Floor Statements

Mr. President, reserving the right to object, might I inquire as to how many additional minutes we are talking about?

I have no objection.

Mr. President, are we in a period of morning business?

What is the time limit?

I ask unanimous consent that I be allowed to speak for 20 minutes.

I thank the Chair.

Mr. President, we are having a debate on the organizing resolution. We have heard a great deal. The Senator from Minnesota just spoke somewhat disparagingly of what he calls ``crocodile tears'' on this side of the aisle and said we were trying to rewrite history.

I would like to set the record straight with a little bit of history--some that I know because I was directly and personally involved.

We all recall that the 107th Congress was unique. It was 50-50 for the first time in history. The two leaders, facing that unusual circumstance, created an unusual solution to it. However, the question of who would chair the committees was never in doubt. Right from the very beginning, it was clearly understood that since the Republicans had the vote of the Vice President for organization purposes, Republicans would chair all of the committees.

The fight over money has been exaggerated by those who have debated here. There was a protracted conversation and negotiation between Senator Lott and Senator Daschle over the issue of money, but there was never any doubt that the Republicans, with the Vice President's vote, would organize the committees, and work began immediately for the organization of the committees, with the Republicans recognized as the chairs.

Now, when Senator Jeffords left the Republican Conference--crossed the aisle and decided he would caucus with the Democrats--I was chairman of the Legislative Branch Subcommittee of the Appropriations Committee. I had a hearing scheduled to proceed with the work of the Appropriations Committee. Senator Jeffords made his announcement at a 10 o'clock news conference in the morning, as I recall--I may not have the exact time correct. As I left the Senate Chamber following Senator Jeffords' announcement, I said to my staff: Put the hearing on hold because Senator Durbin is now the chairman of that subcommittee.

I ran into Senator Durbin waiting for the subway in the basement of the Capitol, and I said to him: Dick, since you are now the chairman of that subcommittee, you decide whether or not we hold the hearing. He looked a little nonplussed but said to me: Bob, don't you want to hold the hearing since you have set it up? I said: No, Dick, you hold the hearing because you are now the chairman. He said: Oh, thank you very much for that courtesy.

There were no resolutions that had to be passed, as far as I was concerned, because it was very clear that the power in the Senate had shifted and I--and I know of no other Republican--was not going to act as a dog in the manger and hang on to the technicality that no resolution had been passed in order to hold on to power for a few extra minutes, or a few extra days, in the face of the fact that the decision had been made as to who would control the Senate.

Now we come to the present circumstance: An organizing resolution determining who will be chairmen of the committees has been introduced by the majority leader, and it is being contested by the minority leader and the members of the Democratic Party. We understand now that this is a deliberate strategy that was laid down by the Democrats prior to the time this Congress was organized. Prior to the time when new Senators were sworn in, prior to the time when we gathered to meet, the Democrats had met and made the decision that they would hang on to the committee power for as long as they possibly could. We have written evidence of this in the form of an e-mail sent by Ben McMakin, who is the legislative director to Senator Patty Murray, the previous chairman of the Senatorial Campaign Committee.

Senator Murray's legislative director, in an e-mail dated January 2, prior to the time when we met, prior to the time anybody was sworn in, prior to the time when anybody was addressing these questions formally, made these points. He begins this by saying to his staff:

Here is an update from Daschle staff on where we find

ourselves at the beginning of the 108th Congress. Democrats

continue to serve as chairs of all committees and

subcommittees until the Senate reorganizes.

Technically, that is true. Historically, that has never been true. No party, when there has been a change in control from one party to the other as a result of the actions of the American people--those things called elections, which we usually pay attention to around here--but no party has ever tried to hang on to its control of committees when there was a transition of power from one party to the other. Technically, it is true, Democrats continue to serve as chairs of all committees and subcommittees until the Senate reorganizes, but that reorganization resolution always passes virtually immediately, and there is never an attempt on the part of the outgoing party to hang on to the power that the people have given to the incoming party.

However, Mr. McMakin makes this point:

Senate Democrats have leverage when the organizing

resolution hits the floor, as it is debatable and will

ultimately require 60 votes to pass.

Understand, this is not Mr. McMakin's idea. This is Mr. McMakin's report to his staff of the position of the Daschle staff. He simply was taking notes of what the minority leader staff was telling him and the other legislative directors. I will read that sentence again:

Senate Democrats have leverage when the organizing

resolution hits the floor, as it is debatable and will

ultimately require 60 votes to pass.

If ever there was a clear statement that prior to the time the Congress even met, Senator Daschle and his

staff were planning to filibuster the organizing resolution, there it is.

Again, the attitude that was on the Republican side when Senator Jeffords walked across the aisle, I handed the gavel to Senator Durbin that afternoon. I handed it to him without any resolution. I handed it to him without any action, without any thought that there would be a filibuster or clinging to power because I recognized the power had changed in the Senate, and that meant if we were going to have orderly activity on the people's business, the power had to change in committees.

Here is the reality of where we are today. The Democrats are saying: We cannot allow the organizing resolution to pass until the funding issues are resolved. The funding issues are not up for resolution until the end of February because of the disarray with which we ended the last Congress, with funding resolutions and appropriations bills not passed. The funding of committees was passed in the last Congress that carries over to the end of February. We have no dispute on funding at the moment. We will have at the end of February.

We can organize the Senate and allow the committees to go forward this afternoon without disrupting the present funding circumstance. We do not need to tie the two together. The majority leader has offered the resolution just to allow the Republicans to take the gavels, nothing else. The negotiations over funding can still continue. The arguments over percentages can still go forward. And the Democratic leader is saying: No, we are going to hang on to the gavels; we are going to hang on to our technical power that is a residue of the last Congress; we are going to continue to say the election did not make any difference week after week for as long as we can.

We come to another very interesting statement by Mr. McMakin in this e-mail on January 2. He says:

January 20th recess. Daschle staff says highly unlikely

that we will recess that week due to standoff over organizing

resolution and delay in addressing outstanding appropriations

measures.

Before the Congress even met, Senator Daschle knew there would be a filibuster on the organizing resolution and knew that would carry over 3 weeks, 4 weeks, on in to cancelling the January 20 recess which had been previously scheduled with, I understand, the approval of the Democratic schedulers. No, no, Daschle's staff is alerting other Senators' staffs that the recess will not take place because we will still be haggling over the organizing resolution.

I do not know how you can be more specific about a determined plan laid out in the beginning to slow down the work of the Senate, to obstruct the people's business, to make sure the effect of the election is delayed as long as possible than you have in this e-mail from Mr. McMakin.

There is one item on here I find of interest. While most of the e- mail does deal with the fact that the Democrats intend to filibuster the organizing resolution and slow down, delay as long as possible the Republicans' ability to take over the Senate and manage it, under the heading ``Other Legislative Issues,'' Mr. McMakin has this very interesting sentence:

UI fight to resume again on first day.

Those of us who were here on the first day understand ``UI'' stands for unemployment insurance. That the first item out of the box when the new majority leader offered a bill, which he thought had been agreed upon by both sides and, therefore, was a simple matter of asking unanimous consent, in fact, the Democrats were lying in wait to begin the fight over again; that the unanimous-consent request would be objected to, as it was--objected to by one of the Senators who had entered into the agreement forming it in the first place. Ultimately, that got taken care of, but the strong message laid in advance by the Daschle staff, as they talked to other legislative directors, was: We are going to begin fighting the Republicans at every step on every item the first day--the first day.

As we think back over the election, with all of the punditry that goes into analyzing it, we find that different pundits come to different conclusions. Some have said the Democrats lost because they did not have a clear message. Others have said the Democrats lost because they obstructed everything the President tried to do and the voters punished them for that obstruction. And then others said the Democrats lost because they did not obstruct enough; they were not tough enough; they did not show themselves with enough backbone.

From this memo and from the actions since this memo, it becomes clear to me the Democratic leadership in the Senate has decided the third set of pundits is correct: That they lost the election because they did not obstruct the President enough, and so this time, they are not only going to try to trip him up on unanimous-consent agreements that Republicans think have been cleared in advance, they are not only going to lay traps for the majority leader when he thinks the path is clear, they are even going to go to the point of trying to hang on to the gavels as long as they can to prevent the Republicans from organizing the committees and moving forward with the committee work as long as they can so that perhaps at the end of the Congress, they can say: You see the disarray the Republicans were in, you see how difficult it was for us to have Republicans in charge; they could not get anything done.

Filibustering the organizing resolution, demanding 60 votes before the Republican chairmen can even pick up the gavels, and then complaining, as the Senator from Minnesota did, that the Republicans are shedding crocodile tears because things are not being done the way the Democrats want--Mr. President, this is unprecedented, and I hope it is unique. I hope in every successive session in the history of this Republic, when the Senate gathers, the party which won the control of the Senate through the election is allowed to take control of the gavels in the committee as soon as the Senate gathers.

That is what I thought democracy was all about. That is how I behaved when Senator Jeffords changed the power in the Senate and, as far as I know, that is how every other Republican chairman behaved. We handed over the gavels without protest.

We handed over the gavels with an attempt to make sure the work of the Senate went forward smoothly. We did not haggle and complain. We just said, the Democrats are now in charge. Good luck. We will do the best we can to help.

When Senator Jeffords crossed the aisle, funding issues took weeks to resolve. That is a different question. Funding issues can go until February and they will not affect anybody. To tie the two of them together and to slow down, indeed prevent, the majority party from exercising majority control over funding issues that can and should be resolved at some point in the future is, in my view, irresponsible and ultimately, in the eyes of the American people, unforgivable.

I am sure there will be those in the media who will say the Democrats are just asking that the Republicans be fair. They got 49 votes, they should have 49 percent of the money.

Let me take a few moments and explain that one. If we do not deal in percentages but we deal in dollars, what is it the Republicans are offering the Democrats in funding? Forget the percentages; talk about the dollars. We are offering, as I understand it, the same dollars they had in the last Congress. What we are asking for is a few more dollars on the Republican side. That brings the Republican percentage of the total dollars up to 60, which is down from the target Senator Daschle set prior to the election when he was asked what the funding levels would be. He said the funding levels would be two-thirds to one-third, 67 percent for the Democrats, 33 percent for the Republicans, if the Democrats took clear control in the election. That was his plan if he had control as majority leader.

Now when he is not majority leader, he is saying they have to have 49 percent of the total funding. Using their power in the filibuster, they will give the Republicans a little bit of an administrative kicker but will not allow the Republicans to get enough additional administrative money so the total pot is divided 60/40. They have to have the Republicans under 60. That is the demand, as I understand it.

If we had a fixed amount of dollars we were debating and we were saying

we give the Democrats X percent of that fixed amount, maybe their argument for fairness might have some validity. But the fixed amount is the same amount they had been getting under the 107th Congress when they were in the majority, and we are saying we are going to add on the Republican side enough administrative dollars so the total percentages go up to 60, and the Democrats are objecting to that.

I ask unanimous consent for an additional 3 minutes.

So this is where we are. This is not a fight over money. This is not a fight over fairness in funding. This is a deliberate, predetermined, precongressional attempt to prevent the Republicans from being successful. This is deliberate obstruction, planned and announced, at least among their own troops, prepared for and carefully scripted. For the Democratic leader, through his staff, to be able to predict in advance of the Congress meeting that a recess scheduled 3 weeks later would not occur is a clear demonstration he is prepared to obstruct every step of the way, even if it means denying the party that was chosen by the people as the majority party its proper majority status.

So let us not get carried away in percentages. Let us not get carried away in false arguments about fairness. What is on the table is an organizing resolution that deals nothing with money. What is on the table for discussion is a funding resolution that gives the Democrats every bit as much money as they had in the 107th Congress.

Simple fairness to the American people who made their choice in November demands we get on with this; that the Republicans be given the gavels; that the Congress be organized, the Senate be organized; and that we move ahead to the people's business instead of to partisan monkey business.

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

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

Mr. President, I ask unanimous consent that I be allowed to speak in morning business for up to half an hour.

Thank you, Mr. President. I appreciate your concern and your helpfulness.

Mr. President, the Senator from South Carolina has just concluded a rather lengthy and significant speech on the President's growth package. I thought it appropriate that there be some kind of response. If I may, I would like to start with something that some of my staff might consider professorial, a little lecture, if you will, on the nature of economics to sort of set the background for what I want to say about the President's growth package.

There are laws in economics that apply regardless of how we like them or do not like them. If I may create a somewhat crude analogy but one I hope makes the point, there is a law in science known as the law of gravity. The law of gravity says two bodies will attract each other when falling in free space, so that an individual who walks to the edge of a cliff and looks down and jumps into space will be attracted to the mass of the Earth below him and end up down at the bottom of the valley. We call this falling off a cliff.

Some people will go to the edge of a cliff and, in desperation, jump off the cliff to commit suicide. Others will be playing at the edge of a cliff, examining the beautiful view, and, by accident, stumble and fall off the cliff. And there are those who say: Well, it isn't fair. It isn't fair. The first person jumped off the cliff deliberately and, therefore, to a certain extent, deserved his fate of death, but the second person had no desire to kill himself, and he just stumbled, and, by virtue of where he was, the law of gravity killed him, too. And it isn't fair.

Well, we can rail all we want about fairness, but the law of gravity operates regardless.

I make that point because a similar situation exists with respect to economics. There are laws in economics that many in this Chamber will stand here and say: It isn't fair. But they operate nonetheless. They operate just as inexorably as the law of gravity operates. And they have an impact on our lives and the way things work.

The most significant of these laws, of course, is the law of supply and demand. The law of supply and demand operates in capitalistic countries; it operates in communistic countries; it operates in dictatorships; it operates in tyrannies; it operates in free societies everywhere. The law of supply and demand is as inexorable as the law of gravity.

There are some people who stand up and say it isn't fair for Michael Jordan to play basketball for a living and be paid $20 or $30 million a year, when someone else plays just as much basketball on a playground, works just as hard as Michael Jordan, expends just as much sweat, and doesn't get paid anything.

Well, there is no demand for the services of the second player. No one wants to pay to see him perform. But there is great demand on the part of sports-loving Americans to see Michael Jordan perform. Therefore, since there is great demand for his services, and there is only a supply of one Michael Jordan, he can command virtually whatever salary he wants in that situation.

There are those who say: It isn't fair for Tiger Woods to be paid millions and millions of dollars just because he plays golf. There are plenty of Americans who would love to play golf all weekend, the way Tiger Woods plays golf all weekend, and be paid millions and millions of dollars for their efforts--it isn't fair--but for those who would like to be Tiger Woods, no one wants to watch them play golf, there is no demand for observing their abilities on the golf links, and the number of people who want to watch Tiger Woods either in person or on television is very high, a very high demand, a supply of only one, Tiger Woods. As a consequence, he can charge, once again, virtually anything he wants for his services.

The law of supply and demand cannot be repealed by the Senate. The law of supply and demand cannot be repealed by the House of Representatives. It operates, it dominates what happens in the economy.

Now we come to the question of what do we do to make the economy as strong as possible. One of the first rules we should follow is to respect the law of supply and demand and we do not attempt to repeal it through government activity in the name of fairness.

Let's talk about taxes for a moment. Most Americans don't realize that we have two Federal tax systems. We have additional tax systems at the State and local level in sales taxes, property taxes, and other kinds of taxes, but at the Federal level we have two tax systems. They are completely independent of each other. Even though for accounting purposes, the Federal Government mixes the money together and makes it appear as if there is only one source of income, there are two.

The first is the payroll taxes. The payroll taxes have been instituted by the Congress for the purpose of funding the Nation's primary entitlement programs, which are Social Security and Medicare. Everyone who works pays into the Social Security trust fund. Everyone who works pays into the Medicare trust fund. There is no refund.

There is no forgiveness. If you work, you pay into those trust funds. Then at the end, when you retire, you get the benefits that come out of those trust funds.

That is an entirely self-contained, single tax system of payments in and benefits out. We can argue about the fairness of that one because many people pay in all their working lives, die before they reach 65, and get nothing back. Other people who are long lived pay in all their working lives and then get 10 times back what they pay in. If you live until your eighties or your nineties and you have been paying in Social Security since you started work at 14, it is a great deal for you; you get an enormous amount back. But if you pay in and die at 62, every penny you put in is lost. That is the system. We can talk about dealing with it at some point, and perhaps we should, but that is one entirely self-contained tax system.

The other tax system the Federal Government uses is income tax. Income tax is graduated. The more you earn, the more you pay. The fact is that if you separate these two systems as they are separated by law and practice, you discover that roughly 50 percent of working Americans pay nothing into the second system. They make no contribution whatsoever to covering the cost of government. The top 50 percent of American wage earners pay all of the income taxes. Indeed, the top 1 percent pay something like a quarter of all of the income taxes. It is heavily loaded to the top end. There are some who say that isn't fair, some who say every citizen ought to pay something for the management of government: Every working citizen pays something for the entitlements, but every working American ought to pay something for the cost of the Defense Department and the Commerce Department and the new Homeland Security Department and all of the rest of it.

We have made the decision in the Congress that that is not the case. We have made the decision that only the top half of Americans will pay for the cost of general government. We have loaded it in such a way that the very richest Americans pay the very most. Indeed, a very high percentage of the total tax load is at the top 1 percent. When you go to the top 5 percent, you are beginning to get close to half of the whole of Federal revenues. Over half of all Federal revenue comes from the top 10 percent of earnings.

Economics is about incentives. Tiger Woods has an incentive to perfect his golf game better than anybody else's so he can get to that point I have described where he is in short supply and there is great demand. Michael Jordan has an incentive, an economic incentive, to perfect his basketball game so he is better than anybody else so that the law of supply and demand will work on his behalf. If we want to grow the entire economy and, therefore, the amount of money that comes from those top 50 percent of the taxpayers, indeed from the top 10 percent where the majority of the money comes from, we want to create incentives for those people to perfect their skills and improve their ability to create wealth.

Understand, all wealth is created from two things: One, risk taking. There is no wealth created unless somebody takes a risk somewhere; and No. 2, accumulated capital. Even the Communists learned that. They tried to say, no, wealth is created by labor, but as they built their own economy, they recognized that somewhere, someplace there had to be an accumulation of capital.

The creation of a backhoe that can dig better ditches than people can dig with sticks represents capital that is accumulated for the cost of purchasing that backhoe. Somebody put that much capital together to create that backhoe. We have in the United States the largest capital investment of any nation in the world, and we have the strongest economy in the world. We reward risk taking better than any other country in the world, and that creates more wealth in the world.

This is not an accident. This is the way it happens. When you have the right incentive to the right people, they will respond to that incentive and, under the law of supply and demand, they will then create skills that create wealth that benefits everybody.

As I have said, the top 50 percent pay all of the income taxes in this country. The bottom 50 percent benefit enormously from that fact.

I remember in the Banking Committee, a question was asked of Chairman Greenspan of the Federal Reserve system during the nineties, when the economy was booming: Mr. Chairman, said the questioner, what portion of American society has benefited the most from this economy?

Now, from the way the questioner asked the question, it was clear what answer he expected and certainly the answer he wanted. He wanted Chairman Greenspan to say the top 20 percent have benefited more than anybody else because, look at all the money they have gotten.

Chairman Greenspan surprised the questioner and pleased me with his insight when he said: Without question, the group that has benefited the most from this booming economy is the bottom 20 percent. Oh, said the questioner, look at the amount of money that has gone to the bottom 20 percent compared to the huge amount of money that has gone to the top 20 percent. How can you say the bottom 20 percent benefited the most? Because the lifestyles of the top 20 percent have not changed all that much, he said. If Bill Gates is worth $80 billion, as opposed to $60 billion, there is no big difference in his lifestyle. But if someone at the bottom 20 percent, who barely has employable skills and cannot find a job in a tough economy, can suddenly find a job at $2, $3 and $4 above minimum wage because jobs are scarce--why are they scarce? Supply and demand. The economy is booming. There is a great demand for labor and the supply is small and so the price goes up. He says, in terms of the impact on the lives of people, this booming economy has clearly benefited the bottom 20 percent far more than the other 80 percent.

I think that is the way we have to look at it, Mr. President. I think we have to say, what is the best thing we can do for the citizens who are at the bottom 20 percent. The first answer is that we can get them a job. But if you go back to the Great Depression of the 1930s, 30 percent of Americans were without jobs. In those days, that only included men; women were not in the workforce. If you were to add unemployed women to the statistics, as we would today, because women are now in the workforce, the 1930s would have been absolutely devastating for the number of people who could not find jobs. As the economy got bigger, as wealth was created through accumulated capital and risk taking, people at the bottom began to find jobs.

The statistics are out this morning that unemployment is at 6 percent. This is unchanged from the last number. Some people find that encouraging. I find it a little discouraging. I had hoped that the unemployment rate would start to go down, even though I was taught in school that 6 percent unemployment is full employment. This shows how the economists have changed their attitudes. There was a time when economists said structural unemployment built into the system is 6 percent, and if you ever get below 6 percent unemployment, the economy will overheat and self-destruct through inflation. We know now that isn't true.

We got the unemployment rate down below 4 percent in the late 1990s, as the economy was expanding and growing. Now the economy is still expanding and growing but nowhere near the rate it was. For the year 2002, the growth in the economy will probably come in around 2.9 percent. That is the current forecast. In historic terms, 2.9 percent is a good growth year. In historic terms, there are many years when we would be thrilled with a 2.9 percent growth. But compared to where we were, 2.9 looks anemic. Indeed, compared to where we can be, 2.9 is anemic. I clearly want to see the economy growing at 3, 3.5. I get a little nervous when it starts growing at 4. Then you are getting into the area where you are in danger of tipping over to inflation.

What does all this have to do with the President's growth package? This is a nice lecture on economics. I hope nobody disagrees with it because I think it is sound. But what does it have to do with the President's growth package? Simply this: The President's growth package recognizes the fundamental truths embedded in what I have had to say; that is, all growth comes from capital accumulation and from risk- taking, and the President's growth

package is saying to those who have accumulated capital that we will give you an incentive to take some risks.

There are two incentives built into the President's program: No. 1, lower taxes. If you take your money and risk it and get a return on it, you will get to keep more of it than you can now. That is an incentive for you to take your accumulated capital and risk it more than you are now.

No. 2--almost as important--is certainty. Markets flee uncertainty. Markets get very nervous when we cannot have a sense of what the future will be. The President is saying: Here is a tax cut. We want to move it forward a year and, ultimately, we want to make it permanent so that as you make your plans for how you are going to take risks with your accumulated capital, you can have some certainty that you will be able to keep a little more of it. And if they do that and the economy grows at a rate faster than 2.9 percent per year, who will benefit the most? It will be the people at the bottom. It will be the people who cannot get jobs now who will find that jobs will become plentiful again. It will be the people who are hurting now who will benefit the most from the changes in the economy that will come about as a result of the actions of the President's growth package. There are those who will say: But this isn't fair. It is not fair for you to have an incentive for the Michael Jordans of the world. Your incentives, or your money, should be given to the unemployed. Well, we have extended unemployment insurance. We did that the first day of the Congress, and we should continue to pay attention to that. But the structural needs of the economy are such that the best welfare program we can give the unemployed is to get them a job.

The best way to create jobs is to see to it that the economy grows at more than 2.9 percent per year. So for that reason, I think the President's program is a sound one. There are those who say we cannot afford it in terms of the Federal deficit--look, this is going to cost us $600 billion over the next 10 years. How in the world can we afford that?

Let's go back to the growth numbers. In the next 10 years, if we grow at 2.9 percent every year for the next 10 years, that is an increase of over 30 percent. So 2.9 compounded over 10 years comes to well over 30 percent. Let's say it is 3 percent and not compound it and say it is exactly 30 percent. The economy is currently operating at the level of $10 trillion per year. If we can keep the growth rate at 3 percent per year for 10 years, that is a 30-percent increase. Again, we are not compounding this; we are keeping the numbers simple.

Ten years at $10 trillion is $100 trillion. If the growth rate is indeed another 30 percent, that is another $30 trillion. If what we do in terms of incentives in the tax program can raise the growth rate from 2.9 to just 3.1 or 3.2, multiply that over 10 years and you have $150 trillion. Does $600 billion amount to anything when you are talking about $150 trillion?

The numbers are staggering, but they are very important. If we can raise the growth rate from 2.9 percent to 3.1 percent or 3.2 percent or 3.3 percent with the President's growth program over the 10-year period, we will solve the social problems of those at the bottom. We will get enough revenue for the Federal Government because the Federal Government revenue does not come from the budget. The Federal Government revenue comes from the growth of the economy. We can grow our way out of this problem if we are only smart enough not to fight the basic laws of economics. If we spend our time saying it is not fair, we are like the people who will not build a fence on the edge of the cliff because we say it is not fair for the law of gravity to kill the fellow who stumbled across. Or do we say the law of gravity is going to operate whether we like it or not, and let's go to the expense of building the fence on the edge of the cliff; we will get the benefit of saving the lives of those who stumble across.

I suggest that if we have the right kind of incentives for those who accumulate capital and take risks so that the economy grows, it will be worth whatever it costs, just like building the fence is worth it, even though it is an expense, because of the saving of lives at the other end.

People speak of economics as a science, and it is because it has basic laws on which it is based, but it is also something of an art. Certainly economic forecasting is an art. I have been in this Chamber long enough to see the forecasts all over the place, and no forecast that has ever been made by the Office of Management and Budget, be it Democratic or Republican, or by the Congressional Budget Office, be it Democratic or Republican, has ever proved to be accurate. There are too many variables in the system. It is not that their forecasting tools are wrong, it is that the economy is so fluid and changes all the time and people react differently to incentives than others predict that the forecasts almost always turn out to be either too high or too low.

For many years, OMB and CBO predicted surpluses, and we got deficits. Then for some years, they predicted deficits, and we got surpluses. The economy surprised us.

The plea I have made the whole time I have been in the Senate is, yes, we need to pay attention to the forecasts, we need to pay attention to the economists and their projections, but we need to be a whole lot more humble in our assumption that these are scripture carved in stone. We should focus more on the fundamentals of economics than on the details of today's projections and today's numbers.

Looking at the world as a whole, this is what we see: The United States has less structural taxation built into its system than any other country in the world. The United States has the greatest rewards for risk taking of any country in the world. The United States respects accumulated capital more than any other country in the world. And guess what. The United States has the strongest economy with the strongest growth rate and the highest standard of living of any other country in the world.

If we were to listen to our European friends who tell us what we need to be doing, we should ask the fundamental question: Do we want the U.S. economy to be like the European economy, which is not creating any new jobs, which has a higher rate of taxation than we have and which is virtually stagnant in terms of their GDP growth?

The Europeans are trying to create the world's second largest economy, maybe the world's largest economy through the Euro zone and the establishment of the European Community, but they are not getting there. I submit one of the reasons they are not getting there is because they do not reward productivity; they do not reward creativity; they do not reward risk taking. In the name of fairness, they are stifling the very activity that would create the wealth that would allow them to solve their problems.

I have owned businesses in Japan. Japan is statistically the second largest national economy in the world. Japan has been virtually in depression for 10 years. Why? Because Japan, once again, is not willing to take the kinds of steps I think President Bush's economic plan represents because they say it is not fair. As a result, the pain is spread over all of the Japanese, and they pay a serious price for their inability to recognize that economics is about incentives and the purpose of government is to get out of the way of those who create wealth to the best degree.

Yes, those who create wealth should pay for the government, and in this country they do. As I have said, once again, it is the top earners who pay for the Government. The bottom 50 percent pay nothing for governmental services. They have taxes deducted, once again, but those taxes are in the entitlement system. They do not participate in any way in the payment of Government services out of the general fund.

One last comment, Mr. President, and I will yield the floor. There has been a lot of discussion here about the unfairness of the President's proposal to reduce taxation on dividends. We can debate the fairness argument, and fairness is in the eye of the beholder. There are some who say, as they do out of the administration, it is unfair to tax income twice. There are those in this Chamber who say: Hey, we tax income twice all the time in America. People earn something and they are taxed; they earn something and they are taxed again; they earn something

and they are taxed again. I will leave the fairness argument aside because, as I say, fairness is in the eye of the beholder, and I will not make the case that it is unfair to tax corporate income twice, even though I think there is some validity to the case. I want to address another fundamental question.

In this Chamber last Congress, we passed what is now known as the Sarbanes-Oxley bill. It was a reaction to the Enron scandal and to the corporate governance excesses we saw throughout all of corporate America. Out of that came a phrase that stockholders had heard but that general Americans had not heard before that scandal. It was the phrase referring to ``managed earnings.''

I remember when I was running a public company. They talked about, ``We can manage our earnings,'' the accountants were saying, ``to produce this kind of quarterly result, and Wall Street is looking for this kind of number and we should manage our earnings to give them that number.''

Mr. President, I ask unanimous consent that I be allowed to continue for another 10 minutes.

Mr. President, I remember painfully when our public company fell 1 penny per share short of the projection that Wall Street was looking for. The stock dropped something like 20 percent that day because we fell 1 penny short. When some people in the company said it is not fair for us to be penalized that way, the reaction of the Wall Street analysts was very interesting.

They said: You have the ability to manage your earnings, and if you were not able to find that extra penny and change your number to reflect it, that means you are in a whole lot more trouble than we thought you were. The penny is not important. What is important is what your inability to come up with that penny says about your ability to manage your earnings.

The stock, frankly, has never recovered. When I came to the Senate, it was in the low twenties. At one point in my Senate career it hit 40. Today you can buy every share of that stock you want for $1.25. Fortunately, I sold all of mine before it got there, but not at a high enough number to leave me with anything like the net worth I had when I came to the Senate. So I have had a very painful personal experience with that situation.

Back to the question of dividends. I know as a CEO you can manage earnings but you cannot manage cash. Earnings are an idea, a concept, a hope, or a prayer. Cash is a fact. We created with the Clinton tax cut an incentive for companies to manage their earnings because we put into the law there could be no corporation deduction as an expense for CEO pay over $1 million a year. In other words, if a company was going to pay their CEO $2 million a year, they could only deduct as an expense the first $1 million. So there was a disincentive to compensate the CEO with cash. We did it because people on the floor said it was not fair for a CEO to be paid that much money just like, as I say, some people say it is not fair for Michael Jordan to earn so much more money than any other basketball player.

We created an incentive for compensation to be tied to stock options. Boy, did the Enron executives get that message. They and a number of others under that incentive managed the earnings to drive up the stock price so they could cash in. And those who understood that this was phony accounting did cash in. They sold their shares at the highest point.

That did not use to happen in American industry. It used to be that the measure of a company's value was how high a dividend it paid. But dividends are paid in cash. You can manage earnings but you cannot manage cash. You have to manage the business in order to get cash.

If we were to say, OK, we will make it attractive for people to invest in companies that accumulate cash and pay that cash out to their owners, it will be taxed but it will only be taxed once and the owners can look for a cash return, I think that would have a greater impact on corporate governance and decisions in the boardrooms of America's manufacturing corporations than all of the Sarbanes-Oxley bills we can conceive of and pass. If we want to change the corporate culture in America back toward more fundamental sound manufacturing and goods- producing companies, what structural change could we make that would have a more beneficial effect than saying if you concentrate on accumulating cash which comes from real operations rather than managed earnings, and there is an incentive for you to pay out that cash to your shareholders so there will be an incentive for shareholders to reward those managers who manage their business on sound principles rather than managed earnings, we would have a cultural change that would be tremendous.

Back to my beginning point. Ultimately, the solution to all of our economic problems is to have the economy grow, to have it grow on a sound basis, to have it grow on a consistent basis, to have it grow year over year over year. If we can get the growth rate back up from last year's 2.9 percent to 3.1 or 3.2 and maintain that for the next 10 years, at the end of the 10-year period with the 3-percent growth rate sustained and compounded, we will have all the money we need in the Federal Treasury to cover all projections of deficits. We will have an unemployment rate well below today's 6 percent, even though 6 percent is historically considered full employment. We will have all of the things we need. If in the name of ``fairness'' we ignore economic laws, we ignore the impact of the law of supply and demand, and we do things now that look good for political rhetoric and hamper the long-term growth of the economy, we will find ourselves 10 years from now with bigger deficits and slower growth and higher unemployment and more social problems.

Ultimately, we must keep our eye on the goal that we have: grow the economy. Grow the economy intelligently on the basis of sound principles, build incentives into the system that will reward those that will contribute to growing the economy. And as we do that, we will then be in a position to solve all of our economic problems.

I yield the floor.

Mr. President, I spoke at length and I do not intend to do that again. I congratulate the Senator from New Jersey on his presentation. Even though it sounds as if we are miles apart, we are in fact very much together on our determination to see to it that the ultimate result of what we do is long-term growth for the whole economy. I congratulate him on his analysis.

I have a few things, obviously, with which I would disagree and anticipate that we will have that conversation both in the Banking Committee and on the floor.

There are two specifics I would like to respond to briefly before I turn the time over to my friend from Ohio. The Senator from New Jersey said he would prefer, with respect to dividends, that they be deducted as expenses on the corporate P&L statement rather than made tax free to the recipient. I agree with him absolutely, that that is the more intelligent way to do it. I have said that to the White House as we have had these conversations. The reaction is politically that would be more difficult to sell than making it sound tax free to the recipient.

Maybe if the Senator from New Jersey and I march together in that particular parade, we can move in that direction because the comments he makes about the complexity of the tax system are exactly correct. The difficulties of reporting how this would be handled are just as complex as the Senator from New Jersey suggests they are. I would be with him in seeing if we could make that shift somewhere along the way.

I know he would stop short of doing that because of his feelings with respect to the dividend proposal anyway, but I want him to know that his analysis here is the same as mine and that he has analyzed that one correctly.

The other item we ought to have on the table as we have the discussion, the Senator from New Jersey refers to the impact on the top 1 percent; they would receive $900,000, et cetera. That is true if we assume that every taxpayer who files a tax return who is in that top 1 percent is in fact an individual.

When I first came to the Senate, I stood on this floor and asked this fundamental question--I know the answer from the Senator from New Jersey will be yes, but the answer from the vast majority of my colleagues was no--do you know what a K-1 is? Overwhelmingly, Republicans and Democrats had no idea what a K-1 is. A K-1 is the form you file for income you are receiving from a partnership or an S corporation.

A majority of the tax returns filed by the individuals who would receive the $900,000 to which the Senator from New Jersey refers include K-1 income. The K-1 is set up to avoid double taxation. You join an S corporation or a partnership and you say: All right, the profits of that corporation will flow to my individual tax return. I will pay taxes.

I know this very dramatically from my experience in the 1980s when the personal rate was lower than the corporate rate. With four other individuals, we built a company from virtually nothing to a company that today employs over 4,000 people, and we did it in the decade of greed, as it was referred to by some, of the Reagan years when the top personal rate was 28 percent. By putting that on my personal tax return and paying 28 percent rather than today's effective rate of 42, I was able to see to it that that company, which I headed as the CEO, grew with internally generated funds.

The difference between a 28-percent yield to the Feds and a 42- percent yield to the Feds was the difference between our ability to make that business survive. We built that business entirely with internally generated funds.

My salary was $100,000. My tax return showed $1 million because the money that was flowing through that corporation went on to my tax return as K-1 income. I didn't get a dime of that. I would have loved to have had the after-tax income show up, but we had to fund the company. So as we talk about the tax break to wealthy individuals during this debate, let us keep in mind that we are not talking about Michael Jordan or Donald Trump or Tiger Woods. Yes, they would get those breaks, but overwhelmingly a majority of the people who would get those breaks are businesses that, either through an S corporation device or a partnership device, are putting that income on to individual returns. And that would, in fact, be money that would be invested in creating new jobs. That would, in fact, be money that would be invested in growing the economy.

I know the Senator from New Jersey has had K-1 income because he has been a partnership partner in a very successful partnership, and he understands this. But I want to take this occasion to put this on the record and make this part of the debate as we go forward.

Let us understand, as we argue about the amount the top 1 percent is going to get out of this, that we are not talking just about individuals; we are talking about businesses that depend very definitely on the benefit that comes from having S corporation profits reported through a K-1 show up on individual tax returns but are, in fact, not getting into the individual pockets, are, in fact, funding the growth of small businesses and new enterprises.

With those two immediate comments, I will yield the floor and save the other notes I have taken on the Senator's excellent speech for a direct conversation with the Senator from New Jersey. He has made a significant contribution to this debate, and I look forward to working with him to try to eventually come up with a growth package that makes sense.

Mr. President, I ask unanimous consent to proceed for up to 10 minutes as in morning business.

Mr. President, this is the first day of the 108th Congress. I remember the former Senator from Kansas, Nancy Kassebaum, used to refer to these days as the first day of school, coming back after the recess. Of course, it is a time of celebration as new Senators gather. This one is particular in that it is a time of a new majority leader. I rise to express my confidence in and give my congratulations to Senator Frist of Tennessee in his assuming the position as majority leader. He will prove to be an outstanding leader. The Senate and the people of the United States will be well served by his stewardship.

However, I wish to take this opportunity to make a few comments about the previous majority leader, Senator Lott of Mississippi. Senator Lott has been very much in the news of the last few weeks. He ultimately made what I consider to be the right decision in stepping aside so that the challenges raised to him would not get in the way of the business of the Senate or of the country. The caricature of Senator Lott that appeared in much of the national media did not match in any way the man that I know and love.

I rise to comment briefly on the contribution Senator Lott has made to this institution and to the Nation and take the opportunity of the shifting of power to pay tribute to Senator Lott and the work he has done.

There are many things in his career that we could point to. This is not his funeral so I won't run through a list. But there is one in particular that stands out in my mind, which I will share with those who may be watching, that demonstrates the kind of leader Trent Lott was. I refer to the experience many of us described as the most significant of our careers, and that was the historic moment when the Senate sat in judgment as a trial for the impeachment of the President of the United States. For only the second time in our history, a President had been impeached by the House of Representatives, and we were required

under the Constitution to hold a trial to determine whether the President should be convicted of those crimes of which he was impeached.

Many in the press, many uninformed, asked: Why is the Senate wasting its time dealing with this challenge?

The Constitution left us with no choice. Once the House of Representatives had voted impeachment, the Senate was required under the Constitution to hold a trial, with the Chief Justice of the United States presiding. It was a historic time, and many of my colleagues commented that this was the most significant vote they would ever cast in their political careers.

We met in the old Senate Chamber to discuss what we should do. That was a historic meeting, off the record, if you will, because it was not here with an official reporter taking down every word. But it was an opportunity for Senators to speak freely and openly. In very solemn and somber proceedings, we discussed what we should do. I am not violating any confidences because it has been reported in the press that the Senator from West Virginia, Mr. Byrd, spoke on behalf of the Democrats as we addressed that issue. He made this point. I can't remember his exact words, but these were the words that are in my mind.

Referring to the case before us, he said: This case is toxic. It has besmirched the Presidency, and it has soiled the House of Representatives. And it is about to do the same thing to us.

I believe his analysis was correct, that the case of President Clinton and his actions did indeed besmirch the Presidency, degrade the Presidency, and I think the way it ultimately played out in the House of Representatives stained that body and left bitterness that is still producing bitter fruit. Senator Byrd warned this case, this toxic case, was about to affect the Senate.

The majority leader, who had to handle such a case, was Trent Lott of Mississippi. I was at his side in many of his meetings. I watched from afar in many of the other things he did. Senator Lott handled that historic challenge with as much sensitivity, finesse, wisdom and, yes, grace as it would be possible to do.

When it was over, Senator Lott and Senator Daschle met in the well of the Senate, embraced each other, and said: We did it.

Yes, they did. And they did it together. But the primary responsibility was on the shoulders of Senator Lott. He made Senator Byrd's prophecy not come true. Instead of staining the Senate, instead of soiling the Senate the way that case soiled the Presidency and the House, it was in many ways the Senate's finest hour. The case was handled with dignity. The case was handled with dispatch. And the case was handled with a minimum of bad feelings on both sides.

There are some outside the Senate who attacked Senator Lott and said: You should have had a full-blown trial. You should have let this drag on for 6 weeks, even 6 months. And at the end of that period of time, maybe, just maybe, you would have had a conviction.

Senator Lott understood that the dignity of this body and the unity of the country required the kind of handling of that case that he gave us.

History will look back on the stewardship of Trent Lott as majority leader of the United States with great approval and kindness. This is a man of extraordinary skills who handled himself in an extraordinary way, and all of us who sat in the Senate through that experience benefited by his leadership.

Now he is moving on to other assignments. As I congratulate Senator Frist on his ascension to the majority leadership, I also congratulate Senator Lott on the prospect of a continued career of contribution, perhaps in the policy area more than in the process area. He has demonstrated that he can master the legislative process as well as anyone on the planet. I expect he will now demonstrate that he can make contributions of equal significance in the policy area.

On a personal note, while he is many years my junior in this business of politics, he has acted as my mentor and my teacher. I can think of many times when I have been tangled up in the minutia and arcane nature of the way this body works, where I had nowhere else to go to get myself untangled and set straight. I called Senator Lott and, with calmness and clarity, he said, why don't we do this and, suddenly, the Gordian knot was cut and I emerged ready to go forward in my career because of his wisdom and his guidance.

Again, I congratulate Senator Frist. I was happy to vote for him when the opportunity came. I am looking forward to working with Senator Frist as he demonstrates his ability to lead this body. I have every confidence that that will be a tremendous period in the Senate's history, but, at the same time, I wanted to rise and make it clear that as we embrace Senator Frist's leadership we should recognize and pay tribute to the contribution made to this body and ultimately to the country by Senator Trent Lott of Mississippi.

I yield the floor.