Mr. President, today, we debate this tax reconciliation bill for a third time. We last debated this bill on February 2, Groundhog Day. My friend from Iowa, the chairman of the committee, Senator Grassley, last week compared this repeated…
Mr. President, today, we debate this tax reconciliation bill for a third time.
We last debated this bill on February 2, Groundhog Day. My friend from Iowa, the chairman of the committee, Senator Grassley, last week compared this repeated debate to Groundhog Day. That is true. This debate does remind us of the wonderful film ``Groundhog Day,'' where Bill Murray is forced to live the same day over and over again. But at the risk of giving away some of the plot of the film, let me remind my colleagues of the lesson of the film. In the film, providence dooms Bill Murray to repeat the same day--Groundhog Day, that is--until he learns to live it right. One might say that is where we are. We are doomed to debate tax policy over and over again until we get it right.
In November, when we first debated this bill, the Senate voted 64 to 33 to pass the bill to support AMT relief to middle-income families. Again, last week, the Senate voted 66 to 31 to again pass the bill and support the alternative minimum tax, otherwise known as AMT, relief for middle-income families. In particular, the Senate last week voted 73 to 24 to support the Menendez amendment to express the sense of the Senate that protecting middle-income families from the alternative minimum tax should be a higher priority in 2006 than extending capital gains and dividends tax cuts that do not expire until the end of 2008 or the beginning of 2009.
So the same question keeps popping up over and over again and the same answer keeps coming back: Let's make sure the relief from the onerous and family unfriendly AMT happens now. We must defer on extending expensive tax breaks for investors until a later date.
Yet I keep reading in the papers that Senate leaders have promised that capital gains and dividends tax cuts will still be in this reconciliation bill. The Senate position, by an overwhelming vote of 73 Senators, is providing immediate relief to more than 17 million middle- income families that otherwise would see a tax increase this year. Since that is so, it seems to me we should accept that position, accept that view, and work toward its enactment.
Statements that we will provide AMT relief to working families separately and later in the year undermine this Senate position. It is statements such as those that have led us to this Groundhog Day. It is statements such as that that call into question the Senate's votes and cause the Senate to have to vote once again to deliver that same message. Today, we will debate several motions to instruct, and the first one will be Groundhog Day for AMT.
For 17 million American families, 2006 came with an unwelcome surprise--a stealth tax. The temporary protection from alternative minimum tax, or AMT, expired December 31. That means that 17 million more American families will be subject to it this year. That is an increase from 3 million to 20 million taxpayers in one year alone.
Once again, the Senate will debate whether to support our position, where AMT relief is a priority. In contrast, the House position was to prefer extending capital gains and dividends cuts, which expire in 2009; that is, over AMT protection, which expired 6 weeks ago. I think the answer to that is clear.
If the House position prevails in conference, working families will lose. If we do not extend the AMT protection, a family with three kids earning $63,000 will be hit by the AMT this year. The AMT is family unfriendly. The AMT creeps deeper and deeper into working families each year. Protection from the AMT should be a priority for both sides of the aisle and both sides of the Capitol.
Instead, the House has passed a separate alternative minimum tax bill without the procedural protections of this bill. And while this other House bill purports to protect families from the alternative minimum tax, there will still be 600,000 additional taxpayers paying higher taxes for this year 2006 due to this stealth tax. The House AMT patch, or otherwise known as the hold-harmless provision, as some have called it, does not really hold anyone harmless. Last year, 2005, there were 3.6 million American taxpayers paying this AMT stealth tax. Under the House bill, there would be 4.2 million taxpayers paying the AMT stealth tax in 2006; that is, this year.
So as we debate this issue once again, let us remember our priority: that millions of working families now subject to a tax increase courtesy of the AMT are a priority we should address. Once we accept that priority, the decision whether to allocate $50 billion to extending capital gains tax cuts becomes much more clear. So let us do what is urgent first. Let us do what working families expect and need. Doing so will be the only way to move on to better days for these families.
I want to expand on that last point. The capital gains and dividends tax cuts contained in the House bill, as I mentioned, are among matters most in dispute in this legislation, so let me take a couple of moments to discuss why Congress does not need to extend them in this bill.
Under current law, taxpayers who earn money in capital gains and dividend income pay taxes on that income at a lower rate than they do on their ordinary income; for example, wages. In 2003, we passed legislation that set the current law for the taxation of capital gains and dividend income. For taxpayers in most income brackets, capital gains and dividend income are taxed at 15 percent. Taxpayers in the lower two tax brackets do not receive a great deal of capital gains and dividend income. But for taxpayers in those two brackets, what capital gains and dividend income they receive is taxed at 5 percent now and will be tax free in 2008. Prior law, before 2003, taxed long-term capital gains at 20 percent or 10 percent. Prior law taxed dividend income similar to any other ordinary income, so there is a split in capital gains. The House bill would extend the lower tax rates Congress enacted in 2003 to the end of 2010.
The first question before us, therefore, is when does Congress need to act on capital gains and dividend income tax rates? Those rates do not expire this year. Those rates do not expire next year. Those rates do not expire the year after that. Rather, those rates expire on January 1, 2009, about 3 years from now, after the next Presidential election.
So the first thing we need to note is that extension of capital gains and dividends tax rates is far from an urgent matter.
The second question we need to ask is: Is it fiscally responsible to extend those tax cuts right now?
According to the Joint Committee on Taxation, the cost of a 2-year extension of those tax rates amounts to $50 billion over a 10-year budgetary horizon. Some who like lower capital gains and dividends tax rates will cite a lower 5-year cost of $20 billion, but that masks the full cost over the decade to come.
Perhaps we should be a little more frank with the American people because it is no secret that many who like lower capital gains and dividends tax rates would like to make those lower rates permanent. This is the position the administration takes. So we ought to look at the cost of making those rates permanent. According to the President's new budget request, making these tax cuts permanent would cost more than $200 billion over 10 years.
Mr. President, $200 billion is a lot of money. Two hundred billion dollars is about what we spend on fighting crime, combating drugs, and the entire administration of Justice for 5 years. Two hundred billion dollars is about what the Federal Government spends on highways, airports, and the entire Transportation budget for 3 years. And $200 billion is about what we spend on
veterans' retirement and disability benefits for 6 years. So extending capital gains and dividend tax cuts costs real money.
The third question we need to ask is: Are capital gains and dividends tax cuts the best use of the money set aside for tax cuts in the budget? For there is a far more pressing need for tax relief before us in this bill and that is relief from the onerous alternative minimum tax.
Millions of working families are beginning their annual ritual of filling out their tax returns. It takes more time than most of us would like, and millions of taxpayers are being forced to fill out their returns twice. They have to do so if they owe money under the alternative minimum tax. The need for relief from the alternative minimum tax is not some faraway possibility, several years down the road. Relief from the alternative minimum tax expired for the tax year 2006. That is the more pressing tax relief need before us.
Treasury Secretary Snow testified before the Senate Finance Committee last Tuesday. He told the committee:
Tax increases carry an enormous risk of economic damage.
And I can tell you today that the President will not accept
that risk. He will not accept a tax increase on the American
people.
That is exactly why we need to prevent a tax increase on those working American families who would be subject to the alternative minimum tax, unless we act. In the same vein, the popular research and development tax credit expired at the end of last year. Businesses have argued for years that the annual 1-year extension provides no certainty for business planning and investment. We need to extend the R&D tax credit.
Some will make breathless arguments that capital gains and dividends tax cuts are necessary. Why are they necessary, they say? They say they are necessary to prevent dire consequences in the stock market. They say that the stock market will plunge if we don't enact this in 2 years. It doesn't need to be enacted. They want to enact it because the current law is in existence until January 1, 2009. But they say the stock market is going to fall.
Let us look at the time period starting in May 2003, when Congress reduced the dividend and capital gains tax rates. Since then, the stock market has seen a 14-percent growth. Furthermore, let us look at the time when Congress first cut the capital gains tax rate in August of 1997. Between then and the time the further cuts were made in May of 2003, the market grew by 13 percent. Now let us look at the time before either the capital gains or dividends tax cuts. Before the 1997 tax cuts, capital gains were taxed at 28 percent, much higher than the current law, and dividends were taxed as ordinary income, higher than under current law. In those times of higher capital gains and dividend tax rates, between the time the Clinton administration took office and August 1997, did the market grow by 13 percent or 14 percent? No. The market grew by a whopping 236 percent, far more than the 13 percent and 14 percent when the lower rates were in existence.
So the evidence is not there that lower capital gains and dividends tax cuts will lead to increased stock prices. Indeed, one would make the case that other economic factors are much more important to stock market returns than are capital gains and dividends tax rates.
One of those factors is the fiscal responsibility of the mid-1990s. After President Clinton took office in 1993, Congress and the President enacted meaningful, I mean meaningful deficit reduction. We reduced the Government's demand for scarce capital. We freed up savings to finance productive business investments. And we put the Nation on a path to economic growth. In contrast, financing tax cuts by running greater deficits increases the Government's demand for scarce capital. Deficit- financed tax cuts take away savings that could be available to finance productive business investments. Increasing the deficit detracts from economic growth.
To encourage economic growth, we need to get deficits under control, and the first step we can take down that road is to stop making the deficit worse by enacting more tax cuts than we can afford.
Capital gains and dividends tax cuts do not expire for 3 years. Capital gains and dividends tax cuts cost a lot of money. Capital gains and dividends tax cuts are a less-pressing priority than relief from the alternative minimum tax. And the evidence is simply not there that capital gains and dividends tax cuts contribute to market strength. That is not the evidence. It may be somebody's theory, but that is not the evidence.
So that is why we do not need to extend capital gains and dividends tax cuts today. We can face this issue later. Rather, let us address the more pressing need to extend relief from the alternative minimum tax. Let us act responsibly. Let us save capital gains and dividends tax cuts for another day.
I yield the floor.
Mr. President, we next expect to hear from the Senator from Connecticut, Mr. Dodd, to have a motion to instruct on veterans and military personnel. We anticipate thereafter we will hear from the Senator from Rhode Island. He will have a motion to instruct on defense needs.
I yield the floor so the Senator from Connecticut may send his motion to the desk.
Mr. President, we are next expected to hear from the Senator from Rhode Island, who will have a motion to instruct on defense needs. Thereafter, we expect to hear from the Senator from New York, Mr. Schumer, who will have a motion to instruct on the tuition deduction.
To facilitate the consideration of Senator Reed's motion, I ask unanimous consent that the pending motions be temporarily set aside so that the Senator from Rhode Island may offer his motion.
Mr. President, people call Montana the ``big sky'' State. Standing on the top of Mount Sentinel--the backdrop of the University of Montana--on a clear day, a person can see nearly 50 miles in almost every direction. I might say that at the top of Lone Mountain in Big Sky, MT, you can see the Tetons in Wyoming. Back at Mount Sentinel, which many of us climb from time to time, at the foot of it a professor is studying a horizon that stretches much farther than 50 miles. Professor Dan Reisenfeld is one of the key astrophysicists working on a mission to map and study the edge of the solar system.
Professor Reisenfeld is busy playing a part in the design of the interstellar boundary explorer, or I-BEX, an instrument that uses a large-aperture camera to detect high-energy particles coming from the edge of the solar system.
What does this mean? If I-BEX is successful at gathering information about the boundaries of the solar system, this will help companies that build satellites orbiting the Earth to predict solar storms. Solar storms can disrupt a satellite's operation and even cause irreparable damage.
Here on Earth, that means that emergency communications equipment would be able to function without the fear of interruption. And global communications can be more seamless.
Some of the most important scientific research is being done at universities across Montana and across the country. This research covers the gamut from biotechnology to stem cell research, to cutting- edge computer science. But institutions across the world are catching up.
In January, I visited India's Institute of Technology in Delhi. Eager, young engineering students are plotting for a better tomorrow in their country and the world. India, similar to many other developing countries, has made significant investments in education over the past several years. India produces 12 percent of the total global supply of university graduates. This percentage is increasing. China is now second only to the United States in the number of researchers in its workforce. According to the World Bank's most recent statistics, since 1985, China has seen an almost 400-percent increase in its per capita education spending.
While China, India, and other developing nations may still have a long way to go, they are training workers for a new world.
That takes me back to Professor Reisenfeld at the University of Montana. The University of Montana, similar to most colleges and universities across the country, is a tax-exempt organization. Tax- exempt universities rely in large part on tax deductible charitable contributions from alumni, private foundations, and businesses.
Legislative proposals that encourage more giving to charity help provide scholarships, build science centers, and hire new faculty to do cutting-edge research. In large part, charitable donations from the private sector--business and individuals--help America keep its competitive edge. There is no doubt about that, Mr. President. Our universities are a very key, integral part in America's R&D and in enhancing our country's competitiveness.
The Senate-passed tax reconciliation before us includes several incentives to encourage charitable giving. One of the most important incentives for charitable giving included in the Senate-passed bill is the IRA rollover provision. According to the American Council on Education, the IRA rollover provision is supported by close to 2,000 colleges and universities across the country. The provision promises to be an important tool for planned giving--a staple of university fundraising.
In addition, the IRA rollover represents a significant simplification over current law. Let me explain.
The IRA rollover provision allows older, financially secure donors to seamlessly transfer amounts in their IRA to their favorite charity, without first recognizing the IRA into income.
Under current law, taxpayers who want to donate their IRAs to charity must first take the amount into income. This can cause a huge disincentive to give if the amount of the IRA exceeds the donors' adjusted gross income limitation, for example.
In some cases, donors are forced to incur income for tax purposes for amounts the donor has given to charity. This makes no sense. The law should encourage taxpayers to give to charity.
For example, a taxpayer with an adjusted gross income of $40,000 and an IRA worth about $100,000, is forced to take that full $100,000 into income prior to making a gift to charity.
As a result, this taxpayer is considered to have $140,000 in income, for tax purposes--even though the taxpayer is giving $100,000 away.
Because taxpayers are subject to adjusted gross income limitations, even if the donor gives the entire $100,000 in the IRA away to charity, the taxpayer can only deduct up to half of adjusted gross income--in this example, $70,000.
In short, under current law, this taxpayer is forced to recognize $30,000 more in taxable income, even though the IRA is going entirely to charity. We should not penalize charitable giving.
The IRA rollover provision corrects this problem by simply disregarding from income amounts in a donor's IRA given to charity.
This proposal will have a fundamental effect on the amount of money contributed to charity. Currently, there are more than $2.5 trillion held in IRAs. If 1 percent of the assets currently held in IRAs were donated to charity, that would mean an additional $25 billion would go to benefit the type of research conducted by Professor Reisenfeld at the University of Montana. And money would also go to scholarships for the students working side by side with Professor Reisenfeld in his classroom.
The House bill does not include these new charitable giving incentives. Mr. President, the upcoming conference will highlight the priorities of each body. We include this provision; the House does not.
It is unclear at this point whether there will be enough revenue to extend capital gains and dividend tax treatment beyond the current law, which we all know doesn't expire until January 1, 2009, and also include the important charitable incentives included in the Senate- passed bill.
I hope that the conference committee makes charities and our future scientists its priority.
Mr. President, I want to discuss the importance of extending the R&D development tax credit for 2 years.
This is one of the key issues for conference. The Senate passed a 2- year extension of the revised and improved R&D credit, but the House only passed 1 year.
I am hopeful that 2 years will be retained in conference, as this tax incentive is essential for U.S. businesses in our global economy. Businesses depend on it. They need to know it is there. Predictability is important.
I have consistently discussed the need for America to maintain its competitive edge. To do that, we must cater to our strength: innovation.
Let me state that during the almost 2 weeks I was in Asia, China, and India in January meeting with business leaders and public officials, one thing became clear; that is, sure, there is a rising Chinese and Indian challenge, just as other countries challenge the United States, but they constantly told us that in the private sector the one advantage America still has is innovation, creativity. Over and over again I heard that. I hope that lasts. I hope it lasts a long time. We know people in other countries are working very hard; they are aggressive and hungry and they are going to do all they can to be as creative--if not more so--as we are in the United States. But that is the one edge we have currently, and we must do our utmost to make sure that lasts.
Foreign direct investment, including research and development, is shifting heavily toward China and India. The competition for qualified researchers has increased markedly.
On my recent trips to China and India, people constantly told me, as I have said, that the one thing they admire most about America is our innovation. We must foster R&D, and extending this vital credit for 2 years would help maintain that focus.
Every morning we hear news of some new product or discovery that promises to make our jobs easier and our lives better. For example, between 2002 and 2003, the annual number of cancer deaths decreased for the first time in 70 years. Unfortunately, for women, it rose slightly, but the annual number of cancer deaths has decreased. One reason for that was better detection and treatment. That is a direct result of American technological innovations, and those result from R&D.
Since 1981, when the research and development credit was first enacted, the Federal Government has been a partner in R&D. And we contribute to this effort as a society because of the benefits to society from additional research spending. It is a societal effort to get a societal benefit.
Congress clearly believes that the R&D credit is an effective policy instrument. One of the major limitations of the credit, however, is its temporary nature.
As the Electronic Industries Association wrote:
An extension of the credit that goes beyond the end of this
year will also help diminish the uncertainty for companies
regarding the availability of the credit.
The organization goes on to say:
The yearly fight to ensure that the credit is available for
costly and high-risk research done in the United States can
cause companies to discount the credit's long-term value and
reduce its benefit to the economy.
An analysis by the Joint Committee on Taxation found:
A credit of longer duration may more successfully induce
additional research that would a temporary credit, even if
the temporary credit is periodically renewed.
U.S. workers who engage in R&D activities 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 private wage of about $35,000 a year. These jobs paid nearly 80 percent more than the average private-sector wage of less than $20,000 per year during the same time. Many of these jobs would never have been created without the assistance of the R&D credit.
The R&D tax credit is vital to the economic development of our country. It is very important to American businesses. It is very important to American workers. It is important to help America maintain our competitive edge.
I urge my colleagues to support a 2-year extension of the R&D credit. I hope you will join me in pressing our House colleagues to accept this Senate provision.
Mr. President, I suggest the absence of a quorum.
Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
Mr. President, what a difference 5 years makes. On March 21, 2001, the Finance Committee conducted a hearing entitled ``Budget Surpluses and Debt Reduction.'' When we held that hearing, the Office of Management and Budget projected a surplus of about $5.6 trillion over the next 10 years. A lot has changed since then.
At the end of this past December, Treasury Secretary Snow sent us letters asking us to raise the debt ceiling for the fourth time in the last 4 years. The Government is now seeking to raise the debt ceiling by $781 billion. This is on top of a $450 billion increase in 2002, a record $984 billion increase in 2003, and an $800 billion increase in 2004. With the latest debt limit increase, the Government will have raised the debt ceiling by $3 trillion in just 4 years. Remember, 5 years ago, OMB projected a surplus of about $5.6 trillion for the following 10 years.
Something needs to change. We have a serious problem with our Federal budget. For the current year, the administration's budget projects a deficit of $423 billion. That would be the highest deficit in the history of the country. That deficit would equal 3.2 percent of the entire economy. While that percentage is not a record, it is far too high, with the baby boom generation about to retire just around the corner. The retirement of this large generation will dramatically raise the costs of Social Security, Medicare, and Medicaid. Their retirement will put enormous pressures on the budget.
We should rather be entering this stressful period with a balanced budget. We should be paying down the debt. We should be getting ready. We should not be running record budget deficits. We need to change course. We need to return to the policies and procedures that helped reduce that $5.6 trillion surplus.
One of those procedures was the pay-as-you-go rule. That rule made it difficult for Congress to enact new spending or tax cuts without paying for them. That simple rule had a powerful effect, but that rule ended a few years ago. Congress replaced it with a newer, toothless version, and we have paid the price in higher deficits and debt. Congress must reinstate the original pay-go rule.
Beginning in 1990, we also enacted policies to reduce deficits and debt. First, following a budget summit, Congress enacted the deficit reduction package of 1990. Then, in 1993, in the first year of the Clinton administration, we narrowly enacted a $500 billion deficit reduction package. What happened? Long-term interest rates dropped. Economic growth ensued. The deficit came down.
Finally, both parties worked together again in 1997 and enacted another deficit reduction package. That package was intended to balance the budget by 2002.
But economic growth was strong. These years were a part of the longest peacetime economic expansion in American history. The Government balanced its budget in 1998, earlier than expected, and then the Government balanced the budget even without using Social Security surpluses. It is incredible, if you stop and think about it.
That set the stage for the projections of 2001, with a $5.6 trillion surplus for 10 years. But now we are projecting huge deficits and debt for both the long term and the near term. The time has come for leaders of both parties to work together to achieve another agreement to reduce our deficits. But in order to be successful, we need to put everything on the table, and I mean everything. We need to put all spending, not just entitlement spending, on the table. We need to put all corporate tax loopholes and tax breaks for special interests on the table, and we need to put the $350 billion yearly tax gap between revenues owed and revenues collected on the table.
I don't know the answers, but I do know we cannot keep on going as we are. Something has to change. We need to come together to reduce Federal deficits. The task is clear, and I can only hope and pray all our leaders will take up the task.
Mr. President, in Proverbs, King Solomon begins by offering words of encouragement to the Israelites to embrace learning:
Let the wise hear and gain in learning, and the discerning
acquire skill.
A little later in the passage Solomon admonishes:
Fools despise learning and wisdom.
I hope the upcoming conference committee will take this proverb to heart. It is past time for this country to start taking education seriously again, and be ready to make investments in our children's future now. Delay would be foolish.
The Senate-passed bill takes a step in the right direction by including a provision to eliminate the barriers in the Tax Code to the charitable giving of books to schools, libraries, universities, and literacy programs. Educational institutions and literacy programs are beset by budget cuts and continued challenges to our Nation's commitment to literacy. Two-thirds of American classrooms have fewer than 50 children's books, and almost 60 percent of childcare centers buy less than 1 book per child a year.
This is not just an issue in the classroom. Almost 12 million children living below the poverty level in the United States today are growing up with minimal access to books. According to First Book, a nonprofit that focuses on child literacy, more than 60 percent of low- income families have no children's books in their home, and more than 80 percent of programs serving children in need have no age-appropriate books or other printed materials.
In my home State, as in many other States, there is a real need. In 2003, according to the Montana State Library Association, the Montana State library system was a victim of a 26-percent budget cut. These reductions mean less money for local libraries, and these reductions mean cuts in State subsidies that funded book purchases.
Large-scale book donations are crucial to these libraries, and these donations also greatly assist adult literacy efforts. Programs such as the Montana Adult Basic and Literacy Education, or ABLE, serve adults who lack sufficient mastery of basic skills to function in society, a high school diploma, or basic English skills. ABLE is meeting real needs. According to the State agency in charge of adult literacy in Montana, nearly 75,000 adults in Montana do not have a high school diploma or GED.
Because of the tremendous need for books in Montana and across the country, I filed an amendment in the Finance Committee with Senator Hatch to include incentives for book donations in the Senate-passed bill. Here is how it works.
Current law provides special tax incentives for gifts of property including books to certain organizations. Current law, however, requires the donor to make the gift targeted solely to the ill, the needy, or infants, categorized as children under the age of 18.
Unfortunately, books donated directly to educational programs at public libraries and universities are not eligible for that tax deduction. Why? Because they don't exclusively serve the ill, the needy, or infants.
In addition to the exclusion of those institutions, donations are sometimes
discouraged when the differences in educational and commercial market elude the IRS when valuing the donation. If book donations do not qualify for the enhanced deduction, the value of the deduction for charitable giving is no more than what they would give if they merely threw them away. As a result, it is often more economical for publishers to truck these books to a dump than it is to distribute them to needy schools and libraries, especially given the manpower and postage costs of determining worthy donees and shipping books.
In the Senate-passed bill, we have provided legislative language to ensure that public libraries, universities, and literacy programs are eligible with enhanced deductions that already exist in the Tax Code for other kinds of charitable donations.
To protect against publishers making unwanted donations of dated materials, the provision includes a requirement that organizations certify the materials are suitable and appropriate for their educational programs.
In addition to organizations in Montana such as ABLE, many gulf area government agencies that are in desperate need after Hurricanes Katrina and Rita have written us petitioning for this change. We have heard from the Mississippi Department of Education, Louisiana-Mississippi school and library systems and library associations, as well as the Texas Library Association and Mississippi's Barksdale Reading Institute. Numerous national educational organizations have written us, including the American Library Association, the Education Industry Association, and the Association of Educational Publishers.
The lack of access to books poses the greatest barrier to literacy. We shouldn't allow books to be taken to the landfill because of an unintended obstacle in the Tax Code, particularly when one considers the massive loss of books along the gulf coast.
I might add, I was down at the gulf coast. I was standing next to a library that was obliterated on the gulf. There were books strewn open, and you could see where a cake of mud was left after the water receded and we were standing on ruined books. You won't believe this, but I reached down to pick up a book and look at it to see what it was, and out of all of the books, guess what its title was. ``A Perfect Storm.'' I couldn't believe it. It was pure happenstance, pure coincidence, but I can tell you that having visited the gulf, they need books.
As students and families make the slow return to the gulf and an incredible effort to rebuild their communities, it is necessary to remember that equally important to the rebuilding of these important institutions is the need to restock them with sufficient numbers of books and quality education materials.
As First Lady Laura Bush said on September 24 last year, it is our duty to ``rebuild these schools on the Mississippi coast and in New Orleans and make sure the libraries are built better and stocked even better than they were before.''
The book provision in the Senate-passed bill would help restock schools from the gulf to Montana and across the country. As the First Lady admonished, this is our duty. I hope the conference committee agrees.
Mr. President, continuing in a series of statements prefacing the conference and other measures that might be coming up later this year, I wish to spend a moment on health savings accounts.
High-deductible health plans and health savings accounts, otherwise known as HSAs, have become the centerpiece of the administration's effort to reform the health care system. In fact, the proposed budget would spend an additional $156 billion over 10 years to encourage more Americans to choose these plans and accounts.
I am concerned that high-deductible plans will do more harm than good, and the billions of dollars the President wants to spend on beefing up the limits on HSAs, health savings accounts, will not benefit those who need coverage the most and can least afford it. That is because HSAs favor the healthy and they favor the wealthy. As healthy insureds join these arrangements, the average cost for those remaining in comprehensive plans will increase, and that will make comprehensive plans less affordable for those who need coverage.
Do HSAs favor those who are healthy and can afford something? Let me quote from the High-Deductible Health Plans and Health Savings Accounts Worksheet, found on the Federal Government's Office of Personnel Management Web site. This worksheet is designed to help Federal employees decide whether to use plans such as these which are now part of the Federal employees health benefit plan. Step three of this worksheet reminds us that preventive care is not subject to the high deductible. Then it goes on to say:
Absent other health care needs, if you contribute a higher
amount to your HSA, you will get a higher tax deduction plus
a higher balance in your HSA to use for future expenses.
Since your out-of-pocket costs before plan benefits begin
also defines the maximum amount of personal, tax-deductible
contributions you can make, contributing a larger amount
isn't necessarily bad. If you use a relatively low amount of
health care and you can afford to make the maximum
contribution, you may be attracted to these aspects of HDHPs
with HSAs.
That is high-deductible health plans and the health savings account. This is what it says in the Federal brochure for Federal employees: If you use a relatively low amount of health care and you can afford to make the maximum contribution, you may be attracted to it.
If we enacted the higher HSA contribution limit proposed by the President's budget, the attraction of HSAs for those who are healthy and can afford to contribute the maximum would only grow stronger. Why? Because that statement was written before the proposal that the administration has before us, to dramatically increase the deductibles and eligibilities of those plans which I think are basically investment vehicles, not health vehicles.
Billie Holiday sang, ``Them that's got shall get, them that's not shall lose''. That's a pretty good description of the effect of expanding HSAs on our health care system.
Some may argue that this preference of healthy, well-to-do taxpayers for HSAs would not be a problem if we just put everyone into a high- deductible plan and eliminated more comprehensive arrangements. Eliminating choice takes care of adverse selection. If there were no choice, and therefore no adverse selection, would expanding HSAs be a cost-effective solution? Would tax dollars spent on expanding HSAs go to increase coverage and control costs?
Let us say, for the sake of discussion, that we force everyone, healthy or not, into a high-deductible health plan with a $1,500 deductible. And let's go further, and put $1,500 into an HSA for everyone, so ability to contribute is not a factor. Wouldn't that address my concern that the President wants to spend money on the healthy and wealthy instead of focusing on those who need help most?
The answer is, no, not as HSAs currently operate. And certainly not with the President's proposed increase in the contribution limit.
To illustrate my concerns, let's consider two taxpayers--Jane and John, both 30 years old. Jane is healthy. John has a chronic condition that requires him to take medications every day and occasionally pay a midnight visit to the emergency room.
Every year, $1,500 is deposited to Jane and to John's HSA accounts. Each year, John must withdraw his $1,500 contribution to pay out-of- pocket medical expenses. Jane only has to withdraw about $500 a year, leaving the other $1,000 to accumulate for retirement.
Over the next 35 years, if Jane can earn 5 percent investment return, she will accumulate an HSA account balance of more than $90,000. If the President's higher contribution limits were in place and Jane could afford to contribute the maximum to her HSA, she could have more than $400,000 in her HSA at retirement. Because he had to use his HSA contributions to pay medical expenses, John will retire with a zero balance in his HSA.
In other words, the President's health tax proposals may or may not expand health coverage and will do little to control costs. But they will definitely create retirement savings for the healthy.
I am all for retirement savings, but using tax dollars to increase retirement savings for individuals with low medical expenses is a strange and ineffective approach to covering the uninsured, and controlling health care costs. Surely we can do better.
Mr. President, I am going to stop speaking pretty soon here. I very much hope Senators come to the floor with motions to instruct because time is passing. Just because I am speaking, it doesn't mean someone can't come to the floor. If anybody comes to the floor, I will stop speaking.
Mr. President, Yale Law School professor Michael Graetz once said:
A tax shelter is a deal done by very smart people, that,
absent tax considerations, would be very stupid.
A GAO study estimated that tax shelters cost the American taxpayer up to $18 billion a year in lost revenue.
There must be a lot of very smart people out there putting together some very stupid deals.
We have all heard about some of these deals.
We know them as the Enron scandal, the KPMG scandal, the German SILO sewer system scandal. The list goes on.
These deals are like the legendary retail scam used by con artists to cheat cashiers out of extra change. It's called the ``short count.'' Like a tax shelter, it involves smart cons and stupid deals.
There are several steps to the cash register scam. First, the con artist buys something that costs less than $1, and he gives the cashier a $10 bill to pay for it. When the cashier hands back the change, the con artist offers to give back ten $1 bills in exchange for the $10 bill he used to make his original purchase.
Now, the trick is that the con artist must get the cashier to give back the original $10 bill before he gives up his $1s. Quickly, before the cashier notices, the con then substitutes the $10 bill the cashier just handed him for one of the $1 bills. He hands the cashier nine $1 bills and one $10 bill, for a total of $19.
When the cashier notices the con artist gave her too much money, the con acts surprised.
Because he's such a ``nice guy,'' he offers to give the cashier another $1 to add to the $19 so the cashier can just give him back a $20 bill.
The con then leaves the store with a tidy $10 profit, while the poor cashier is left holding the bag.
When she tries to reconcile her register at the end of the day, she'll have a gap of $10. She will probably end up paying the $10 out of her own pocket.
I don't know if you follow that. It's a little complicated, isn't it? The con artist is a pretty smart guy who took advantage of an unsuspecting cashier. He took a routine transaction and turned it into something complicated and stupid. Yet, all those steps, all that shifting of money back and forth, didn't add one iota of substance to the transaction.
We call the guy who duped the cashier a con artist. But, we call lawyers, accountants and financial advisors who get involved in tax shelters ``tax professionals.''
We call the victim of the ``short count'' scam the cashier. But, we call the victims of tax shelters ``innocent American taxpayers.''
Individuals who invest in tax shelters to avoid paying their fair share of taxes shift their tax burden onto the backs of hard-working Americans who do comply with our tax laws.
The IRS estimates that 85 percent of taxpayers pay the taxes that they owe. Investors in tax shelters are part of the other 15 percent.
Eighty-five percent of American taxpayers are carrying the tax load for the noncompliant 15 percent.
This is not right. This is not fair. We cannot allow this to continue.
We need to finish up the work that we started in the American Jobs Creation Act. That bill beefed up laws against tax shelters. It increased penalties for wrongdoers.
We need to pass legislation that will clarify the economic substance doctrine. Clarifying the economic substance doctrine will put an end to the erratic and inconsistent court decisions that have determined the legitimacy of tax shelters.
The economic substance doctrine is a common-law doctrine that courts use to deny tax benefits on transactions that don't provide a meaningful change to the taxpayer's economic position other than the tax benefit itself.
In other words, the doctrine requires that a transaction must have economic reality and a business purpose apart from the tax consequences.
The proposed change clarifies how the courts should apply this doctrine. It doesn't require them to use the doctrine. But if they do decide to use the economic substance doctrine, the change would give them standardized criteria to use as litmus tests to decide if a transaction has any real economic purpose.
The Senate has passed this proposal several times, most recently in the tax reconciliation bill before us today. But it has never passed in the House.
We need to stop batting this proposal around. We need to make it into law.
The economic substance doctrine exposes transactions that use the Tax Code in an unintended way to avoid paying taxes.
Clever accountants, attorneys, and financial advisers deliberately manipulate the Tax Code to design and sell abusive transactions. At first glance, the deals stand up to scrutiny. At first glance, they appear to comply with the literal language of the Tax Code. They are very complicated. But when you give the deals the smell test, they give off a very bad odor. It is clear this is not what the law basically intended.
You realize that they have no purpose other than to avoid or evade taxes. They have no real business purpose and no economic reality. They shift money and paper around using complex arrangements that have no reason to exist, except to create nonexistent losses or false deductions.
They are smoke and mirrors, a cleverly designed illusion, to fool the IRS and to cheat the rest of our Nation's taxpayers, who properly report their income and pay what they owe.
That's where the economic substance doctrine comes in. Its standards of economic benefit and business purpose allow the courts to pierce the facade of legitimacy to determine if a deal has any real economic substance.
The courts have employed the economic substance doctrine countless times. But their decisions have been inconsistent.
This is due, in large part, because they lack a specific framework of guidelines and principles within which to apply the doctrine.
The courts are divided on what to do.
Some look only to the form of the transaction. They limit their analysis to the four corners of the Tax Code, no matter how crazy the result.
Others look beyond the form to the substance of the transaction and consider whether the tax result is consistent with congressional intent.
It is the role of Congress to pass legislation clarifying the economic substance doctrine to resolve these inconsistencies and uncertainties. The legitimacy of a tax transaction in California should be evaluated in the same way as a transaction in Florida.
Reliance on isolated and diverse judicial decisions does not lead to effective tax administration. Litigation is expensive both for taxpayers and the IRS. Tax professionals will shop around for the most advantageous court case to justify an egregious position. We all know that there is forum shopping. They are going to go to the judge who is most lenient.
We need to provide clarity and certainty.
Congress's failure to enact this legislation sends an implied message that we don't take abusive transactions seriously. Tax professionals know that we cannot keep all the holes in the dike plugged up by dealing with each abusive scheme on a piecemeal basis.
With our proposed change, we are not reinventing the wheel. We are only improving it. The economic substance doctrine has been part of the fabric of our tax system since the case of Gregory v. Helvering in 1935. It has been around. It has to be consistently applied to minimize taking advantage of the Tax Code.
Our proposal merely articulates the way many of the circuits have already applied this longstanding judicial doctrine.
Codification will strengthen this important standard that has been eroded by conflicting and confusing case law and by the greed of many practitioners who are willing to overlook it in exchange for profit.
We must give the courts a reliable and consistent standard to use when considering the economic substance doctrine. Failure to do so protracts the cat-and-mouse game that taxpayers, the IRS and the courts have played for years.
You might ask: If passing a law to clarify the economic substance doctrine will stop this kind of abuse to our
tax system, why hasn't it happened? That's a very good question.
Unfortunately, there are powerful critics against the proposal, including the American Bar Association and the Bush administration.
Our legislation provides a framework of consistent and standardized criteria to apply to the economic substance tests. The courts retain complete autonomy and flexibility to decide whether or not to use the doctrine in the first place.
The critics, however, argue that the courts will ``lose flexibility'' to evaluate transactions.
They say that ``an explicit and comprehensive statutory test'' is a bad thing.
In truth, their position would maintain the status quo. Their position would keep the law broad and vague. And their position would perpetuate the same environment that has fostered tax shelters, tax schemes, and other abusive transactions.
Taxpayers have a right to plan their taxes so that they don't pay more than they legitimately owe. This legislation is aimed at those deals that cross the line into manipulation and abuse--not smart tax planning.
The critics say, unfairly, that the Senate proposal is ``overbroad'' and could cast doubt on ``legitimate tax planning.'' They say that this provision will be ``ineffective'' because taxpayers will just find a way to work around it by crafting their deals with apparent business purpose and economic substance.
But if the legislation is as ``inflexible'' and ``overbroad'' as they say, how can it possibly leave room for taxpayers to work around it?
The proposal that Chairman Grassley and I included in this tax reconciliation package provides standardized principles to use as guidelines to clarify when a transaction is abusive.
It will reduce rogue interpretations of the Tax Code and promote consistency and certainty instead of the existing confusion.
Critics argue that it promotes uncertainty because there is no clear line of demarcation between what passes muster and what doesn't. Ignoring the provision's standardized guidelines, they suggest that the proposal gives the IRS and the courts too much power--that it provides opportunities and incentives to find transactions ``abusive at will.''
In reality, it does just the opposite.
And that's exactly why some of the opponents of this measure don't like it. They want to keep the power and flexibility to design and sell tax shelters and other transactions that pillage our tax system.
There's an old saying that the best defense is a good offense. That pretty much sums up the opposition to this proposal. Like the tax shelters they peddle, their arguments lack substance.
We should not stand idly by as a few con artists peddle their scheme and take advantage of honest taxpayers. We should plug this loophole in the law.
We should urge the House to agree to the Senate-passed provision.
I urge my colleagues to work together to get this passed for the benefit of the American taxpayers, most of whom are honest and decent, and they are paying their fair share and do not like at all these con artists making millions and forcing the good, honest, paying taxpayers to subsidize those con artists and those companies taking advantage of it.
I yield the floor. I suggest the absence of a quorum.
Mr. President, the next motion will be a motion by the Senator from Oregon, Mr. Wyden, on energy. I ask unanimous consent that the pending motions be temporarily laid aside so the Senator from Oregon may offer his motion.
Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
Mr. President, I think around 8 we will probably have two votes. It is also my understanding that the other side of the aisle will be offering various motions to instruct which presumably will be voted on, as will motions to instruct on this side of the aisle.
I must say, though, I have glanced at the proposed motions to instruct on the other side, and I find it very curious. Why do I say that? I say that because we in the Senate passed a bill. The House has passed a bill.
We are going to go to conference on the two bills now. Presumably, it is the Senate conferees who are charged to defend the Senate bill. Presumably, the House conferees are charged to defend the House bill. After all, that is what a conference is all about. The Senate passes a bill and goes to conference; the House passes a bill and goes to conference.
These motions that are going to be offered, however, do not defend the Senate bill. Quite to the contrary, they are opposed to the Senate bill. They defend the House-passed bill, the capital gains treatment. I find that very curious. I, frankly, find it very disconcerting, because if this is the case, it will set the precedent basically for a motion to instruct, not to defend the body's views. Most of the motions to instruct from the other side will be motions not to defend the Senate bill, but urge provisions in the House bill. That is nuts.
Most of the motions to instruct by Members on this side are asking the conferees to defend the Senate-passed provisions. I point that out because, as I said, it is curious and disconcerting, and I hope all Members recognize what is going on here; namely, what I just outlined. I hope this is an aberration and that it doesn't continue. Otherwise, this is another example of the chaos, the virtual free-for-all around here, and disrespect for procedure, for rules, for civility, and for both sides working together. I hope maybe that is an oversight by the other side of the aisle with all the motions that are going to be coming up.
Nevertheless, I have them before me. That is what they seem to say. I point that out for Members; it is an observation before we vote to take into consideration. Most of the instructions I see are with respect to capital gains treatment. There is no provision for extending current law which doesn't expire until January 1, 2009; whereas, there are provisions in the House-passed bill to extend it for 2 more years, even though current law doesn't expire until January 1, 2009.
The motions to be offered are to basically take up and encourage the conferees to pass the House provisions. That is very curious.
Mr. President, I suggest the absence of a quorum.
Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
Mr. President, I see the Senator from Illinois, and I ask unanimous consent that the pending motions be temporarily set aside so that the Senator from Illinois may offer a motion.
Mr. President, I strongly support extending the deduction for tuition costs through December 31, 2009, as provided for in the Senate bill.
To compete successfully in the world today, America must make education a priority--not only a priority but a very top priority. Why? I think it is pretty obvious. For one thing, our competitors certainly are.
Let's talk about, for example, training engineers. Engineers develop new jobs and new industries. Yet Japan and Europe train twice as many engineers as we do. China trains three times as many. In fact, I think the statistics are even more alarming than that. We are missing the boat. We are missing the boat.
Let's just stop for a minute. If China, Europe, and Japan train many more times than we, especially China, and add Indians to the mix-- Indians are training lots of engineers--just think of what that means for the next 5 or 10 years based only on the size of those countries. If they are training many times more than we--and I think the population of India is close to 1 billion, and China is 1.3 billion. In about 10 years, it is going to be somewhat more than 1 billion. And our population is about 280 million, 290 million, something like that. I would say we are way behind the eight ball. We need to spend much more time than we are on education.
Congress has responded with a number of income tax benefits for higher education financing. Tax incentives such as the HOPE scholarship and lifetime learning credits, the Coverdell education savings account and prepaid tuition and college savings plans help American families pay for college. The deduction for qualified higher education tuition and related expenses, section 222 of the Tax Code, was first added as part of the 2001 Economic Growth and Tax Relief Reconciliation Act.
Let me explain more. We cannot allow America's workforce to be left behind. To remain the most competitive and innovative country in the world, we need to make education affordable.
Let me state a small anecdote. I was in Bangalore, India, not too long ago, about 3 or 4 weeks ago, and I asked the head of the research center there, the Jack Welch Research Center, which, frankly, is one of the two or three state-of-the-art research centers General Electric has, I asked the manager of it: Why are you here? Why are you here in Bangalore? Guess what he said.
He said: Because this is where the greatest talent pool is.
I asked: Where is the next greatest talent pool for your top-flight scientists and engineers here?
He said: China.
I asked: Well, where is the United States in terms of ranking for the best talent pool?
Frankly, he said it was way down on the bottom. Not the very bottom. He said: You are down there.
So I asked him: What can we do in America to be more competitive than we are today, to make sure we have the best jobs for our kids, and, more importantly, for our kids and grandkids so that we in America can pass on to our kids and grandkids the same standard of living we have today, which our parents gave to us?
His answer: You guys have to spend more on education, and you have to make it less expensive so more students can get the quality education they want and need. Also, you have to lower your education costs. It is too costly in America to get a good education. He said: You also have to lower your health care costs. Your health care costs are way, way too high compared to every other country in the world.
Sure, we have high-quality health care, he said, but we spend twice as much per capita on health care in America as does the next most expensive country.
Are we twice as healthy as the next most expensive country? I doubt it.
But right off the top, the manager of that technology center in Bangalore, India, made it very clear to me that we
Americans have to spend a lot more time boosting our talent pool so we have more scientists and engineers than we currently have in the United States. We have a lot of them, and they are good, but it is also very clear that we are slipping or, to put it differently, other countries are catching up and are going to pass us soon if we don't get our act together.
It costs today almost $43,000 a year for tuition, fees, and room and board in a 4-year public college. Just think of it: $43,000 a year; that is a public college. At a 4-year private college, it costs more than $100,000. That is just ridiculous, that it costs that much for a college education in America today. It is outrageous, and it puts education far out of reach for so many students.
From 1981 to 1995, tuition at a 4-year public college/university increased by 234 percent. That is right. From 1981 to 1995, tuition increased by 234 percent. That is three times the growth in median household income and more than three times the increase in the cost of living over this same period. That is unsustainable, clearly unsustainable. That is wrong. I don't know why this country doesn't start to address that more directly, more frontally, because the earlier we do, the more jobs and the more high-paid jobs we are going to have for Americans.
For tax years 2002 and 2003, taxpayers with adjusted gross incomes of less than $65,000--or say $130,000 for married couples filing jointly-- are allowed to deduct $3,000 for qualified higher education tuition and related expenses. Three thousand dollars. Remember how costly education is, the figures I just gave you a moment earlier.
For tax years 2004 and 2005, the maximum deduction is $4,000 for those same families and $2,000 for Americans with adjusted gross incomes of $65,000 to $80,000 for a single person or from $130,000 to $160,000 for married couples filing jointly. Unfortunately, this important deduction expired at the end of 2005.
Critics of extending the deduction for tuition costs ask why we have both this deduction and the HOPE and lifetime learning tax credits. It is true that the current system can be complicated, and it is complicated. Families that qualify for tax credits are sometimes better off with a deduction. Unfortunately, families don't always know which tax choice is best for them. So we are looking at whether the tax incentives for education should be combined or should they be simplified. But until we do, I wish to put the deduction on the same timetable as the tax credits which are in effect until 2010.
Let us look at the House. The House only extends this deduction for 1 year--clearly not enough. Senators on both sides of the aisle have agreed that this deduction is important to working families trying to get their children a good education. We must, therefore, preserve this deduction and, as proposed in the Senate bill, extend this important deduction for 4 years.
If America is going to be competitive in the global economy, it must make education a top priority. Extending the deduction for tuition costs through December 31, 2009, does exactly that by helping provide our children with affordable education. Therefore, I will work hard to ensure the deduction for tuition costs is extended through December 31, 2009, as provided for in the Senate bill, and I urge my colleagues to support this extension.
I may sound like a broken record, but every fiber in me, my bones and my muscles, my blood and whatever is in me, I just know that we have to work a lot harder, a lot more effectively to address American competitiveness, and most of that comes down to education. It is making sure that our kids and we ourselves are educated as best as we possibly can. Education is a lifetime effort; it is not just K through 12. It is lifetime. It also begins at very early ages--Prestart, Head Start, K through 12, college. It also includes votech training for job skills. It is continuing education. It is bringing us more up to date. For those of us who graduated a long time ago, it is making sure we are continuing to be up to date with what is going on and are able to translate new ideas into jobs.
I have traveled a lot overseas and I have seen a lot of countries, especially in Asia. I can tell you, they are on the march. Speaking primarily of the Chinese and the Indians--clearly Japan is a very large country, with the second largest economy in the world, but it will not be long before China is the largest economy in the world. I am guessing by the year 2030 China will be the largest economy in the world. That is not far away. It is only 24 years from now. I may be off by 10 years; it may be 10 later or 10 earlier. But 24 years is now, in terms of the time it takes to get us up to speed, the time it takes to get education programs in place, the time it takes to make sure we are graduating more scientists and engineers and have a tax and health care policy that makes more sense, and an energy policy that makes more sense.
We are a wonderful, big country. We are extremely lucky. We are the luckiest people in the world to be Americans. We don't see people heading for the door to live in other countries. Rather, people want to live in America. They want to come to America because of our values, et cetera.
It is true in the last couple of years our image overseas has been greatly tarnished. The image of America today is not what it was several years ago. That is due, I think, primarily to the foreign policy of this country. But nevertheless, overall most people would rather live in America than some other country. We Americans certainly would. We want that to continue as long as it possibly can, not just for ourselves but, more importantly, for our children and for our grandchildren. That is the legacy we want to pass on to them.
To do that, you have to have some kind of plan. You can't let these go helter-skelter. Other countries have plans. They definitely have plans. It is clear, China has a plan. I don't know if they are going to be successful, but they have a plan. They know what they want to do. They know that they have to boost and are boosting their science and engineering education. They know they have to develop the interior provinces, not just the eastern coastal provinces. What are they doing about it? They are doing something about it. They have a plan. They are spending a lot of money and building big superhighways out in western China. There is a big, fancy airport in western China. I was in Chunking 4 or 5 weeks ago, at a huge, massive, fancy, wonderful airport in western China. That is government policy.
They have plans to deal with unemployment. They have plans, frankly, to put on what they think will be the world's best Summer Olympics in 2008. I bet they have a plan to win more gold medals than any other country, too. They have plans. You have to take your hat off to them because they are doing what they think they have to do to progress and bring themselves out from the lower living standards they have had for so many years.
It is true many Chinese live in poverty. It is true many Indians live in poverty. That is also true. But they have plans to address that. I remember not too many years ago I was in Shanghai. I was talking to the mayor of Shanghai about all these wonderful, fancy buildings in Shanghai. I said: You must be proud of all you are doing in Shanghai.
The mayor turned to me and said: We have problems.
I said: What do you mean?
We have high unemployment by China's standards. This is what we are doing to retrain people. Some of these jobs are old jobs. As the Chinese Government works to downsize these state-owned enterprises, Government-owned enterprises that are all subsidized, they know as they enter the World Trade Organization they have to get rid of a lot of these state trading enterprises. Man, oh, man, they know as that happens they are going to have huge unemployment problems. So they have details, all they are trying to do, in their plan to address that job loss in China.
Then he pointed to the river there in Shanghai and he said: Pollution; this river is polluted. We have a 10-year plan to clean up this river so it is no longer polluted.
I don't know whether it has been successful or not. That was 5 years ago. I assume the river is probably polluted. But you could tell, talking to him, he had plans to address the problems that we have.
India certainly is the same. When I was in India a couple or 3 weeks ago,
they have plans how they are going to build up India. I went to the subway in Delhi. That is a fancy subway. That makes our subway in Washington, DC--it is comparable. But guess what. In the Indian subways you can use your cell phone because they make sure when they tunnel under they have the radio stations there, the towers, so you can use your cell phones. They are building 18 more subways in India, fancy ones.
Other countries are building them. It is not us. When I was there, I heard constantly from all over India: Where are the Americans? Where are you? Australians are here and Malaysians, other countries are here, Germans and French. The subway was 60 percent Japanese financed. Where are the Americans? They want us there, but we are not there.
What I am saying is things are happening in this world. We have to get with it. Much of that is education. Much of that is learning what is going on. Much of that is forming partnerships where both countries do well. We can't stick our heads in the sand. Things are happening and I think a large part of this is education.
Let me say this again, about that same point. When Tom Friedman's book came out, ``The World Is Flat,'' I took it on myself to travel around the United States by myself and ask CEOs, What do you think of this book? Have you read this book? They all read it, of course.
I said: What do you think? Do you agree? They all agreed. Some said: This is scary. Some said: Yes, this is a challenge.
Then I asked the next set of questions: What do we do about all this? Sure, it is true, largely true. Sure, it is a little scary. Sure, it is a challenge. What do we do about it?
That kind of set them back a little bit. They hadn't thought a lot about solutions; a little bit. But the solution they all tended to gravitate to was education. We Americans have to focus much more on quality education, quality teachers. We are doing a good job. I got a great education when I grew up in Helena, MT, in Missoula, MT. The teachers, I thought, were excellent. They were tough and they were good. Current teachers are good. But all I am saying is whoever we are, we know we have to keep moving and progressing. You know when you tread water you are likely to sink. You can't keep treading water. You have to go ahead.
I am often reminded of the former head of Intel, Andy Grove, who wrote a book, ``Only The Paranoid Survive.'' That is probably true in the semiconductor industry, but I think it is partly true in life. That is not to say we all have to be paranoid. Clearly not. But it is to say you have to be vigilant, and really vigilant.
Frankly, if I were President, what I would do is change this budget around massively. I would put a lot more in this budget for education. I would put a lot more into making sure we can solve our health care cost problems in this country; more coverage. I would make sure we tackled and made America energy independent. This thing about independent 25 years from now is way too tepid, way too weak. We have to get started now. I suggest developing DARPA for energy. DARPA, in the Defense Department, developed lots of great technologies, military technologies, applicable in the private, civilian sector. We can do the same on energy. That will attract bright minds. It will help us be more energy independent, make us less hostage to events overseas.
It is so clear to me. I may be wrong, but I tell you it is clear to me, anyway, what we need to do. I think in my gut most Americans sense that, this sort of sense we have to get moving here. I think a lot of Members of this body would be surprised, if we were to be much more bold, as to the gratitude Americans would show to Congress for finally taking the lead and doing something.
We have to get organized somewhat, not seen to be prescriptive, not seen to pick winners and losers, but I am saying harness the energy that is in America and help focus it a little more on where we should be going. After all, that is why many of us sought these jobs. We sought these jobs to represent our people in the best way we could. We sought these jobs because we thought, many of us--most of us think we have pretty good judgment and priorities and common sense. If that is the case, I urge us to get out of our little boxes, get out of our little cubbyholes, get out of our daily routines, get out of the stuff that pulls us apart from our real job here, just a little bit--maybe for 30 percent of our time--and work more on long-term strategic measures and do what is right and address the core of some major issues that face us, rather than getting caught up in the routines around here, our series of meetings.
Meetings are good. Seeing constituents is great. We serve our employers back home. But we are also here as a body, 100 of us, and I think it is time for us, working with the other body and the executive branch, to truly put partisan politics aside and get something done that makes some sense.
I yield the floor.
Mr. President, I don't want to be too picky here, but don't we have to ask consent to put these motions aside? If that is proper, whatever is the routine here, so we have some consistency.
Mr. President, I first commend my friend and colleague from Utah. I agree with him. I think it should be permanent. I urge my colleagues to support the motion to instruct making it permanent. We will have a little more certainty and help in research and development in our country. It helps us be more competitive. I compliment him for offering that motion to instruct.
I also speak in favor of the Stabenow motion to instruct with respect to the R&D tax credit which will be coming up shortly, essentially because we have to move ever more aggressively to invest more in research and development in our country. And the current temporary nature of the credit just makes no sense.
The Senate-passed bill is a credit extension for 2 years. I remind my colleagues that the current credit is expired. It expired at the end of last year. We are now in February. The Senate bill extends it for calendar years 2006 and 2007, and the House bill just has 1 year, 2006.
I am for more predictability, more certainty, especially with expect to the R&D tax credit.
I also received a letter from the R&D Credit Coalition, a group representing 85 trade associations and more than 1,000 small, medium, and large companies. In the manufacturing sector alone, which performs nearly 60 percent of all private and industrialized R&D in the United States, there are 14 million manufacturing employees who get the benefit of this credit.
The coalition in their letter said:
The Coalition believes the Senate-passed provision will
help make the credit a more powerful incentive to undertake
long-term, high-risk R&D projects in the United States.
Consistent with the provision you and 45 of your Senate
colleagues have taken as sponsors of a permanent and
strengthened R&D credit, extending this credit for an
additional year will better enable the intended incentive
effect of the tax credit to be realized.
I ask unanimous consent that the letter be printed in the Record.
Mr. President, spending for R&D will increase in 2006, but America has challenges to face, such as major increases in the funding of offshore operations. The total amount of foreign direct investment, including R&D, is shifting heavily towards India and China, and competition for qualified researchers will increase markedly over a short period of time.
Most important is to keep American jobs. Keep them here, keep them at home. R&D has some of the most highly paid and intellectually stimulating jobs. With offshore operations and foreign R&D investment shifting to India and China, jobs for U.S. workers will decrease in this area.
I strongly urge support of both the motion to instruct by Senator Hatch and also the motion to instruct that will be presented later, I assume, by the Senator from Michigan, Ms. Stabenow.
I suggest the absence of a quorum.
Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
I yield such time as the Senator from Arkansas may use.
Mr. President, I ask any motions be set aside so the Senator from Michigan can offer a motion to instruct.
Mr. President, I ask that the pending motions be set aside so the Senator from New Jersey can offer his motion. Obviously, under the rules, he has at least a half hour, maybe even longer. Senator Schumer from New York is coming over. Under the rules, he would have the same length of time. We are going to vote about 8 o'clock, but, of course, that can slip a little to accommodate the Senators from New Jersey and New York. I counsel my friends from New Jersey and New York to not use all of their time unless they really want to. I admire the Senator from New Jersey. He is concise and to the point in his presentation.
Motion to Instruct Conferees
Mr. President, I see several Senators on the floor. I believe--and perhaps someone can correct me--the Senator from New York was here earlier.
Motion to Instruct Conferees
Mr. President, I ask that the pending motions be set aside.
Mr. President, even though the hour of 8 is about to arrive, I yield whatever time the Senator from Texas requires.
Mr. President, I ask unanimous consent that 2 minutes be allocated to explaining these motions and that 2 minutes be equally divided.
Mr. President, I will yield my time.
I suggest the absence of a quorum.
Mr. President, I ask unanimous consent that the Grassley motion for Senators Talent and Snowe be the Grassley amendment for Talent, Snowe, and Lincoln.