, industrial R&D spending growth has been essentially flat.

Over recent years, industry-financed R&D declined from 1.88 percent to 1.65 percent of GDP in the United States between 2000 and 2003, while R&D performed by the business sector declined from 2.04 percent to 1.81 percent of GDP. Japan, in contrast, saw a steep increase in business-performed R&D--from 2.12 percent to 2.32 percent of GDP between 2000 and 2002--and modest gains were posted in the EU.

Moreover, just last week, the World Economic Forum released its annual Global Information Technology Report. The rankings, which measure the propensity for countries to exploit the opportunities offered by information and communications technology, ICT, revealed that Singapore has displaced the United States as the top economy in information technology competitiveness. As a matter of fact, the United States has dropped from first to fifth place in this ranking. Iceland, Finland and Denmark are the countries ranked two, three and four out of the 104 countries surveyed. Iceland moved up from tenth last year.

These numbers should be a wake up call for all of us. As research spending falls, so too will the level of future economic growth.

It is also important to recognize that many of our foreign competitors are offering permanent and generous incentives to firms that attract research dollars to those countries. A 2001 study by the Organization of Economic Cooperation and Development, OECD, ranked the U.S. ninth behind other nations in terms of its incentives for business R&D spending. Countries that provide more generous R&D incentives include Spain, Canada, Portugal, Austria, Australia, Netherlands, France, and Korea. The United Kingdom was added to this list in 2002 when it further expanded its existing R&D incentives program. The continued absence of a long-term U.S. government R&D policy that encourages U.S.-based R&D will undermine the ability of American companies to remain competitive in U.S. and foreign markets. This disparity could limit U.S. competitiveness relative to its trading partners in the long-run.

Also, U.S. workers who are engaged in R&D activities currently benefit from some of the most intellectually stimulating, high-paying, high-skilled

jobs in the economy. My own State of Montana is an excellent example of this economic activity. During the 1990s, about 400 establishments provided high-technology services, at an average wage of about $35,000 per year. These jobs paid nearly 80 percent more than the average private sector wage of less than $20,000 per year during the same year. Many of these jobs would never have been created without the assistance of the R&D credit. While there may not be an immediate rush to move all projects and jobs offshore, there has been movement at the margins on those projects that are most cost-sensitive. Once those projects and jobs are gone, it will be many years before companies will have any incentive to bring them back to the United States.

We continue to grapple with the need to stimulate economic growth and advance policies that represent solid long-term investments that will reap benefits for many years to come. Senator Hatch and I repeatedly have pointed to the R&D tax credit as a measure that gives us a good ``bang for our buck.'' I hope this year we can enact a permanent tax credit that is effective and more widely available. I encourage my colleagues to join us in this effort.

As we have in years past, our proposal would make the current research and experimentation tax credit permanent and increase the Alternative Incremental Research Credit, AIRC, rates. And, in this legislation we take one additional but necessary step.

We propose a new alternative simplified credit that will allow taxpayers to elect to calculate the R&D credit under new computational rules that will eliminate the present-law distortions caused by gross receipts. This revised and improved R&D credit did pass the Senate last year on a 93-0 vote, but a straight short-term extension of current law was enacted instead.

There is no good policy reason to make research more expensive for some industries than for others. While the regular R&D tax credit works very well for many companies, as the credit's base period recedes and business cycles change, the current credit is out of reach for some other firms that still incur significant research expenditures. To help solve part of this problem Congress enacted the AIRC in 1996 and now we propose a way to address the rest of that problem.

Under current law, both the regular credit and the AIRC are calculated by reference to a taxpayer's gross receipts, a benchmark that can produce inequities and anomalous results. For example, many taxpayers are no longer able to qualify for the regular credit, despite substantial R&D investments, because their R&D spending relative to gross receipts has not kept pace with the ratio set in the 1984-88 base period, which governs calculation of the regular credit. This can happen, for example, simply where a company's sales increase significantly in the intervening years, where a company enters into an additional line of business that generates additional gross receipts but involves little R&D, or where a company becomes more efficient in its R&D processes.

Our proposal would correct this by allowing taxpayers a straightforward alternative research credit election. Taxpayers could elect, in lieu of the regular credit or the AIRC, a credit that would equal 12 percent of the excess of the taxpayer's current year qualified research expenditures, QREs, over 50 percent of the taxpayer's average QREs for the 3 preceding years. Unlike the regular credit and the AIRC, this credit calculation does not involve gross receipts.

The R&D tax credit has proven it can be an effective incentive. We need to act to make it a permanent part of the tax code that U.S. businesses can rely on. The best thing we can do for our long-term economic well-being is to stoke the engine of growth--technology, high- wage jobs and productivity. I look forward to working with Senator Hatch and all my colleagues on this important issue.

I urge my colleagues to support this important piece of legislation.

Mr. President, I ask unanimous consent that the following fellows and interns of the Finance Committee be granted floor privileges during consideration of the budget resolution: Brian Townsend, Mary Baker, Janis Lazda, Richard Litsey, Cuong Huynh, David Schwartz, Stuart Sirkin, Janellen Duffy, Ashley Fingarson, Jessica Heringer, Serena Maxwell, Jesse Woodson, Briana Schwandt, Emily Meeker, Waylon Mathern, and Adrienne Frazier.

Mr. President, I rise today to commend John Gilliland, who worked for me on the trade staff of the Finance Committee for the last 2 years. He left to go work for the law firm of Miller and Chevalier, where I know he will be a great success.

We were lucky to have John with us on the Committee for 2 years. But he has been working hard on public policy issues for much longer than that.

John began his Senate career in the office of my good friend and colleague, Senator Blanche Lincoln. John worked for 2 years as her legislative counsel on trade and agriculture issues. Senator Lincoln, of course, was instrumental in helping us pass the 2002 farm bill and the Trade Act of 2002, and John was her key staffer on both pieces of legislation.

My staff worked closely with John on these issues, and everyone was so impressed by him that I hired him to help us on the Finance Committee.

I am glad we did. John has been a tremendous asset. He knows agriculture and trade inside and out. I am always amazed that I can ask him almost anything, and he not only knows that answer, but can give me all of the history, politics, and nuance.

His knowledge of agriculture was particularly important for Montana, where farming and ranching are the engine of our export income. John is somebody who I trusted to represent me in Montana, and someone who I trusted to represent Montana here in Washington. That alone is saying a lot.

John worked on some difficult and important issues while on the Finance Committee. He played a key role in the Australia free-trade agreement and was responsible for oversight of WTO negotiations. He was also a strong advocate for our work to end the embargo against Cuba, and he helped negotiate the first ever Montana-Cuba agriculture trade deal. In fact, John traveled with me on several of my trade missions, including to Cuba, Asia, Australia, and New Zealand.

John is also someone who is very dedicated to his family. He is lucky to have a wonderful wife, Rebecca, and three great kids-Will, Hudson, and Rebecca Jane. And they are fortunate to have a hard-working and talented husband and father.

Now, all of this is not to say that John doesn't have his faults. Most of his colleagues give John a hard time for not being able to match his clothes. Their criticism is warranted. In fact, on a trip to Thailand last year, we finally forced him to buy a new suit and some dress shirts. I am confident that we have now set him on the right path.

Having visited John at his desk, I can also say that I am happy that OSHA never paid him a visit. I heard someone describe John and his office best when they said that he combines southern charm with northern efficiency and third-world desk organization.

All of that said these are about the worst things you can say about John. In fact, you would be hard pressed to find a person who does not like John. He is truly one of the nicest and most genuine people you will ever meet. There are a lot of people in this town with substantive knowledge, but there are few who can put together the substance, personality, and strategy and be truly exceptional. John is one of those people.

I always say that public service is one of the most noble things a person can do. John Gilliland embodies the best in public service. He is aces. And I wish him the best.

Mr. President, I am pleased to join my colleague, Senator Santorum, in introducing legislation to permanently extend and improve upon the Work Opportunity and the Welfare-to-Work tax credits. Last year, I was pleased to successfully add a permanent a extension of these credits to the Senate passed JOBS bill, which combined the credits and made certain improvements. When the expiring tax provisions were considered last year as part of the Working Families Tax Relief bill, I offered an amendment to combine both credits and make them permanent. While this provision was not retained in conference, I was successful in securing an extension of the current program through December 31, 2005. This extension expires at the end of this year so immediate action is needed to make these credits permanent and make several reforms in the programs to improve their effectiveness. These recurring lapses and extensions make administration of this credit burdensome both for the taxpaying employer, who cannot keep track of who is or isn't qualified, and for the IRS, which needs to ensure taxpayers are complying with the ever-shifting law.

Over the past decade, the Work Opportunity Tax Credit, WOTC, and the Welfare-to Work, W-t-W, have helped over 2.2 million public assistance dependent individuals enter the workforce. Both of these important programs are scheduled to expire on December 31, 2005. These hiring tax incentives have clearly demonstrated their effectiveness in helping to level the job selection playing field for low-skilled individuals by providing employers with additional resources to help recruit, select, train and retain individuals with significant barriers to work. Many vulnerable individuals still need a boost in finding employment, and this is particularly critical during periods of high unemployment. The weak economy and rising unemployment give employers many more hiring options because of the larger pool of experienced laid-off workers. Without an extension of these programs, the task of transitioning from welfare-to-work will become even harder for individuals who reach their welfare eligibility ceiling.

Because of the costs involved in setting up and administering a WOTC/ W-t-W program, employers have established massive outreach programs to maximize the number of eligible persons in their hiring pool. The States, in turn, have steadily improved the programs through improved administration. WOTC has become an example of a true public-private partnership design to assist the most needy applicants. Without the additional resources provided by these hiring tax incentives, few employers would actively seek out this hard-to-employ population.

WOTC provides employers with a graduated tax credit equal to 25- percent of the first $6,000 in wages for eligible individuals working between 120 hours and 399 hours and a 40-percent tax credit on the first $6,000 in wages for those working over 400 hours. The W-t-W tax credit is geared toward long-term welfare recipients and provides a 35- percent tax credit on the first $10,000 in wages during the first year of employment and a 50-percent credit on the first $10,000 for those who stay on the job a second year.

In my own State of Montana, many businesses take advantage of this program, including large multinational firms and smaller family-owned businesses. Those who truly benefit from the WOTC/W-t-W program, however, are low-income families, under the Food Stamp Program, the Aid to Families with Dependent Children, AFDC, and Temporary Assistance for Needy Families, TANF, programs, and also low-income U.S. Veterans. In Montana, more than 1,000 people were certified as eligible under the WOTC program during an 18-month period, October 2001 through March 2003, including 476 Food Stamp recipients, 475 AFDC/TANF recipients, and 52 U.S. veterans.

The bill we are introducing provides for a permanent program extension of the two credits. After a decade of experience with WOTC and W-t-W, we know that employers do respond to these important hiring tax incentives. Permanent extension would provide these

programs with greater stability, thereby encouraging more employers to participate, make investments in expanding outreach to identify potential workers from the targeted groups, and avoid the wasteful disruption of termination and renewal A permanent extension would also encourage the state job services to invest the resources needed to make the certification process more efficient and employer-friendly.

The bill also includes a proposal to simplify the programs by combining them into one credit and making the rules for computing the combined credits simpler. This would be accomplished by creating a new welfare-to-work target group under WOTC. The minimum employment periods and credit rates for the first year of employment under present work opportunity tax credit would apply to W-t-W employees. The maximum amount of eligible wages would continue to be $10,000 for W-t-W employees. In addition, the second year 50-percent credit under W-t-W would continue to be available for W-t-W employees under the modified