Floor Statements

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 President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, today is July 24, which probably means not very much to most of the people in this Chamber, but in my home State, July 24 is close to the biggest day of the year. July 24 is the day that Brigham Young and the first group of Mormon pioneers came down the canyon outside of Salt Lake Valley and decided that was the place where they would stop. They had been coming across the Plains for months looking for a place to settle, and as Brigham Young rose up out of his wagon at the mouth of the canyon and looked down over the valley, he stared for a few moments and then turned to his associates and said: It is enough. This is the right place. They decided that was where they would settle. This date, therefore, became enshrined as the founding date of the State of Utah, and it has been celebrated with a parade ever since.

I remember as a young child being taken by my parents to sit in the upper window of a department store overlooking Main Street in Salt Lake City and watching as the floats and the cars went down the street.

I remember, as a little boy, that there was always one float that had a big banner on it that said ``Pioneers;'' that is, these are people who had actually come across the Plains before the railroad, either walking or in covered wagons--or primarily a combination of both--and had arrived in the valley. They were still alive when I was a little boy to watch them. One of them was my grandfather, who had been born in Birmingham, England, and been carried as a 2- and 3-year-old across the Plains by his father and mother and landed in Salt Lake City in the 1860s prior to the coming of the railroad.

I watched every parade, and that group of pioneers kept getting smaller and smaller each year. Finally, there was a parade where there were no pioneers. There was no one who had been part of that trek. But the parade lives on.

Senator Hatch and I were both scheduled to be in it today, as I have been in virtually every July 24 parade since I have been elected. But votes here on the floor of the Senate have made it impossible for us to do that and at the same time discharge our duties. So I simply wish to take note here on July 24 of the importance of that event and make this comment about it that I think may have some relevance to what we are doing today.

Those people came to Utah because they had no other choice. They came to Utah because they were--the first group of them--finally driven out of every other place in the United States where they had tried to settle. They had created a settlement in Ohio, and they were driven out. They had created a settlement in Missouri, and they were driven out. They had created a settlement in Illinois, and they were driven out. And there were many in their group who decided: We have had enough.

They decided to stay in the Midwest, give up their religion, give up their commitment to the cause that had held them together, and settle down in the hopes they would have peace with their neighbors. But that hardy group that decided they were not going to give up, that they were going to move someplace where everyone would leave them alone, deliberately chose Salt Lake Valley because nothing had ever been raised there before. It was part of the great American desert. John C. Freemont, the great frontiersman, offered $1,000 for the first bushel of corn that could be raised in Salt Lake Valley. They faced enormous adversity to do what they did, to demonstrate their commitment to their religion and their convictions.

After 9/11, President Bush spoke to us in the National Cathedral, and he talked about adversity. Quoting an unknown source, he said: Adversity introduces us to ourselves. As the descendant of some of those pioneers, that is a lesson worth reminding ourselves of at least once a year. Adversity introduces us to ourselves. Those people, as they went through that adversity, discovered who they were and determined that they would not linger on the past and their adversity but they would be confident about their future. They built there in that forsaken valley not only trees and crops and houses but the foundation of a movement that now moves around the world.

I am grateful to them for what they did. I am grateful to them for the legacy of reminding us that the future is more important than the past, that our opportunities are more important than our grievances, and that when adversity has told us who we are, we should, in the words of a hymn they sang as they moved across the plains: Gird up our loins, fresh courage take, and move forward in the conviction that our God will never us forsake.

Today, on July 24, I share that with my fellow Senators in the belief that it is still good advice for our future.

Mr. President, after all the fireworks and contention on some previous issues this week, I rise to speak about something that has very little interest to most Americans but tremendous interest, I believe, to a certain portion of our economy. I want to use this opportunity to call it to the attention of the Senate.

I am talking about a practice that occurs in the stock market that has the very interesting name of naked short selling. That conjures up all kinds of interesting images in many people's minds, but this is what it is: It is a practice where somebody sells short a particular stock and never ever has to cover the sale.

Now, even that may be too much stock-market-type jargon for people to understand what I am talking about. So let me quote from an article that appeared in the Wall Street Journal a few weeks ago.

Mr. President, I ask unanimous consent that the article be printed in the Record at the conclusion of my remarks.

Quoting from the article, it says:

The naked [short selling] debate is a product of the

revolution that has occurred in stock trading over the past

40 years. Up to the 1960s, trading involved hundreds of

messengers crisscrossing lower Manhattan with bags of stock

certificates and checks. As trading volume hit 15 million

shares daily, the New York Stock Exchange had to close for

part of each week to clear the paperwork backlog.

As an insert in the quotation, I remember those days. I was trading in the stock market at the time, and having the market shut down to clear the back office paperwork was not an unusual experience. Going back to the article:

That led to the creation of DTCC--

Those are initials for the Depository Trust and Clearing Corporation--

which is regulated by the SEC.

If I might, as an aside, I do not think that last statement is true. I am not sure that the SEC has control over the DTCC.

Almost all stock is now kept at the company's central

depository and never leaves there. Instead, a stock buyer's

brokerage account is electronically credited with a

``securities entitlement.'' This electronic credit can, in

turn, be sold to someone else.

Replacing paper with electrons has allowed stock-trading

volume to rise to billions of shares daily. The cost of

buying or selling stock has fallen to less than 3.5 cents a

share, a tenth of paper-era costs.

But to keep trading moving at this pace, the system can

provide cover for naked shorting, critics argue. If the stock

in a given transaction isn't delivered in the 3-day period,

the buyer, who paid his money, is routinely given electronic

credit for the stock. While the SEC calls for delivery in

three days, the agency has no mechanism to enforce that

guideline.

This is where the practice of naked short selling comes in. I did not really understand it until I had some investment bankers--not the kind you find on Wall Street but the more modest kind you find in Salt Lake City--sit me down in front of a screen and show me what happens with stock trading. To put it in the simplest terms, someone who wants to sell short--that is, sell stock he does not own--will place a sale order.

Now, when I first sold short as a participant in the market, my broker gave me this crude little poem to remember. He said: ``He who sells what isn't his'n, must buy it back or go to prison.'' He said: You have to understand, if you sell a stock short, the time is going to come when you are going to have to buy it back to cover that sale by delivering shares. In the days the Wall Street Journal talked about, that meant buying a crinkly piece of paper--a stock certificate--and delivering it so you have covered your short sale.

Today, that is not the case because all of the stock certificates are gone, and the crinkly pieces of paper have been replaced by electronic impulses in a computer. So this is what happens. A short seller enters the market and says: I want to short--I want to sell--1,000 shares of XYZ stock. That means at some point he has to produce 1,000 shares to cover his sale. How do you do that? You borrow the shares, and then you buy them back at some future time.

All right. From whom do you borrow them? The DTCC. They have all the shares on deposit, and so you go to the DTCC and you say: I want to borrow 1,000 shares of XYZ stock. They say: Fine, we have them on deposit. We will lend them to you so you can use them for your short sale.

All right, everything is fine--except in this electronic age, it is possible for you to keep shuffling around the electronic impulses that represent the stock and never ever have to buy it back.

Stop and think about that. That is a pretty good business plan. You can sell as much as you want and never ever have to pay for it. If a stock is trading at $5 a share, you could go in and sell 1,000 shares, and you get paid $5,000 for selling 1,000 shares, and you never have to buy them. Because you are constantly moving around the electronic impulses that represent those shares, you never have to cover.

Now, when you talk to the DTCC people, they say: No, we always make sure there is a delivery. And if there is not, it is not our fault. It is not our responsibility to police this. It is up to the brokerage houses to do this.

The SEC has spent enough time looking at this and enough time talking to me that they issued to me a three-page letter outlining the steps they have taken to stop the practice of naked short selling.

Mr. President, I ask unanimous consent that their letter be included in the Record at the conclusion of my remarks.

I think the SEC letter goes a long way--the SEC actions go a long way. Without getting too technical about it, they have taken a number of steps to prevent what are called ``fails to deliver'' and, therefore, to try to stop the naked short-selling situation.

But I have discovered something that appears to be a way around the SEC rules. Here is the transaction: Broker A shorts 1,000 shares. At the end of 13 days, which is the period he has to produce the shares, he has been unable to find any--probably hasn't even looked--but he has this requirement under the SEC rule to produce 1,000 shares. So he goes to broker B and says quietly: Sell me a thousand shares. Broker B says: I don't have any. Broker A says: It doesn't matter, sell me a thousand shares so I can cover. Broker B: All right. I will sell you a thousand shares so you can cover and there will be no passage of money; this is a deal between the two of us--a rollover. At the end of 13 days, broker B has to deliver a thousand shares, so broker A

sells the same 1,000 phantom shares back to broker B, and they ping- pong these back and forth for as long as they want.

So you can have a situation where people are selling shares that don't exist, taking commissions on the sale, and the profits of the sale, and never, ever having to produce the shares.

I think it is serious enough that we ought to have a hearing about this in the Banking Committee. I have spoken to the chairman of the Banking Committee, Senator Dodd, and asked him if it wouldn't be possible for us to have such a hearing at some point in the future. He has expressed a willingness to do that. I understand we can't set a time for that right now; there are too many other things going on in the Banking Committee. But I am delighted to know he is willing to cooperate with us in examining this issue.

I would like to suggest several things I would like to discuss at that hearing. First, by the way, I want the officials of the DTCC to have the opportunity to come in and explain how it works. I have seen letters to the editor in the Wall Street Journal, where they say this article is inaccurate, and I don't want to be relying on this article if it is inaccurate. I think a congressional hearing is a good place for those who are running the DTCC to explain to us how it works. I would like the SEC to come in and give us their background and information as to how their rules are working to try to stop the naked short selling. But I have these two additional recommendations that I would hope we could get done by regulation and, if not, I am prepared to introduce legislation to deal with them.

First, I think there should be a rule which says there cannot be borrowing, that brokers cannot borrow for short sales more stock than is on deposit with the DTCC. I think that is obvious. If there are 3 million shares of XYZ Company on deposit at the DTCC, people should not be able to short sell 4 million shares. I have seen the situation where people with these small companies--and all this happens primarily in little companies--people with small companies, in an effort to defend their stock against the short sales that are rolling over, are buying stock, and it is electronically credited to them and end up on paper, or at least on computer, owning more shares than exist. How can that be? If somebody buys the stock for his company and ends up owning 110 percent of the issued stock, and people are still selling that stock, you know you are dealing with phantom shares.

So my first recommendation would be that the DTCC cannot make available as loans for short sellers more stock than they have on deposit. Once they have reached the point that 100 percent of the shares they have on deposit have been loaned out, they can't loan out any more. I think that is an obvious commonsense recommendation, but it doesn't apply now.

Secondly, I think there ought to be a rule which says a broker cannot be paid a commission on a short sale until the shares are delivered. Back to the business model. The broker sells $5,000 worth of stock. He can do it every day. He can get $5,000 every day, without ever having to cover the stock, and he gets a commission on making the sale. So if you say, no, there will be no commissions paid until the stock is delivered, you will have a significant impact on stopping this activity.

Now, people who hear the complaints about naked short selling say: It only represents a tiny percentage of the trillions of dollars' worth of trading activity that goes on in American markets every day. They are right. It is only a tiny percentage. But that is small comfort to those who have gotten a few dollars together, formed a business, gone to the market to try to raise some capital to support the business, put on the marketplace, say, 25 percent of their shares, holding the other 75 percent for themselves, and then getting some support in the market so that the shares edge up from 25 cents to 50 cents to $1, to $1.25 and then suddenly see the short sellers come in and say: OK, we will drive that stock back down from $1.25 to 2.5 cents, and we will do it by selling stock that doesn't exist and in the process we will ruin the company.

The one thing that convinced me this was real was when the investment bankers sat me down in front of a screen and showed me the stock trading of a company that has been out of business for 3 years, and the stock trades regularly, every 13 days. You know exactly what they are doing. The brokers are rolling the stock back and forth every 13 days, so they are meeting the SEC requirements--they are delivering--but the shares they are delivering to each other back and forth do not exist. The company was driven out of business by the short sellers who made it impossible for them to go to the capital markets.

As I said in my opening remarks, this is a tiny matter. It does not involve very many people, but to the people who are involved, it, frankly, can be a matter of life and death. There are enough of them starting businesses and creating entrepreneurial activity in the United States that we owe it to them to find out exactly what is going on with respect to this activity. That is why I have asked Chairman Dodd to consider a hearing on this matter to let us hear from the SEC, to let us hear from the DTCC, and to let us hear from those in the marketplace who have actual experience and see if the present SEC rules are sufficient or if we need to do additional things along the lines of the two items I have suggested.

I yield the floor.

[From the Wall Street Journal, July 5, 2007]

Exhibit 1

Blame the ``Stock Vault''?

Clearinghouse Faulted On Short-Selling Abuse; Finding the Naked Truth

(By John R. Emshwiller and Kara Scannell)

Depository Trust & Clearing Corp. is a little-known

institution in the nation's stock markets with a seemingly

straightforward job: It is the middleman that helps ensure

delivery of shares to buyers and money to sellers.

About 99% of the time, trades are completed without

incident. But about 1% of the shares valued at about $2.5

billion on a given a day--aren't delivered to the buyer

within--the requisite three days, for one reason or another.

These ``failures to deliver'' have put DTCC in the middle

of a long-running fight over whether unscrupulous investors

are driving down hundreds of small companies' share prices.

At issue is a nefarious twist on short-selling, a

legitimate practice that involves trying to profit on a

stock's falling price by selling borrowed shares in hopes of

later replacing them with cheaper ones. The twist is known as

``naked shorting''--selling shares without borrowing them.

Illegal except in limited circumstances, naked shorting can

drive down a stock's price by effectively increasing the

supply of shares for the period, some people argue.

There is no dispute that illegal naked shorting happens.

The fight is over how prevalent the problem is--and the

extent to which DTCC is responsible. Some companies with

falling stock prices say it is rampant and blame DTCC as the

keepers of the system where it happens. DTCC and others say

it isn't widespread enough to be a major concern.

The Securities and Exchange Commission has viewed naked

shorting as a serious enough matter to have made two separate

efforts to restrict the practice. The latest move came last

month, when the SEC further tightened the rules regarding

when stock has to be delivered after a sale, But some critics

argue: the SEC still hasn't done enough.

The controversy has put an unaccustomed spotlight on DTCC.

Several companies have filed suit against DTCC regarding

delivery failure. DTCC officials say the attacks are

unfounded and being orchestrated by a small group of

plaintiffs' lawyers and corporate executives looking to make

money from lawsuits and draw attention away from problems at

their companies.

historic roots

The naked-shorting debate is a product of the revolution

that has occurred in stock trading over the past 40 years. Up

to the 1960s, trading involved hundreds of messengers

crisscrossing lower Manhattan with bags of stock certificates

and checks. As trading volume hit 15 million shares daily,

the New York Stock Exchange had to close for part of each

week to clear the paperwork backlog.

That led to the creation of DTCC, which is regulated by the

SEC. Almost all stock is now kept at the company's central

depository and never leaves there. Instead, a stock buyer's

brokerage account is electronically credited with a

``securities entitlement.'' This electronic credit can, in

turn, be sold to someone else.

Replacing paper with electrons has allowed stock-trading

volume to rise to billions of shares daily. The cost of

buying or selling stock has fallen to less than 3.5 cents a

share, a tenth of paper-era costs.

But to keep trading moving at this pace, the system can

provide cover for naked

shorting, critics argue. If the stock in a given transaction

isn't delivered in the three-day period, the buyer, who paid

his money, is routinely given electronic credit for the

stock. While the SEC calls for delivery in three days, the

agency has no mechanism to enforce that guideline.

``phantom stock''

Some delivery failures linger for weeks or months. Until

that failure is resolved, there are effectively additional

shares of a company's stock rattling around the trading

system in the form of the shares credited to the buyer's

account, critics say. This ``phantom stock'' can put downward

pressure on a company's share price by increasing the supply.

DTCC officials counter that for each undelivered share

there is a corresponding obligation created to deliver stock,

which keeps the system in balance. They also say that 80% of

the delivery failures are resolved within two business weeks.

There are legitimate reasons for delivery failures,

including simple clerical errors. But one illegitimate reason

is naked shorting by traders looking to drive down a stock's

price.

Critics contend DTCC has turned a blind eye to the naked-

shorting problem.

denver lawsuit

In a lawsuit filed in Nevada state court, Denver-based

Nanopierce Technologies Inc. contended that DTCC allowed

``sellers to maintain significant open fail to deliver''

positions of millions of shares of the semiconductor

company's stock for extended periods, which helped push down

Nanopierce's shares by more than 50%. The small company,

which is now called Vyta Corp., trades on the electronic OTC

Bulletin Board market. In recent trading, the stock has

traded around 40 cents. A Nevada state court judge dismissed

the suit, which prompted an appeal by the company.

DTCC says the roughly dozen other cases against it have

almost all been dismissed or not pursued by the plaintiffs.

Nanopierce garnered support from the North American

Securities Administrators Association, which represents state

stock regulators. The group filed a brief arguing that if the

company's claims were correct, its shareholders ``have been

the victims of fraud and manipulation at the hands of the

very entities that should be serving their interest.''

dtcc's defense

DTCC General Counsel Larry Thompson calls the Nanopierce

claims ``pure invention.'' DTCC officials say the main

responsibility for resolving delivery failures lies with

the brokerage firms. DTCC nets the brokerage firms'

positions but it is the brokerages that manage their

individual client accounts and know which client failed to

deliver their stock.

DTCC officials say that Nanopierce had internal business

problems--including heavy losses--to explain its stock-price

drop. DTCC received support in the suit from the SEC, which

filed a brief defending the trade-processing system and

arguing that federal regulation pre-empted state-court

review.

In January 2005, the SEC made an initial swipe at the

naked-shorting problem by requiring that if delivery failures

in a particular stock reached a high enough level, many of

those failures would have to be resolved within 13 business

days. But some failures weren't covered by the rule. The SEC

action in June aimed to cover those remaining delivery

failures. Naked shorting could ``undermine the confidence of

investors'' in the stock market, SEC Chairman Christopher Cox

says.

However, it doesn't seem likely that the SEC's latest move

will end the debate that has been raging in the market for

years. While lauding the SEC action, critics are questioning

whether it is sufficient. The SEC still hasn't taken all the

steps necessary to ensure ``a free and transparent market''

as required under federal securities laws, says James W.

Christian, a Houston attorney who represents several

companies that claim to have been damaged by naked shorting.

Among other things, authorities need to make public much

more trading data related to stock-delivery failures, he

says.

Critics contend that DTCC and the SEC have been too

secretive with delivery-failure data, depriving the public of

important information about where naked shorting might be

taking place. Currently, DTCC's delivery-failure data can

only be obtained through a Freedom of Information Act request

to the SEC, which has released some statistics that are

generally two months old.

In light of the controversy, DTCC has proposed making more

information available and the SEC says it is looking at

releasing aggregate delivery-failure data on a quarterly

basis.

Madam President, reserving the right to object, on behalf of the Republican leader, I would add an additional unanimous consent request that at a time to be determined by the majority leader, in consultation with the Republican leader, the Senate proceed to the immediate consideration of Calendar No. 96, S. 223, under the following limitations: That the committee-reported amendment be agreed to and that the only other amendment in order be a McConnell or his designee amendment, with 1 hour of debate equally divided in the usual form on the bill and 1 hour equally divided on the McConnell amendment, and that following the use or yielding back of the time, the Senate proceed to vote in relation to the McConnell amendment, followed by a vote on passage of the bill, as amended, if amended, with no intervening action or debate.

In that case, Madam President, on behalf of the Republican leader, I must object to the request of the majority leader.

Mr. President, I shall not take a great deal of time. I simply rise to express my support for the amendment offered by the senior Senator from New Mexico. He has thought the matter through very carefully and described, I think, a hopeful approach, one that recognizes technology in the energy business is constantly changing, that opportunities are arising that we may not even think of now.

One area where I have shown an interest is tidal energy, and we are in the infancy of finding out about that. We need to have an open-ended opportunity to find alternative energy sources.

So with that, I thank the Senator from New Mexico for his leadership on this issue and am happy to be a cosponsor of his amendment.

Mr. President, may I inquire how much time is available to me.

I listened with interest to the Senator from Texas. I wish to discuss basically the same thing, perhaps putting a slightly different twist on it. People look at the economics of energy and make this point. They say it costs something like a dollar a barrel to lift the oil in Saudi Arabia. That is the elevating price, a dollar, a dollar and a half, whatever. It doesn't sound like very much when oil is selling for something like $60 a barrel.

They look at the difference between the lifting cost and what we are paying, and then they look at the difference between the cost for a barrel of oil and the cost of a gallon of gasoline and they say: Somebody is making an awful lot of money here, and there has to be something wrong. There has to be someone hiding in the weeds who is profiteering off us. If we can find that ``someone'' and stop him from doing the profiteering, then everything would be fine, we would have plenty of oil, we would have lower prices at the pump, everything would be fine. There is a conspiracy going on. There is somebody somewhere who needs to be discovered, exposed, and attacked, and then everything will be fine.

Well, unfortunately, the real world does not operate like that. In the real world, there are reasons, valid reasons, for prices to be where they are and for the situation to be as it is. The fundamental fact, with respect to retail prices, that people forget, if indeed they even know, is this: The retail price is not set on the basis of what it costs to put a gallon of gas into the pump that you go to when you fill up your tank; the retail price is set by

what it would cost to replace the gallon of gas once it is gone out of the tank and into your gas tank.

That means whoever is setting the price is concerned with uncertainties that are there in the marketplace that will determine the future replacement cost. If there is a geopolitical uncertainty, Iran, Iraq, unrest in Saudi Arabia, instability in Venezuela, whatever it might be, the marketplace will say: We have to have the uncertainty return, we have to have a premium on what it would cost to protect us against the uncertainty because it may well be that supply is suddenly disrupted around the world, and if we are going to have an additional gallon of gas in that service station tank in the future, we are going to have to pay for that uncertainty there, so we will charge an uncertainty premium now.

This is the working of the marketplace. As I have said often, and expect to say again, we cannot repeal the law of supply and demand. We think we can. In Congress we keep passing laws that say we are going to set prices here and there. But whenever we try, all we do is produce one of two results. When we try to repeal the law of supply and demand, when we try to interfere with market forces, we either create a shortage or a surplus.

When we set the price artificially too high in the market, we create a surplus, as everybody wants to get in on the very good price, people want to sell for the highest price. We did that in Congress with respect to silver. We wanted to have silver mined in the United States. So the United States said: We are going to pay so much for silver. It was above the price the market would pay. We opened up silver mines, the Government ended up with a huge surplus of silver piling up in warehouses because we set the price higher than the market would put it.

When we set the price too low, as we have done with gasoline, with oil windfall profits, set the price too low, then we get a shortage; nobody wants to produce for that low price. So we can tell ourselves how wonderful we are. We can say we have the power to set prices by legislation, but if we set them in the wrong places, if we go away from where the market is, the market either gives you a surplus of things we don't need or we create a shortage.

We saw the impact of the shortage during the Carter administration. We all remember the long lines, where we were lined up to get gasoline. There was a shortage. It was artificially created. When Ronald Reagan became President, he said: No, we are going to let the market work. The shortages all went away. The lines went away. Interestingly enough, the prices actually came down in many areas of energy as the market then responded to the reality of demand.

Our problem now is we do not have sufficient supply to bring the prices down. One of the reasons, as the Senator from Texas made clear, one of the reasons is we do not have the refinery capacity we need. It is all very well and good to pump oil out of the ground, but the oil you purchase out of the ground cannot be put into your car. The oil pumped out of the ground has to be refined into gasoline. If it is not, it sits there accumulating until the refinery capacity can be brought on line.

We know that very well in Utah. We have a tremendous amount of production going on in eastern Utah now. As oil is available, it can come out of the ground. At the worldwide prices for oil now, even though it might be more expensive than $1.50, with oil selling at $60 a barrel, $70 a barrel on the international market, there is money to be made. There is oil to be produced in eastern Utah, but it is sitting there. It is not ending up in anybody's gas tank. It is not helping bring down the price at the pump. What is the matter? We don't have the refinery capacity to refine that particular kind of oil. There are refineries in Salt Lake City. They are operating at 90 percent capacity plus. They are refining oil that comes from Canada, because that particular kind of oil is easier to refine than the oil coming out of eastern Utah. If we could build a refinery in eastern Utah--and the economics are there to justify it--we could bring down the price of gasoline at the pump, because all of that oil would be turned into gasoline.

So why aren't we building new refineries? The regulations that come from the Federal Government are restricting refineries. People who own refineries are doing everything they can to expand them. The refinery capacity is up fairly dramatically, but the number of new refineries has not gone up dramatically. We are pushing to have the limit our ability to refine oil in the refineries we now have.

We are still told the real reason prices are up is because there is a conspiracy. There is price gouging going on. Last week the Washington Post commented on this issue about conspiracy and the people who are deliberately driving up the price of gasoline. If I may quote from the Washington Post editorial entitled ``Myths About That $3.18 Per Gallon'':

Multiple investigations by the Federal Trade Commission

since 2000 have come up, well, dry. Conspiracy theorists say

this lack of evidence is proof that the regulators are in bed

with the oil companies. But last year, California's Energy

Commission undertook its own investigation of a May 2006

price increase--and found no smoking gun indicating market

manipulation. Today's high prices are the result of a

collision among consumers' increasing demand for gas, the

shortage of oil-refining capacity and 50 states with

different regulations that make it hard to trade gas across

state lines.

That is the reality. It is a collision of increasing demand for gas, static oil refining capacity, and different State regulations. We should be dealing with that reality. Why aren't we? Back to the editorial:

So why protect consumers from this vaporous phantom?

Politics. More than 80 percent of Americans believe that high

gas prices are the result of oil company shenanigans rather

than market forces, according to the Opinion Research Corp.

So passing legislation against gouging is a bit of theater

that allows the political class to avoid the hard work of

getting Americans to use less gas.

We engage in political theater all the time around here--that is our business--but occasionally, I would hope we would recognize reality, we would understand the price of gasoline is set by market forces that look at what it will cost to replace that gasoline.

I will make a last point. There would be more certainty about what it would cost to replace that gasoline if President Clinton had not vetoed legislation opening ANWR, making that oil available to us for our domestic supply. One of the things that was said at the time was, that is so far away in the future, that is 10 years away.

Well, it has been more than 10 years since he vetoed that bill. If he had not, we would now have the supply coming down from Alaska, saying we can mitigate the geopolitical uncertainties of oil in foreign countries by having this supply of millions of barrels available in the United States. The manufacturers of gasoline, refiners of gasoline, would say: We have a stable source of supply here within the United States. We need not charge as high an uncertainty premium as we might otherwise do.

There is no question it would have a significant impact on lowering gas prices, if only we had done it. The Congress did it. The President vetoed it. Now the leadership of Congress continues to oppose ANWR. One of the arguments is: That is more than 10 years away.

We did it more than 10 years ago. We need to do it now for the advantage of people 10 years ahead.

This is not to denigrate the good things in the Energy bill before us. This is not to say conservation is not important. This is not to say alternative sources of energy are not important. But this is to say we need to look at the whole picture and recognize we cannot conserve our way into a solution. Just because conservation is a good idea doesn't mean increasing the source of supply is a bad one.

I yield the floor.

Mr. President, I am honored to join with my friends in this particular effort. I congratulate the occupant of the chair, Senator Salazar, and Senator Alexander for putting this forward. We are seeing people come on board in equal numbers on both sides of the aisle to demonstrate that this is a bipartisan effort.

Some might say this is an attack on the President's plan. I do not see it in that fashion at all. I think this is a demonstration of bipartisan support for an American plan, to see what we can do to get a more stable Iraq.

When I go to Iraq and talk to the experts, they tell me the war is being fought on two fronts: It is being fought in Iraq and in Washington, DC. Al-Qaida has declared Iraq as the front line of their war on the ``great satan,'' which to them is the United States of America. The battle being fought in Washington, DC, has to do with America's resolve in standing up to al-Qaida. The word that is going out from Osama bin Laden in his audiotapes, and the letters that are being circulated, is that if we can just hold on long enough, the battle will be resolved in Washington, DC, as the Americans decide they no longer want to continue the fight.

By demonstrating in a bipartisan fashion that the Senators of the United States are willing to talk about long-term commitments and long- term solutions, we are making our contribution to winning the war in Washington. General Petraeus has been charged with the security portion of the war in Iraq. The Iraqi Parliament and the Iraqi Government themselves must deal with the political problems in Iraq. We must not let them down by partisan bickering in Washington that encourages al- Qaida to believe America will walk away from its responsibilities.

This piece of legislation is not about name calling or blaming for past mistakes. There is no question there have been past mistakes. We will let the historians sort that out. Our responsibility is to do today what is needed to bring about an eventual proper resolution.

In every war America has been in, there have been times of darkness,

times of despair. Think about Abraham Lincoln and what he faced with the continuing bad news from the front in his effort to keep the Union together. Think about World War II and the bad news that came out of the first encounters in North Africa and some of the other American efforts where we were repulsed. If we had all said we are going to turn our backs on this and walk away, we would not have the kind of world of peace we have received as a result of our efforts in those wars.

Now is the time for the Congress to say: Regardless of what may or may not have been a mistake in the past, we still have to stand together and move forward on the basis of intelligent analysis, and we are using as our starting point as that analysis the Iraqi Study Group. The President is not hostile to this. I think he is open to it, and I think it is incumbent upon the Congress to say to him: Look for new solutions, but base them on sound analysis, and if you will, we will be with you, we will move forward in a bipartisan manner to see to it America does not fail in Iraq.

Madam President, if there is one thing I hear over and over again when I talk to my constituents about where we are in this Congress, it is the request that we get together and work together and that we get something done. There is always some particular issue someone will raise that will have to do with immigration, that will have to do with taxes, that will have to do with Social Security, but underlying all these issues is the refrain: Why can't you people work together? Why can't you get something done? As one constituent put it, almost plaintively: Senator, is there any hope, or are you just going to bicker back and forth between the parties, as you have always done?

Well, this month, there has been a sign of hope that I think we ought to make mention of that demonstrates that, in fact, maybe it is possible for us to work together on some of the more contentious issues. This sign of hope did not necessarily come from the Congress, it was an action that involved Members of Congress and members of the Bush administration, and it has to do with trade.

There are many issues that divide the two parties, but one that has divided us as much as any has been the issue of trade, with the Democrats saying under no circumstances will we approve any more free- trade agreements until we get the kinds of provisions with respect to labor standards that we insist on; and the Republicans have said and Republican administrations have said, those kinds of agreements are deal breakers; if we put those in the trade agreements, we make the trade agreement impossible to enforce. The two sides have yelled at each other over this issue now for years.

Well, this month we have had a breakthrough, and I will quote from the newspaper articles with respect to this, first, from the New York Times and then from the Wall Street Journal. With a May 11 headline ``Bush and Democrats in Accord on Labor Rights in Trade Deals,'' the New York Times said the following:

The Bush administration and House Speaker Pelosi, breaking

a partisan impasse that had dragged on for months, reached an

agreement this evening on the rights of workers overseas to

join labor unions. Both sides predicted the agreement would

clear the way for congressional approval of several pending

trade agreements.

This came as happy news to me. I was with the majority leader and a group of Senators when we went to South America, and we heard from the President of Peru that the most significant thing we could do in the United States to maintain good relations with Peru was to approve the Peru Free Trade Agreement. After this conversation, some of the Democratic Senators who were on that trip said to me: Bob, that is going to be very hard. It is going to be very difficult. We are not getting the kind of cooperation we feel we need out of the Bush administration. Well, now they have. It has been worked out.

Again, back to The New York Times:

Negotiations to complete the trade deals have been led by

Susan Schwab, United States Trade Representative on the

administration side, and by Representative Charles Rangel,

the New York Democrat who is Chairman of the Ways and Means

Committee on the House side.

Good news. Both sides giving a little and getting something done. Then this paragraph from the New York Times:

Despite the endorsement of Mr. Rangel and Speaker Pelosi,

many Democrats say that half or more of the Democrats in

Congress may vote against the deal, but the agreement is

expected to pass with strong backing among Republicans, whose

leaders will urge them to vote with President Bush.

This reminds me of a meeting I had in the White House when Bill Clinton was the President. We were talking about how to deal with trade, and President Clinton said to the Members of Congress who were there: What do we need? The former Senator from New York, Pat Moynihan, sitting next to the President, spoke up and said: Sir, we need more Democrats. The Republicans are fine on this issue, it is the Democrats who are the problem.

Well, we have had that breakthrough on trade. It is encouraging. The Wall Street Journal had this to say about it.

The agreement announced last night by House Speaker Pelosi,

Treasury Secretary Henry Paulson, and other top officials and

lawmakers clears the hurdle to passage of some small

bilateral trade deals, and it could ultimately smooth the way

for broader trade measures such as renewing President Bush's

soon to expire authority to negotiate trade deals without the

threat of congressional amendments as well as a new global

trade agreement now being negotiated in the Doha round of

world trade talks.

I raise this as a ray of hope and then as the background for a suggestion. I hope the sense of urgency that brought the two sides together on trade can apply to the question of the tax cuts and whether they will be made permanent. I was in New York yesterday with a group of representatives from Wall Street, from the venture capital community and those economists who deal with the question of growth and keeping the economy strong, and was interested to be told the one thing that would be the most important for them to keep the economy strong and growing was to keep the tax cuts that were enacted in 2003 in the law permanent.

We asked some of those representatives what would happen if the tax cuts were to expire? The reaction we got was: Well, we assume that Congress will, of course, not let them expire because they have worked so well. They have made significant differences with respect to corporate governance and economic growth that, of course, they are going to be extended. Then I pointed out to them that if we stay on the track that was established in the budget bill that was passed, the budget bill that the Senator from New Hampshire talked about, those tax cuts will expire in 2010.

The folks in New York were stunned. How could Congress do this? How could they allow that to expire in the face of the evidence that these tax cuts have been so beneficial? We said: Well, that is the path we are on. That is the glidepath that was set in this budget bill. The budget bill can be trumped by future budgets later on, but if nothing is done and we stay exactly as we are, these tax cuts are certain to expire.

What will be the consequences? Well, we have turned to some experts who will make these kinds of projections and asked that question. We would like to talk about this. I am sure no one can see the detail on the chart, but I will do my best to highlight the visual impact. I will say, in all fairness, as I always say, these are projections, and every projection is wrong. I don't know whether it is wrong on the high side or wrong on the low side, but every projection we ever have about the future, that is specific, is wrong. Nonetheless, I think the basic trend that is shown in these charts is a legitimate trend.

This first one talks about the number of jobs that will be created State by State if the tax cuts are made permanent. Now, don't pay attention to the numbers because you can't see them, look at the bars and let me identify the States that will see significant job growth if the tax cuts are made permanent.

The biggest line is California, followed by Florida, Illinois, New York, Ohio, Pennsylvania, and Texas. It might be interesting to go back to those States and look at how those Senators from those States voted on the budget bill that would have the tax cuts expire. Jobs in California, Florida, Illinois, New York, Ohio, Pennsylvania, and Texas.

Some of those States are complaining about their current economies. They are saying their unemployment rate is too high. Make the tax cuts permanent and you make a significant contribution to creating jobs in those States.

What about economic growth in those States? Let's look at that chart. Basically, they are the same States, but there are some slight changes. Once again, this is the income growth

per State if the tax cuts are made permanent. And the winner, again, clearly, is California, followed by New York and Texas. But Michigan begins to show up, New Jersey begins to show up, along with Florida, Illinois, Ohio, and Pennsylvania. These are States, again, where they are saying: Our economic growth has been anemic, our job growth has been anemic. What can we do?

The answer to what can we do? We can make the tax cuts permanent. Well, no, politically, we don't want to do that. Politically, it makes good rhetoric for us to attack the rich.

One of the things we have to remember as we have these economic debates is the best thing you can do for someone who is poor is to find him a job. The best thing you can do for people who are at the bottom is to have strong economic growth. Who gets hurt the most in a recession? It is the poor. Who loses his job when unemployment goes up? It is the person with the least skills, who can least afford to lose his job.

I remember a hearing in the Joint Economic Committee, when one of my colleagues, in the midst of the boom of the late 1990s, asked Chairman Greenspan: Who has benefitted the most from this boom, expecting the answer to be: Well, it is the people at the top; the people at the top have gotten all the money; the people at the top have benefitted from the boom, and we have to do something about that. Chairman Greenspan said, very emphatically and very firmly, the people who have benefitted the most from this booming economy are the people at the bottom. The bottom quintile have seen their life change, their lifestyle, their availability to income improve better than anybody else.

We always single out Bill Gates as the richest person in the United States. Did Bill Gates get hurt with the recession? No. His lifestyle didn't change. He didn't lose his house. He wasn't in danger of being late on his mortgage payments because he didn't have any mortgage payments. The growth in the economy did not make that big an impact on his situation. But the people at the bottom, who were unable to get the jobs in the recession that began in 2000; the people at the bottom, who were unable to meet their bills with the recession of 2000; the people at the bottom, whose skills were such that they were the first laid off, they are the ones who have benefitted the most by the expansion that began with the passage of the tax cuts in 2003.

They are the ones who were benefited the most when the unemployment rate fell below 5 percent. It is currently 4.4 percent.

In my home State of Utah, the unemployment rate is 2.3 percent. Who is benefiting the most? It is the people who would otherwise be unemployed if the unemployment rate went back up to 6 percent.

When we look at income growth per State, don't say that only benefits the fat cats; that only benefits the people at the top. Recognize that the best welfare you can do for anyone is to find them a job. The best life-changing experience you can create for someone is to have a strong economy where that person can work and grow their own savings and get slightly ahead.

Chairman Greenspan was very firm about that, with respect to who benefited the most from the income growth of the 1990s. It is still true today. Who will get hurt if the tax cuts are not made permanent and the jobs represented on these charts do not materialize? It will be the people who lose their jobs.

We, the Congress and the administration, demonstrated that we could get together on the trade deals. It was announced with great gladness that the Democrats who had said ``never'' and the Republicans who had said ``never'' were able, finally, to get together and make this thing work. Can't we do that with respect to tax policy? Can't we understand now that the tax policy has worked?

Since the tax cuts were enacted, 8.5 million new jobs have grown up in the United States. More Americans are working today than ever in our history, both in total numbers and as a percentage of the workforce. Can't we celebrate that achievement and say let's keep in place the policies that caused it? Or will we continue to say, no, we can't let anything happen because, for some political reason we want to scare people, we want to use class warfare rhetoric; we want to say, no, this isn't really working, it is an illusion. Ignore the statistics. Ignore the facts.

I think we can work together. I think we should work together. I think the facts are clear. We should endorse them and move ahead in that spirit.

Mr. President, I ask unanimous consent that the time on the Republican side be equally divided among myself, Senator Cornyn, and Senator Gregg.

Mr. President, we celebrate anniversaries around here. We find times to look back. Today happens to be the fourth anniversary of the Senate passage of the last of the Bush tax cuts. We have heard a lot of rhetoric around here about those tax cuts. We heard it in advance, we heard it as they have gone along, we continue to hear it.

I thought on the fourth anniversary of the Senate passage of the tax cuts it might be a wise idea to spend some time with some facts.

Our former colleague, Senator Gramm of Texas, always used to say: I tell my children never argue about the facts. Facts are things you can look up. Argue about what the facts might mean, but don't argue about the facts.

We don't take his advice as much as I think we should. We spend too much time arguing about the facts. Let's look them up.

One of the things we are told constantly is that since the passage of the tax cuts, the rich have gotten richer, the tax burden has shifted from the rich to the poor, and that this is terrible and we need to reverse that trend. Well, let's look at a few facts. Let's go back to the 8 years prior to the time of the Bush administration and see what happened in terms of the rich getting richer and the poor getting poorer.

While President Clinton was the President, dividing into five quintiles, which is what economists do, we see what happened to pretax income. During the Clinton years, in the lowest 20 percent, the bottom quintile, pretax income went down. In the second quintile, the pretax income went down. The red bars are prior to Clinton and the blue bars are after. In the middle 20th percentile, the pretax income went down. In the second highest quintile, pretax income went down. In the top quintile, pretax income went up between the time when Clinton was elected and the end of the Clinton administration.

Our source for this is the Congressional Budget Office. These are the facts.

What has happened since President Bush has been in office? Let's take a look at the same areas and look with the new data plugged in. It is very interesting.

Since Bush has been elected, the lowest quintile has seen their pretax income go up. The second lowest quintile has seen their pretax income go up. The middle quintile has seen their pretax income go up. The second highest quintile has seen their pretax income go up, but the top quintile, the

top 20 percent, has seen their pretax income come down.

Once again, the source for these facts is the Congressional Budget Office. On this side of the chart, we see the share of pretax income. This is the number of people to focus on.

The share of income is very high for the top 20 percent and low for the bottom 20 percent. So we look at share and ignore the trend if we want to make the case that the tax cuts have been bad for people at the bottom. In fact, since Bush has been President, we see things have gotten better for people at the bottom.

This comes as somewhat of a surprise to those who were advising us when we passed the Bush tax cuts. I would like to quote from the Brookings Institution. They viewed the tax cuts, as they were proposed, and they had this cogent statement to make about the future, and I quote:

Our findings suggest that the tax bill will reduce the size

of the future economy, raise interest rates, make taxes more

regressive, increase tax complexity, and prove fiscally

unsustainable. These conclusions question the wisdom and

affordability of the tax cut and suggest that Congress

reconsider the legislation, especially in light of the

economic downturn and terrorist attacks that have occurred

last summer.

Very interesting. Reduce the size of the future economy? Since Bush has been President, the U.S. economy has grown more than the entire Chinese economy. Under the Bush Presidency, the U.S. economy has grown $2.7 trillion in GDP. The total Chinese economy is $2.3 trillion. They missed that one.

Raise interest rates? No. Make taxes more regressive? Well, let's look at that one in another chart. Increase tax complexity? I will grant them that. Congress increases tax complexity every time we pass a law. That is an easy prediction to make. And prove fiscally unsustainable? I don't think so.

Here is the relative income tax burden by income group, taking the specific prophecy made by the people at the Brookings Institute. The people in the lowest quintile were receiving that much earned income tax credit. In other words, their tax payments were negative. They received money in transfers. Now, since the passage of the tax cut, the amount of money they have received has been greater. The second lowest quintile used to pay a little taxes; now they receive transfer payments. The middle quintile paid that much taxes; now they pay less. The second highest quintile, virtually identical, but the trend line is down. Who has paid the most taxes? Who has had the greatest increase in taxes? It is the top 20 percent.

At the end of the Clinton administration, this is where it was, and at the end of the Bush term, this is where it is. Brookings was wrong on virtually every point, except their prediction that we would make the tax law more complex. That, as I say, is a prediction one can always make and always be sure of.

What about fiscal sustainability? I remember when I ran for reelection in 2004, right after the tax cuts, my opponents said, we have to bring down the deficit. The deficit is too high. I said: Not only is it going to come down, it is coming down. We see year after year, since the passage of the tax cuts, that the deficit has shrunk. It has shrunk in absolute dollars and it has shrunk as a percentage of GDP. We have the same word out of the Congressional Budget Office and OMB at the end of the first quarter.

Why would we get a shrinking deficit when we have cut tax rates? The answer lies in the dynamism of the American economy, and we look back again on this anniversary date to see what has happened to people's predictions. The red bars are the predictions that the Congressional Budget Office made of the amount of revenue we would receive from capital gains. They predicted that the capital gains revenue would stay flat or barely increase as a result of the reduction in capital gains tax rates.

We reduced the capital gains tax rates, and guess what happened. That is shown in the blue lines. The capital gains realizations--that is the money that came in--went up in 2003, higher than the CBO projection. It went up in 2004 even higher. It went up in 2005 even higher. In 2006, it knocks your socks off. They had predicted $54 billion in realizations, and the fact is, it was $103 billion. The actual capital gains tax receipts were substantially higher than projected by CBO.

Well, how can that be? If we cut the tax rates, how can we get more revenue? The answer to that, of course, is a reality that we so often forget around here, and that is the economy is not static. The economy is not a sum zero game that says: All right, if you cut it here, then you have to see it rise there. If we cut tax rates, we have to see the deficit go up.

We have seen exactly the opposite. We have cut tax rates, and we have seen the deficit go down. Why? Because people respond to economic incentives. When they have an economic incentive to form a new business, create a new opportunity, modernize a plant--because they would not have to pay so much in taxes as they previously had to pay-- the new business, the new opportunity, the modernized new plant will create new jobs and creates new income and, therefore, more taxes, more tax revenue, even as the tax rates come down.

We have seen this historical fact again and again for decades, yet we continue to ignore it. The computers at the Congressional Budget Office are programmed not to take into account the growth in the economy and not to predict this kind of result.

So on this anniversary date, I thought I would simply share with the Senate a few facts that demonstrate that the tax cuts have been good for America.

Mr. President, I appreciate the comments of my friend from Oregon. I wish to make it very clear that if it were not for his dogged persistence in going after the issue of health care reform in this Congress, we would not be where we are. Many of us talk about this. We talk about it in the dining room. We talk about it as we are waiting between rollcall votes. We sit in the cloakroom and say, wouldn't it be great? Yes, why don't we do it? It would be fabulous if. . . .

Senator Wyden goes beyond the talk. He is determined to go after this. He and I have had a number of conversations, and I know he has had conversations with the administration at the White House and at the Department of Health and Human Services. He is a bulldog on this issue. If it gets done, it will be a tribute to his tenacity. I am beginning to believe it will get done. I am getting his enthusiasm.

I want, for a moment, to spend a little time on history so we can understand how we got in the mess we are in, and why the proposal Senator Wyden has laid down--and I am proud to cosponsor--is the right direction in which to go. We got in the mess where we are with health care back in the Second World War, when the Federal Government decided, once again, it was going to repeal the law of supply and demand. I have said here many times, if I can control what we carve in marble around here to remind us of our duties, along with these Latin phrases I love, we should also have something before us that says you cannot repeal the law of supply and demand. The law of supply and demand is as immutable as the law of gravity. Because it occurs in economics, some people think we can get around it.

In the Second World War, we had wage and price controls. We were going to prevent inflation by Federal fiat. In other words, we were going to repeal the effects of the law of supply and demand. All right, so that means if I had an employee, I could not give him a raise. All right. Senator Wyden opens a business and he wants my employee. Since it is a new job, he offers my employee more than I can pay, and I cannot match that because it is against the law. So in order to hold my employee, I say: I will tell you what I will do: instead of giving you a raise in dollars that you can put into your paycheck, I will give you a raise in value. The value will be a health insurance policy that is worth more than Senator Wyden is offering you in money. And here is the good thing about it: You won't have to pay taxes on this raise. I will pay the taxes on it; that is, it will be deductible. You won't have to pay taxes on it. So you get more value and you get a tax break. Isn't that a good deal? And the employee says: Yes, I will stay with you instead of switching jobs because you can, in fact, get around the Government's effort to prevent you from giving me a raise.

That sounds innocent enough, but it started us down the road of having the employer spending the employee's money. They say, no, that is not employee money, that is employer money; the employer is paying for it. No, he is not. The employee earned that amount of money, returned that amount of value to his employer, but he didn't get it in his W-2. That meant the employer ultimately determined how it would be spent. So we started down the road to where there is a major divide in paying for health insurance. The employer is spending the employee's money, but the employer wants to hold that amount down because it will mean savings in his overall business plan.

So the primary economic motive on the part of the employer is to hold the costs down. He will make a deal, therefore, that produces a temporary, short-term cost advantage for him. The consumer of the service, the employee, has a different agenda. He wants the best care he can get. But since he doesn't control the dollars, even though they are his dollars in terms of his earnings, he is stuck with whatever decision the employer makes.

That might make a little bit of sense if the employee stays with the employer his entire career. But we have gone long beyond that. I tell graduates of the university they can expect to change jobs 10 times before they are 50, and they may even change careers. You may be trained as a veterinarian and end up as a Senator. We have two examples of that here in the Senate today. I thought I was going to spend my entire career in the glass and paint business, a business my grandfather founded, my father ran, and when I graduated, I assumed I was going to be there for the rest of my life. I was there for 4 years, and a change came along, and then there was another change. I sat down when I was 50 and

discovered I had changed jobs 17 times from the age of 20 to the age of 50. In terms of health care, that meant 17 times I was exposed to having my health care canceled--17 times, when they were worried about preexisting conditions; 17 times when I would be in a situation I would not like. Indeed I was, because there was a period in that 30-year timespan when I had no health coverage at all. The employer I was working for could not provide it, or under some circumstances I had no employer, period.

So I understand how the precedent set in the Second World War simply doesn't apply to the 21st century. If we were to have a system where the employee controls his dollars--not the employer--and takes the product he buys with those dollars with him from employer to employer, we could solve an enormous amount of the problems we have in health care.

Let's talk about overall costs. John Goodman had a piece in the Wall Street Journal where he talked about quality. He pointed out a study that said the best quality in health care can be found in three cities in the United States. One was Seattle, WA; one was Rochester, MN--and the Mayo Clinic comes to mind--and the third was Salt Lake City, UT. Naturally, that makes me feel pretty good. It pointed out if every American received the kind of health care that was available in Salt Lake City, UT, the cost would go down by one-third and the quality would go up substantially.

So why doesn't everybody do that? Because they can't take their dollars and shop. They are stuck with whatever plan the employer decides to buy, and even as he is buying, the employer does not have transparency or information that would say to him: The best health care is available at Intermountain Health Care in Salt Lake City. Instead, the salesman who comes in to sell the employer the policy will say: I can save you this much money in this kind of situation. All right, I will buy that policy. The focus is on the dollars rather than the quality.

This is an ironic situation that when quality and competition is focused on, cost comes down automatically. That is what happens in the rest of the economy. Why shouldn't it happen in health care? It doesn't happen in health care because of what we did in World War II, and the legacy of that has followed downward.

What about Government health care? One of the problems with Government health care is we do it in Congress. Every private health care plan had a drug component decades ago. Medicare didn't have a drug component until the last Congress. Why? Because we in Congress couldn't agree as to what it should be. We always agreed there should be one, but we argued about it: It should be better, it should be smaller, we have a doughnut hole. All of the things we talked about that the average consumer knows nothing about or cares nothing about tied it up for decades.

We finally passed Part D. There were dire predictions that it wouldn't work because it wasn't a Government-run plan. It let in private competition. It allowed the senior citizens to make a choice between private offerors. And what has been the consequence of that?

We have some statistics: 2,596 different plans are now being offered around the United States. People are stunned at that number. They thought it would be a monopoly of big drug companies. But when the customer could choose and niche markets opened up, drug companies started to offer products in those niches, and the number of choices exploded.

I have heard the Senator from Wyoming say: We were worried about Wyoming because Wyoming is so small. We didn't think there would be more than one or two plans in Wyoming, if anybody wanted to come at all. We thought Wyoming would be bypassed by Medicare Part D.

There are now 34 Medicare Advantage plans in Wyoming--plenty of choice--and the polls show that something in excess of 80 percent of the seniors like Medicare Part D.

What has happened to the cost? It is one of the few Government programs that I can identify where the cost has come in below projections.

The one thing I always say on the floor of the Senate is, we know every projection with respect to Government plans is always wrong. We don't know whether it is wrong on the high side or wrong on the low side, but we know it is always wrong. But if you are going to bet, bet that it is wrong on the low side. Bet that the program will cost more than we project or than CBO projects. This is one that has come in below.

All of these straws in the wind tell me Senator Wyden is on to something very significant. It is the Healthy Americans Act which says let the people control their own money. Let the people have their own plan that is going to give us better quality and lower costs.

We look around the world and we see other countries that have tried the single-payer system, and they are retrenching. We look around the world and we see other countries that tried a consumer-driven health care plan, and they are prospering with respect to getting their health care costs down.

With that history, Mr. President, I am proud to be the Republican cosponsor with Senator Wyden and salute him once again on his leadership and his tenacity in getting this program moving forward.

Mr. President, I say to my friend from Oregon that some of us proposed that during that debate. He is right to mention John Chafee. John Chafee was a towering figure in this body. He was the head of the Republican health care task force. We talked about an individual mandate as opposed to an employer mandate.

The core of the bill that was on the Senate floor, sponsored by then- majority leader George Mitchell, was an employer mandate. And in the partisan nature of that debate, we Republicans organized ourselves to stop that bill. We divided the bill into various sections, and my assignment was to attack the employer mandate. I had a stack of material that high to help me do that with my fellow Senators. But as I would talk with people on the other side, I would say: Let's talk about an individual mandate. I think everyone should have some kind of coverage.

I think it is in society's best interest to have everyone have some kind of coverage. We do it with auto insurance. You can't drive if you don't have an individual insurance plan. So that is how we get universal coverage.

The political stars simply weren't lined up to deal with it. But this is not a new idea. It was around that long ago, and if we had done it, I think we could have passed legislation.

Mr. President, the record is very clear that when people spend time taking care of themselves, their health care costs go down dramatically. We had examples presented to us from companies that have done that; that is, companies that have been very aggressive in trying to make sure their employees stay healthy rather than simply pay for what happens when they get sick.

The CEO of General Mills was with Senator Wyden and me at the press conference this week in which he talked about the things they have done in their company. They have held their health care cost increases to the level of inflation. We would all be thrilled with that because health care costs have been going up in double digits for years now.

People respond to incentives, and if there are incentives for parents, incentives for employees to stay healthy rather than simply waiting for the ultimate bill to come along, we will make a significant difference.

If I can be personal for one quick moment, I once worked for Howard Hughes. In the Hughes organization in the 1960s and 1970s, we had absolutely total health care coverage. Anything that had to do with health care, we would send in the bill, and it would get paid 100 percent. I sent in my kids' orthodontist bills, and they paid for straightening their teeth. There wasn't any concern about what was covered or what wasn't. I figured I could have sent in the vet bills for my dog and probably gotten reimbursed, but I didn't do that.

I look back on that and the sense of security and abundance that came from that led me to overuse the system and to not worry about how well we were because they would take care of us. So I have had a personal experience about how important it is to pay attention to health at the front end.

Mr. President, there is nothing that succeeds in politics like good programs, like good policy. Ronald Reagan didn't invent it, but he is known for repeating it, saying there is no limit to the amount of good you can do if you don't care who gets the credit. Far too much of the partisanship stems from the fact that we don't want the other party to get credit for solving the problem.

When I have had discussions across the aisle about this and Social Security, I get told: Bob, we will address that right after the next election. The next election never comes because there is always a next election.

The Senator from Oregon is exactly right in that for the first time since Dwight Eisenhower's election, we have an election where there is not an incumbent in the White House on the ballot, either a sitting President or a sitting Vice President. So the Democrats who control the Congress have a political motive to show they can do something as they go into the 2008 elections.

The Republicans cannot try to take credit for that with their candidate because they are not going to have a candidate who is part of the present administration. But the Republicans want to be able to say: Well, at least in the last days of the Bush administration something important got done.

The setting is rare. We should take advantage of it. This is the moment, and I join with the Senator from Oregon in an attempt to seize it.

Mr. President, I ask unanimous consent that I be allowed to speak for up to 15 minutes.

Mr. President, my theme today has to do with our friends in the media, or the fourth estate as they like to call themselves. There are two items I wish to call to the attention of the Senate and anyone else who might be listening with respect to the performance of the media. The first one is highlighted in an editorial that appeared this morning in the Wall Street Journal entitled ``Frist's Vindication.''

All of us in this Chamber know Senator Frist. We know him as a man of integrity, intelligence, and grace. He presided over the Senate as the majority leader for 4 years. He has a long history as a humanitarian, as a scientist, as a skilled doctor who pioneered procedures in the process of heart and lung transplants.

We also know him as the target of media attack for insider trading, and we know groups that are self-anointed as watchdogs of the public consciousness that picked that up and kept the drumbeat alive. Our friends in the media also kept the drumbeat alive saying, over and over again, Dr. Frist was a hypocrite, Dr. Frist engaged in insider trading, Dr. Frist used his position to enrich himself while he was here in the Senate.

Well, the Securities and Exchange Commission was sufficiently aroused by those attacks that they entered into an investigation of Dr. Frist's activities with respect to his stock. That investigation is now closed. I did not realize the investigation was closed because there has been no hue and cry whatsoever in the media. There has been no mention that came to my attention in the media, until I picked up this morning's Wall Street Journal and saw this editorial.

I would like to quote from it. Under the title ``Frist's Vindication'' and the subhead ``So much for that `insider trading' smear,'' here is what it says:

When insider-trading allegations against former Senate

Majority Leader Bill Frist

surfaced back in 2005, they were splashed on the pages of

major newspapers from coast to coast. Now that Dr. Frist has

been vindicated, the silence is instructive. Is anybody out

there?

It goes on to describe the allegations against Dr. Frist. I shall not repeat them. Basically, it says he used his position in the Senate to get insider information and started selling his stock in HCA in advance of a drop in the stock that occurred because of earnings reports.

The editorial says:

Thanks in part to his meticulous email archives, Dr. Frist

was able to show that he had begun the process of selling his

HCA stock in April of 2005, months before he was alleged to

have received the inside whispers.

It goes on to discuss the groups that attacked him. Again quoting:

For years he was harassed by such liberal lobbies as Public

Citizen, and Citizens for Responsibility and Ethics in

Washington, which alleged conflicts of interest. These groups

objected even to those stocks he held in the blind trust he

had created to avoid the appearance of a conflict of

interest. Yet when he sold those stocks, with a possible eye

on higher office, he was pilloried for doing what the

ethicists had asked him to do all along.

The editorial indicates that while this absolution is a relief to Dr. Frist, ``it's impossible to undo the damage to his political career. Despite flimsy evidence, the media storm cast a shadow over his office, derailing any thought of a Presidential bid this year. The Nashville heart surgeon chose instead to `take a sabbatical from public life.' ''

A great deal was made out of this. The editorial quotes American University professor James Thurber as saying that Dr. Frist ``came in like Jimmy Stewart and was leaving like Martha Stewart.'' That is a great line. That gets headlines. The press loves things of that kind.

Now that it is clear he behaved in an absolutely ethical way-- documented everything he did, turned over all of his e-mails--and has been completely cleared, after 18 months of careful examination by the Securities and Exchange Commission, we hear nothing in the press, we hear nothing in the way of an apology from Public Citizen or Citizens for Responsibility and Ethics in Washington. Maybe ethics does not apply to them when it comes to apologizing for smears against legitimate and responsible public servants. Maybe we will now hear that Dr. Thurber has something else to say besides his quick quip about Dr. Frist being the same as Martha Stewart as she went to jail. But I doubt we will hear any of that. I doubt the press will even notice. I doubt there will be a sidebar anywhere.

I am grateful to the Wall Street Journal for pointing this out to us, and I appreciate the opportunity on the floor of the Senate to speak on behalf of a man whom I consider a friend, I think whom all of us consider a responsible Senator, a devoted leader. He deserves better at the hands of the press and those self-appointed leaders of ethics who are quick to criticize but slow to apologize.

Now, Mr. President, the next issue I would like to raise with respect to the media has to do with the hysteria over America's trade deficit with China. I have some charts I would like to put up to show some historical evidence with respect to this issue.

Let's talk about China and the trade deficit and the rise of China. This chart has two lines on it, one in red, which is American exports to China, and one in blue, which is American imports from China.

Let's go back to 1975, before people were all excited about China and how China was destroying us in the age of globalization, how China's cheap labor was taking all of our jobs, and we were flooded with Chinese imports. We notice on the chart there was a gap between American exports to China and American imports from China. No one felt that gap was ready to threaten and destroy the American economy. No one got excited about it. All right.

You go to 1990, and you find that neither line has moved up very much, but the gap remains virtually the same. Now, the Chinese economy started to take off and we started to buy things from them, and at the same time we started to sell things to them. Both lines started moving up. We saw, yes, imports from China were going up, but exports to China were going up. By 2002, 2003, both were up significantly over where they had been in 1975. But the gap remained roughly the same. All right.

Interestingly enough, as we get toward 2005 and so on, there are moments when the gap disappears, when our sales to China were greater than our imports from China. Why would that be? It would be because the improving Chinese economy now has enough money to buy American goods. They want to buy our airplanes. Boeing does well in China. The last time I was in China, I met with the manager of General Motors in China. General Motors was having a very bad year in the United States, but they were having a good year in China. They were making money in China. They were selling Buicks and other automobiles in China.

The red line started to move up, and, as I say, at one point they actually crossed the blue line. OK, the blue line opened up again, not as great as the gap back in 1975, but it began to open up. Once again, we saw the gap closed. Sales to China reached the same level as purchases from China. And then it opened up again. It appears if we want to project from this period on into the future that the pattern of our importing slightly more from China than we sell to China is likely to continue.

I doubt this historic demonstration of facts comports with the way the media is talking about China. They are telling us China is going to overtake us. They are telling us China is going to destroy us. They are telling us China is the nation of the future. We have heard in the media statements about the 20th century being the American century; the 21st century is going to be the Chinese century.

Well, let me put up another chart that I think will demonstrate that might be a little bit premature.

Let's look at the size of the two economies. The size of the economy is measured in gross domestic product. The gross domestic product of the United States in 2000 was $9.8 trillion. The gross domestic product in China in 2000 was $1.2 trillion. This is the beginning of the Chinese century? The Chinese are starting off pretty far behind in this race if they are going to turn the 21st century into the Chinese century. They are at $1.2 trillion and we are at $9.8 trillion. We have sprinted into what the media is calling the Chinese century now for the first 6 years.

Where are we? These statistics are for the first 5 years, the first 5 percent. In that period of time, our annual GDP growth has been 3.2 percent. The Chinese has been 10 percent. Those are the numbers that say they are going to overtake us. Ten percent is clearly better than 3 percent.

I would make this one footnote with respect to the 10 percent. I am a little suspect of these numbers because the Chinese released their annual figures on December 31 of the same year. We don't know our annual figures for months afterwards. Then, when more data comes in, we revise them upward or downward, based on additional information. Somehow they know on New Year's Eve exactly how they have done during the year. If they were a corporation required to report to the SEC, there would be some investigations about the possibility of ``cooking the books.'' I think they make the determination of where they want the number to be and then report it thusly, either too high or too low for whatever their political purposes might be.

So all right, let's take these numbers at their face value. These numbers mean from 2000 to 2005 the Chinese GDP grew from $1.2 trillion to $2.2 trillion, a $1 trillion increase. That is not a slouchy thing to do. That is clearly a tremendously impressive performance--almost doubling a $1 trillion increase. How about the United States. We are just limping along at 3 percent, 3.2 percent, but we went from $9.8 trillion to $12.4 trillion.

In other words, they went up $1 trillion, and we went up $3 trillion. How is that possible if they are growing another 10 percent, and we are only growing at 3 percent? It is because they are starting from a very low base. Those who say the 21st century will be the Chinese century and the Americans are through need to pay attention to what the real numbers are.

If we are going to have a game and we start out the game with one team having almost 10 times as many points as the other, and then add on to that on a percentage basis rather than an

absolute basis, we see in terms of the gap between the size of the American GDP and the Chinese GDP the gap is actually widening rather than shrinking. Yes, they can have a higher rate of growth, but their higher rate of growth is on a much lower base. Our growth on a higher base is unprecedented in world history.

My message today is we need to hold the media accountable as well as all of the others. We have had two examples I have highlighted this morning where the media has misled us: the first with respect to one of our respected and beloved colleagues, Dr. Frist, where he was smeared and then when he was vindicated, that fact was ignored. The second has to do with telling us where the world is going. For whatever reasons, there are those who are constantly panicked about China and its impact on the United States who need to pay attention to the reality of the numbers.

Mr. President, I yield the floor.

Mr. President, may I, before I begin my comments prepared for today, make two quick comments.

No. 1, I note the passing of Boris Yeltsin, President of Russia and a major figure in the transition between the Communist rule and the present democracy that exists in Russia. Like many Members of the body, I had the opportunity to meet Boris Yeltsin. That is one of the privileges we have as Senators--we get to meet important people from around the world. I can't pretend to know him at all. I simply shook his hand and said hello. But I was in Russia not long after he took power, spent time in the U.S. Embassy there, and noted the impact he had on helping bring Russia into the modern world, the world of democracy, and out of the ancient world, the world of tyranny. He had his faults. He had his problems. But he played a pivotal role, and we should take a moment to recognize that fact.

The one quote attributed to him that I enjoyed personally with respect to our life here has to do with the Library of Congress. When my constituents come to Washington, I tell them: You need to go see the Library of Congress, the Jefferson Building. Aside from the

Capitol itself, it is the most beautiful building on Capitol Hill, and maybe in Washington. Boris Yeltsin is said to have gone into the Library of Congress and looked around at that magnificent lobby and then questioned: How did you get a building like this? You didn't have any czars.

Having been to the buildings in the Kremlin and seeing the kinds of things the czars built, I understand that the Library of Congress probably would have impressed him.

Mr. President, my second comment has to do with our Chaplain. I listened with great interest and humility to the prayer he offered this morning. I felt touched by the things he asked on our behalf. They were the kinds of things I need from our Heavenly Father. I was grateful to the Chaplain for his ability to touch on those. I read his biography before it was published. He was gracious enough to give a copy of it to my wife, who has now read it, and I have reread it. We are well served by having a man of his spirituality and intellectual background and learning as our Chaplain in the Senate.

Mr. President, I rise to turn my attention to a report that was released yesterday, the annual report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and the Disability Insurance Trust Funds. Those are fancy names for what we call Social Security.

With yesterday's release, they once again changed their projection as to what the future might hold with respect to Social Security, thus underlying a point I have tried to make in my career in the Senate ever since I arrived; that is, all projections about the future are wrong. I don't know whether they are wrong on the high side or on the low side, but they are always wrong. The closer we get to reality, the more we have to adjust those projections and say: Well, it is closer to this, that, and the other.

The most reliable projections are those which are 30 days out. The next most reliable are those which are 3 months out and then those which are 6 months, those which are a year. Those which are 20 years or 30 years out are all very much subject to challenge. We are seeing that here. We have had projections on which we have based our speeches and our actions. Now we are seeing those projections get changed. But there is one projection that is not subject to change that has bearing on the issue of Social Security. I would like to put up a chart which demonstrates that.

The reason this one is not subject to change is that all of the people represented here are already born. These are people who are already alive. These are not projections about demographics. These are not projections about economics. These are the facts with respect to the American population. This is a chart showing the percentage of Americans who are over 65. Back in 1950, it was around 5 percent of Americans who were over 65. Then it increased gradually over the years. Now it is closer to 10 percent. There was a dip in the percentage that occurred between 1990 and now. That dip represented the birthrate back in the Great Depression when people, for their own reasons, curtailed the having of children. One could say it was primarily economic. Children have ceased to be economic assets; they have become consumer goods. When times are hard, you cut back on your consumer goods.

Then we had what we demographers call the baby boom. The GIs came home from World War II. They started families. They started their careers. They were filled with optimism, and they were willing to take on some extra consumer goods. They had larger families. Those children are now reaching retirement age.

Starting in 2008, something is going to happen in America that has never happened before in our history: The percentage of Americans over retirement age is going to double in a 20-year period. Then it will taper off again, after we have absorbed the impact of the baby boom generation, and continue to increase but at a relatively minor rate. It is this phenomenon, this projection, which is a reliable one--because all of these people have been born--that is driving the crisis in Social Security. It is not the Republicans who are driving the crisis. It is not the Democrats who are responsible for the crisis. We should stop talking in partisan terms about this and recognize the reality. This is a demographic reality. This is a demographic projection upon which we can rely.

Social Security is a program that covers everybody who works. It covers the single mom who works as a waitress at the minimum wage, and it covers Oprah Winfrey and Warren Buffett and Bill Gates. The multibillionaires receive Social Security. They receive Social Security on the basis of the amount they pay into the program. The amount they pay into the program is substantially more than the amount the single- mom waitress pays in. Because it is structured in that fashion, Oprah Winfrey will receive more than the single-mom waitress--indeed, significantly more. The question arises, under those circumstances, in order to deal with the shortfall that is described in the report issued by the trustees, do we need to continue that idea; that is, that Oprah Winfrey, with her billions, still should get more Social Security than the single-mom waitress who, when she retires, has no personal safety net whatsoever. I am not suggesting that what we do is penalize Oprah Winfrey or Warren Buffett or Bill Gates. I don't want to pick on Oprah too much, but she is perhaps the most visible all of these billionaires about whom I speak.

There is something in the Social Security system that we should address and that people on both sides of the aisle should address; that is, the way Social Security benefits are currently figured has in that mathematical formula a method of increasing the benefits to compensate for inflation. The formula that is there increases the benefits more than inflation goes up. We don't know that. Americans aren't aware of that. We say: Here is the benefit line, and it should increase by so much with respect to inflation, and that is only fair. It increases more than inflation actually goes up.

The late Senator Moynihan from New York used to say the way to deal with this reality of the doubling of Americans over retirement age is to simply adjust the inflation adjustment to true inflation.

We are paying out more than inflation would justify. If we just back it down to pay out exactly what inflation would justify, then we solve the problem. Then the report from the trustees says there will be enough money. It is the fact we have adjusted it higher than inflation that is causing the money to disappear, causing the projections to be as bad as they are.

Let me show you what happens if we do not make some kind of adjustment. Here is another chart that takes the information that comes from the trustees and puts it in perspective. This flat line is the income coming into the Social Security system. This blue line is the payout. As you will see, starting at about 2014, the amount paid out will be more than the amount coming in.

How do we make up the difference? Well, it is in the trust fund. It is a commitment made by the Congress. So the Congress will put up the money. We will honor the commitment of the trust fund.

Then, around about 2040, 2041, all of a sudden the trust fund is exhausted, and, by law, you cannot pay out more than you have coming in--unless you dip into the trust fund. So if there is no trust fund, and you cannot pay out any more than you have coming in, the amount of benefits drops dramatically back to the level of the income. That is where we are, and that is roughly a 25-percent cut across the board to everybody.

That is a 25-percent cut to the woman who waited on tables as a single mom and is now at retirement age and sees her benefits cut 25 percent. It is a 25-percent cut for Oprah Winfrey, who will not notice it. Indeed, she probably won't even be aware the Social Security check is coming in because in her billions that check gets lost.

This dotted line shown on the chart is what the benefits should have been if we had enough money. But we will not have enough money, and that is where we will be.

Instead of waiting until 2041 to deal with this reality, what we should do now is listen to what Senator Moynihan had to say--but with this amendment, he said: Change the adjustment for inflation to match real inflation, and you get enough money to keep the two together.

I say: Leave the present overly generous adjustment for inflation in place for the single mom; that is, leave the present situation in place for the bottom third of people who pay into the trust fund. Then say to Oprah Winfrey and Bill Gates: You are going to have to struggle by with just inflation as it really is. We are not going to give you the inflation-plus energizer that we give to the bottom third.

Now, for those of us who fall somewhere in between the bottom third and Bill Gates, we can have a blend. We can have a mixture of the more generous benefits paid to the bottom third and the less generous benefits paid to the top 1 percent. By simply making that kind of adjustment now--now, not waiting until 2041--we can avoid the crisis in 2041.

Now, I have had conversations with my friends across the aisle about this proposal for several years. I have introduced it as a piece of legislation and discussed it with people around this Congress of both parties. This is the reaction I get: Bob, this is a good idea. This is something we probably ought to do. But we won't address the problem until after the next election.

Mr. President, the next election never comes. There never is an ``after the next election.'' We are constantly demagoging the Social Security issue for political advantage and putting off the time when we must deal with it.

So triggered by the occasion of the report released by the trustees of the Social Security trust funds, I say today, the time has come for both parties to recognize this is a problem that will not go away. This is a projection we can trust, and it is time for us to put partisan advantage or perceived partisan advantage aside and deal with it.

I yield the floor.