Max Baucus

Mr. BAUCUS

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 President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. BAUCUS. Mr. President, a few days ago, at Lincoln Center in New York City, illusionist David Blaine completed a week in a water-filled bubble. He then got himself chained up, got rid of his air hose, and tried to escape from the chains, while setting a world record for holding one's breath underwater. His goal was to hold his breath for 9 minutes. His feat was impressive. But he failed. After 7 minutes, he had to be let out of the remaining chains. He had to be rescued. This bill also contains an illusion. This bill's illusion is paying for tax cuts with further tax cuts. Like Mr. Blaine's illusion, this bill's illusion also fails. I give Mr. Blaine a lot of credit. He does his illusions in full view of the public--an open water bubble in the middle of New York City. The tax bill does its illusions in the dark--outside the budget window. Some of those viewing Mr. Blaine in New York City thought he had a lot of chutzpah to try his feat. The sponsors of this tax bill also have a lot of chutzpah if they think they can balance one set of tax cuts with another set of tax cuts--and call that fiscal responsibility. Mr. Blaine called his stunt ``Drowned Alive.'' That also a fitting name for what this bill would do to the American taxpayer. I am talking about section 512 of this bill. That section would remove the income limits on conversions from traditional IRAs to Roth IRAs, effective in 2010. Under this provision, all who convert their IRA accounts in 2010 get a tax break--2-year averaging of the taxable amount of the conversion, with payments to be made in 2011 and 2012. Why does the bill contort these changes into 2010 through 2012? There is an easy explanation. The conferees wanted to raise money in 2011 through 2013. They needed money on those years to help cover the cost of extending capital gains and dividends cuts. And they needed to cover those costs to avoid a point of order under the Byrd Rule. So a 2010 effective date and the funneling of transfers into 2010 serve a clear purpose. The sleight of hand is that a provision that loses money--billions of dollars a year--in years beyond the budget window are made to pass muster as a revenue offset provision. The illusion is to call this provision a revenue raiser. How does this provision raise revenue? It encourages taxpayers who earn more than $100,000 a year to transfer traditional IRA balances into a Roth account. These taxpayers would pay taxes in the short run on traditional IRA balances and get tax-free investment income later. Take for example a taxpayer with an IRA holder who makes $120,000 and is covered by an employer-sponsored retirement plan. Say that this taxpayer contributes to a traditional IRA. Under current law, the contributions would not be deductible. At retirement, the taxpayer would pay ordinary income taxes on the invstment earnings--what tax advisers call ``the inside buildup.'' But the original contributions would be returned tax-free. They would be what tax advisers call ``basis'' in the account. In 2010, say that the taxpayer takes advantage of the new law we create today and converted the traditional IRA to a Roth IRA. In 2011 and 2012, the taxpayer would pay taxes on 50 percent of the investment earnings that were in the account. At retirement, the taxpayer could withdraw any additional buildup in the account tax free. So the provision would raise revenue by taxing the conversion in 2011 and 2012. Then the provision would lose revenue when withdrawals were made from the account in the future. The provision would thus borrow from our children. The conferees felt a need for revenue in 2011 and 2012 to pay for a 2-year extension of the capital gains and dividends cuts. So this bill would take the revenues from the future and claim them now. The philosophy of this bill is: Let's just spend it now. Let our children figure out how to replace the revenue that would have been collected 10 or 20 or 30 years from now. How much revenue would this provision take from our children? The Joint Tax Committee's revenue estimates show losses of more than $1 billion in 2014, 1.2 billion in 2015. To get a good idea of the longer- term losses, we asked the Joint Tax Committee to provide us with an estimate for the same provision, but effective in 2006 instead of 2010, so we could confirm that there will be revenue losses further down the road. Under the joint tax rules, you have to ask them for it beginning this year because they can provide the estimates. If you ask them beginning in later years, under their rules, they will not do the math. We asked them to do the math and we asked if it went into effect this year. Mr. President, I ask unanimous consent that the Joint Tax Committee's response appear at this point in the Record.

Mr. BAUCUS. I want to thank the distinguished chairman of the Finance Committee for this clarification and his willingness to work with me to address this important problem.

Mr. BAUCUS. Mr. President, I would like to engage in a brief colloquy with the distinguished chairman of the Finance Committee, Senator Grassley, regarding changes to the section 199 wage limitation. The conference report attempts to better target the application of the wage limitation by counting only those wages that are ``properly allocable to domestic production gross receipts.'' This change may have unintended consequences for certain industries. In some industries, many workers, particularly those with specialized expertise, provide services as independent contractors or through their own businesses. In such cases, service payments to these workers are not treated as wages under the current wage limitation. When section 199 was first created, some of the impacted industries requested that we adopt a rule to count these payments for services in determining the wage limitation. The request was dropped because we addressed their issue indirectly by allowing them to use a broader wage base for calculating the limitation. By eliminating this ``headroom,'' we are resurrecting a problem for these industries. These industries are doing exactly what section 199 was meant to encourage. They are creating high-quality manufacturing and production jobs and contributing substantially to our Nation's economy and trade. I am hopeful that we will reexamine this issue and take the steps necessary to ensure that these industries are not adversely and unduly affected.

Mr. BAUCUS. This analysis shows that the provisions of this bill will worsen the deficit by $34 million in 2016, $128 million in 2017, $222 million in 2018, $316 million in 2019, and $410 million in 2020. Now, if the appropriate authorities advised the Chair that the bill before us had the revenue effects described in this table, and the Roth IRA provisions caused the deficit to worsen in these by years by the amounts that I have cited, even when taken together with all the other provisions in this bill, once again, the Roth IRA provision would violate the Byrd rule. Thus, if one does some rather simple arithmetic, one can readily see that the Roth IRA provisions in this bill would worsen the deficit in the out years. And doing that rather simple arithmetic would render the Roth IRA provisions out of order. The problem is that my staff's estimates, and even the estimates of the Joint Tax Committee and the Congressional Budget Office, are not authoritative. Under the Budget Act, the Chair is required to turn to the Budget Committee for revenue estimates. The problem is, for whatever reason, the Budget Committee majority has chosen not to do this rather simple arithmetic. The Budget Committee majority has chosen not to see the fiscal consequences of this bill. It is not as though these fiscal consequences are somehow obscure. It should come as little surprise that one tax cut will not pay for another tax cut. But the Budget Committee majority chooses not to see. It is not as though the Budget Committee cannot look into the future. The Budget Committee majority has complained of out year costs involving spending to help the victims of asbestos, for example. But when it comes to these tax cuts, the Budget Committee majority chooses not to see. It is not as though the Budget Committee cannot recognize a budget gimmick when it sees one. The Budget Committee majority has complained of shifts from one year to another in the highway bill, for example. The Roth IRA provision before us today is the mother of all such shifts. But the Budget Committee majority chooses simply not to see. Thus, Mr. President, I see this case as another abuse of the process. I see this case as another instance of disregard for the rules of the Senate. I see this case as another case of disrespect for the rule of law. In 1996, this majority abused the reconciliation process by applying it to legislation to worsen the deficit. Last year, this majority abused the Senate rules by threatening to eliminate the right to extended debate through what folks call ``the nuclear option.'' And today, this majority adds another chapter to that history of abuse of power, by simply choosing not to see violations of the rule when they are there staring us all in the face. I find it curious that the same majority that cried so loudly about ``the rule of law'' in the impeachment of President Clinton today once again shows such little respect for the rule of law right here in the Senate. For this disrespect for the rule of law is not about private morality. This disrespect for the rule of law is about the exercise of power. There is a word for disrespect for the rule of law in the exercise of power. It is called tyranny. And that, Mr. President, is another reason to vote against this conference report. Mr. President, I must say that I was surprised to see such a complicated and controversial provision in the conference agreement. I am referring to the provision to repeal the grandfather clause that was enacted by the American Jobs Creation Act of 2004, as part of the repeal of the old FSC/ETI regime. Further, this provision was not in the Senate or the House bill. What is most surprising, though, is that it may not have been necessary in addition to maybe not being prudent. This provision purports to end a dispute with the European Union over these long standing tax incentives. But the EU said it was willing to accept the remaining time on the 2-year transition period, and the grandfathering of leasing contracts. The only provision that the European Union is totally against is the grandfather clause for sales contracts. The European Union stated as much in a letter just last week where they said they wanted to work out a negotiated settlement. So the question has to be asked: Why does this bill go beyond the European Union's concessions? In an attempt to increase the revenue raised by this bill, the bill eliminates binding contract relief for both lease and sales contracts. In every step of the way during the last 7 years of this dispute, Congress has worked closely amongst tax and trade experts and alongside business to minimize the harm any new regime might entail. But not here. No hearings, no deliberations, ignoring a concession by the other side and game over. It is interesting to reflect on the long history of this provision. Both the extraterritorial income and the Foreign Sales Corporation, or FSC, regimes offered exclusions for export income. The Jobs Act repealed the extraterritorial income exclusion provisions and provided transition rules to phase out the tax benefits. The Jobs Act also provided a grandfather clause which allowed certain contracts to continue to receive the extraterritorial income exclusion. For the past two decades, the U.S. provided export-related tax benefits under the foreign sales corporation regime. In early 2000, the World Trade Organization found that the regime was a prohibited export subsidy under the relevant WTO agreements. Congress then repealed the foreign sales corporation provisions and enacted a new regime, the extraterritorial income regime, or ETI. From its inception, the European Union has doubted the validity of this regime. The European Union lodged a complaint with the World Trade Organization. It argued that the provision was an export subsidy in violation of World Trade Organization agreements. The World Trade Organization agreed with the European Union in August of 2001. An appellate body upheld the finding in January 2002. The World Trade Organization later ruled that the European Union could impose $4.03 billion in sanctions on its imports from the United States. Congress immediately began work to fix the problem. There were several hearings that lead to a number of bills attempting to either repeal or modify the exclusion provisions. The Jobs Act repealed the extraterritorial income regime for transactions after December 31, 2004. It provided a transition rule that phased out the tax benefits over a 2-year period. Taxpayers could retain 100 percent of their exclusion benefits for transactions prior to 2005, 80 percent for transactions during 2005, and 60 percent for transactions during 2006. For transactions after 2006, a taxpayer would not have any income exclusion benefits. The Jobs Act also provided that a contract in effect prior to September 17, 2003, would still be awarded exclusion benefits for the duration of the contract. This is what we call the binding contract relief. The purpose behind transition rules was to provide a soft landing to corporations. To give corporations time to adjust to the change in tax policy. Prior to September 17, 2003, companies relied on the extraterritorial income tax benefits when they entered contracts. The binding contract relief protected U.S. companies where the company might otherwise be substantially harmed by the loss of the tax benefit. Eliminating the grandfather clause eliminates certainty for these U.S. companies. We shouldn't blindly accept a provision that was not part of the Senate nor the House bill. We shouldn't blindly accept a provision that repeals a provision that took years to develop. We shouldn't blindly accept a provision that goes beyond what is required. I urge my colleagues to vote down this bill. Mr. President, we have had a very interesting debate today. As I expected, it was a real battle of statistics and charts. Again, I would like to thank my good friend, the chairman of the Finance Committee. I know that Senator Grassley fought hard to defend the Senate position in the conference committee. And I think the vote in favor might have been overwhelming if he had been successful in bringing back that Senate bill rather than the bill we have today. But I look forward to working with him and battling side-by-side to deliver that promised second bill. And that brings me back to what I spoke of this morning: there is a substantial amount of work undone. Despite $70 billion spent on tax cuts today, there are millions of teachers, families with kids in college, businesses that want to conduct important research or hire the hard-to-employ that will not see one dollar of the benefits handed out today. It is true that this conference report made tough choices. Those choices were tough on teachers, tough on families, tough on businesses. Hopefully, their relief boat will be coming soon. Until then, though, I will be voting against this bill that made the wrong choices--putting 2009 tax cuts before 2006 tax cuts, and putting ideological wants before America's needs. I hope that the next bill will be a bipartisan product. I am sure if it is, that it will enjoy broad support in this Senate and across the country. I look forward to working on that bill. Mr. President, I want to take a moment to thank the individuals who worked so hard on this legislation. First, I thank my good friend Senator Grassley, the chairman of the Finance Committee, for his leadership on this bill. I also appreciate the hard work and cooperation of his staff, especially Kolan Davis, Mark Prater, Dean Zerbe, Elizabeth Paris, Christy Mistr, John O'Neill, Chris Javens, Cathy Barre, Anne Freeman, Grant Menke, and Nick Wyatt. Second, I thank the staff of the Joint Committee on Taxation and Senate legislative counsel for their service. Finally, I thank my staff for their tireless effort and dedication, including Russ Sullivan, Bill Dauster, Pat Heck, Melissa Mueller, Jonathan Selib, Judy Miller, Rebecca Baxter, Ryan Abraham, Carol Guthrie, and Brianne Rogers. I also thank our dedicated fellows, Mary Baker, Stuart Sirkin, Thomas Louthan, Tiffany Smith, Laura Kellams, Caroline Ulbrich, Margaret Hathaway, and Robin Burgess. I also thank our law clerk, Christal Edwards. I thank our hardworking interns Zachary Henderson, Lesley Meeker, Lauren Shields, Britt Sandler, Jordan Murray, and Andreas Datsopoulos. Wage Limitation

Mr. BAUCUS. In summary, it shows a provision that begins with revenue increases but then shows revenue losses. Specifically, it shows revenue losses of $1.1 billion in year 5, $1.5 billion in year 6, $1.7 billion in year 7, $1.9 billion in year 8, $2.1 billion in year 9, and $2.3 billion in year 10. Now, if this provision were the only provision in a budget reconciliation bill covering years 2006 through 2010, it would plainly violate section 313(b)(1)(E) of the Congressional Budget Act because of its revenue losses in the out years. This is of course a simplistic analysis. There are other provisions in the bill before us. The question then arises whether those other provisions raise more revenue than the Roth IRA provision loses. My Finance Committee staff have taken the Joint Tax Committee estimates for these other provisions--all the revenue raisers--and projected their current rate of growth into the future. The results are shown in another table, which I ask unanimous consent be printed in the Record.

Mr. BAUCUS. Mr. President, I want to talk now about the rules of the Senate. With this bill, the majority has once again abused the process. With this bill, the majority has once again shown its disrespect for the rule of law. Mr. President, I have served in the Congress for 32 years. I have served in the Senate for 28 years. I am continually grateful to my employers, the people of the State of Montana, for giving me this opportunity. I was in the Congress in 1975, when the Budget Committee reported the very first budget resolution. I was in the Senate in the early 1980s, when the Budget Committee reported its first budget reconciliation bill. I have seen this process change. And the Majority is changing this process again today. Mr. President, this bill comes before us today under the extraordinary procedures that we call budget reconciliation. This is a process that bypasses the normal Senate rules. Under the normal Senate rules, Senators may debate legislation at length. Under budget reconciliation, this bill is subject to a strict time limit. Under the normal Senate rules, and rule XXII, it takes the affirmative vote of 60 Senators to cut off debate. Under budget reconciliation, a simple majority will determine the outcome of this bill. The Senate chose early on to limit the power to use budget reconciliation. The Senate saw early on that this power could be subject to abuse. Thus, starting in 1985, the Senate adopted the Byrd Rule against extraneous matter in reconciliation bills. This important rule was named after the dean of the Senate, the Senior Senator from West Virginia. The Senate enacted this rule to ensure that the majority did not abuse the budget reconciliation process to cover extraneous matters. From 1985 through 1996, that meant that budget reconciliation bills could not worsen the deficit. Then, in 1996, the current majority chose to overturn that understanding of the rule. And in 1996, the current majority began the process of using reconciliation for legislation that worsens the Nation's fiscal balance. That choice is at the root of much of the fiscal debacle that we see today. But at least one vital part of the Byrd rule remains. One part of the Byrd rule so explicitly prohibits worsening the deficit that the majority has not yet been able to write it out of the books. One part continues to prohibit including in reconciliation provisions that would cause a committee's entire work product to worsen the deficit in years beyond those covered by the reconciliation instructions. That part is section 313(b)(1)(E) of the Congressional Budget Act. I believe that, today, the majority is taking another step down the road of abusing the reconciliation process. I believe that today the majority is willfully ignoring the application of that rule. And I thus believe that today the majority is once again cheapening the rule of law. My complaint lies with the Roth IRA provision that I discussed earlier. As I noted, that provision will worsen the deficit by increasing amounts into the future. But because the majority chooses not to recognize this fact, I am left with no procedural recourse. I'll try to demonstrate my point through a series of steps. First, let me take the hypothetical case of a budget reconciliation bill that contained just the Roth IRA provisions in this bill but effective in 2006. That is the case for which the Joint Tax Committee has provided the revenue estimates that I discussed earlier. For the sake of simplicity, I ask unanimous consent that the Joint Tax Committee estimates be printed in the Record.

Mr. BAUCUS. Mr. President, I would like to enter into the Record some information I just received from the Joint Committee on Taxation. I asked them to provide me with information on who benefits from the capital gains and dividends tax cuts. According to the Joint Committee on Taxation, 84 percent of the capital gains tax cut goes to individuals earning $200,000 or more. And also according to the Joint Committee on Taxation, 2 percent goes to households earning less than $50,000. Additionally, for the dividends tax cut, 63 percent of the tax savings goes to individuals with annual income of $200,000 or more. And only 6 percent goes to taxpayers earning $50,000 and under. I hope this information will help clarify some of the debate on the floor today. Again, these numbers are directly from the Joint Committee on Taxation with no interpretation. I ask unanimous consent that this information be printed in the Record.

Mr. BAUCUS. The Joint Tax Committee estimated that the pattern of increasing revenue losses continues, growing about $200 million a year. So by 2020, the loss would be over $2 billion a year. That extrapolates to $3 billion a year by 2030. In other words, this bill would take $2 to $3 billion from our children, every year, to pay for a 2-year extension of capital gains and dividends rate tax cuts, which we know would not go into effect until January 1, 2009. That troubles me, and it should trouble all my colleagues. The conferees made bad choices in putting this conference report together. American workers need an extension of the Saver's Credit that expires after 2006, but get an extension of a capital gains and dividends cut that does not expire until 2009. And the bill purports to pay for those tax cuts for with a Roth IRA conversion provision that starts losing revenue by 2014 and has losses that balloon outside the budget window. There are so many reasons to vote against this report. The use of a tax cut to allegedly pay for another tax cut is just one symptom of a seemingly irresistible urge to put wants before needs. I encourage my Colleagues to join me in voting for setting the right priorities. I urge them to vote against this conference report. I yield the floor.

Mr. BAUCUS. Madam President, I begin by commending my good friend, the chairman of the Committee on Finance. He is a great American. People in Iowa are very lucky to have him representing them. I know of no finer man in the Senate. I know Senator Grassley sought to defend the Senate's position in the conference committee. He is a proud man, too. He wanted to do what is right in defending the Senate's position, but I regret the conference committee could not end up more like the Senate product because the conference before the Senate today is much different than the bill that passed the Senate. It is so different that I am raising questions as to how much of the Senate bill we have in the conference. This past Saturday, Lillian Asplund died. Ms. Asplund was the last American survivor of the 1912 sinking of the Titanic. She was the last survivor with actual memories of the event. Ms. Asplund's life reminds us that people make choices, and those choices can have significant consequences. Just as much, the bill before the Senate today reflects choices. Those choices will have significant consequences. Shortly after midnight on that cold morning of April 15, 1912, passengers started evacuating that doomed ship. At the beginning, women and children went first. But it was not long before that rule gave way. Soon it became clear that the privileged went into the rescue boats first. About that time, the most extraordinary thing happened: Some of those privileged and wealthy passengers decided to give up their place in line. They decided to let others go first. Benjamin Guggenheim, the son of the colossally wealthy mining magnet, sipped brandy and smoked cigars in a deck chair while the ship went down. Today, on this bill, we see no such valor, we see no such sacrifice. Rather, in this bill, ideological wants push their way to the front of the line, ahead of America's needs. At the end of last year, 16,000 American businesses lost their tax incentive to create high-paying research jobs for American-based workers. But relief for them did not make it into this bill. At the end of last year, millions of school teachers lost a small but significant tax break for classroom supplies they purchase out of pocket. But relief for them did not make it into this bill. At the end of last year, millions of middle-income American families with kids in college lost the ability to deduct tuition costs. But relief for them did not make it into this bill. These provisions--what some people call the popular ``tax extenders''--were given second-class status. They did not make it into the lifeboat. And to what did these popular, already-expired tax provisions have to give way? Well, the first-class passenger on this ship is a tax break for investors, where not one dollar will be used until January 1, 2009. I think it is important to remind ourselves of that. Not one dollar of cap gains and dividend tax breaks will be utilized by anyone until January 1, 2009. That is several years from now. But some will say this tax break for 2009 is desperately needed today--Why? they say--to provide certainty. You might as well just call this tax bill, the 2009 Tax Increase Prevention Act, because it does just that: it prevents tax increases for the most well-off in the future, in 2009. This bill chose to prevent a tax increase in 2009, rather than prevent tax increases in 2006. For the millions of families, teachers, businesses, and workers out there who lost their tax benefits on January 1 of this year, there is no tax increase prevention in this act. There is no ``tax increase prevention act'' for the so-called second-class citizens. I do not call them second class at all. They are Americans. They are teachers. They are people working in research and development. They are families and kids trying to pay tuition costs. There is no relief for them. All of those provisions expired at the end of last year. Here we are, well into 2006, and they are not in this bill. Middle-American provisions are not in this bill. No. Rather, what is in this bill is for 2009, a tax break for 2009 for investors. Well, some will also say: Oh, don't worry. Other tax legislation may be, might be, should be coming soon. Yes, and the check is in the mail. Some will say these 2009 cuts on capital gains and dividend income will benefit all Americans, and you will see a blizzard of statistics and quotes to try to substantiate that point, including the chart you recently saw from my good friend from Iowa. Actually, that is not a Joint Tax Committee chart. That is a chart based upon the Finance Committee staff with Joint Tax Committee statistics. And that chart, frankly, does not accurately portray the facts. Many commentators who have commented on that chart have pointed out the discrepancies in it. I am not going to get into this tit for tat, back and forth as to whose statistics are better. But I will say this, it defies common sense to argue that a tax break that takes effect in 2009 for the high- income Americans somehow benefits middle-income and lower income Americans more than the most wealthy. That totally defies logic. Someone can come up with a set of statistics to try to make that point but it is patently absurd. Some will say these 2009 tax cuts, as I say, will benefit all Americans, and you will see statistics, but that is not the fact. I decided to go to the source. I represent Montana. The more than 900,000 residents of Montana are my employers, so I asked the Montana Department of Revenue where the benefit of these tax cuts would go. Well, of course, not everyone in Montana has this type of investment income. So the Montana Department of Revenue told me that just 400 households in Montana would receive an average benefit of $14,000 from the capital gains tax cut in 2009. Roughly, 90 percent of the households in Montana would get almost zero benefit from the capital gains cut. Ninety percent: almost zero benefit. With these numbers, it is very hard for me to understand why this 2009 tax break is urgent, while Montana teachers and families with kids in college who lost their tax break last December must wait for the next rescue boat, whenever it may or may not occur. Of course, I am very pleased that protection is in the bill from the alternative minimum tax. I am pleased that conferees included the full Senate-passed version. Some may recall, it was a struggle to get that in the Senate-passed version last November. The original version, and the version that came out of committee, did not include a full hold harmless from the alternative minimum tax. Those versions would have left 600,000 more families paying that tax. We fought to improve the Senate bill to be a true hold harmless. And we succeeded in doing so before the bill finally left the Senate. That version is retained today. This protection from the alternative minimum tax will protect almost 17 million families across our country, including about 45,000 in Montana. The Montana tax collector tells me that AMT protection will help about a quarter of all households in Montana with incomes between $45,000 and $80,000. That group might have otherwise seen an average tax increase of $1,700. Unfortunately, there is little else in this bill to be proud of. Working families have been left behind. Congress has chosen ideological wants over America's needs. The Senate-passed bill did the tax business the Congress needed to do this year. I am proud of that bill. In contrast, the bill before us leaves much work undone. As a result, the deficit will probably be larger because the conferees made the choices they did. I will have more to say about the fiscal effects of this bill. In the end, those effects may be the real iceberg. The fiscal effects of this policy may be the real disaster. Madam President, I urge my colleagues to reject the choice made by this conference. I urge my colleagues to vote against leaving those families and teachers and workers behind. I urge my colleagues to reject this disastrous bill. One other point, Madam President, is this: The conferees had a choice. Basically, we did one thing we had to do. I should not say ``we'' because I was not on the conference. I was not allowed to be a member of the conference. But while the conferees did do something that was good--that is, make sure the taxpayers do not have to pay the alternative minimum tax--they had another choice, and the choice basically is this: Do they enact a tax break that does not take effect until 2009, for investors, or do they include provisions such as the research and development tax credit, the WOTC, the work opportunity tax credit, the tuition tax deduction, and the teachers deduction, which expired last year? Do they enact those and extend those for this year so people will still know research and development is important this year? Again, the choice is: On the one hand, enact a provision that does not take effect until 2009 for investors or, instead of doing that, because that can be postponed for a couple years--we are not yet in 2009--extend the provisions which expired last year. These are provisions that American business and industry and innovators are desperately depending on--that is, the research and experimentation tax credit--to help America be competitive in the world. Or they could have included provisions that parents paying for college tuition can count on, teachers can count on for the supplies and so forth. All of these expired last year. So again, the choice is: a 2009 tax break or help maintain those provisions which expired last year. That is basically what all this comes down to. That is the choice that was before the conferees. And the conferees chose the former, the 2009 extension--it does not take effect for a few more years--for the most well-off, at the expense of American businesses, their companies, and universities that are so depending on the research and experimentation tax credit. And, at the expense of teachers who so clearly today depend upon that little extra help for classroom supplies, at the expense of kids and families who so need that tuition deduction. That was the choice that was made. And the choice, as I said, was ideological wants of a few at the expense of America's needs. That is basically what is before us today. That is why I think it makes sense not to adopt this conference report. Madam President, our country is in a battle. It is a competitive battle with the rest of the world--China, India, Eastern European countries. There are so many countries that are so excited about their future, and they are trying to increase their economic position. I take my hat off to them. They are trying very hard, and they are doing a great job. Certainly, businesses in China and India are. We have to meet that challenge. And it is a great opportunity for us. But to meet that challenge, we have to start today thinking strategically, thinking longer term. What does that mean? That means much more attention on education, a lot more attention on education, so we have the best and the brightest in America who can design the products we can utilize here, with high-paying jobs here, and export those products overseas. Also, there is so much we have to do. We have to stop thinking short term in this country, in this Congress, in this administration and start laying the foundation for the long term. Now, some will say: Well, we need, in 2009, to extend, for 2 more years, the dividend and capital gains tax cut because that is good for America. I have to say, I have lots of arguments and statements by very reputable people who say that is not the case. Let me refer to a couple of them. Let's take the Federal Reserve. Let's talk about the stock market. Federal Reserve economists recently compared key U.S. stocks, which would benefit from the 2003 tax cuts, to other investments, which would not. What did they conclude? What did Federal Reserve economists conclude: We fail to find much, if any, imprint of the dividend tax cut news on the value of the aggregate stock market. That is the conclusion of Federal Reserve economists. The Congressional Research Service agrees. What do they say? Any stock market effects represent temporary windfalls to holders of current stocks and are simply a manifestation of the income effects of the tax cuts; these wealth effects should not be considered as an additional stimulus. . . . Recent studies finding that dividends had increased substantially have been used to argue that the tax cut induced private savings. This evidence does not appear robust. . . . There are lots of comments--lots. And I might say: Why is the economy doing pretty well today? The proponents of this conference report would like to say: Oh, it is because of the other tax cuts. The stock market went up dramatically more before those tax cuts went into effect. And since those tax cuts went into effect, the stock market has not done so well. I might also point out that the economy is doing well now. Why? Read this morning's paper. There was a big, long article asking: Why is the economy doing so well? And what does this morning's paper say? What are the conclusions, basically? It is because of strong, aggregate demand-- where? China, India--for commodities, for oil, for gas, for coal, for uranium. That is what I think has kept basically demand strong. It is, also, frankly, a major propellant for the economy today. It is not the dividends and capital gains tax cut. That is a ruse. I am not going to go into it any more than that because I know subsequent speakers will have a blizzard of statistics to argue the opposite. It kind of gets me to another point. When the rooster crows, does that cause the Sun to come up? Does it? I don't think so. Did the dividend and capital gains tax cuts cause the great economy we have? Not necessarily. You have to ask yourself what is the real cause. The real cause is the underlying demand from other countries which are buying so many commodities. That is one reason why the price of oil is so high today, and that is what is causing the market to go up. That is what is causing the economy to be strong. We have to ask ourselves: That is today; what about tomorrow? What about next year, 2 or 3 years from now? These tax breaks are also going to make the deficit and debt much worse. We want to be strong tomorrow. By tomorrow, I mean the next few months, the next, couple 3 years. We want the stock market to be high during that period. We want demand and wages to be high. That will happen the more we focus on the basics today. The basics again are education, research, and development so that we start strategically to plan for our kids and grandkids. The conference report before us decides against that. This report says: No, forget the basics. Forget teachers, forget research and development. Even though those provisions expired last year, we won't do anything about them. Rather, we are going to pass this provision which costs so much money in this budget and doesn't take effect for 3 more years. That is not a choice most Americans would want us to make. I notice Senators Bingaman and Dodd have been waiting to address the Senate. I would like to inquire through the Chair whether the Republican side has a speaker who wishes to speak. If not, I yield 10 minutes to Senator Bingaman, to be followed by 15 minutes to Senator Dodd. I ask unanimous consent for that. That is 10 minutes to Senator Bingaman and 15 minutes to Senator Dodd.

Mr. BAUCUS. Madam President, in consultation with the chairman of the committee, I ask consent that the filing deadline for the second-degree amendments to S. 1955 occur at 3 p.m. today.

Mr. BAUCUS

Mr. BAUCUS. I ask consent the following fellows, interns, detailees of the Committee on Finance be allowed on the Senate floor for the duration of the debate on the tax relief bill, H.R. 4297: Mary Baker, Tom Louthan, Tiffany Smith, Robin Burgess, Christal Edwards, Laura Kellams, Caroline Ulbrich, Margaret Hathaway, Britt Sandler, and Lauren Shields.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I am proud to rise today and announce a historic event in my home State. For only the second time in the history of Montana, our great State will welcome the President of Ireland. President Mary McAleese has displayed courage, intellect, determination, and passion as she has guided her country for nearly a decade. During this time her country has experienced unprecedented growth, quickly rising to the upper echelons of nations. President McAleese will make an inaugural pilgrimage to a city whose history has been intimately tied with Ireland's for more than a century. In 1882, a lone Irish immigrant, driven by the work ethic instilled in his homeland and his desire to succeed, made a discovery that would forever change the face of Montana, the West, and America. The city was Butte, MT, and the man was Marcus Daly. Three hundred feet into the belly of the Earth, Daly set off an explosion that unearthed a revolution. Before his amazed eyes lay one of the riches veins of copper the world had every seen, and with it the unknowing hopes of millions of Irish immigrants. Butte, and its neighbor to the northwest Anaconda, quickly became thriving metropolises turning these mining communities into a virtual mosaic of nationalities and ethnicities. When walking down the street, one could hear the chatter of Eastern Europeans, smell cooking from the Middle East, or view native dress from Scandinavia. But above all was the voice of the Irish. The Irish made Butte their own, easing their longing for their native Eire by molding the city to reflect the land from their past. The streets were vibrant with festivities straight from the homeland; these hard-working immigrants, ranging in professions from doctors to lawyers to miners and gandy dancers, populated this young bustling city and gave it the feel of an island thousands of miles away. As the years passed, the pride of the Irish continued to ring strong, and with it the city of Butte. Butte quickly became the heart of Montana, and shaped the figures whose names would forever be remembered in the lore of our State. Names like Mike Mansfield and Burton Wheeler will be etched in the hearts and minds of Montanans for many years to come, and with them the tradition of the Irish. Today, Butte remains a vibrant city, as the new generation of Irish- Americans listen to the whispers of their ancestors and continues to uphold the proud tradition of being Butte Irish. With the same values that turned this sleepy community into the heartbeat of the West, the people of Butte continue to thrive and the city remains as strong as the immigrants who first settled it. As President McAleese is embraced by the spirit of this magnificent city and by the residents who carry on the proud tradition of hailing from Butte, I say: may the road rise to meet you, may the wind be always at your back, may the sun shine warm upon your face, the rains fall soft upon your fields and, until we meet again, may God hold you in the palm of His hand.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I rise today to pay tribute to the 1-163rd infantry battalion of Montana's National Guard for their continued contribution to our Nation. In peacetime, these soldiers have performed admirably at home in Montana, but in wartime the members of the first of the l63rd infantry battalion truly deserve recognition. For 18 months, they were deployed to Iraq where, on a daily basis, they risked their lives to defend our Nation's core beliefs--freedom, justice, and equality. In November of 2005, 700 troops returned home to Montana. While serving abroad, these men and women spent the majority of their time at 3 forward operating bases in northern Iraq. They bravely undermined insurgency in the largest and most dangerous area in the 116th Brigade's area of operations. These Montanans risked their lives daily during their field operations. In total, the 1-163rd infantry battalion performed 6,400 patrols where they encountered frequent attacks. During their deployment, the 1-163rd engaged in over 35 direct battles with members of the Iraqi insurgency and received small arms fire over 130 times. The battalion also defused almost 200 improvised explosive devices, IEDs, and experienced 359 IED detonations. In addition to the routine patrols that the unit regularly performed, the battalion also conduced 35 task force level operations, 10 joint task force air assault missions, and 120 deliberate company-level operations. Despite the dangerous conditions, the 1-163rd infantry battalion still made considerable advances in neutralizing their area of operations. The battalion was able to reduce the number of arms and insurgents in the area. Hundreds of Iraqi weapon systems were confiscated, including AK-47s, rocket propelled grenades and mortar tubes, and over 100 insurgents were detained. These efforts were critical in minimizing the likelihood of future attacks in the area. Not only did the 1-l63rd improve the overall safety of northern Iraq, but this infantry battalion also participated in the extensive reconstruction effort. In total, 68 projects worth $7.5 million were successfully implemented by the battalion. Countless improvements to municipalities in northern Iraq are directly attributable to the 1- 163rd. Today I wish to especially commend two members of the 1-163rd who did not return home but instead gave their lives in service to this great Nation. SGT Travis Arndt, 23, from Great Falls, MT, was killed in action near Kirkuk, Iraq, on September 21, 2005. MSG Robbie McNary, 42, died in combat in Hawijah, Iraq, on March 31, 2005, leaving behind his wife and three children in Lewistown, MT. Let us remember them for their honorable service and ultimate sacrifice. As a Montanan, an American, and a Senator, I would like to truly thank and commend the first of the 163rd infantry battalion of the Montana's National Guard for their excellent performance during this last deployment and their impressive dedication and loyalty to this nation. In November, when the 1-163rd returned to Montana from their 18-month deployment, they were applauded for their success, but I would like to keep that recognition alive. Long after this war on terror is over, we will remember their contribution to our most valuable freedom and security. Thank you.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I rise to comment on legislation that Chairman Grassley and I introduced yesterday that would limit public trustees for Social Security and Medicare to a single four-year term of service. The bill, S. 2752, will also codify that the President should consult with Congress on the nominations of public trustees for these important programs. This legislation was prompted by recent events. Upon learning last November that the White House intended to renominate John L. Palmer and Thomas R. Saving as pubic trustees, Chairman Grassley and I both responded immediately that the White House should find two new individuals to nominate as public trustees. Both individuals had already served one term as Social Security and Medicare public trustees, and their terms ended in March 2005. Dr. Palmer and Dr. Saving served admirably as public trustees during their term and the Chairman and I thank them for their service, but I did not want to see an important tradition abandoned. Never in the history of the public trustees have individuals served more than one term, and that's for good reason. Fresh thinking and new ideas are critical to the proper assessment and administration of the Social Security and Medicare programs. If the executive branch will not voluntarily follow this vital precedent, this principle must be written into law. There was a second problem last year. The White House is supposed to consult with the chairman and ranking member of the Finance Committee before sending the nominations to the Senate. Unfortunately, no such consultation occurred last year prior to the nominations being forwarded to the Senate. Therefore, the blll a adds language to the Social Security Act requiring the President to consult with the chairman and ranking member of the Committee on Finance before considering individuals to be nominated as public trustees. Ignoring our views, on April 19 of this year, the White House announced the recess appointments of Mr. Palmer and Mr. Saving as public trustees of the Social Security and Medicare programs. I immediately objected to this action by the White House because I believe the role of the public trustees is too important to be diminished by the recess appointment process. It was this extreme action on the part of the White House--in combination with the other two problems I mentioned previously--that prompted the chairman and me to introduce this bill today. I think some good has come out of this unfortunate episode regarding the public trustees. Hopefully, everyone has a better understanding of the role of the public trustees. The Greenspan Commission recommended creating the positions of two public trustees to help ensure that the reports on the Social Security and Medicare trust funds were objective and not solely the work of administration officials. The Greenspan Commission envisioned experts from outside the executive branch who are confirmed by the Senate. They are unlike most other Presidential appointments because they do not represent the administration, they represent the public. Because of that unique distinction, it is inappropriate to recess appoint the public trustees. Individuals who are nominated to be public trustees should be selected by a process of consultation between the White House and Members of Congress. Once confirmed by the Senate, they should only serve one term. To do otherwise undermines the public trustees' role as an objective check on the production of the trust fund reports. Since this legislation should not spark any controversy, I hope both Chambers will quickly consider and pass this bill and send it to the President for his signature.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I rise to speak in favor of the bipartisan amendment that Finance Committee Chairman Grassley has just offered. As ranking Democrat on the Finance Committee, I have worked with Chairman Grassley to develop this amendment. The amendment provides $38 million to the Social Security Administration, SSA--fully paid for--to reimburse the costs SSA incurred as a result of Hurricane Katrina and other hurricanes of the 2005 season. The supplemental appropriations bill, as reported by the Senate Appropriations Committee, would appropriate $106.5 billion, including $ 67.7 billion for the wars in Iraq and Afghanistan, $4.5 billion for foreign assistance programs, and $27.1 billion for relief needed because of last season's hurricanes. In contrast, no funding for SSA to make up for its costs from Katrina and the other hurricanes is currently provided in the supplemental. The Social Security Administration performed superbly in the aftermath of these hurricanes. SSA assisted more than 528,000 persons in FEMA Disaster Recovery Centers and shelters and helped many others who came to its field offices. To provide such assistance, SSA urgently invoked emergency procedures and issued approximately 85,000 immediate payments for displaced beneficiaries and those who could not access their bank or other financial accounts. In addition, SSA changed the addresses of displaced beneficiaries, provided individuals who had lost their identification documents with confirmation of their Social Security numbers, and took applications from many people from the affected areas who had become newly eligible for Social Security disability or survivors benefits or benefits from the Supplemental Security Income program. SSA even passed along messages to beneficiaries from worried family members. Finally, some SSA employees drove hours to provide relief to overstretched field offices, sometimes sleeping on air mattresses set up in the offices because there were no other places to stay. Together, these activities caused SSA to redirect $38 million from funding for its normal tasks and obligations. There were costs to SSA of $6 million to acquire and outfit temporary space and renovate offices damaged by the storm, including costs for computers, furniture and supplies. SSA estimates that there were $12 million in costs for new workloads, including processing immediate payments, changing addresses, confirming Social Security numbers, and taking new claims that resulted from the hurricanes. It cost SSA $7 million to pay for the travel and per diem expenses for employees who came to the affected areas from other regions to help, as well as for employees who were forced to relocate because of damaged or destroyed homes and offices and who continued to work in other offices. Costs related to unprocessed work include $12 million for SSA workloads, such as claims, hearings, that were not processed as a result of the storms' disruptions. Nearly $1 million was spent to pay the salaries of those SSA workers who volunteered to work for FEMA in the affected areas, and thus were not doing their regular SSA work. Unfortunately for SSA, it had already had its funding cut by a total of $300 million below the President's request for fiscal year 2006. Rather than being able to absorb the $38 million caused by the hurricanes, SSA found its $300 million shortfall being exacerbated by these additional $38 million of costs. The Social Security Administration could make very good use of an additional $38 million of funding for fiscal year 2006 at this time by increasing overtime hours. This would allow SSA to make up for a small piece of the reductions and delays of service to its normal applicants and beneficiaries. In the Senate-passed supplemental, many Federal agencies are reimbursed for costs arising from these hurricanes. Surprisingly, that is not the case for the Social Security Administration. This is especially ironic in view of the efforts of the Social Security Administration and its employees to help the gulf coast and its citizens, including some efforts that were above and beyond the call of duty. This bipartisan amendment will address this funding shortfall for the Social Security Administration by providing it with an additional $38 million for the current fiscal year. The amendment is fully paid for. As reported by the Appropriations Committee, the supplemental appropriations bill provides $10.6 billion to FEMA for disaster relief from Hurricane Katrina and other hurricanes of the 2005 season. Of this amount, according to the committee report, $2.4 billion is provided for ``other needs.'' Although the report provides some examples of such ``other needs,'' there is no list of specific projects and activities whose costs total $2.4 billion. This amendment increases SSA's funding for fiscal year 2006 by $38 million and reduces the $10.6 billion appropriated for the FEMA Disaster Relief account in this bill. The $2.4 billion provided by this bill for ``other needs'' is part of the $10.6 billion appropriated for the FEMA Disaster Relief account in the bill. This amendment will not result in the loss of any specific project or activity provided for by this bill. Nor will it cause this bill to result in any additional costs to the Federal Government. This amendment will restore the loss of resources for the Social Security Administration that has resulted from the 2005 season's hurricanes. I believe this is the right thing to do. I urge my colleagues to support this bipartisan amendment.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, on October 4, 1957, an object the size of a basketball shot into space. And history changed. The Soviet Union had launched Sputnik. And Americans reacted with fear. That fear quickly turned to determination to win the race to space. Just one month later, the Russians launched Sputnik II with one precious passenger: a Russian mutt named Laika. Laika became the first living being to orbit earth. Today, a dog in space might seem like a good start for a Disney film. But in 1957, American scientists worried that these events foreshadowed Soviet military and strategic advantage. By the following summer, Congress had created NASA. Sputnik's launch had provided the catalyst. For years before, scientific organizations and even the White House had declared the exploration of space as a priority. It took Sputnik to move us to action. Half a century later, we find ourselves waiting for the next Sputnik. Report after report has outlined the risk that America runs by not doing more in research and education. A recent report entitled ``Waiting for Sputnik'' cautions that our workforce must include a greater percentage of ``knowledge workers''--including scientists and engineers--if we are to maintain our technological lead in defense capabilities. And another recent report, ``Rising Above the Gathering Storm,'' expresses fear that America's lead in science and technology can be abruptly lost and difficult or impossible to regain. What these reports and others are telling us is one thing: We cannot wait for the next Sputnik. We must recognize that our advantage is fleeting. We must begin today with more science, more education, and more commitment to research to prepare for the future. Asia has recognized this. Asia is plowing more funding into science and education. China, in particular, understands that technological advancement means security, independence, and economic growth. Spending on research and development has increased by 140 percent in China, Korea and Taiwan. In America, it has increased by only 34 percent. Asia's commitment is already paying off. More than a hundred Fortune 500 companies have opened research centers in India and China. I have visited some of them. I was impressed with the level of skill of the workers I met there. China's commitment to research, at $60 billion in expenditures, is dramatic by any measure. Over the last few years, China has doubled the share of its economy that it invests in research. China intends to double the amount committed to basic research in the next decade. Currently, only America beats out China in numbers of researchers in the workforce. Over the last few months, I have offered a series of proposals to improve America's competitiveness. Today, I am pleased to introduce the Research Competitiveness Act of 2006. This bill would improve our research competitiveness in four major areas. All four address incentives in our tax code. Government also supports research through Federal spending. But I am not addressing those areas today. First, my bill improves and simplifies the credit for applied research in section 41 of the tax code. This credit has grown to be overly complex, both for taxpayers and the IRS. Beginning in 2008, my bill would create a simpler 20 percent credit for qualifying research expenses that exceed 50 percent of the average expenses for the prior 3 years. And just as important: The bill makes the credit permanent. Because the credit has been temporary, it has simply not been as effective as it could be. Since its creation in 1981, it has been extended 10 times. Congress even allowed it to lapse during one period. The credit expired again just last December. And another short-term extension is pending in both tax reconciliation bills in conference. Last year, the experts at the Joint Committee on Taxation wrote: ``Perhaps the greatest criticism of the R&E credit among taxpayers regards its temporary nature.'' Joint Tax went on to say, ``A credit of longer duration may more successfully induce additional research than would a temporary credit, even if the temporary credit is periodically renewed.'' Currently, there are two different ways to claim a tax credit for qualifying research expenses. First, the ``traditional'' credit relies on incremental increases in expenses compared to a mid-1980s base period. Second, the ``alternative incremental'' credit measures the increase in research over the average of the prior 4 years. Both of these credits have base periods involving gross receipts. My bill replaces these with a new credit, known as the ``Alternative Simplified Credit,'' based on research spending without reference to gross receipts. The current formula hurts companies that have fluctuating sales. And it hurts companies that take on a new line of business not dependent on research. The Senate has passed this alternative formula as an optional credit several times. It is now pending in both versions of the tax reconciliation bill. It has not yet been enacted, though, even on a temporary basis. I support the 2-year extension of the R&E credit contained in the Senate version of the tax reconciliation bill. That is why this new simpler formula in my bill would not start until 2008. That start date would give companies plenty of time to adjust their accounting. The main complaint about the existing credits is that they are very complex, particularly the reference to the 20-year-old base period. This base period creates problems for the taxpayer in trying to calculate the credit. And it creates problems for the IRS in trying to administer and audit those claims. The new credit focuses only on expenses, not gross receipts. And is still an incremental credit, so that companies must continue to increase research spending over time. A tax credit is a cost-effective way to promote R&E. A report by the Congressional Research Service finds that without government support, investment in R&E would fall short of the socially optimal amount. Thus CRS endorses Government policies to boost private sector R&E. Also, American workers who are engaged in R&E activities benefit from some of the most intellectually stimulating, high-paying, high-skilled jobs in the economy. My own State of Montana has excellent examples of this economic activity. During the 1990s, about 400 establishments in Montana provided high-technology services, at an average wage of about $35,000 per year. These jobs paid nearly 80 percent more than the average private sector wage, which was less than $20,000 a year during the same period. Many of these jobs would never have been created without the assistance of the R&E credit. My research bill would also establish a uniform reimbursement rate for all contract and consortia R&E. It would provide that 80 percent of expenses for research performed for the taxpayer by other parties count as qualifying research expenses under the regular credit. Currently, when a taxpayer pays someone else to perform research for the taxpayer, the taxpayer can claim one of three rates in order to determine how much the taxpayer can include for the research credit. The lower amount is meant to assure overhead expenses that normally do not qualify for the R&E credit are not counted. Different rates, however, create unnecessary complexity. Therefore, my bill creates a uniform rate of 80 percent. The second major research area that this bill addresses is the need to enhance and simplify the credit for basic research. This credit benefits universities and other entities committed to basic research. And it benefits the companies or individuals who donate to them. My bill provides that payments under the university basic research credit would count as contractor expenses at the rate of 100 percent. The current formula for calculating the university basic research credit--defined as research ``for the advancement of science with no specific commercial objective''--is even more complex that the regular traditional R&E credit. Because of this complexity, this credit costs less than one-half of 1 percent of the cost of the regular R&E credit. It is completely under-utilized. It needs to be simplified to encourage businesses to give more for basic research. American universities have been powerful engines of scientific discovery. To maintain our premier global position in basic research, America relies on sustained high levels of basic research funding and the ability to recruit the most talented students in the world. The gestation of scientific discovery is long. At least at first, we cannot know the commercial applications of a discovery. But America leads the world in biotechnology today because of support for basic research in chemistry and physics in the 1960s. Maintaining a commitment to scientific inquiry, therefore, must be part of our vision for sustained competitiveness. Translating university discoveries into commercial products also takes innovation, capital, and risk. The Center for Strategic and International Studies asked what kind of government intervention can maintain technological leadership. One source of technological innovation that provides America with comparative advantage is the combination of university research programs, entrepreneurs, and risk capital from venture capital, corporations, or governments. Research clusters around Silicon Valley and North Carolina's Research Triangle exemplify this sort of combination. The National Academies reached a similar conclusion in a 2002 review of the National Nanotechnology Initiatives. In a report, they wrote: ``To enhance the transition from basic to applied research, the committee recommends that industrial partnerships be stimulated and nurtured to help accelerate the commercialization of national nanotechnology developments.'' To further that goal, the third major area this bill addresses is fostering the creation of research parks. This part of the bill would benefit state and local governments and universities that want to create research centers for businesses incubating scientific discoveries with promise for commercial development. Stanford created the Nation's first high-tech research park in 1951, in response to the demand for industrial land near the university and an emerging electronics industry tied closely to the School of Engineering. The Stanford Research Park traces its origins to a business started with $538 in a Palo Alto garage by two men named Bill Hewlett and Dave Packard. The Park is now home to 140 companies in electronics, software, biotechnology, and other high tech fields. Similarly, the North Carolina Research Triangle was founded in 1959 by university, government, and business leaders with money from private contributions. It now has 112 research and development organizations, 37,600 employees, and capital investment of more than $2.7 billion. More recently, Virginia has fostered a research park now housing 53 private-sector companies, nonprofits, VCU research institutes, and state laboratories. The Virginia park employs more than 1,300 people. The creation of these parks would seem to be an obvious choice. But it takes a significant commitment from a range of sources to bring them into being. To foster the creation and expansion of these successful parks, my bill will encourage their creation through the use of tax- exempt bond financing. Allowing tax-exempt bond authority would bring down the cost to establish such parks. Foreign countries are emulating this successful formula. They are establishing high-tech clusters through government and university partnerships with private industry. Back in 2000, a partnership was formed to foster TechRanch to assist Montana State University and other Montana-based research institutions in their efforts to commercialize research. But TechRanch is desperately in need of some new high-tech facilities. It could surely benefit from a provision such as this. I encourage my Colleagues to visit research parks in their States to see how my bill could be helpful in fostering more successful ventures. A related item is a small fix to help universities that use tax- exempt bonds to build research facilities primarily for federal research in the basic or fundamental research area. Some of these facilities housing federal research--mostly NIH and NSF funded projects--are in danger of losing their tax-exempt bond status. Counsel have notified some state officials that they may be running afoul of a prohibition on ``private use'' in the tax code, because one private party has a superior claim to others in the use of inventions that result from research. The complication comes from a 1980 law. In 1980, Congress enacted the Patent and Trademark Law Amendments Act, also known as the Bayh-Dole Act. The Bayh-Dole Act requires the Federal Government to retain a non- exclusive, royalty-free right on any discovery. In order to foster more basic research through Federal-State-university partnerships, we need to clarify that this provision of the Bayh-Dole act does not cause these bonds to lose their tax-exempt status. And my bill directs the Treasury Department to do so. I understand that the Treasury Department is aware of this significant concern. Whether or not Congress enacts my legislation, I hope that the Treasury Department will clarify the situation later this year. The fourth major area that my bill addresses is innovation at the small business level. Recently, representatives of a number of small nanotechnology companies came to visit me. They told me that their greatest problem was surviving what they called the ``valley of death.'' That's what they called the first few years of business, when an entrepreneur has a promising technology but little money to test or develop it. Many businesses simply do not survive the ``valley of death.'' I believe that Congress should find a way to assist these businesses with promising technology. Nanotechnology, for instance, shows much promise. According to one recent report, over the next decade, nanotechnology will affect most manufactured goods. As stated in Senate testimony by one National Science Foundation official earlier this year, ``Nanotechnology is truly our next great frontier in science and engineering.'' It took me a while to understand just what nanotechnology is. But it is basically the control of things at very, very small dimensions. By understanding and controlling at that dimension, people can find new and unique applications. These applications range from common consumer products-- such as making our sunblocks--better to improving disease-fighting medicines--to designing more fuel-efficient cars. So, to help these small businesses convert their promising science into successful businesses, my bill would establish tax credits for investments in qualifying small technology innovation companies. These struggling start-up ventures often cannot utilize existing incentives in the tax code--like the R&E tax credit--because they have no tax liability and may have little income for the first few years. They need access to cheap capital to get through those first few research-intensive years. The credit in my bill would be similar to the existing and successful New Markets Tax Credit. The New Markets Credit has provided billions of dollars of investment to low-income communities across the country. In my bill, entities with some expertise and knowledge of research would receive an allocation from Treasury to analyze and select qualifying research investments. These investment entities would then target small business with promising technologies that focus the majority of their expenditures on activity qualifying as research expenses under the R&E credit. In sum, my bill would boost both applied and basic research. It would boost research by businesses big and small. And it would foster research by for-profit and non-profits alike. There is no clear answer to how to address the concerns raised in the ``Waiting for Sputnik'' report. But the answer is clear that we must try--and soon. A noted environmentalist once said: ``Every major advance in the technological competence of man has forced revolutionary changes in the economic and political structure of society.'' From telephones to rockets to computers, I believe that this is true. Let us work to see that the next big technological advance is discovered here in America. Only through continued commitment to research can we ensure that it is.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, on October 4, 1957, an object the size of a basketball shot into space. And history changed. The Soviet Union had launched Sputnik. And Americans reacted with fear. That fear quickly turned to determination to win the race to space. Just one month later, the Russians launched Sputnik II with one precious passenger: a Russian mutt named Laika. Laika became the first living being to orbit earth. Today, a dog in space might seem like a good start for a Disney film. But in 1957, American scientists worried that these events foreshadowed Soviet military and strategic advantage. By the following summer, Congress had created NASA. Sputnik's launch had provided the catalyst. For years before, scientific organizations and even the White House had declared the exploration of space as a priority. It took Sputnik to move us to action. Half a century later, we find ourselves waiting for the next Sputnik. Report after report has outlined the risk that America runs by not doing more in research and education. A recent report entitled ``Waiting for Sputnik'' cautions that our workforce must include a greater percentage of ``knowledge workers''--including scientists and engineers--if we are to maintain our technological lead in defense capabilities. And another recent report, ``Rising Above the Gathering Storm,'' expresses fear that America's lead in science and technology can be abruptly lost and difficult or impossible to regain. What these reports and others are telling us is one thing: We cannot wait for the next Sputnik. We must recognize that our advantage is fleeting. We must begin today with more science, more education, and more commitment to research to prepare for the future. Asia has recognized this. Asia is plowing more funding into science and education. China, in particular, understands that technological advancement means security, independence, and economic growth. Spending on research and development has increased by 140 percent in China, Korea and Taiwan. In America, it has increased by only 34 percent. Asia's commitment is already paying off. More than a hundred Fortune 500 companies have opened research centers in India and China. I have visited some of them. I was impressed with the level of skill of the workers I met there. China's commitment to research, at $60 billion in expenditures, is dramatic by any measure. Over the last few years, China has doubled the share of its economy that it invests in research. China intends to double the amount committed to basic research in the next decade. Currently, only America beats out China in numbers of researchers in the workforce. Over the last few months, I have offered a series of proposals to improve America's competitiveness. Today, I am pleased to introduce the Research Competitiveness Act of 2006. This bill would improve our research competitiveness in four major areas. All four address incentives in our tax code. Government also supports research through Federal spending. But I am not addressing those areas today. First, my bill improves and simplifies the credit for applied research in section 41 of the tax code. This credit has grown to be overly complex, both for taxpayers and the IRS. Beginning in 2008, my bill would create a simpler 20 percent credit for qualifying research expenses that exceed 50 percent of the average expenses for the prior 3 years. And just as important: The bill makes the credit permanent. Because the credit has been temporary, it has simply not been as effective as it could be. Since its creation in 1981, it has been extended 10 times. Congress even allowed it to lapse during one period. The credit expired again just last December. And another short-term extension is pending in both tax reconciliation bills in conference. Last year, the experts at the Joint Committee on Taxation wrote: ``Perhaps the greatest criticism of the R&E credit among taxpayers regards its temporary nature.'' Joint Tax went on to say, ``A credit of longer duration may more successfully induce additional research than would a temporary credit, even if the temporary credit is periodically renewed.'' Currently, there are two different ways to claim a tax credit for qualifying research expenses. First, the ``traditional'' credit relies on incremental increases in expenses compared to a mid-1980s base period. Second, the ``alternative incremental'' credit measures the increase in research over the average of the prior 4 years. Both of these credits have base periods involving gross receipts. My bill replaces these with a new credit, known as the ``Alternative Simplified Credit,'' based on research spending without reference to gross receipts. The current formula hurts companies that have fluctuating sales. And it hurts companies that take on a new line of business not dependent on research. The Senate has passed this alternative formula as an optional credit several times. It is now pending in both versions of the tax reconciliation bill. It has not yet been enacted, though, even on a temporary basis. I support the 2-year extension of the R&E credit contained in the Senate version of the tax reconciliation bill. That is why this new simpler formula in my bill would not start until 2008. That start date would give companies plenty of time to adjust their accounting. The main complaint about the existing credits is that they are very complex, particularly the reference to the 20-year-old base period. This base period creates problems for the taxpayer in trying to calculate the credit. And it creates problems for the IRS in trying to administer and audit those claims. The new credit focuses only on expenses, not gross receipts. And is still an incremental credit, so that companies must continue to increase research spending over time. A tax credit is a cost-effective way to promote R&E. A report by the Congressional Research Service finds that without government support, investment in R&E would fall short of the socially optimal amount. Thus CRS endorses Government policies to boost private sector R&E. Also, American workers who are engaged in R&E activities benefit from some of the most intellectually stimulating, high-paying, high-skilled jobs in the economy. My own State of Montana has excellent examples of this economic activity. During the 1990s, about 400 establishments in Montana provided high-technology services, at an average wage of about $35,000 per year. These jobs paid nearly 80 percent more than the average private sector wage, which was less than $20,000 a year during the same period. Many of these jobs would never have been created without the assistance of the R&E credit. My research bill would also establish a uniform reimbursement rate for all contract and consortia R&E. It would provide that 80 percent of expenses for research performed for the taxpayer by other parties count as qualifying research expenses under the regular credit. Currently, when a taxpayer pays someone else to perform research for the taxpayer, the taxpayer can claim one of three rates in order to determine how much the taxpayer can include for the research credit. The lower amount is meant to assure overhead expenses that normally do not qualify for the R&E credit are not counted. Different rates, however, create unnecessary complexity. Therefore, my bill creates a uniform rate of 80 percent. The second major research area that this bill addresses is the need to enhance and simplify the credit for basic research. This credit benefits universities and other entities committed to basic research. And it benefits the companies or individuals who donate to them. My bill provides that payments under the university basic research credit would count as contractor expenses at the rate of 100 percent. The current formula for calculating the university basic research credit--defined as research ``for the advancement of science with no specific commercial objective''--is even more complex that the regular traditional R&E credit. Because of this complexity, this credit costs less than one-half of 1 percent of the cost of the regular R&E credit. It is completely under-utilized. It needs to be simplified to encourage businesses to give more for basic research. American universities have been powerful engines of scientific discovery. To maintain our premier global position in basic research, America relies on sustained high levels of basic research funding and the ability to recruit the most talented students in the world. The gestation of scientific discovery is long. At least at first, we cannot know the commercial applications of a discovery. But America leads the world in biotechnology today because of support for basic research in chemistry and physics in the 1960s. Maintaining a commitment to scientific inquiry, therefore, must be part of our vision for sustained competitiveness. Translating university discoveries into commercial products also takes innovation, capital, and risk. The Center for Strategic and International Studies asked what kind of government intervention can maintain technological leadership. One source of technological innovation that provides America with comparative advantage is the combination of university research programs, entrepreneurs, and risk capital from venture capital, corporations, or governments. Research clusters around Silicon Valley and North Carolina's Research Triangle exemplify this sort of combination. The National Academies reached a similar conclusion in a 2002 review of the National Nanotechnology Initiatives. In a report, they wrote: ``To enhance the transition from basic to applied research, the committee recommends that industrial partnerships be stimulated and nurtured to help accelerate the commercialization of national nanotechnology developments.'' To further that goal, the third major area this bill addresses is fostering the creation of research parks. This part of the bill would benefit state and local governments and universities that want to create research centers for businesses incubating scientific discoveries with promise for commercial development. Stanford created the Nation's first high-tech research park in 1951, in response to the demand for industrial land near the university and an emerging electronics industry tied closely to the School of Engineering. The Stanford Research Park traces its origins to a business started with $538 in a Palo Alto garage by two men named Bill Hewlett and Dave Packard. The Park is now home to 140 companies in electronics, software, biotechnology, and other high tech fields. Similarly, the North Carolina Research Triangle was founded in 1959 by university, government, and business leaders with money from private contributions. It now has 112 research and development organizations, 37,600 employees, and capital investment of more than $2.7 billion. More recently, Virginia has fostered a research park now housing 53 private-sector companies, nonprofits, VCU research institutes, and state laboratories. The Virginia park employs more than 1,300 people. The creation of these parks would seem to be an obvious choice. But it takes a significant commitment from a range of sources to bring them into being. To foster the creation and expansion of these successful parks, my bill will encourage their creation through the use of tax- exempt bond financing. Allowing tax-exempt bond authority would bring down the cost to establish such parks. Foreign countries are emulating this successful formula. They are establishing high-tech clusters through government and university partnerships with private industry. Back in 2000, a partnership was formed to foster TechRanch to assist Montana State University and other Montana-based research institutions in their efforts to commercialize research. But TechRanch is desperately in need of some new high-tech facilities. It could surely benefit from a provision such as this. I encourage my Colleagues to visit research parks in their States to see how my bill could be helpful in fostering more successful ventures. A related item is a small fix to help universities that use tax- exempt bonds to build research facilities primarily for federal research in the basic or fundamental research area. Some of these facilities housing federal research--mostly NIH and NSF funded projects--are in danger of losing their tax-exempt bond status. Counsel have notified some state officials that they may be running afoul of a prohibition on ``private use'' in the tax code, because one private party has a superior claim to others in the use of inventions that result from research. The complication comes from a 1980 law. In 1980, Congress enacted the Patent and Trademark Law Amendments Act, also known as the Bayh-Dole Act. The Bayh-Dole Act requires the Federal Government to retain a non- exclusive, royalty-free right on any discovery. In order to foster more basic research through Federal-State-university partnerships, we need to clarify that this provision of the Bayh-Dole act does not cause these bonds to lose their tax-exempt status. And my bill directs the Treasury Department to do so. I understand that the Treasury Department is aware of this significant concern. Whether or not Congress enacts my legislation, I hope that the Treasury Department will clarify the situation later this year. The fourth major area that my bill addresses is innovation at the small business level. Recently, representatives of a number of small nanotechnology companies came to visit me. They told me that their greatest problem was surviving what they called the ``valley of death.'' That's what they called the first few years of business, when an entrepreneur has a promising technology but little money to test or develop it. Many businesses simply do not survive the ``valley of death.'' I believe that Congress should find a way to assist these businesses with promising technology. Nanotechnology, for instance, shows much promise. According to one recent report, over the next decade, nanotechnology will affect most manufactured goods. As stated in Senate testimony by one National Science Foundation official earlier this year, ``Nanotechnology is truly our next great frontier in science and engineering.'' It took me a while to understand just what nanotechnology is. But it is basically the control of things at very, very small dimensions. By understanding and controlling at that dimension, people can find new and unique applications. These applications range from common consumer products-- such as making our sunblocks--better to improving disease-fighting medicines--to designing more fuel-efficient cars. So, to help these small businesses convert their promising science into successful businesses, my bill would establish tax credits for investments in qualifying small technology innovation companies. These struggling start-up ventures often cannot utilize existing incentives in the tax code--like the R&E tax credit--because they have no tax liability and may have little income for the first few years. They need access to cheap capital to get through those first few research-intensive years. The credit in my bill would be similar to the existing and successful New Markets Tax Credit. The New Markets Credit has provided billions of dollars of investment to low-income communities across the country. In my bill, entities with some expertise and knowledge of research would receive an allocation from Treasury to analyze and select qualifying research investments. These investment entities would then target small business with promising technologies that focus the majority of their expenditures on activity qualifying as research expenses under the R&E credit. In sum, my bill would boost both applied and basic research. It would boost research by businesses big and small. And it would foster research by for-profit and non-profits alike. There is no clear answer to how to address the concerns raised in the ``Waiting for Sputnik'' report. But the answer is clear that we must try--and soon. A noted environmentalist once said: ``Every major advance in the technological competence of man has forced revolutionary changes in the economic and political structure of society.'' From telephones to rockets to computers, I believe that this is true. Let us work to see that the next big technological advance is discovered here in America. Only through continued commitment to research can we ensure that it is.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, America has never lacked challenges, nor has it lacked the determination and ingenuity to resolve them. In our Nation's very first hours, we faced stark realities. Revolutionary War debts put the Treasury $79 million in the red. States could not retire their debt. Our young Nation had no public credit. We also had no source of revenue--much less a means to collect it. And many Americans were as indebted as their Government. The future held promise, but the present was bleak. America's first Treasury Secretary, Alexander Hamilton, embraced these challenges. The day after his appointment--a Saturday--he put in motion a plan to get our economy on its feet. In his first weeks, he created a customs service to generate income, established a rudimentary coast guard for enforcement, and laid the foundation for fruitful trade relations with Britain. These first weeks in office proved Hamilton a man of action. The years that followed showed him a man of vision. The Treasury Secretary authored the legendary Report on Public Credit, the blueprint for America's fiscal system. Not without controversy, his plan consolidated debt and issued new bonds. He raised taxes and set up a national central bank. The legacy of Hamilton's plan endures today. Hamilton's action and vision launched our Nation's early prosperity. But today, we again face mounting challenges. Using accrual accounting, the 2005 Financial Report of the United States Government reported that the Government is running a net operating deficit of $760 billion--more than 6 percent of our economy. Our foreign debt to GDP ratio has not been this high since Grover Cleveland was President in the late 19th century. We face the largest current account deficit in history--more than $800 billion. A rising China and India are testing our innovative capacity and the robustness of our manufacturing sector. We are also neglecting education and the young minds that will define our future successes. We have forgotten our research institutions that generate ideas and spur innovation. We are abandoning the basic infrastructure that buttresses our economic growth. We have let health care become a burden rather than an asset. We have emptied our saving accounts and neglected investment. Like newly independent America, the United States today demands vision and action. I have put forward a comprehensive competitiveness initiative to address these challenges. I have introduced trade competitiveness legislation to make sure our trading partners play by the rules and give our companies and workers a fair shot a success. I have introduced energy competitiveness legislation to promote innovation and research and reduce our dependence on fossil fuels. I have also proposed savings competitiveness legislation to close the fiscal gap and encourage Americans to save. Savings boosts investment and innovation. This week I will introduce legislation to boost innovation by revamping and making permanent the R&D tax credit. In the coming weeks, I will introduce ambitious legislation on education, health care, and international tax competitiveness. But I do not pretend to have all of the answers. That is why today I would like to recognize another initiative that embraces these competitiveness challenges. It is an initiative that invokes the vision and action of Alexander Hamilton. This namesake initiative--the Hamilton Project--led by some of America's brightest minds, is clear in its vision and bold in the action it promises. Based on principles--not politics--the Hamilton Project recognizes that broad-based economic growth in America is stronger and more sustainable than growth that accrues to a small segment of the population. The Hamilton Project recognizes that our Nation can pursue economic security for American workers and economic growth simultaneously--and that both can be mutually reinforcing. The Hamilton Project recognizes that effective government plays a critical role in facilitating our Nation's prosperity and enhancing economic growth. These principles inform four pillars of action: education and work, innovation and infrastructure, savings and insurance, and effective government. Under each pillar, the project promises innovative ideas and a clear blueprint to realize them. Already, the project has proposed reducing the skills gap of underprivileged school children and improving the effectiveness of our teachers. They have put forward clear proposals to boost savings in America and simplify taxes for the majority of Americans. In the coming months, the Hamilton Project will continue to roll out specific policy proposals in each pillar. The project's work so far promises clear-eyed, detailed plans for our most pressing challenges. I look forward to evaluating each proposal. I recommend that my colleagues take the time to do the same. Once again, I applaud those at the Hamilton Project for their initiative. Our challenges may be daunting, but we must all welcome the challenge. Upon accepting his nomination as Treasury Secretary centuries ago, Hamilton understood the hugeness of his task, saying: ``I conceived myself to be under an obligation to lend my aid towards putting the machine in some regular motion.'' Let us follow his lead. And let us lend our aid, and keep this great machine in motion. Mr. President, I ask unanimous consent to have printed in the Record the Executive Summary of the Hamilton Project's strategy paper.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, today I am introducing the Pharmacy Access Improvement Act of 2006. The Medicare prescription drug benefit got off to a bumpy start. As the new benefit was rolled out, the program experienced problems related to its computer system and databases. A lot of those problems have been fixed. But a new computer program or new software could not fix a number of the problems that pharmacists faced. The Medicare drug benefit made big changes to the pharmacy business. Transitioning dual eligible beneficiaries from Medicaid to Medicare drug coverage affected the pharmacists who provide drugs. And pharmacists have experienced problems dealing with the private drug plans that offer the new benefit. I have been hearing from pharmacists in Montana who are struggling. They are trying to help their patients. But they face great difficulty. The success of the Medicare drug benefit ultimately depends on the pharmacists who deliver the drugs. So we have to help them. And we must act now, before pharmacists find that they are no longer able to provide drugs to Medicare beneficiaries, or to provide drugs at all. This bill would provide the help that pharmacists need to continue delivering the Medicare drug benefit. It would resolve problems that they face every day as they provide Medicare beneficiaries with their drugs. It would help ensure that pharmacies remain open and operable so the drug benefit can be a meaningful part of beneficiaries' health care. The Pharmacy Access Improvement Act would do several things to help pharmacies. First, it would strengthen the access standards that drug plans have to meet. It is important that the drug plans contract with broad and far-reaching networks of pharmacies. This bill would ensure that the pharmacies that drug plans count in their networks provide real access to Medicare beneficiaries. It would also help safety net pharmacies to join drug plan networks. These pharmacies have served the most vulnerable patients for years. They should be able to continue to do so. Drug plans should not be allowed to exclude safety net pharmacies. Excluding them does a huge disservice to needy beneficiaries. This bill would rectify the problems that safety net pharmacies have encountered in participating in the Medicare drug benefit. The Pharmacy Access Improvement Act would speed up reimbursement to pharmacies. The delay that pharmacies have experienced in receiving payment from drug plans has sent pharmacies all over the country into financial frenzy. These delays have forced pharmacies to seek additional credit, dip into their savings, or worse, as they try to continue operations. This bill would require drug plans to pay promptly. Most claims would be reimbursed within 2 weeks, making it easier for pharmacies to operate. And the bill would impose a monetary penalty on plans if they paid late. One of the most common complaints from beneficiaries has been how confused they are. One source of their confusion comes from the practice of co-branding. Co-branding is when a drug plan partners with a pharmacy chain and then includes the pharmacy's logo or name on its marketing materials and identification cards. This is confusing, because it sends the message that drugs are available only from that pharmacy. And that is not true. To help end this confusion, the Pharmacy Access Improvement Act would prohibit drug plans from placing pharmacy logos or trademarks on their identification cards and restrict other forms of co-branding. This bill would also require that pharmacists be paid reasonable dispensing fees for each prescription that they fill. Currently, some plans pay no dispensing fees. Other plans pay only nominal dispensing fees. Pharmacists are not able to cover their costs of dispensing drugs. And that puts them at a severe disadvantage. It eats up their margins from non-Medicare business. And it is unsustainable in the long-run. Some would say that it is too soon to consider legislation that affects the Medicare drug benefit. I disagree. The problems that pharmacists are facing are real. And they are not going away. If we wait a year to consider the Pharmacy Access Improvement Act, it may be too late for many pharmacists and the beneficiaries whom they serve. We have a duty to make the Medicare drug benefit as strong and robust as it can be. And the Pharmacy Access Improvement Act presents an opportunity for us to do just that. I urge my colleagues to support it.

Mr. BAUCUS. Mr. President, today I am introducing the Medicare Prescription Drug Simplification Act of 2006. This bill would improve the Medicare drug benefit by creating simple, understandable benefit packages. It would provide extra funds for State counselors who educate Medicare beneficiaries about the drug benefit. And it would strengthen consumer protections for beneficiaries who enroll. Medicare drug benefits are critical to the health of our Nation's elderly and disabled. In 2003, after years of debate, Congress added drug coverage to Medicare through passage of the Medicare Modernization Act, the MMA. I was proud to help pass that bill. The law was not perfect. But, as I said then, we should not let perfection be the enemy of the good. The MMA can go a long way toward helping those who need it most. But implementation of the law has been flawed. The Centers for Medicare and Medicaid Services, or CMS, was put in charge of ensuring that the prescription drug benefit was fully operational by January 1, 2006. The task was big. And CMS worked hard to get it done. Unfortunately, CMS's efforts have come up short in a few major areas. First, CMS made the new program needlessly confusing. The law charged CMS with approving prescription drug plans. Last April, I urged CMS to approve only the plans meeting the highest standards, so that seniors could choose among a manageable number of solid offerings. But CMS ignored that advice. Instead, CMS approved 47 plans in my State alone, and more than 1,500 nationwide. Furthermore, the differences between the plans are mind- boggling and difficult to sort out, even for the most-savvy consumer. Beneficiaries deserve better. They must be able to make apples-to- apples comparisons in order to choose what is best for them. There are other problems in the way that CMS chose to implement the new program. Consumer protections are weak and inconsistent. The list of drugs covered by plans should not change in the middle of the year. Plan formularies should be transparent. And patients should be able to request exceptions to them using the same process and forms, no matter which plans the patients enrolled in. Also, CMS terribly underfunded State Health Insurance Programs, known as SHIPs. These agencies are mainly staffed by volunteers who help educate and advise people about Medicare and the new drug benefit. They have held thousands of community events and assisted millions of people across the country. But they struggled to meet demand for help with the new drug program. Last week, Montana AARP donated $40,000 of its own funds to help the Montana SHIP keep enough staff and volunteers through the May 15 deadline. CMS provided only $7,500 for a five-county region in Montana with an area bigger than Delaware. In contrast, CMS spent $300 million for an ad campaign, a bus tour, and a blimp. Yet despite these ads, many seniors are still confused about the drug benefit. When I asked Montanans how they feel about the new program, they tell me that it is too complex and confusing. Recent focus groups conducted by MedPAC, the group that advises Congress on Medicare policy, found the same the problem. According to MedPAC, beneficiaries are ``confused by the number of plans, variation in benefit structure.'' And a study released by the Kaiser Family Foundation says: ``the absence of any standardization for many features of drug plan benefit design, and even some of the basic terminology used to describe these plans, adds to the challenges for beneficiaries'' and ``is likely to make apples-to-apples comparisons across plans more difficult for consumers.'' The report ``confirm[ed] the importance of federal safeguards . . . to minimize unnecessary complexity in [the] Medicare prescription drug plan marketplace.'' The message is coming through loud and clear from constituents, researchers, advocacy groups, and government advisers. We need to make the Medicare drug benefit more understandable, straightforward, and transparent. And that's what this bill would do. First, the bill would make choices among prescription drug plans more simple and straightforward. It would require the Federal Department of Health and Human Services to define six types of drug benefit packages that insurers could offer. In addition, Medicare and insurers would both have to use uniform language, names, and terminology to describe drug benefit packages. Seniors can reach informed decisions, but they deserve clear options. This approach is similar to the one Congress took with the Medicare supplemental market. In 1980, Congress enacted the Baucus amendments to fix marketing abuses and consumer confusion with supplemental or Medigap plans. Those reforms required private issuers to meet minimum standards and have minimum loss ratios. Ten years later, Congress again took up Medigap reform, passing legislation that led to the standardization of Medigap policies. This resulted in a limited number of Medigap options, each with a fixed set of benefits. These changes were successful in helping consumers to make comparisons and in strengthening consumer protections. My colleague and co-sponsor, Senator Ron Wyden, was instrumental in bringing about these reforms. And I thank him for his involvement then and today. The bill that we are introducing today would build on these lessons and apply them to the Medicare drug benefit. By establishing six standardized types of benefit packages that insurers can offer, the bill would help people to make apples-to-apples comparisons. It would make choices more understandable. It would reduce confusion and help beneficiaries make the decisions that are best for each individual. And it would do this while preserving the ability of insurers to compete in the marketplace. Second, the bill would provide extra funds to State Health Insurance Programs through 2010. Putting information on the Internet, television, and a toll-free hotline is not enough. Third, the bill would stop drug plans from removing medications or increasing drug costs during the benefit year. Fourth, the bill would prohibit insurance agents from engaging in unfair marketing practices that prey on vulnerable people--practices like cold-calling seniors. I believe strongly that Medicare beneficiaries need prescription drug coverage. And, if CMS implements it correctly, the market-based approach envisioned in the MMA can deliver those benefits effectively. But a market can work only if the product is well defined and consumers have sufficient knowledge of it. As Adam Smith said: ``[Value] is adjusted . . . not by any accurate measure, but by the haggling and bargaining of the market.'' It's not fair to expect seniors and people with disabilities to haggle and bargain if the choices are incomprehensible. Some may say that lots of choice is good. This is true when people buy cars or toasters. But, as many economists have shown, the health care market is different. People want to choose their providers and pharmacies. But they do not necessarily want to wade through a confusing array of plans. Some may say that we should hold off making changes until the market consolidates. But that is both unfair and unrealistic. With more than 1,500 plans in the market now, how much consolidation could really fix the problem of confusion and complexity? Furthermore, the next enrollment period is fast approaching, and consumers are insisting on relief now. Some may say that enrollment is high, so why tinker with the benefit? But look at the numbers. In 2003, CMS said that they expected 19 million Americans to sign up for the drug program. But so far, only 8 million have voluntarily enrolled. In Montana, only 42 percent of people who have a choice about whether to sign up have done so. We can do better than that. And with passage of the Medicare Prescription Drug Simplification Act, we will. The MMA tried to balance the needs of private plans and beneficiaries. But implementation has tilted that balance toward the private firms, rather than seniors and the disabled. The Medicare Prescription Drug Simplification Act of 2006 would restore the proper balance needed to make the drug program work fairly for people with Medicare.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, today I am introducing the Medicare Prescription Drug Simplification Act of 2006. This bill would improve the Medicare drug benefit by creating simple, understandable benefit packages. It would provide extra funds for State counselors who educate Medicare beneficiaries about the drug benefit. And it would strengthen consumer protections for beneficiaries who enroll. Medicare drug benefits are critical to the health of our Nation's elderly and disabled. In 2003, after years of debate, Congress added drug coverage to Medicare through passage of the Medicare Modernization Act, the MMA. I was proud to help pass that bill. The law was not perfect. But, as I said then, we should not let perfection be the enemy of the good. The MMA can go a long way toward helping those who need it most. But implementation of the law has been flawed. The Centers for Medicare and Medicaid Services, or CMS, was put in charge of ensuring that the prescription drug benefit was fully operational by January 1, 2006. The task was big. And CMS worked hard to get it done. Unfortunately, CMS's efforts have come up short in a few major areas. First, CMS made the new program needlessly confusing. The law charged CMS with approving prescription drug plans. Last April, I urged CMS to approve only the plans meeting the highest standards, so that seniors could choose among a manageable number of solid offerings. But CMS ignored that advice. Instead, CMS approved 47 plans in my State alone, and more than 1,500 nationwide. Furthermore, the differences between the plans are mind- boggling and difficult to sort out, even for the most-savvy consumer. Beneficiaries deserve better. They must be able to make apples-to- apples comparisons in order to choose what is best for them. There are other problems in the way that CMS chose to implement the new program. Consumer protections are weak and inconsistent. The list of drugs covered by plans should not change in the middle of the year. Plan formularies should be transparent. And patients should be able to request exceptions to them using the same process and forms, no matter which plans the patients enrolled in. Also, CMS terribly underfunded State Health Insurance Programs, known as SHIPs. These agencies are mainly staffed by volunteers who help educate and advise people about Medicare and the new drug benefit. They have held thousands of community events and assisted millions of people across the country. But they struggled to meet demand for help with the new drug program. Last week, Montana AARP donated $40,000 of its own funds to help the Montana SHIP keep enough staff and volunteers through the May 15 deadline. CMS provided only $7,500 for a five-county region in Montana with an area bigger than Delaware. In contrast, CMS spent $300 million for an ad campaign, a bus tour, and a blimp. Yet despite these ads, many seniors are still confused about the drug benefit. When I asked Montanans how they feel about the new program, they tell me that it is too complex and confusing. Recent focus groups conducted by MedPAC, the group that advises Congress on Medicare policy, found the same the problem. According to MedPAC, beneficiaries are ``confused by the number of plans, variation in benefit structure.'' And a study released by the Kaiser Family Foundation says: ``the absence of any standardization for many features of drug plan benefit design, and even some of the basic terminology used to describe these plans, adds to the challenges for beneficiaries'' and ``is likely to make apples-to-apples comparisons across plans more difficult for consumers.'' The report ``confirm[ed] the importance of federal safeguards . . . to minimize unnecessary complexity in [the] Medicare prescription drug plan marketplace.'' The message is coming through loud and clear from constituents, researchers, advocacy groups, and government advisers. We need to make the Medicare drug benefit more understandable, straightforward, and transparent. And that's what this bill would do. First, the bill would make choices among prescription drug plans more simple and straightforward. It would require the Federal Department of Health and Human Services to define six types of drug benefit packages that insurers could offer. In addition, Medicare and insurers would both have to use uniform language, names, and terminology to describe drug benefit packages. Seniors can reach informed decisions, but they deserve clear options. This approach is similar to the one Congress took with the Medicare supplemental market. In 1980, Congress enacted the Baucus amendments to fix marketing abuses and consumer confusion with supplemental or Medigap plans. Those reforms required private issuers to meet minimum standards and have minimum loss ratios. Ten years later, Congress again took up Medigap reform, passing legislation that led to the standardization of Medigap policies. This resulted in a limited number of Medigap options, each with a fixed set of benefits. These changes were successful in helping consumers to make comparisons and in strengthening consumer protections. My colleague and co-sponsor, Senator Ron Wyden, was instrumental in bringing about these reforms. And I thank him for his involvement then and today. The bill that we are introducing today would build on these lessons and apply them to the Medicare drug benefit. By establishing six standardized types of benefit packages that insurers can offer, the bill would help people to make apples-to-apples comparisons. It would make choices more understandable. It would reduce confusion and help beneficiaries make the decisions that are best for each individual. And it would do this while preserving the ability of insurers to compete in the marketplace. Second, the bill would provide extra funds to State Health Insurance Programs through 2010. Putting information on the Internet, television, and a toll-free hotline is not enough. Third, the bill would stop drug plans from removing medications or increasing drug costs during the benefit year. Fourth, the bill would prohibit insurance agents from engaging in unfair marketing practices that prey on vulnerable people--practices like cold-calling seniors. I believe strongly that Medicare beneficiaries need prescription drug coverage. And, if CMS implements it correctly, the market-based approach envisioned in the MMA can deliver those benefits effectively. But a market can work only if the product is well defined and consumers have sufficient knowledge of it. As Adam Smith said: ``[Value] is adjusted . . . not by any accurate measure, but by the haggling and bargaining of the market.'' It's not fair to expect seniors and people with disabilities to haggle and bargain if the choices are incomprehensible. Some may say that lots of choice is good. This is true when people buy cars or toasters. But, as many economists have shown, the health care market is different. People want to choose their providers and pharmacies. But they do not necessarily want to wade through a confusing array of plans. Some may say that we should hold off making changes until the market consolidates. But that is both unfair and unrealistic. With more than 1,500 plans in the market now, how much consolidation could really fix the problem of confusion and complexity? Furthermore, the next enrollment period is fast approaching, and consumers are insisting on relief now. Some may say that enrollment is high, so why tinker with the benefit? But look at the numbers. In 2003, CMS said that they expected 19 million Americans to sign up for the drug program. But so far, only 8 million have voluntarily enrolled. In Montana, only 42 percent of people who have a choice about whether to sign up have done so. We can do better than that. And with passage of the Medicare Prescription Drug Simplification Act, we will. The MMA tried to balance the needs of private plans and beneficiaries. But implementation has tilted that balance toward the private firms, rather than seniors and the disabled. The Medicare Prescription Drug Simplification Act of 2006 would restore the proper balance needed to make the drug program work fairly for people with Medicare.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, today I am introducing the Pharmacy Access Improvement Act of 2006. The Medicare prescription drug benefit got off to a bumpy start. As the new benefit was rolled out, the program experienced problems related to its computer system and databases. A lot of those problems have been fixed. But a new computer program or new software could not fix a number of the problems that pharmacists faced. The Medicare drug benefit made big changes to the pharmacy business. Transitioning dual eligible beneficiaries from Medicaid to Medicare drug coverage affected the pharmacists who provide drugs. And pharmacists have experienced problems dealing with the private drug plans that offer the new benefit. I have been hearing from pharmacists in Montana who are struggling. They are trying to help their patients. But they face great difficulty. The success of the Medicare drug benefit ultimately depends on the pharmacists who deliver the drugs. So we have to help them. And we must act now, before pharmacists find that they are no longer able to provide drugs to Medicare beneficiaries, or to provide drugs at all. This bill would provide the help that pharmacists need to continue delivering the Medicare drug benefit. It would resolve problems that they face every day as they provide Medicare beneficiaries with their drugs. It would help ensure that pharmacies remain open and operable so the drug benefit can be a meaningful part of beneficiaries' health care. The Pharmacy Access Improvement Act would do several things to help pharmacies. First, it would strengthen the access standards that drug plans have to meet. It is important that the drug plans contract with broad and far-reaching networks of pharmacies. This bill would ensure that the pharmacies that drug plans count in their networks provide real access to Medicare beneficiaries. It would also help safety net pharmacies to join drug plan networks. These pharmacies have served the most vulnerable patients for years. They should be able to continue to do so. Drug plans should not be allowed to exclude safety net pharmacies. Excluding them does a huge disservice to needy beneficiaries. This bill would rectify the problems that safety net pharmacies have encountered in participating in the Medicare drug benefit. The Pharmacy Access Improvement Act would speed up reimbursement to pharmacies. The delay that pharmacies have experienced in receiving payment from drug plans has sent pharmacies all over the country into financial frenzy. These delays have forced pharmacies to seek additional credit, dip into their savings, or worse, as they try to continue operations. This bill would require drug plans to pay promptly. Most claims would be reimbursed within 2 weeks, making it easier for pharmacies to operate. And the bill would impose a monetary penalty on plans if they paid late. One of the most common complaints from beneficiaries has been how confused they are. One source of their confusion comes from the practice of co-branding. Co-branding is when a drug plan partners with a pharmacy chain and then includes the pharmacy's logo or name on its marketing materials and identification cards. This is confusing, because it sends the message that drugs are available only from that pharmacy. And that is not true. To help end this confusion, the Pharmacy Access Improvement Act would prohibit drug plans from placing pharmacy logos or trademarks on their identification cards and restrict other forms of co-branding. This bill would also require that pharmacists be paid reasonable dispensing fees for each prescription that they fill. Currently, some plans pay no dispensing fees. Other plans pay only nominal dispensing fees. Pharmacists are not able to cover their costs of dispensing drugs. And that puts them at a severe disadvantage. It eats up their margins from non-Medicare business. And it is unsustainable in the long-run. Some would say that it is too soon to consider legislation that affects the Medicare drug benefit. I disagree. The problems that pharmacists are facing are real. And they are not going away. If we wait a year to consider the Pharmacy Access Improvement Act, it may be too late for many pharmacists and the beneficiaries whom they serve. We have a duty to make the Medicare drug benefit as strong and robust as it can be. And the Pharmacy Access Improvement Act presents an opportunity for us to do just that. I urge my colleagues to support it.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, in Montana, we have a long and proud athletic heritage, and the University of Montana men's basketball team has added yet another chapter to this great legacy. The Griz finished their Cinderella season with a 24-to-7 record. Among their many great achievements this season was beating perennial basketball powerhouse Stanford, upsetting the top-seeded Northern Arizona Lumberjacks to win the Big Sky tournament, and shocking the No. 5 seeded Nevada Wolfpack in the first round of the NCAA tournament. This truly was a magical season for our Griz. By advancing to the second round of the NCAA tournament, the Griz accomplished a feat no Griz team had in over 30 years. Yet this season was about more than just wins and losses, it was about a team that is a true class act-- both on and off the court. This team's dedication to their school, their fans, their studies, and their community is a direct reflection of the man who leads them. Coach Larry Krystkowiak is truly the epitome of what it means to be a Montanan. Growing up in a small town, Coach ``K'' went on to play basketball at the University of Montana, where he still holds the record for the most points and rebounds in a career. Once he completed his collegiate career, he went on to a successful career in the NBA. After his retirement from professional basketball, Coach ``K'' moved to the other side of the bench and became an assistant coach. Eventually he found himself back home, as coach of the Griz. As head coach, Coach ``K'' instilled in his team that being a college athlete is about more than just playing a sport, it is about being a role model for a community. Nothing exemplifies this mentality more than when Coach ``K'' himself offered to have his head shaved in order to show support to a friend who had recently been diagnosed with cancer and to raise money for children who were battling the disease. I want to take this opportunity to publicly congratulate each player on the roster, the coaching staff, Coach ``K'', and the entire University of Montana community for their magical season. I ask that the list of coaches and team members be printed in the Record. The information follows: 2005-2006 University of Montana Men's Basketball Team Coaches: Larry Krystkowiak, Head Coach; Andy Hill; Brad Huse; and Wayne Tinkle. Players: Mike Chavez; Kevin Criswell; Matt Dlouhy; Bryan Ellis; Jordan Hasquet; Matt Martin; Virgil Matthews; Stuart Mayes; John Seyfert; Kyle Sharp; Greg Spurgetis; Andrew Strait; Austin Swift; and Eric Van Vliet.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, colleagues, this is deja vu all over again. This is the reconciliation cut bill of $11 billion which barely passed the House all over again. It is added on, on top of that again. That was a net $11 billion cut for Medicare and Medicaid in the jurisdiction of the Committee on Finance, and this is $11 billion yet on top of that. That will come out of you know whose hides. You know how unpopular that will be back home. This is not the way to cut entitlement spending or put a limit on it. The better way is an all-encompassing way when everyone is in it together, not directed to the Committee on Finance jurisdiction which will cut more out of Medicaid, cut more spending out of Medicare. I strongly urge my colleagues, just remember, this is deja vu all over again. It is a repeat of what happened last year. That was extremely unpopular.