Wayne Allard

Mr. ALLARD

Mr. ALLARD. Mr. President, this morning, the Senate will immediately proceed to a rollcall vote on passage of the transportation appropriations bill. Following that vote, the Senate will begin consideration of H.R. 1151, the credit union legislation. Any votes ordered today with respect to the credit union bill, or any other legislative or executive items, will be postponed, to occur on Monday, July 27, at a time to be determined by the two leaders. As always, Members will be notified when Monday's voting schedule becomes available. I thank my colleagues for their attention. I yield the floor.

Mr. ALLARD

Mr. ALLARD. Mr. President, I rise in support of H.R. 1151. First, I want to begin by thanking Chairman D'Amato for skillfully steering the Credit Union Membership Act through the Senate Banking Committee and onto the Senate floor. It has been a pleasure to work with both him and his staff on this Senate Banking Committee. That also is speaking in behalf of my staff also. We have been very appreciative of their work in helping us with our issues and what you are doing for credit unions. I am pleased to support this credit union bill in the Banking Committee, and I am pleased to continue to support it now. I have always been a supporter of the credit union movement. The main reason I have been supportive is because I felt that any competition among financial institutions is vitally important. And, obviously, the credit unions provide the customer another choice out there; another way of meeting his banking and financial needs. During my years in the Colorado State Senate I worked closely with the Colorado Credit Union League and the numerous credit unions and members that we have in Colorado. I have been pleased to continue my work with the Colorado Credit Unions as a member of the Senate Banking Committee. Mr. President, there are 185 credit unions in Colorado. There are 1,321,000 credit union members in Colorado. And the credit unions hold nearly $7 billion in assets in Colorado. Credit Unions play a vital role in our communities. They provide an opportunity for groups of people to join together and pool their assets. Credit Unions are run by their members. Those members make loans and help each other to get ahead and build a prosperous life for their families and for their communities. Let me turn to several provisions in the Credit Unions bill. I am particularly supportive of the new capital requirements and the ``prompt corrective action'' requirements that we put in the bill during our deliberations in the Senate Banking Committee. That is because I feel so strongly that we need to work to make sure that our financial institutions remain safe and sound. I have always felt that we were particularly blessed to be serving in the Senate particularly during a time when our economy is doing very well. As much as I would like to hope that our economy continues to prosper, history has shown us that periodically there are fluctuations in our economy; there are good times and there are bad times. If we do not make good decisions today to assure safety and soundness, it is going to create problems in the future. So that is why I have been so pleased with the safety and soundness provisions that we have added to H.R. 1151. These provisions are vital to protect credit union members. We want the credit union members' movement to remain strong and well capitalized. Let me turn to the issue of taxation. From the beginning of this debate, I have opposed the taxation of credit unions. They are collective organizations. They are not-for-profit businesses. They pool their assets. Their gains go back to the members as assets. They also go back to their members as interest, and that interest is taxable to the credit union members. As I said earlier, credit unions exist to help their members, and consequently I do not believe that credit unions should be taxed. I have been concerned with the tax and regulatory burden that remains on small financial institutions, whether they are banks or credit unions. Consequently, I will support elimination of the Community Reinvestment Act. I support lifting the CRA burden on small financial institutions, and I support reducing the tax burden on small banks. I raised this issue during the Banking Committee's hearing last month on the proposed financial modernization legislation. We need to do something to make certain that our small community banks can remain viable. We do not want those banks to drown in the burden of regulation and taxation. At the time of the hearing I had brought up a question about subchapter S corporations and independent banks, and, graciously, the chairman says, ``You know, I think maybe you are on to something. We ought to continue to pursue that.'' Consequently, because of the strong support from the chairman in trying to give tax relief to small banks, I put together some legislation. This has all resulted because a small, independent banker from my State of Colorado decided to share with me some ideas he had about S corporations and how we could help small banks through the Tax Code. So the chairman was very receptive to those concerns. He said, ``Well, let's work on it.'' We worked on it. We have introduced some legislation that will be helpful to small bankers in Colorado and throughout the country. It has become very clear that small banks do want something done with their subchapter S corporations. The subchapter S provisions of the Internal Revenue Code reflect the desire of Congress to eliminate the double tax burden on small business corporations. Subchapter S has been liberalized a number of times, and most recently in 1996. Yesterday, I introduced legislation that will expand and improve subchapter S of the Internal Revenue Code, and this is S. 2346. I am joined in this effort by Senators D'Amato, Faircloth, Hagel, Enzi, Bennett, Mack, Shelby, and Grams. This legislation contains several provisions that will make the subchapter S election more widely available to small businesses in all sectors. It also contains several provisions of particular benefit to community banks that may be contemplating a conversion to the subchapter S. Financial institutions were first made eligible for the subchapter S election in 1996. This legislation builds on and clarifies the subchapter S provisions applicable to financial institutions. As Congress considers credit union legislation and financial modernization legislation, it is important that we explore ways in which we can ensure that the tax and regulatory burden on our community banks remains reasonable. This S corporation legislation is reflective of that desire, and we will now begin working with the Senate Finance Committee to see if we can get this legislation in a bill this year. Section 403 of this credit union bill will require the Secretary of the Treasury to submit a study to Congress within 1 year that will make legislative recommendations on how Congress can reduce and simplify the tax burden on small banks. I hope the Treasury Department will be endorsing this S corporation legislation. It seems to me that it is one of the better ways to reduce the tax burden on small banks. In the last several months, there has been considerable conflict between banks and credit unions. They both play a vital role in our communities. I hope that in the coming months we can produce legislation that will strengthen credit unions as well as community banks, and I support the bill. I thank the members of the committee, particularly the chairman, for their support of H.R. 1151, and look forward to swift passage. I am particularly pleased to serve on this committee because of the cooperation and sincere desire in that committee to make sure that we have strong financial institutions and that we have competition out there, which I think is the real answer to a lot of our problems. I yield the floor, Mr. President. Mr. D'AMATO addressed the Chair.

Mr. ALLARD

Mr. ALLARD. Mr. President, today I am pleased to introduce legislation that will expand and improve Subchapter S of the Internal Revenue Code. I am joined in this effort by Senators D'Amato, Faircloth, Hagel, Enzi, Bennett, Mack, Shelby, and Grams. The Subchapter S provisions of the Internal Revenue Code reflect the desire of Congress to eliminate the double tax burden on small business corporations. Pursuant to that desire, Subchapter S has been liberalized a number of times, most recently in 1996. This legislation contains several provisions that will make the Subchapter S election more widely available to small businesses in all sectors. It also contains several provisions of particular benefit to community banks that may be contemplating a conversion to Subchapter S. Financial institutions were first made eligible for the Subchapter S election in 1996. This legislation builds on and clarifies the Subchapter S provisions applicable to financial institutions. Mr. President, as Congress considers credit union legislation and financial modernization legislation, it is important that we explore ways in which we can ensure that the tax and regulatory burden on our community bankers remains reasonable. This legislation is reflective of that desire. Mr. President, I ask unanimous consent that the text of the bill and the attached explanation of the provisions of the bill be printed in the Record.

Mr. ALLARD

Mr. ALLARD. Mr. President, today I am pleased to introduce legislation that will expand and improve Subchapter S of the Internal Revenue Code. I am joined in this effort by Senators D'Amato, Faircloth, Hagel, Enzi, Bennett, Mack, Shelby, and Grams. The Subchapter S provisions of the Internal Revenue Code reflect the desire of Congress to eliminate the double tax burden on small business corporations. Pursuant to that desire, Subchapter S has been liberalized a number of times, most recently in 1996. This legislation contains several provisions that will make the Subchapter S election more widely available to small businesses in all sectors. It also contains several provisions of particular benefit to community banks that may be contemplating a conversion to Subchapter S. Financial institutions were first made eligible for the Subchapter S election in 1996. This legislation builds on and clarifies the Subchapter S provisions applicable to financial institutions. Mr. President, as Congress considers credit union legislation and financial modernization legislation, it is important that we explore ways in which we can ensure that the tax and regulatory burden on our community bankers remains reasonable. This legislation is reflective of that desire. Mr. President, I ask unanimous consent that the text of the bill and the attached explanation of the provisions of the bill be printed in the Record.

Mr. ALLARD

Mr. ALLARD. Mr. President, I am here today to tell my colleagues about an issue of great importance to the people of my state of Colorado. This summer, the state of Colorado has lost an estimated $23 million, at least, due to the problem I am here to address. We have been assured again and again by the Administration that the situation would soon be resolved. I no longer have faith in that assurance, and I believe that I am going to have to make my point stronger and louder in order to secure fair treatment for the State of Colorado. I am disappointed that the problem has lingered for this long, and that my attempts to cooperate with the Department of Transportation have been met with apathy and diluted efforts. This is a problem that I have been working on for months, and I am continually and increasingly frustrated by the lack of concern shown by the Administration. I was first made aware in April of this year that an application for international service into Denver International Airport was near approval. A foreign airline filed an application with the Department of Transportation to provide direct service between Denver and London. This flight was to be the first overseas flight at Denver's young international airport. British Airways wants to provide this service, and to date is the only airline that has applied to do so. Of course the prospect of a direct flight to Europe is exciting for the people of Colorado; our booming economy, growing business sector, and tourism industry are primed for this direct international service. The application process under the bilateral Air Transport Services agreement between the United States and the United Kingdom is designed to be a routine step. By law, final review by the United States of the British Airways flight is intended only to assure compliance with technical requirements for air safety and ownership. At some point in the review process, the Department decided to hold the British Airways flight hostage to influence an unrelated situation. An American airline had approval to provide service between Charlotte, North Carolina and London, but being a new entrant into the market, choice slots were not available for their service. That airline, US Airways, and the Department of Transportation demanded that British Airways relinquish its established slots into London's Gatwick Airport before the Denver-London service would be approved. The Senior Senator from Colorado, Senator Campbell, and I met with Secretary Slater. We offered our assistance and shared our concerns, and the Secretary assured us that the situation would be resolved soon. Subsequently, US Airways participated in an international slot conference, and legitimately negotiated more desirable slots at Gatwick. The original conditions for approval of Denver-London service were met. Still, the Department refused to approve the British Airways application. My patience in this matter has not been respected. Frankly, the expanding complaints of US Airways have absolutely no connection to the pending Denver-London service, and Department is inappropriately using the people of Colorado. I do not approve of the Department leveraging the concerns of one state against another, or using our international flights as a bargaining chip in an unrelated matter. This is the first time the Department has withheld final approval on a US/UK flight to influence the status of another flight. The precedent being set indicates bureaucratic abuse and blatant disregard for a fair resolution of Colorado's problem. The Department should focus on the international flights between London and Charlotte; there is no need to push Coloradans around while the Administration and US Airways are engaged in an unrelated fight. It is reasonable to think that this service would easily win support from the Transportation Secretary. British Airways has a clear right to operate this service under the term of the UK/US Air Services Agreement. In addition, Secretary Slater is attempting to negotiate an open skies aviation agreement with Britain. In light of this fact alone, failure to approve the Denver-London route is ridiculous. After this episode with the Denver flight, does the Administration really believe that the British authorities will have faith in the ability of the United States to be forthright in international flight negotiations? The issue of approving Denver-London service was postponed recently when the Secretary and several of his top staffers traveled to Africa. Patiently awaiting his return, I came across a story on the AP wire about the Secretary's activities in Africa. I was stunned to see the story that began, and I quote, ``Transportation Secretary Rodney Slater Friday called on European authorities to respect aviation agreements negotiated by the United States with individual countries.'' It is ironic that the Secretary lectured Europe on fulfilling its obligations under air service pacts when he will not honor the current US/UK pact and approve Denver-London service. How the Secretary could make these comments while keeping a straight face is beyond me. Speaking of that trip, I would like to know why the Secretary has been able to find so little time to deal with this pressing issue. When I last spoke to Mr. Slater on the phone, he told me that he was working to resolve the issue in the next few days. I expected his call at the end of that week and hoped to learn that they had approved service. It was the week before our July recess, and the call never came. After waiting for another week and investigating the delay, I learned that the Secretary was traveling to Africa for the second time this year, and that Colorado's problems would have to wait until July 15. While he simply set the issue aside, I could not. Unfortunately, neither myself nor my staff could reach the Secretary or his top aides on this issue because they were all traveling and unavailable. I am concerned that the Secretary and Assistant Secretaries have so much time for traveling and so little time for important issues here at home. I am outraged to know that my constituents' tax dollars, and mine as well, are buying flights to Africa while the state is losing money because of the Department's inaction. There is absolutely no reason that the Secretary could not have approved Denver-London service before he and his staff left for Africa. Now, after being assured that this would be his top priority upon returning from his trip, I am astounded that Mr. Slater is not prepared to be straightforward and make this decision. Several Colorado officials have told Secretary Slater, in no uncertain terms, that this is an important issue to Colorado. I watched the original start date for British Airways service move from June First to August First, and saw it again postponed to September First. The Secretary knew very well that the service had to be approved by the end of last week for the airline to be prepared to begin on that date. Failure to approve the flight has resulted in moving the start date to October first. Colorado has already lost four months of direct Denver- London service, and the reasons that the Department has provided for this delay are inadequate. I am through standing by while the Department is delinquent on its approval of Denver-London direct air service. I am prepared to consider using any means available to me to hasten a decision by the Department.

Mr. ALLARD

Mr. ALLARD. I thank the Senator from Missouri. I thank the Chair for recognizing me. I appreciate the other Members who are on the floor allowing me to go ahead and speak. I was presiding, and the Senator from Florida has graciously consented to give me some relief from the Chair while I come down and make some comments on this important piece of legislation. I want to talk a little bit about my State because I think it gives some idea of how this issue impacts my State. I happen to be rising in favor of the Nickles amendment, the Senator from Oklahoma. You see the map on the Senate floor entitled ``FHA Loan Limits by County,'' which was alluded to during comments made by my colleague from Missouri. During his comments, he pointed to the Rocky Mountain region in my State. That region characterizes counties of high levels of income which would be impacted by the upper loan limit increase in the VA/HUD Appropriations bill. These counties have a high preponderance of second homes. The reason these counties have a higher FHA loan limit is that they are recreation counties. People who go to these counties and have second homes make a considerable amount of money. Now, there is no doubt that there is a housing problem in those counties for individuals who have to run the ski lifts, individuals who work in the ski lodges, but they do not have the income level to afford a loan of $197,000 for a home. In fact, some may not even qualify for the lower loan limit range, which we are raising from $86,000 to $109,000. In addition to this disparity of wages that you see in these areas, many of these counties have implemented a no-growth policy. Finding affordable housing is certainly a problem we all should strive to deal with, not just at the Federal level, but also at the local level, at the county level, and particularly at the city level. Many counties in Colorado, because of their rapid growth rate, have decided to try to slow down that growth by increasing the costs of development, increasing the costs of homes. If we have a problem in those counties with obtaining affordable housing, I think that local governments should have a responsibility and should implement some programs that would hold the costs of those homes down so that those with lower and median incomes can afford them. I think my colleague from Oklahoma, Senator Nickles, did a very good job in explaining what the current situation is, and the proposed increase of the FHA loan limit. Currently, the lower FHA loan limit is $86,000 and the upper limit is $170,000. This appropriations bill raises both of these limits to a lower limit of $109,000 and an upper limit of $197,000. I like the idea that we raise up the lower loan limits. I think that helps us meet the needs of lower income and median-income families. The higher income limits, in my view, don't need to be subsidized. Most of that market is already met by conventional loans. In fact, in order to have a $197,000 mortgage, a buyer typically needs an income level of $74,000 or more. These individuals are the top 16 percent of the income earners in the United States. Nearly 85 percent of households earning more than $50,000 already own homes. I think that is reflected in the State of Colorado. I point out this idea of raising the loan limits is a rather controversial issue, as far as Colorado is concerned. The mortgage lenders in my State cannot reach a consensus as to whether this ought to happen or not. They are divided. So it is with a considerable amount of thought and concern that I enter into the debate as it applies to my State of Colorado. I see no reason why the Congress should be advocating that HUD compete against a very successful private market. I would also point out, from some of the testimony that was received by the Banking Committee on which I serve with the Senator from Florida, Senator Mack, there is really no clear connection between FHA loan limit increases and greater access to financing affordable houses. So when I put all these factors together, I find myself opposing raising the upper loan limit, and yet supporting an increase in the lower FHA loan limit. I think a lot of the testimony that was heard by the Banking Committee, the authorizing committee, was significant in pointing out that there is a three-times higher default rate for higher loans than there is for lower loans. In other words, the higher the loan is for the home, the higher the default rate is, as far as FHA is concerned. In this program, if there is a default on a loan, the taxpayers must pick up the cost. I do not think it is necessary for us to provide for that indirect subsidy. If we look at the lower loan limit, 73 percent of all mortgages of $85,000 or less are already provided by the private sector. Therefore, I think we can assume that this market is being serviced sufficiently. The FHA program is set up to make riskier loans to individuals who are not serviced in the private sector. By allowing the loan limit to increase, FHA will be insuring higher valued loans and will be, as a consequence, exposed to an increased risk. As I pointed out earlier, as these loan limits increase, the number of defaults will simply increase. I don't think that we should be increasing the upper loan limit. Therefore, I am supporting the Nickles amendment. I think it is the correct approach to the problem, particularly as it applies to my State. I think it is also the right approach as far as the country is concerned since only three percent of the counties will be affected by the upper limit. Without any further ado, I yield the floor. I thank Senators for their indulgence.

Mr. ALLARD

Mr. ALLARD. I further ask consent that the Senate stand in recess from 12:30 until 2:15 p.m., to allow the weekly party caucuses to meet.

Mr. ALLARD. Mr. President, I ask unanimous consent that when the Senate completes its business today it stands in adjournment until 9:30 a.m. on Tuesday, July 14. I further ask that when the Senate reconvenes on Tuesday, immediately following the prayer, the routine requests through the morning hour be granted.

Mr. ALLARD

Mr. ALLARD. Mr. President, I ask unanimous consent that the Senate now turn to H.R. 6, the higher education bill, and that the Senate insist on its amendment, request a conference with the House, and the Chair be authorized to appoint conferees on the part of the Senate, all without further action or debate.

Mr. ALLARD

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

Mr. ALLARD

Mr. ALLARD. I ask unanimous consent that the bill be deemed read a third time and passed, the motion to reconsider be laid upon the table, and that any statements relating to the bill appear in the Record.

Mr. ALLARD. Mr. President, I ask unanimous consent that the Senate now proceed to the consideration of S. 2294 introduced earlier today by Senator Hatch.

Mr. ALLARD

Mr. ALLARD. Senator Hatch has an amendment at the desk for himself and others, and I ask for its consideration.

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

Mr. ALLARD. Mr. President, I ask unanimous consent that the Senate now proceed to the consideration of Calendar No. 382, S. 2022.

Mr. ALLARD. I ask unanimous consent that the amendment be agreed to, the committee amendment be agreed to, the bill be considered read the third time and passed, the motion to reconsider be laid upon the table, and that any statements relating to the bill appear in the Record.

Mr. ALLARD

Mr. ALLARD. I yield the floor.

Mr. ALLARD. If there is no further business to come before the Senate, I now ask the Senate stand in adjournment under the previous order, following the remarks of the Senator from New Jersey, Senator Lautenberg.

Mr. ALLARD

Mr. ALLARD. For the information of all Senators, on Tuesday morning, under a previous order, the Senate will debate the motion to waive the Budget Act with respect to the Daschle amendment, with a vote occurring on the motion at 10 a.m. Following that vote, the Senate will continue consideration of the agriculture appropriations bill with the hope of finishing the bill by early evening. For the remainder of the week, it is hoped that the Senate will complete several more appropriations bills. Members are reminded that the Leader Lecture Series, hosted by the majority leader, will be held tomorrow night at 6 p.m. in the old Senate Chamber. The Speaker will be former Senate Majority Leader Howard Baker. Also, on Wednesday morning at 10 a.m. there will be a joint meeting of Congress in the House Chamber to receive an address by the President of Romania.

Mr. ALLARD

Mr. ALLARD. Mr. President, I ask unanimous consent that the Senate now proceed to the consideration of Calendar No. 438, S. 1976.

Mr. ALLARD. Mr. President, I ask unanimous consent that the committee substitute be agreed to, the bill be considered read a third time and passed, the motion to reconsider be laid upon the table, and that any statements relating to the bill appear in the Record.

Mr. ALLARD

Mr. ALLARD. Mr. President, I wish to speak about capital gains and the way that we look at the estimates that come from a reduction in taxes such as capital gains. Earlier this year, I introduced legislation to reduce the capital gains tax to 14 percent and to provide indexing of the capital gains tax from that point out. This legislation builds on last year's tax bill which moved the capital gains rate down from 28 percent to 20 percent. I rise today to commend both the Senate majority leader and the Speaker of the House for their recent calls for a reduction in the top capital gains rate to 15 percent. Both of our leaders have indicated they are introducing legislation to cut the rate. This could be accomplished as early as this year. Again, I commend them for their leadership. I also wish to express my support for a provision in the IRS reform bill that returns the holding period for long-term capital gains treatment to 12 months. Last year, the administration unwisely insisted on extending this out to 18 months. This added complexity to the code and represented another attempt by Government to micromanage investment decisions. There is a great deal of interest in the tax treatment of capital gains due to mounting evidence that capital gains tax rate reductions not only benefit taxpayers and the economy but also increase revenues. Last month, the Joint Tax Committee released new estimates of the revenue resulting in the 1997 reduction of the top capital gains rate from 28 percent to 20 percent. The Joint Tax Committee apparently underestimated the revenue gain in 1998 by $13 billion and in 1999 by $12 billion. In fact, the latest estimates are that over the first 5 years revenue could be as much as $58 billion greater than previously forecast. Now, this does not surprise me. In fact, there are a number of us in Congress who have been making this very point for years. The capital gains tax rate cut will increase revenue, not reduce it. There are two principal reasons for this increase in revenue. First, there is the short-term incentive to sell more capital assets; second is the long- term progrowth benefit from a capital-friendly tax policy. The capital gains tax is largely a voluntary tax. The tax is only paid if the investor chooses to sell the asset. If taxes are high, an investor can hold on to the asset for years. But when taxes are low, investors will often decide to sell the assets and ``realize'' the capital gain. History confirms this pattern. In 1978, when the capital gains tax rate was reduced from 40 percent to 28 percent, capital realizations increased by 50 percent, and tax receipts increased. In 1981, Congress and President Reagan further reduced the capital gains tax rate to 20 percent. Once again, capital gain realizations increased dramatically and by 1983 were again up by 50 percent. By contrast, tax revenues actually dropped for a number of years following the capital gains tax rate hike in 1986. Mr. President, last year, when Congress proposed to cut the capital gains tax rate from 28 percent to 20 percent, the Joint Tax Committee submitted its revenue estimate. The Joint Tax Committee forecast a 10-year revenue loss from the rate cut of $21 billion. Mr. President, it is clear that the Joint Tax Committee and Congressional Budget Office estimates dramatically underestimated both the strength of the economy and the positive response to the tax rate cut. The Joint Tax Committee now concedes that there will be a significant revenue gain from capital gains realizations. In my view, a review of the last twenty years of capital gains tax rates and the associated revenues suggests that the model used by the Joint Tax Committee and the Congressional Budget Office to estimate capital gains revenues is flawed. The Congressional Budget Office argues that government revenue estimates adequately account for behavioral changes that occur as a result of tax changes. Despite this claim, it would appear that when tax rates are lowered the revenue estimating model significantly exaggerates the revenue losses. In fact, in no single year after a rate cut has there ever been a loss of revenue. Conversely, when tax rates are increased, the model significantly exaggerates the level of revenue gains. Not only do the Congressional models fail to accurately measure the response of taxpayers to changes in tax rates, they exclude an estimate of the impact of tax changes on economic performance. Congress is largely in the dark when it comes to any estimates of the economic benefit of tax rate reductions. It is logical to assume that a lower tax rate on capital lowers the cost of capital. This clearly benefits the economy. As a consequence the Federal Government will realize greater income, payroll, and excise taxes. In addition, State and local tax revenues will also rise. Admittedly, all of this is difficult to measure. However, I would like to see some attempt made to include these factors in revenue models. At a minimum they should always be appended to the official revenue estimates. This would give Congress a more complete picture of the impact of tax changes on revenues. Mr. President, I will note that a recent addition to the rules of the House permits the Joint Committee on Taxation to append dynamic estimates to tax legislation when requested to do so by the Chairman of the Ways and Means Committee. This dynamic estimate is to reflect the anticipated macroeconomic effects of tax legislation, and is to be used solely for informational purposes. It is time for Congress to build on this process. Dynamic estimates should be routinely requested in both the House and Senate. Congress should also make greater use of the work of a multitude of economists. I would note for example that in 1997 the Joint Economic Committee published a study by two Florida State University economics professors; James Gwartney and Randall Holcombe that argued that the optimal capital gains rate is 15 percent or less. These economists predicted accurately prior to last year's rate cut that a reduction in the rate would increase revenues. While improvements in the revenue estimating process are certainly desirable, the fact remains that estimates are just ``estimates'', and Congress should recognize that those estimates will often turn out to be way off the mark. That is why Congress should place greater emphasis on the impact that changes in the taxation will have on the private economy, and less emphasis on projections of government revenue. Economic growth, job creation, and international competitiveness should be our focus. Mr. President, when it comes to capital gains taxes I suggest that Congress spend less time gazing into the crystal ball of revenue forecasting, and more time focusing on the real world impact of taxes on capital formation, job creation, and economic growth. I think it will then be abundantly clear that we should continue to reduce the tax on capital to 14 percent. This will continue the good work that we began last year. Mr. President, the U.S. level of tax on capital has been among the highest in the world, I am dedicated to seeing that it becomes one of the lowest in the world. A low rate of tax will encourage capital investment, economic growth and job creation. This is no time for the United States to sit on its lead; we must continue to ensure that America is the premier location in the world to do business. A low capital gains tax will help our economy, but it will also help America's families by reducing their tax burden. I look forward to working with Majority Leader Lott and with Speaker Gingrich as we continue to cut the rate of taxation on capital gains. I yield the balance of my time. Mr. MOYNIHAN addressed the Chair.

Mr. ALLARD

Mr. ALLARD. Mr. President I was prepared to offer an amendment to the VA/HUD Appropriations bill that would have taken away EPA's authority to withdraw Colorado's delegated environmental programs. EPA has been threatening Colorado's authorization to administer delegated programs because of an environmental self-evaluation law the State passed in 1994. As many listening know, self-evaluation laws allow companies, individuals, and local governments to go above and beyond what is required in seeking out environmental problems under their jurisdiction. In return the entity who performed the audit is protected from fines. Colorado's law makes good sense, in fact in the short time it has been in existence those who have availed themselves of it have found and corrected many environmental problems that otherwise would have gone undetected. However, last February I became aware that EPA may not have been taking the State of Colorado seriously with respect to negotiations on the self-evaluation law. At that time I stated my intention to object to an EPA nominee. Subsequently, I dropped my objection to their nominee after speaking with Assistant Administrator Herman about my concerns. He agreed to do his best to ensure that negotiations occurred in good faith and that they were inclusive of Colorado's elected officials who had an interest in the manner. Over the past several weeks I became concerned that EPA had not followed through on this commitment. I was particularly distressed at the prospect that EPA had promised me they would take an action and then turned around and ignored their promise. Earlier today Assistant Administrator Herman called me and assured me that he had been faithful with respect to the previous agreement we had made. However, he agreed to redouble his efforts in negotiating an agreement to the audit issue in Colorado that has broad based support because of broad based involvement among policy makers and other local officials. While my inclination is still to offer my amendment, I am willing to forego it in this instance. However, should I find that EPA is attempting to exclude people from negotiations on Colorado's environmental audit law I will revisit this issue soon. Veterans' Tobacco-related Illnesses and Disability

Mr. ALLARD

Mr. ALLARD. Mr. President, I rise today to discuss language in the DoD authorization report contained in the ``Additional Matters of Interest'' section. The language in the DoD Authorization targets an amendment Senator Wyden and I were able to get accepted during the Superfund markup. Earlier this year the EPW Committee marked up S. 8, which if passed and signed into law would significantly improve the Superfund program. At markup Senator Wyden and I proposed an amendment clarifying the waiver of sovereign immunity currently contained in Section 120 of Superfund. A waiver of sovereign immunity basically allows private parties and state and local governments to bring suit against the federal government for noncompliance. This original waiver was added in 1986 when Superfund was last reformed and was accepted with broad bipartisan support. The intent of Section 120 is clear and unambiguous to those who research the legislative history and read it faithfully. The words are plain and they read: ``Each department, agency, and instrumentality of the United States (including the executive, legislative, and judicial branches of government) shall be subject to, and comply with, this chapter in the same manner and to the same extent, both procedurally and substantively, as any nongovernmental entity, including liability under section 9607 of this title.'' My reading of this is that the federal government needs to comply with the law just like any private party or state or local entity. As Senator Stafford said during passage of the 1986 Superfund amendments, ``. . . the legislation recognizes the reality that, only in unusual cases, th[at] national security may require issuance of circumscribed Executive orders exempting a Federal facility from the requirements of the Superfund Amendments and Reauthorization Act of 1986. In all such cases, Executive orders should adopt the method of protecting legitimate national security interests that maximize compliance with the environmental and health requirements imposed by the legislation. For example, it may be appropriate to require EPA employees reviewing cleanup plans [to] obtain a national security clearance, but it would not be appropriate to exempt such plans from national cleanup standards simply because EPA employees are assigned to ascertain what standards should apply to the cleanup.'' However, the language in the '86 Amendments was not exact enough and wiggle room was left for the Federal government to avoid their environmental responsibilities. Unfortunately, even though our amendment is merely clarifying, some in the Senate would like to maintain dual cleanup standards, one for those who live near a private National Priority List (NPL) site and another for those who live near an NPL site the federal government has responsibility over. Simply put, that should not be happening. The Armed Services Committee has expressed concern with our Amendment and has even gone so far as to include report language in their bill commenting on legal language in another bill. Further they have asked for a study on the cost of our amendment. I provide the above background as context for my reply to the Committee's characterization of our amendment to S. 8. In their report the Armed Services Committee made several claims with which I disagree. They also make claims which can be disputed which are outlined below: (1) the report states that, ``[t]he amendment would require federal facilities to comply with state and local substantive and procedural requirements, rather than the uniform, national process described in the National Contingency Plan.'' The implication is that federal facilities would no longer be subject to the National Contingency Plan (NCP) and that all cleanups would be done pursuant to state and local law. That is not the case. What our amendment in Committee simply did was allow state, local, and to some extent EPA the authority to enforce compliance with current Superfund and similar State and local laws. Enforce the current Superfund law including its implementing regulations, the NCP, and similar state and local laws against federal facilities just as they would against private parties. I have attempted to make this point clear in the past and I will attempt to do so once again, this amendment would ensure that Federal entities are held to the same standard of compliance as local, state, and private parties. Nothing more, nothing less. (2) The report also states that, ``[u]nder current law, Federal facilities are already subject to state laws concerning removal and remedial action, including laws regarding enforcement (42 U.S.C. 9620(a)(4)), but state challenges must be brought after remedial action is complete. (42 U.S.C. 9613 (g))[sic]'' The Federal government has not followed this section of law faithfully, in reality they have argued that it merely requires them to comply with substantive sections of the law, for example, Applicable or Relevant and Appropriate Requirements (ARAR's). As evidence of this is a letter from the Chief Counsel for the National Guard Bureau on September 13, 1996 to Assistant Attorney General Steve Shackman, regarding Duluth Air Force Base State Superfund Site. In this letter Mr. Hise asserts that, ``[c]ompliance with a state CERCLA law's substantive requirements, via the ARAR's process [which includes provisions to waive ARAR's], fulfills CERCLA's legal requirements.'' To state it once again, my concern is that, even though the report asserts that States can take action under 113(h) after remedial action is complete the federal polluters do not acknowledge this section means what it says. Instead, they maintain it only requires them to comply with state standards as ARARs. In fact, the only case in this area, U.S. versus Colorado, held that the federal government could not escape regulation under an authorized state RCRA program merely by listing on the NPL. Clearly, clarification is necessary that Congress intended all federal agencies to comply with this law in substance and procedure. Beyond the merely incorrect statements in the report there is a fundamental difference in philosophy. In my view the Federal government needs to be held to the same standard as any other entity. If we are going to have a Federal Superfund law then it should apply to everyone. In other words everyone needs to be in the same bath tub with the same scrub brush. I believe this was true when we made all laws applicable to Congress and believe we need to make at the least this law applicable to all Federal agencies. When I proposed this amendment in Committee it was claimed that it would cost the government too much money. In fact, if we examine what has occurred under RCRA, which has had the same language in effect since 1992, the conclusion is the opposite. A study done by the EPA entitled, The Federal Facility Compliance Act: Enforcement Analysis of RCRA Administrative Orders at Federal Facilities indicates that State governments have been easier on the Federal government than the EPA. The study found the following: while Federal orders averaged 369 days before settlement, state orders averaged 196. Also, during the study period the EPA fined Federal facilities over $9 million while states fined Federal facilities only slightly over $4 million. In other words those who claim the states will gold plate remedies have no basis for that belief. Finally, I note that the Armed Services Committee has asked for a study which is due at the end of September outlining the additional potential liability a Superfund waiver would incur. I'm not opposed to such a study but I am sending a letter to the President's Council on Environmental Quality bringing it to their attention and asking them to oversee the collection of the data. I am certain that the authors of the amendment wouldn't object to such oversight which would avoid the perception of the fox guarding the chicken house.

Mr. ALLARD

Mr. ALLARD. Mr. President, I rise in support of the conference report to the Educational Savings and School Excellence Act. First of all, before I make my comments, I recognize the leadership of the Senator from Georgia, as my previous colleagues have done. I think he has done a tremendous job in bringing forward the issue of education and what we can do as parents, as Senators, what we can do as school board members, as State legislators, or whatever, to begin to think of innovative ways in which we can improve our educational system. There is no doubt in my mind that we need to have some innovative solutions. The reason I am supporting this conference report is because this is an innovative approach that involves parents, as well as school board people. It is going to broaden the effort in education. It is going to benefit all schools, whether it is private schools or public schools. I want to take a few moments to sort of review the history of the A+ accounts. Maybe my colleague has already done that, but I think it is very important that we do that. In doing this, I am going to urge my colleagues to join me in supporting these new opportunities that we are going to be creating for children and their families to receive the best possible education. Now, reviewing the history a little bit, last year, we authorized educational savings accounts for those individuals who were going to postsecondary education, going on to colleges and vocational schools after graduating from high school. Beginning last June, we introduced this opportunity to more American families by adopting an amendment to the Taxpayer Relief Act, which established education savings accounts. Now, this amendment passed, but it was dropped from the Taxpayer Relief Act bill, due to a veto threat. Senator Coverdell's A+ savings account was introduced as a separate bill, and it was passed this spring by a vote of 56-43. I was delighted with the outcome of that vote. Following the recent conference agreement on the Educational Savings and School Excellence Act, I am confident that we have before us a bill that makes sense for all families and children--those who seek private or public education. The conference report was passed by the House last week, and it is our turn to pass this bill and hand the President a new opportunity to improve education. I would like to go over a few provisions of the Educational Savings and School Excellence Act, putting forth the A+ accounts. Our legislation increases the dollar amount from $500 to $2,000, the amount that parents can set aside to save for their children's education for both public and private elementary and secondary school expenses. With the education savings account, the money is never Government money, so issues of Government intervention and the constitutionality of using Government funds for religious schools is not a real argument in this debate. This bill would empower parents with the financial tools to provide for all of the needs they recognize in their children--needs that teachers or administrators should not be trusted to address in the same way that a parent can. This bill would allow families, single parents, or anyone earning less than $95,000 annually to deposit up to $2,000 per child in after- tax income into those interest-bearing savings accounts each year. The option for using these funds are simply endless. Raising a child is expensive--we all know that as parents-- whether the child is attending a private school or a public school. My children happen to have attended public schools and I will be the first to admit that education is expensive. This bill will help parents save for computers, tutoring expenses--if you have a child with special needs--uniforms, transportation--if you are in rural areas and you have special transportation needs out there--SAT prep courses, so they can get ready for higher education, postsecondary education, or even tuition for private schools. Now I would like to go over a few reasons why I am supporting this legislation. I think this bill is simply good news for all students-- especially those in public schools. This legislation does not ignore any school whatsoever. Numerous provisions have been included to improve public education, as well as private education. It assists smaller schools by increasing the amount of school construction bonds that smaller school districts can use. It provides incentives for public schools to strive for higher academic achievement. It encourages teachers to improve literacy programs by training them to use proven methods, such as phonics. It will help students stay in school by authorizing a national dropout prevention program. To make schools more safe, we have included a provision that allows weapons brought to school to be used as evidence in any internal school disciplinary proceedings. In addition, the bill includes the provision to make savings in qualified State tuition plans completely tax free. These tuition plans are powerful incentives for parents to save for their children's college education. My State of Colorado is one of 21 States that has already implemented this kind of program. I can tell you from what I have observed in my State of Colorado, it is catching on, and it is popular. This bill would free up plan holders from having to pay Federal tax on interest buildup. This means more savings for tuition, room, board, and books or supplies. Tax relief for these plans offers yet one more reason to support this conference report. This bill is about freedom. It is about education. Let's take a step forward in improving our Nation's education system for all American children. I encourage my colleagues to join me in passing the Education Savings and School Excellence Act today and to support the conference report. Thank you, Mr. President.