Max Baucus

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I ask any motions be set aside so the Senator from Michigan can offer a motion to instruct.

Mr. BAUCUS. Mr. President, today, we debate this tax reconciliation bill for a third time. We last debated this bill on February 2, Groundhog Day. My friend from Iowa, the chairman of the committee, Senator Grassley, last week compared this repeated debate to Groundhog Day. That is true. This debate does remind us of the wonderful film ``Groundhog Day,'' where Bill Murray is forced to live the same day over and over again. But at the risk of giving away some of the plot of the film, let me remind my colleagues of the lesson of the film. In the film, providence dooms Bill Murray to repeat the same day--Groundhog Day, that is--until he learns to live it right. One might say that is where we are. We are doomed to debate tax policy over and over again until we get it right. In November, when we first debated this bill, the Senate voted 64 to 33 to pass the bill to support AMT relief to middle-income families. Again, last week, the Senate voted 66 to 31 to again pass the bill and support the alternative minimum tax, otherwise known as AMT, relief for middle-income families. In particular, the Senate last week voted 73 to 24 to support the Menendez amendment to express the sense of the Senate that protecting middle-income families from the alternative minimum tax should be a higher priority in 2006 than extending capital gains and dividends tax cuts that do not expire until the end of 2008 or the beginning of 2009. So the same question keeps popping up over and over again and the same answer keeps coming back: Let's make sure the relief from the onerous and family unfriendly AMT happens now. We must defer on extending expensive tax breaks for investors until a later date. Yet I keep reading in the papers that Senate leaders have promised that capital gains and dividends tax cuts will still be in this reconciliation bill. The Senate position, by an overwhelming vote of 73 Senators, is providing immediate relief to more than 17 million middle- income families that otherwise would see a tax increase this year. Since that is so, it seems to me we should accept that position, accept that view, and work toward its enactment. Statements that we will provide AMT relief to working families separately and later in the year undermine this Senate position. It is statements such as those that have led us to this Groundhog Day. It is statements such as that that call into question the Senate's votes and cause the Senate to have to vote once again to deliver that same message. Today, we will debate several motions to instruct, and the first one will be Groundhog Day for AMT. For 17 million American families, 2006 came with an unwelcome surprise--a stealth tax. The temporary protection from alternative minimum tax, or AMT, expired December 31. That means that 17 million more American families will be subject to it this year. That is an increase from 3 million to 20 million taxpayers in one year alone. Once again, the Senate will debate whether to support our position, where AMT relief is a priority. In contrast, the House position was to prefer extending capital gains and dividends cuts, which expire in 2009; that is, over AMT protection, which expired 6 weeks ago. I think the answer to that is clear. If the House position prevails in conference, working families will lose. If we do not extend the AMT protection, a family with three kids earning $63,000 will be hit by the AMT this year. The AMT is family unfriendly. The AMT creeps deeper and deeper into working families each year. Protection from the AMT should be a priority for both sides of the aisle and both sides of the Capitol. Instead, the House has passed a separate alternative minimum tax bill without the procedural protections of this bill. And while this other House bill purports to protect families from the alternative minimum tax, there will still be 600,000 additional taxpayers paying higher taxes for this year 2006 due to this stealth tax. The House AMT patch, or otherwise known as the hold-harmless provision, as some have called it, does not really hold anyone harmless. Last year, 2005, there were 3.6 million American taxpayers paying this AMT stealth tax. Under the House bill, there would be 4.2 million taxpayers paying the AMT stealth tax in 2006; that is, this year. So as we debate this issue once again, let us remember our priority: that millions of working families now subject to a tax increase courtesy of the AMT are a priority we should address. Once we accept that priority, the decision whether to allocate $50 billion to extending capital gains tax cuts becomes much more clear. So let us do what is urgent first. Let us do what working families expect and need. Doing so will be the only way to move on to better days for these families. I want to expand on that last point. The capital gains and dividends tax cuts contained in the House bill, as I mentioned, are among matters most in dispute in this legislation, so let me take a couple of moments to discuss why Congress does not need to extend them in this bill. Under current law, taxpayers who earn money in capital gains and dividend income pay taxes on that income at a lower rate than they do on their ordinary income; for example, wages. In 2003, we passed legislation that set the current law for the taxation of capital gains and dividend income. For taxpayers in most income brackets, capital gains and dividend income are taxed at 15 percent. Taxpayers in the lower two tax brackets do not receive a great deal of capital gains and dividend income. But for taxpayers in those two brackets, what capital gains and dividend income they receive is taxed at 5 percent now and will be tax free in 2008. Prior law, before 2003, taxed long-term capital gains at 20 percent or 10 percent. Prior law taxed dividend income similar to any other ordinary income, so there is a split in capital gains. The House bill would extend the lower tax rates Congress enacted in 2003 to the end of 2010. The first question before us, therefore, is when does Congress need to act on capital gains and dividend income tax rates? Those rates do not expire this year. Those rates do not expire next year. Those rates do not expire the year after that. Rather, those rates expire on January 1, 2009, about 3 years from now, after the next Presidential election. So the first thing we need to note is that extension of capital gains and dividends tax rates is far from an urgent matter. The second question we need to ask is: Is it fiscally responsible to extend those tax cuts right now? According to the Joint Committee on Taxation, the cost of a 2-year extension of those tax rates amounts to $50 billion over a 10-year budgetary horizon. Some who like lower capital gains and dividends tax rates will cite a lower 5-year cost of $20 billion, but that masks the full cost over the decade to come. Perhaps we should be a little more frank with the American people because it is no secret that many who like lower capital gains and dividends tax rates would like to make those lower rates permanent. This is the position the administration takes. So we ought to look at the cost of making those rates permanent. According to the President's new budget request, making these tax cuts permanent would cost more than $200 billion over 10 years. Mr. President, $200 billion is a lot of money. Two hundred billion dollars is about what we spend on fighting crime, combating drugs, and the entire administration of Justice for 5 years. Two hundred billion dollars is about what the Federal Government spends on highways, airports, and the entire Transportation budget for 3 years. And $200 billion is about what we spend on veterans' retirement and disability benefits for 6 years. So extending capital gains and dividend tax cuts costs real money. The third question we need to ask is: Are capital gains and dividends tax cuts the best use of the money set aside for tax cuts in the budget? For there is a far more pressing need for tax relief before us in this bill and that is relief from the onerous alternative minimum tax. Millions of working families are beginning their annual ritual of filling out their tax returns. It takes more time than most of us would like, and millions of taxpayers are being forced to fill out their returns twice. They have to do so if they owe money under the alternative minimum tax. The need for relief from the alternative minimum tax is not some faraway possibility, several years down the road. Relief from the alternative minimum tax expired for the tax year 2006. That is the more pressing tax relief need before us. Treasury Secretary Snow testified before the Senate Finance Committee last Tuesday. He told the committee: Tax increases carry an enormous risk of economic damage. And I can tell you today that the President will not accept that risk. He will not accept a tax increase on the American people. That is exactly why we need to prevent a tax increase on those working American families who would be subject to the alternative minimum tax, unless we act. In the same vein, the popular research and development tax credit expired at the end of last year. Businesses have argued for years that the annual 1-year extension provides no certainty for business planning and investment. We need to extend the R&D tax credit. Some will make breathless arguments that capital gains and dividends tax cuts are necessary. Why are they necessary, they say? They say they are necessary to prevent dire consequences in the stock market. They say that the stock market will plunge if we don't enact this in 2 years. It doesn't need to be enacted. They want to enact it because the current law is in existence until January 1, 2009. But they say the stock market is going to fall. Let us look at the time period starting in May 2003, when Congress reduced the dividend and capital gains tax rates. Since then, the stock market has seen a 14-percent growth. Furthermore, let us look at the time when Congress first cut the capital gains tax rate in August of 1997. Between then and the time the further cuts were made in May of 2003, the market grew by 13 percent. Now let us look at the time before either the capital gains or dividends tax cuts. Before the 1997 tax cuts, capital gains were taxed at 28 percent, much higher than the current law, and dividends were taxed as ordinary income, higher than under current law. In those times of higher capital gains and dividend tax rates, between the time the Clinton administration took office and August 1997, did the market grow by 13 percent or 14 percent? No. The market grew by a whopping 236 percent, far more than the 13 percent and 14 percent when the lower rates were in existence. So the evidence is not there that lower capital gains and dividends tax cuts will lead to increased stock prices. Indeed, one would make the case that other economic factors are much more important to stock market returns than are capital gains and dividends tax rates. One of those factors is the fiscal responsibility of the mid-1990s. After President Clinton took office in 1993, Congress and the President enacted meaningful, I mean meaningful deficit reduction. We reduced the Government's demand for scarce capital. We freed up savings to finance productive business investments. And we put the Nation on a path to economic growth. In contrast, financing tax cuts by running greater deficits increases the Government's demand for scarce capital. Deficit- financed tax cuts take away savings that could be available to finance productive business investments. Increasing the deficit detracts from economic growth. To encourage economic growth, we need to get deficits under control, and the first step we can take down that road is to stop making the deficit worse by enacting more tax cuts than we can afford. Capital gains and dividends tax cuts do not expire for 3 years. Capital gains and dividends tax cuts cost a lot of money. Capital gains and dividends tax cuts are a less-pressing priority than relief from the alternative minimum tax. And the evidence is simply not there that capital gains and dividends tax cuts contribute to market strength. That is not the evidence. It may be somebody's theory, but that is not the evidence. So that is why we do not need to extend capital gains and dividends tax cuts today. We can face this issue later. Rather, let us address the more pressing need to extend relief from the alternative minimum tax. Let us act responsibly. Let us save capital gains and dividends tax cuts for another day. I yield the floor.

Mr. BAUCUS. Mr. President, people call Montana the ``big sky'' State. Standing on the top of Mount Sentinel--the backdrop of the University of Montana--on a clear day, a person can see nearly 50 miles in almost every direction. I might say that at the top of Lone Mountain in Big Sky, MT, you can see the Tetons in Wyoming. Back at Mount Sentinel, which many of us climb from time to time, at the foot of it a professor is studying a horizon that stretches much farther than 50 miles. Professor Dan Reisenfeld is one of the key astrophysicists working on a mission to map and study the edge of the solar system. Professor Reisenfeld is busy playing a part in the design of the interstellar boundary explorer, or I-BEX, an instrument that uses a large-aperture camera to detect high-energy particles coming from the edge of the solar system. What does this mean? If I-BEX is successful at gathering information about the boundaries of the solar system, this will help companies that build satellites orbiting the Earth to predict solar storms. Solar storms can disrupt a satellite's operation and even cause irreparable damage. Here on Earth, that means that emergency communications equipment would be able to function without the fear of interruption. And global communications can be more seamless. Some of the most important scientific research is being done at universities across Montana and across the country. This research covers the gamut from biotechnology to stem cell research, to cutting- edge computer science. But institutions across the world are catching up. In January, I visited India's Institute of Technology in Delhi. Eager, young engineering students are plotting for a better tomorrow in their country and the world. India, similar to many other developing countries, has made significant investments in education over the past several years. India produces 12 percent of the total global supply of university graduates. This percentage is increasing. China is now second only to the United States in the number of researchers in its workforce. According to the World Bank's most recent statistics, since 1985, China has seen an almost 400-percent increase in its per capita education spending. While China, India, and other developing nations may still have a long way to go, they are training workers for a new world. That takes me back to Professor Reisenfeld at the University of Montana. The University of Montana, similar to most colleges and universities across the country, is a tax-exempt organization. Tax- exempt universities rely in large part on tax deductible charitable contributions from alumni, private foundations, and businesses. Legislative proposals that encourage more giving to charity help provide scholarships, build science centers, and hire new faculty to do cutting-edge research. In large part, charitable donations from the private sector--business and individuals--help America keep its competitive edge. There is no doubt about that, Mr. President. Our universities are a very key, integral part in America's R&D and in enhancing our country's competitiveness. The Senate-passed tax reconciliation before us includes several incentives to encourage charitable giving. One of the most important incentives for charitable giving included in the Senate-passed bill is the IRA rollover provision. According to the American Council on Education, the IRA rollover provision is supported by close to 2,000 colleges and universities across the country. The provision promises to be an important tool for planned giving--a staple of university fundraising. In addition, the IRA rollover represents a significant simplification over current law. Let me explain. The IRA rollover provision allows older, financially secure donors to seamlessly transfer amounts in their IRA to their favorite charity, without first recognizing the IRA into income. Under current law, taxpayers who want to donate their IRAs to charity must first take the amount into income. This can cause a huge disincentive to give if the amount of the IRA exceeds the donors' adjusted gross income limitation, for example. In some cases, donors are forced to incur income for tax purposes for amounts the donor has given to charity. This makes no sense. The law should encourage taxpayers to give to charity. For example, a taxpayer with an adjusted gross income of $40,000 and an IRA worth about $100,000, is forced to take that full $100,000 into income prior to making a gift to charity. As a result, this taxpayer is considered to have $140,000 in income, for tax purposes--even though the taxpayer is giving $100,000 away. Because taxpayers are subject to adjusted gross income limitations, even if the donor gives the entire $100,000 in the IRA away to charity, the taxpayer can only deduct up to half of adjusted gross income--in this example, $70,000. In short, under current law, this taxpayer is forced to recognize $30,000 more in taxable income, even though the IRA is going entirely to charity. We should not penalize charitable giving. The IRA rollover provision corrects this problem by simply disregarding from income amounts in a donor's IRA given to charity. This proposal will have a fundamental effect on the amount of money contributed to charity. Currently, there are more than $2.5 trillion held in IRAs. If 1 percent of the assets currently held in IRAs were donated to charity, that would mean an additional $25 billion would go to benefit the type of research conducted by Professor Reisenfeld at the University of Montana. And money would also go to scholarships for the students working side by side with Professor Reisenfeld in his classroom. The House bill does not include these new charitable giving incentives. Mr. President, the upcoming conference will highlight the priorities of each body. We include this provision; the House does not. It is unclear at this point whether there will be enough revenue to extend capital gains and dividend tax treatment beyond the current law, which we all know doesn't expire until January 1, 2009, and also include the important charitable incentives included in the Senate- passed bill. I hope that the conference committee makes charities and our future scientists its priority. Mr. President, I want to discuss the importance of extending the R&D development tax credit for 2 years. This is one of the key issues for conference. The Senate passed a 2- year extension of the revised and improved R&D credit, but the House only passed 1 year. I am hopeful that 2 years will be retained in conference, as this tax incentive is essential for U.S. businesses in our global economy. Businesses depend on it. They need to know it is there. Predictability is important. I have consistently discussed the need for America to maintain its competitive edge. To do that, we must cater to our strength: innovation. Let me state that during the almost 2 weeks I was in Asia, China, and India in January meeting with business leaders and public officials, one thing became clear; that is, sure, there is a rising Chinese and Indian challenge, just as other countries challenge the United States, but they constantly told us that in the private sector the one advantage America still has is innovation, creativity. Over and over again I heard that. I hope that lasts. I hope it lasts a long time. We know people in other countries are working very hard; they are aggressive and hungry and they are going to do all they can to be as creative--if not more so--as we are in the United States. But that is the one edge we have currently, and we must do our utmost to make sure that lasts. Foreign direct investment, including research and development, is shifting heavily toward China and India. The competition for qualified researchers has increased markedly. On my recent trips to China and India, people constantly told me, as I have said, that the one thing they admire most about America is our innovation. We must foster R&D, and extending this vital credit for 2 years would help maintain that focus. Every morning we hear news of some new product or discovery that promises to make our jobs easier and our lives better. For example, between 2002 and 2003, the annual number of cancer deaths decreased for the first time in 70 years. Unfortunately, for women, it rose slightly, but the annual number of cancer deaths has decreased. One reason for that was better detection and treatment. That is a direct result of American technological innovations, and those result from R&D. Since 1981, when the research and development credit was first enacted, the Federal Government has been a partner in R&D. And we contribute to this effort as a society because of the benefits to society from additional research spending. It is a societal effort to get a societal benefit. Congress clearly believes that the R&D credit is an effective policy instrument. One of the major limitations of the credit, however, is its temporary nature. As the Electronic Industries Association wrote: An extension of the credit that goes beyond the end of this year will also help diminish the uncertainty for companies regarding the availability of the credit. The organization goes on to say: The yearly fight to ensure that the credit is available for costly and high-risk research done in the United States can cause companies to discount the credit's long-term value and reduce its benefit to the economy. An analysis by the Joint Committee on Taxation found: A credit of longer duration may more successfully induce additional research that would a temporary credit, even if the temporary credit is periodically renewed. U.S. workers who engage in R&D activities benefit from some of the most intellectually stimulating, high-paying, high-skilled jobs in the economy. My own State of Montana is an excellent example of this economic activity. During the 1990s, about 400 establishments provided high technology services, at an average private wage of about $35,000 a year. These jobs paid nearly 80 percent more than the average private-sector wage of less than $20,000 per year during the same time. Many of these jobs would never have been created without the assistance of the R&D credit. The R&D tax credit is vital to the economic development of our country. It is very important to American businesses. It is very important to American workers. It is important to help America maintain our competitive edge. I urge my colleagues to support a 2-year extension of the R&D credit. I hope you will join me in pressing our House colleagues to accept this Senate provision. Mr. President, I suggest the absence of a quorum.

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

Mr. BAUCUS. Mr. President, what a difference 5 years makes. On March 21, 2001, the Finance Committee conducted a hearing entitled ``Budget Surpluses and Debt Reduction.'' When we held that hearing, the Office of Management and Budget projected a surplus of about $5.6 trillion over the next 10 years. A lot has changed since then. At the end of this past December, Treasury Secretary Snow sent us letters asking us to raise the debt ceiling for the fourth time in the last 4 years. The Government is now seeking to raise the debt ceiling by $781 billion. This is on top of a $450 billion increase in 2002, a record $984 billion increase in 2003, and an $800 billion increase in 2004. With the latest debt limit increase, the Government will have raised the debt ceiling by $3 trillion in just 4 years. Remember, 5 years ago, OMB projected a surplus of about $5.6 trillion for the following 10 years. Something needs to change. We have a serious problem with our Federal budget. For the current year, the administration's budget projects a deficit of $423 billion. That would be the highest deficit in the history of the country. That deficit would equal 3.2 percent of the entire economy. While that percentage is not a record, it is far too high, with the baby boom generation about to retire just around the corner. The retirement of this large generation will dramatically raise the costs of Social Security, Medicare, and Medicaid. Their retirement will put enormous pressures on the budget. We should rather be entering this stressful period with a balanced budget. We should be paying down the debt. We should be getting ready. We should not be running record budget deficits. We need to change course. We need to return to the policies and procedures that helped reduce that $5.6 trillion surplus. One of those procedures was the pay-as-you-go rule. That rule made it difficult for Congress to enact new spending or tax cuts without paying for them. That simple rule had a powerful effect, but that rule ended a few years ago. Congress replaced it with a newer, toothless version, and we have paid the price in higher deficits and debt. Congress must reinstate the original pay-go rule. Beginning in 1990, we also enacted policies to reduce deficits and debt. First, following a budget summit, Congress enacted the deficit reduction package of 1990. Then, in 1993, in the first year of the Clinton administration, we narrowly enacted a $500 billion deficit reduction package. What happened? Long-term interest rates dropped. Economic growth ensued. The deficit came down. Finally, both parties worked together again in 1997 and enacted another deficit reduction package. That package was intended to balance the budget by 2002. But economic growth was strong. These years were a part of the longest peacetime economic expansion in American history. The Government balanced its budget in 1998, earlier than expected, and then the Government balanced the budget even without using Social Security surpluses. It is incredible, if you stop and think about it. That set the stage for the projections of 2001, with a $5.6 trillion surplus for 10 years. But now we are projecting huge deficits and debt for both the long term and the near term. The time has come for leaders of both parties to work together to achieve another agreement to reduce our deficits. But in order to be successful, we need to put everything on the table, and I mean everything. We need to put all spending, not just entitlement spending, on the table. We need to put all corporate tax loopholes and tax breaks for special interests on the table, and we need to put the $350 billion yearly tax gap between revenues owed and revenues collected on the table. I don't know the answers, but I do know we cannot keep on going as we are. Something has to change. We need to come together to reduce Federal deficits. The task is clear, and I can only hope and pray all our leaders will take up the task. Mr. President, in Proverbs, King Solomon begins by offering words of encouragement to the Israelites to embrace learning: Let the wise hear and gain in learning, and the discerning acquire skill. A little later in the passage Solomon admonishes: Fools despise learning and wisdom. I hope the upcoming conference committee will take this proverb to heart. It is past time for this country to start taking education seriously again, and be ready to make investments in our children's future now. Delay would be foolish. The Senate-passed bill takes a step in the right direction by including a provision to eliminate the barriers in the Tax Code to the charitable giving of books to schools, libraries, universities, and literacy programs. Educational institutions and literacy programs are beset by budget cuts and continued challenges to our Nation's commitment to literacy. Two-thirds of American classrooms have fewer than 50 children's books, and almost 60 percent of childcare centers buy less than 1 book per child a year. This is not just an issue in the classroom. Almost 12 million children living below the poverty level in the United States today are growing up with minimal access to books. According to First Book, a nonprofit that focuses on child literacy, more than 60 percent of low- income families have no children's books in their home, and more than 80 percent of programs serving children in need have no age-appropriate books or other printed materials. In my home State, as in many other States, there is a real need. In 2003, according to the Montana State Library Association, the Montana State library system was a victim of a 26-percent budget cut. These reductions mean less money for local libraries, and these reductions mean cuts in State subsidies that funded book purchases. Large-scale book donations are crucial to these libraries, and these donations also greatly assist adult literacy efforts. Programs such as the Montana Adult Basic and Literacy Education, or ABLE, serve adults who lack sufficient mastery of basic skills to function in society, a high school diploma, or basic English skills. ABLE is meeting real needs. According to the State agency in charge of adult literacy in Montana, nearly 75,000 adults in Montana do not have a high school diploma or GED. Because of the tremendous need for books in Montana and across the country, I filed an amendment in the Finance Committee with Senator Hatch to include incentives for book donations in the Senate-passed bill. Here is how it works. Current law provides special tax incentives for gifts of property including books to certain organizations. Current law, however, requires the donor to make the gift targeted solely to the ill, the needy, or infants, categorized as children under the age of 18. Unfortunately, books donated directly to educational programs at public libraries and universities are not eligible for that tax deduction. Why? Because they don't exclusively serve the ill, the needy, or infants. In addition to the exclusion of those institutions, donations are sometimes discouraged when the differences in educational and commercial market elude the IRS when valuing the donation. If book donations do not qualify for the enhanced deduction, the value of the deduction for charitable giving is no more than what they would give if they merely threw them away. As a result, it is often more economical for publishers to truck these books to a dump than it is to distribute them to needy schools and libraries, especially given the manpower and postage costs of determining worthy donees and shipping books. In the Senate-passed bill, we have provided legislative language to ensure that public libraries, universities, and literacy programs are eligible with enhanced deductions that already exist in the Tax Code for other kinds of charitable donations. To protect against publishers making unwanted donations of dated materials, the provision includes a requirement that organizations certify the materials are suitable and appropriate for their educational programs. In addition to organizations in Montana such as ABLE, many gulf area government agencies that are in desperate need after Hurricanes Katrina and Rita have written us petitioning for this change. We have heard from the Mississippi Department of Education, Louisiana-Mississippi school and library systems and library associations, as well as the Texas Library Association and Mississippi's Barksdale Reading Institute. Numerous national educational organizations have written us, including the American Library Association, the Education Industry Association, and the Association of Educational Publishers. The lack of access to books poses the greatest barrier to literacy. We shouldn't allow books to be taken to the landfill because of an unintended obstacle in the Tax Code, particularly when one considers the massive loss of books along the gulf coast. I might add, I was down at the gulf coast. I was standing next to a library that was obliterated on the gulf. There were books strewn open, and you could see where a cake of mud was left after the water receded and we were standing on ruined books. You won't believe this, but I reached down to pick up a book and look at it to see what it was, and out of all of the books, guess what its title was. ``A Perfect Storm.'' I couldn't believe it. It was pure happenstance, pure coincidence, but I can tell you that having visited the gulf, they need books. As students and families make the slow return to the gulf and an incredible effort to rebuild their communities, it is necessary to remember that equally important to the rebuilding of these important institutions is the need to restock them with sufficient numbers of books and quality education materials. As First Lady Laura Bush said on September 24 last year, it is our duty to ``rebuild these schools on the Mississippi coast and in New Orleans and make sure the libraries are built better and stocked even better than they were before.'' The book provision in the Senate-passed bill would help restock schools from the gulf to Montana and across the country. As the First Lady admonished, this is our duty. I hope the conference committee agrees. Mr. President, continuing in a series of statements prefacing the conference and other measures that might be coming up later this year, I wish to spend a moment on health savings accounts. High-deductible health plans and health savings accounts, otherwise known as HSAs, have become the centerpiece of the administration's effort to reform the health care system. In fact, the proposed budget would spend an additional $156 billion over 10 years to encourage more Americans to choose these plans and accounts. I am concerned that high-deductible plans will do more harm than good, and the billions of dollars the President wants to spend on beefing up the limits on HSAs, health savings accounts, will not benefit those who need coverage the most and can least afford it. That is because HSAs favor the healthy and they favor the wealthy. As healthy insureds join these arrangements, the average cost for those remaining in comprehensive plans will increase, and that will make comprehensive plans less affordable for those who need coverage. Do HSAs favor those who are healthy and can afford something? Let me quote from the High-Deductible Health Plans and Health Savings Accounts Worksheet, found on the Federal Government's Office of Personnel Management Web site. This worksheet is designed to help Federal employees decide whether to use plans such as these which are now part of the Federal employees health benefit plan. Step three of this worksheet reminds us that preventive care is not subject to the high deductible. Then it goes on to say: Absent other health care needs, if you contribute a higher amount to your HSA, you will get a higher tax deduction plus a higher balance in your HSA to use for future expenses. Since your out-of-pocket costs before plan benefits begin also defines the maximum amount of personal, tax-deductible contributions you can make, contributing a larger amount isn't necessarily bad. If you use a relatively low amount of health care and you can afford to make the maximum contribution, you may be attracted to these aspects of HDHPs with HSAs. That is high-deductible health plans and the health savings account. This is what it says in the Federal brochure for Federal employees: If you use a relatively low amount of health care and you can afford to make the maximum contribution, you may be attracted to it. If we enacted the higher HSA contribution limit proposed by the President's budget, the attraction of HSAs for those who are healthy and can afford to contribute the maximum would only grow stronger. Why? Because that statement was written before the proposal that the administration has before us, to dramatically increase the deductibles and eligibilities of those plans which I think are basically investment vehicles, not health vehicles. Billie Holiday sang, ``Them that's got shall get, them that's not shall lose''. That's a pretty good description of the effect of expanding HSAs on our health care system. Some may argue that this preference of healthy, well-to-do taxpayers for HSAs would not be a problem if we just put everyone into a high- deductible plan and eliminated more comprehensive arrangements. Eliminating choice takes care of adverse selection. If there were no choice, and therefore no adverse selection, would expanding HSAs be a cost-effective solution? Would tax dollars spent on expanding HSAs go to increase coverage and control costs? Let us say, for the sake of discussion, that we force everyone, healthy or not, into a high-deductible health plan with a $1,500 deductible. And let's go further, and put $1,500 into an HSA for everyone, so ability to contribute is not a factor. Wouldn't that address my concern that the President wants to spend money on the healthy and wealthy instead of focusing on those who need help most? The answer is, no, not as HSAs currently operate. And certainly not with the President's proposed increase in the contribution limit. To illustrate my concerns, let's consider two taxpayers--Jane and John, both 30 years old. Jane is healthy. John has a chronic condition that requires him to take medications every day and occasionally pay a midnight visit to the emergency room. Every year, $1,500 is deposited to Jane and to John's HSA accounts. Each year, John must withdraw his $1,500 contribution to pay out-of- pocket medical expenses. Jane only has to withdraw about $500 a year, leaving the other $1,000 to accumulate for retirement. Over the next 35 years, if Jane can earn 5 percent investment return, she will accumulate an HSA account balance of more than $90,000. If the President's higher contribution limits were in place and Jane could afford to contribute the maximum to her HSA, she could have more than $400,000 in her HSA at retirement. Because he had to use his HSA contributions to pay medical expenses, John will retire with a zero balance in his HSA. In other words, the President's health tax proposals may or may not expand health coverage and will do little to control costs. But they will definitely create retirement savings for the healthy. I am all for retirement savings, but using tax dollars to increase retirement savings for individuals with low medical expenses is a strange and ineffective approach to covering the uninsured, and controlling health care costs. Surely we can do better. Mr. President, I am going to stop speaking pretty soon here. I very much hope Senators come to the floor with motions to instruct because time is passing. Just because I am speaking, it doesn't mean someone can't come to the floor. If anybody comes to the floor, I will stop speaking. Mr. President, Yale Law School professor Michael Graetz once said: A tax shelter is a deal done by very smart people, that, absent tax considerations, would be very stupid. A GAO study estimated that tax shelters cost the American taxpayer up to $18 billion a year in lost revenue. There must be a lot of very smart people out there putting together some very stupid deals. We have all heard about some of these deals. We know them as the Enron scandal, the KPMG scandal, the German SILO sewer system scandal. The list goes on. These deals are like the legendary retail scam used by con artists to cheat cashiers out of extra change. It's called the ``short count.'' Like a tax shelter, it involves smart cons and stupid deals. There are several steps to the cash register scam. First, the con artist buys something that costs less than $1, and he gives the cashier a $10 bill to pay for it. When the cashier hands back the change, the con artist offers to give back ten $1 bills in exchange for the $10 bill he used to make his original purchase. Now, the trick is that the con artist must get the cashier to give back the original $10 bill before he gives up his $1s. Quickly, before the cashier notices, the con then substitutes the $10 bill the cashier just handed him for one of the $1 bills. He hands the cashier nine $1 bills and one $10 bill, for a total of $19. When the cashier notices the con artist gave her too much money, the con acts surprised. Because he's such a ``nice guy,'' he offers to give the cashier another $1 to add to the $19 so the cashier can just give him back a $20 bill. The con then leaves the store with a tidy $10 profit, while the poor cashier is left holding the bag. When she tries to reconcile her register at the end of the day, she'll have a gap of $10. She will probably end up paying the $10 out of her own pocket. I don't know if you follow that. It's a little complicated, isn't it? The con artist is a pretty smart guy who took advantage of an unsuspecting cashier. He took a routine transaction and turned it into something complicated and stupid. Yet, all those steps, all that shifting of money back and forth, didn't add one iota of substance to the transaction. We call the guy who duped the cashier a con artist. But, we call lawyers, accountants and financial advisors who get involved in tax shelters ``tax professionals.'' We call the victim of the ``short count'' scam the cashier. But, we call the victims of tax shelters ``innocent American taxpayers.'' Individuals who invest in tax shelters to avoid paying their fair share of taxes shift their tax burden onto the backs of hard-working Americans who do comply with our tax laws. The IRS estimates that 85 percent of taxpayers pay the taxes that they owe. Investors in tax shelters are part of the other 15 percent. Eighty-five percent of American taxpayers are carrying the tax load for the noncompliant 15 percent. This is not right. This is not fair. We cannot allow this to continue. We need to finish up the work that we started in the American Jobs Creation Act. That bill beefed up laws against tax shelters. It increased penalties for wrongdoers. We need to pass legislation that will clarify the economic substance doctrine. Clarifying the economic substance doctrine will put an end to the erratic and inconsistent court decisions that have determined the legitimacy of tax shelters. The economic substance doctrine is a common-law doctrine that courts use to deny tax benefits on transactions that don't provide a meaningful change to the taxpayer's economic position other than the tax benefit itself. In other words, the doctrine requires that a transaction must have economic reality and a business purpose apart from the tax consequences. The proposed change clarifies how the courts should apply this doctrine. It doesn't require them to use the doctrine. But if they do decide to use the economic substance doctrine, the change would give them standardized criteria to use as litmus tests to decide if a transaction has any real economic purpose. The Senate has passed this proposal several times, most recently in the tax reconciliation bill before us today. But it has never passed in the House. We need to stop batting this proposal around. We need to make it into law. The economic substance doctrine exposes transactions that use the Tax Code in an unintended way to avoid paying taxes. Clever accountants, attorneys, and financial advisers deliberately manipulate the Tax Code to design and sell abusive transactions. At first glance, the deals stand up to scrutiny. At first glance, they appear to comply with the literal language of the Tax Code. They are very complicated. But when you give the deals the smell test, they give off a very bad odor. It is clear this is not what the law basically intended. You realize that they have no purpose other than to avoid or evade taxes. They have no real business purpose and no economic reality. They shift money and paper around using complex arrangements that have no reason to exist, except to create nonexistent losses or false deductions. They are smoke and mirrors, a cleverly designed illusion, to fool the IRS and to cheat the rest of our Nation's taxpayers, who properly report their income and pay what they owe. That's where the economic substance doctrine comes in. Its standards of economic benefit and business purpose allow the courts to pierce the facade of legitimacy to determine if a deal has any real economic substance. The courts have employed the economic substance doctrine countless times. But their decisions have been inconsistent. This is due, in large part, because they lack a specific framework of guidelines and principles within which to apply the doctrine. The courts are divided on what to do. Some look only to the form of the transaction. They limit their analysis to the four corners of the Tax Code, no matter how crazy the result. Others look beyond the form to the substance of the transaction and consider whether the tax result is consistent with congressional intent. It is the role of Congress to pass legislation clarifying the economic substance doctrine to resolve these inconsistencies and uncertainties. The legitimacy of a tax transaction in California should be evaluated in the same way as a transaction in Florida. Reliance on isolated and diverse judicial decisions does not lead to effective tax administration. Litigation is expensive both for taxpayers and the IRS. Tax professionals will shop around for the most advantageous court case to justify an egregious position. We all know that there is forum shopping. They are going to go to the judge who is most lenient. We need to provide clarity and certainty. Congress's failure to enact this legislation sends an implied message that we don't take abusive transactions seriously. Tax professionals know that we cannot keep all the holes in the dike plugged up by dealing with each abusive scheme on a piecemeal basis. With our proposed change, we are not reinventing the wheel. We are only improving it. The economic substance doctrine has been part of the fabric of our tax system since the case of Gregory v. Helvering in 1935. It has been around. It has to be consistently applied to minimize taking advantage of the Tax Code. Our proposal merely articulates the way many of the circuits have already applied this longstanding judicial doctrine. Codification will strengthen this important standard that has been eroded by conflicting and confusing case law and by the greed of many practitioners who are willing to overlook it in exchange for profit. We must give the courts a reliable and consistent standard to use when considering the economic substance doctrine. Failure to do so protracts the cat-and-mouse game that taxpayers, the IRS and the courts have played for years. You might ask: If passing a law to clarify the economic substance doctrine will stop this kind of abuse to our tax system, why hasn't it happened? That's a very good question. Unfortunately, there are powerful critics against the proposal, including the American Bar Association and the Bush administration. Our legislation provides a framework of consistent and standardized criteria to apply to the economic substance tests. The courts retain complete autonomy and flexibility to decide whether or not to use the doctrine in the first place. The critics, however, argue that the courts will ``lose flexibility'' to evaluate transactions. They say that ``an explicit and comprehensive statutory test'' is a bad thing. In truth, their position would maintain the status quo. Their position would keep the law broad and vague. And their position would perpetuate the same environment that has fostered tax shelters, tax schemes, and other abusive transactions. Taxpayers have a right to plan their taxes so that they don't pay more than they legitimately owe. This legislation is aimed at those deals that cross the line into manipulation and abuse--not smart tax planning. The critics say, unfairly, that the Senate proposal is ``overbroad'' and could cast doubt on ``legitimate tax planning.'' They say that this provision will be ``ineffective'' because taxpayers will just find a way to work around it by crafting their deals with apparent business purpose and economic substance. But if the legislation is as ``inflexible'' and ``overbroad'' as they say, how can it possibly leave room for taxpayers to work around it? The proposal that Chairman Grassley and I included in this tax reconciliation package provides standardized principles to use as guidelines to clarify when a transaction is abusive. It will reduce rogue interpretations of the Tax Code and promote consistency and certainty instead of the existing confusion. Critics argue that it promotes uncertainty because there is no clear line of demarcation between what passes muster and what doesn't. Ignoring the provision's standardized guidelines, they suggest that the proposal gives the IRS and the courts too much power--that it provides opportunities and incentives to find transactions ``abusive at will.'' In reality, it does just the opposite. And that's exactly why some of the opponents of this measure don't like it. They want to keep the power and flexibility to design and sell tax shelters and other transactions that pillage our tax system. There's an old saying that the best defense is a good offense. That pretty much sums up the opposition to this proposal. Like the tax shelters they peddle, their arguments lack substance. We should not stand idly by as a few con artists peddle their scheme and take advantage of honest taxpayers. We should plug this loophole in the law. We should urge the House to agree to the Senate-passed provision. I urge my colleagues to work together to get this passed for the benefit of the American taxpayers, most of whom are honest and decent, and they are paying their fair share and do not like at all these con artists making millions and forcing the good, honest, paying taxpayers to subsidize those con artists and those companies taking advantage of it. I yield the floor. I suggest the absence of a quorum.

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

Mr. BAUCUS. Mr. President, I think around 8 we will probably have two votes. It is also my understanding that the other side of the aisle will be offering various motions to instruct which presumably will be voted on, as will motions to instruct on this side of the aisle. I must say, though, I have glanced at the proposed motions to instruct on the other side, and I find it very curious. Why do I say that? I say that because we in the Senate passed a bill. The House has passed a bill. We are going to go to conference on the two bills now. Presumably, it is the Senate conferees who are charged to defend the Senate bill. Presumably, the House conferees are charged to defend the House bill. After all, that is what a conference is all about. The Senate passes a bill and goes to conference; the House passes a bill and goes to conference. These motions that are going to be offered, however, do not defend the Senate bill. Quite to the contrary, they are opposed to the Senate bill. They defend the House-passed bill, the capital gains treatment. I find that very curious. I, frankly, find it very disconcerting, because if this is the case, it will set the precedent basically for a motion to instruct, not to defend the body's views. Most of the motions to instruct from the other side will be motions not to defend the Senate bill, but urge provisions in the House bill. That is nuts. Most of the motions to instruct by Members on this side are asking the conferees to defend the Senate-passed provisions. I point that out because, as I said, it is curious and disconcerting, and I hope all Members recognize what is going on here; namely, what I just outlined. I hope this is an aberration and that it doesn't continue. Otherwise, this is another example of the chaos, the virtual free-for-all around here, and disrespect for procedure, for rules, for civility, and for both sides working together. I hope maybe that is an oversight by the other side of the aisle with all the motions that are going to be coming up. Nevertheless, I have them before me. That is what they seem to say. I point that out for Members; it is an observation before we vote to take into consideration. Most of the instructions I see are with respect to capital gains treatment. There is no provision for extending current law which doesn't expire until January 1, 2009; whereas, there are provisions in the House-passed bill to extend it for 2 more years, even though current law doesn't expire until January 1, 2009. The motions to be offered are to basically take up and encourage the conferees to pass the House provisions. That is very curious. Mr. President, I suggest the absence of a quorum.

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

Mr. BAUCUS. Mr. President, I see the Senator from Illinois, and I ask unanimous consent that the pending motions be temporarily set aside so that the Senator from Illinois may offer a motion.

Mr. BAUCUS. Mr. President, we are next expected to hear from the Senator from Rhode Island, who will have a motion to instruct on defense needs. Thereafter, we expect to hear from the Senator from New York, Mr. Schumer, who will have a motion to instruct on the tuition deduction. To facilitate the consideration of Senator Reed's motion, I ask unanimous consent that the pending motions be temporarily set aside so that the Senator from Rhode Island may offer his motion.

Mr. BAUCUS. Mr. President, I see several Senators on the floor. I believe--and perhaps someone can correct me--the Senator from New York was here earlier. Motion to Instruct Conferees

Mr. BAUCUS. Mr. President, I ask that the pending motions be set aside.

Mr. BAUCUS. Mr. President, the next motion will be a motion by the Senator from Oregon, Mr. Wyden, on energy. I ask unanimous consent that the pending motions be temporarily laid aside so the Senator from Oregon may offer his motion.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I ask unanimous consent that the following list of fellows and interns with the Finance Committee staff be allowed on the Senate floor for the duration of the debate on the tax reconciliation bill: Mary Baker, Robin Burgess, Tiffany Smith, Tom Louthan, Richard Litsey, David Schwartz, Stuart Sirkin, Zachary Henderson, Lesley Meeker, Britt Sandler, Lauren Shields, Janis Lazda, Jordan Murray, Leona Cuttler, Laura Kellams, Deidra Henry-Spires, Caroline Ulbrich, Peggy Hathaway, and Robin Burgess.

Mr. BAUCUS. Mr. President, I ask unanimous consent that Anne Freeman and Theresa Pattara of the Finance Committee staff be given privileges of the floor for the duration of consideration of the House message to accompany H.R. 4297.

Mr. BAUCUS

Mr. BAUCUS. I thank the Chair. Mr. President, I strongly oppose the Cornyn amendment to the underlying bill. I want the record to reflect my deep disappointment in those two amendments. I am deeply concerned we are losing sight of what is at stake. What is that? Making sure that people who are sick, who are likely to become sick from exposure to tremolite asbestos are not denied the ability to fight for their rights against the persons or companies that injured them. That is absolutely the bottom line. If these amendments are agreed to, people in the small county of northwest Montana will not get justice. These people will not get relief. They will not get support. They will not be able to pay for needed health care as they die. We are talking about hundreds of sick and dying people. This amendment turns our back on them. It will hurt them while they are already down. It will hurt the people of Libby. The people in Libby are proud. They have had more than their share of hard knocks. They just keep going, getting up and keep trying. They are good, proud people. But they have been injured. They have been deceived. They have been wronged. They have been lied to. They have tried to put their faith in our Congress and in our legislative process to make things right. They are survivors. I am privileged to know them so well and to represent them. Let me tell you about the first time I went to Libby. It was January of the year 2000. I traveled to Libby to meet with 25 extremely ill people for the first time. I had been briefed a number of times on what I might expect to hear that night. These kind men and women, some of whom are no longer with us, gathered to share huckleberry pie and coffee in the home of Gayla Benefield. They opened their hearts. They poured out unimaginable stories of suffering and tragedy on a scale that absolutely stunned me. Entire families--fathers, mothers, uncles, aunts, sons, and daughters--all sick, hundreds are dead--they are all bound together by their exposure to the company mine, exposure to tremolite asbestos mined by W.R. Grace. This is an isolated community of a few thousand people located as far away from Washington, DC, as you could possibly get, way up in northwest Montana. I will never forget a man I met that night. He has become my dear friend. His name is Les Skramstad. I mentioned Les yesterday. Let me tell you about our first introduction. At that meeting in the home of Gayla Benefield, Les watched me closely all evening. He was weary and came up to me after his friends and neighbors finished speaking and said to me: Senator, a lot of people have come to Libby and told us they would help, then they leave and we never hear from them again. Max, please, as a man like me, as someone's father, too, as someone's husband, as someone's son, help me. Help us. Help us make this town safer for Libby's sons and daughters not even born yet. They should not suffer my fate, too. I was a miner and I breathed that dust in. And what happened to me and all the other men and women who mined wasn't right--but what has happened to the others is a sin. Every day I carried that deadly dust home on my clothes. I took it into our house. I contaminated my own wife and each of our babies with it too. Just like me, they are sick and we will each die the same way. I just don't know how to live with the pain of what I have done to them. If we can make something good come of this maybe I will stick around to see that, maybe that could help make this worthwhile. That is what Les said to me that evening. It riveted me. I told him I would do all that I could, that I would not back down, and I would not give up. I said to myself that evening, if I do anything, I am going to help get justice for the people of Libby, MT. Les accepted my offer and then pointed his finger at me and said: I'll be watching, Senator. Les is my inspiration. He is the face of thousands of sick and exposed folks in this tiny Montana community. When I get tired, and I see the difficulties we face to try to get justice for the people of Libby, I think of Les, and I cannot shake what he asked me to do. In all my years as an elected official, this issue of doing what is right for Libby is among the most personally compelling things I have ever been called on to do. Doing what is right for the community and making something good come of it is my mission in Libby. I thank Les Skramstad every day for handing me my marching orders. My staff and I have worked tirelessly for Libby--not for thanks, not for recognition but because the tragedy is that gripping. There is no other choice. It is a no-brainer. We do all we can. It is such a tragedy for the people of Libby. The extent of asbestos contamination in Libby, the number of people who are sick and who have died from asbestos exposure is staggering. The people of Libby suffer from a deadly asbestos-caused cancer, mesothelioma, at a rate 100 times greater than the rest of the Nation. Mr. President, 1 in 1,000 residents of Libby suffers from this disease. The national average is 1 out of 1 million. Libby residents suffer from all asbestos-related diseases at a rate of 40 to 60 times the national average. So how could this happen? Well, a company named W.R. Grace owned and operated a vermiculite mining and milling operation in Libby. It just so happened the vermiculite was contaminated by a deadly form of asbestos called tremolite asbestos. It is much more pernicious than the ordinary chrysotile asbestos. Tremolite asbestos is so bad, it gets into your lungs. It has hooks in it. It stays there and does not ever get out. Mr. President, 5,000 pounds of tremolite asbestos was blown over the town every day. Every day this dust contaminated the air. Dust settled in the town of Libby, on cars, on homes, in gardens. Think of it. You get up in the morning to go outside, and there is this tremolite asbestos dust on your car. It is on your home. It is everywhere, your garden. It settled on children as they played in the parks. Workers brought the dust home on their clothes and exposed their families. Hundreds have died, hundreds more are sick. The very worst part about this story is that W.R. Grace knew exactly what it was doing and did not tell anyone. It was making a buck while it was hurting people. It knew that the vermiculite dust was contaminated with deadly tremolite asbestos. Yet it had told workers in the town it was harmless. It was just dust, they said. W.R. Grace not only said it was harmless, then what did it do? To add insult to injury, it bagged this stuff. It put all this tremolite asbestos in bags and then gave bags to residents for their gardens and to the high school for covering for the high school track and for parks and playgrounds. Well, W.R. Grace filed for bankruptcy. Before they did that, what did they do? They transferred almost all their assets away to other companies so they could not be sued. So people in Libby could not get justice. Through all of this, W.R. Grace has yet to step up and do the right thing for Libby. So I stepped up. I stood up for the people of Libby. And I am standing up now for Les and his family to do all I can to help him and those other people in Libby. I worked hard with the Judiciary Committee, especially my colleagues, Senator Specter and Senator Leahy, to tailor a solution that addresses the unique problems in Libby. I am extremely grateful to Senator Specter, the chairman of the committee, and Senator Leahy, the ranking member, for all their work to help protect Libby. I spent a lot of time explaining to them the problems of Libby, and to their credit, they listened and put provisions in the bill, the underlying bill, that address the very unique, special problems of the tragedy in Libby. The original medical criteria in the bill did not address the specific needs of Libby because disease resulting from exposure to tremolite asbestos progresses differently than disease from exposure to the traditional form of asbestos. Tremolite asbestos, the latency period is a lot longer. You cannot detect it until much later. It is also a pernicious kind of asbestos that causes much more injury and makes it much more difficult to breathe. It is wicked stuff. So we worked hard, and we included medical criteria that specifically address the unique needs of Libby. My colleagues, I hope, understand-- they must understand; the right thing to do is to understand--this whole community was exposed, not just the mine workers but everyone. W.R. Grace mined the raw vermiculite in the mines of Libby and then milled that vermiculite to remove up to 96 percent of the tremolite asbestos contained in the vermiculite. That milling process then shot 5,000 pounds of tremolite asbestos into the air each and every day. That asbestos blanketed the town. The asbestos did not discriminate where it fell. It covered the school playground and little league baseball field. And it is now growing in the bark of trees, if you can imagine. It is everywhere. I am offended some of my colleagues think they know best. I am offended some of my colleagues, who think they know better, have not taken the time to know the issue, to travel to Libby, to understand what is going on there, to open up their minds and their hearts, to try to understand. They have not taken the time to meet the people, to understand there are different types of asbestos or that the disease from exposure to tremolite asbestos progresses very differently and is much more pernicious. So if you do not support the bill, I ask my colleagues to say so. But do not hold the people and the community of Libby hostage. Whatever we do, however we deal with the underlying asbestos bill, we cannot hold the people of Libby hostage. Do not ask the innocent people of Libby to do your bidding for you. And if this amendment passes--the Cornyn amendments--I will have to go back to Libby. I will look into the eyes of that community, and I will tell them that their Nation turned its back on them. Let me be very clear. I will keep fighting for Libby until they get the help that is desperately needed and long overdue. Until they get the compensation they deserve, I am going to keep fighting. We are going to find a way, eventually, to give these people the justice they deserve. Thank you, Mr. President. I see the chairman of the committee on the floor. I thank him for his help and his recognition of the unique differences in Libby, MT. I tell him, I appreciate that.

Mr. BAUCUS. Is one of the amendments the Cornyn substitute?

Mr. BAUCUS. I ask the Presiding Officer, is there an amendment pending?

Mr. BAUCUS. Mr. President, I do not care who has the floor, but I wish to say I appreciate the comments of the chairman of the committee and, also, how much I appreciate the efforts of the ranking member of the committee, Senator Leahy from Vermont. He has also, as has the chairman of the committee, been very receptive in his understanding of the issue. I might say, I thank again the Senators. They sent staff to Montana to get a firsthand understanding of what is going on. I thank the chairman. I also again thank the Senator from Vermont for his deep understanding. He has taken the time and effort to learn the problems that face Libby, MT. I again thank both Senators.

Mr. BAUCUS. What is the pending business before the Senate?

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I rise today to recognize Mr. Tobey Schule, of Kalispell, MT, for his valuable testimony today before the Senate Finance Committee. The Senate Finance Committee played a key role in enacting Medicare drug benefits. We must be diligent in overseeing their implementation. In 2003, after years of debate, Congress added prescription drug coverage to Medicare. I was proud to help pass that law. The law was not perfect. But it has the potential to do some good. The Medicare drug bill has the potential to make prescription drugs available to millions who could not otherwise afford them. It has the potential to make drugs available that will lessen pain. It has the potential to save lives. Unfortunately, the administration has implemented the new law poorly. After Congress passed the law, the Centers for Medicare and Medicaid Services--CMS--had the duty to ensure that Medicare drug benefits were up and running by January 1, 2006. I appreciate CMS's efforts to implement the new law. It is a huge task. CMS worked hard. But CMS's efforts have come up short, in two major areas. First, CMS made the new drug benefit needlessly confusing. As part of the new law, Congress passed a temporary drug discount card, available in 2004. The card was supposed to give temporary relief from high drug costs. Seniors of modest means were eligible for a $1,200 Federal subsidy for their drug purchases. But most Medicare beneficiaries did not sign up for the drug card. Why? They were paralyzed by the choices. CMS approved 40 Medicare drug cards in my State of Montana alone. Instead of celebrating their choices, most seniors in my State decided not to sign up. Less than a year later, CMS was approving drug plans for the new drug benefit. I urged CMS not to repeat the mistakes that they made with the drug card. I urged CMS to approve only plans meeting the highest standards. But CMS repeated the mistakes of the drug card. CMS approved dozens of plans for participation in the new drug program. CMS approved more than 40 drug plans in Montana. I support choice, competition, and the free market. It is great that Americans can choose from hundreds of different models when buying a new car. But when people don't know what they are buying, choice can lead to confusion. That is particularly true of health care. Ask elderly Americans whether they prefer a four-speed automatic or a five-speed manual, and they will probably choose the automatic. Ask them whether they prefer a drug plan with a four-tiered formulary to a plan with five, and they will probably look at you with a mixture of confusion and anger. My second concern relates to the warnings that CMS ignored. Last year, I asked the independent Government Accountability Office to report on CMS's plans for seniors eligible for both Medicaid and Medicare. I asked: What were CMS's plans for seniors whose drug coverage was moving from Medicaid to Medicare? In December 2005, GAO reported that CMS's plans were insufficient to avoid big disruptions in coverage. CMS disagreed. CMS said: ``[We have] worked diligently on the transition from Medicaid to Medicare drug coverage . . . and . . . these individuals will get effective, comprehensive prescription drug coverage . . . on January 1, 2006.'' That did not happen. GAO was right. Data systems failed. Pharmacists and States were stuck with the bill for co-pays that should never have been charged. And some vulnerable seniors left the pharmacy without the medicines that they needed. Today the Finance Committee heard from Tobey Schule, an independent pharmacist from Kalispell, MT. Mr. Schule is one of thousands of pharmacists who have been burdened with the failed transition from Medicaid to Medicare. I will ask that his testimony from today's hearing be submitted in the Congressional Record, next to my remarks. Last month, Secretary Leavitt and Doctor McClellan briefed members of this committee on problems implementing the new drug program. They outlined seven specific problems. And they outlined plans to fix them. I appreciate CMS's attempts to fix the problems. But some problems remain unsolved. Dr. McClellan, I look forward to hearing how and when CMS plans to fix the problems. In addition to ensuring that the implementation flaws are fixed, Congress should also address the problem of confusion. We can do that by learning the lessons of Medigap. In 1980, Congress enacted amendments that I offered to fix marketing abuses and consumer confusion with Medigap. The reforms required Medigap issuers to meet minimum standards and have minimum loss ratios. Ten years later, Congress again took up Medigap reform, passing legislation to standardize Medigap policies. Ten different Medigap options would be offered, each with a basic set of benefits. This gave consumers an apples-to-apples comparison of Medigap coverage. We should do the same with the new drug program. We should standardize the drug plans. We should make it easier for people to make good choices about which plan is best for them. I intend to introduce legislation to do just that. I understand that the drug benefit is young. But I want this benefit to work. We simply cannot afford another round of confusion. We need broad participation. And that's not going to happen unless we make the program more accessible and understandable. I supported enactment of the Medicare drug benefit in 2003. I still support it. Health insurance needs to cover prescription drugs. But we need to make it work. And I look forward to hearing from our witnesses on how we can do so. I thank Mr. Schule for taking time from his important work to tell the committee about his experiences with the new Medicare drug benefit. Mr. President, I ask unanimous consent that Mr. Schule's testimony be printed in the Record.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, first of all, I thank my colleague, Senator Burns, for helping out in our effort to help the people of Libby, MT. In all the years I have been in public service, I am hard pressed to think of any situation that has bothered me more, that has urged me more to solve, or to help people out, than the people of Libby, MT. They have been put out by so much. It is a community that has faced hardship in so many ways up in northwestern Montana. The sawmills fold up and they go under. The economy there has been extremely difficult to sustain. And on top of that, we have this problem of asbestos, a particularly vicious form of asbestos in Libby, MT, called tremolite. I would like to help remind my colleagues what goes on in Libby and introduce Libby to those who have not paid much attention to Libby. Libby is a very special, very small community up in a remote part of Montana, up in northwest Montana. In a valley deep in the Rocky Mountains, Libby resides on the Kootenai River. And this is not an exaggeration: The people of Libby are struggling. They are struggling mightily day in and day out. They have been uniquely impacted by asbestos exposure. I do not know of any community in the United States that comes close to the level of suffering that the people of Libby have suffered on account of asbestos. Once you visit Libby, you realize very quickly this is a situation which is very different from other asbestos problems in other parts of our country. There is no comparison. First, just a bit about Libby. It is surrounded by staggering natural beauty. It is up near the Cabinet Mountains, next to a divide, the Kootenai River. It is a very special part of the world. The wonder of the mountains and the beauty of the river, however, contrast dramatically to Libby's other major distinction; that is, a community suffering from the worst concentration of asbestos poisoning in America. Many of the people of Libby do not have the luxury now, as a consequence of asbestos, of enjoying all of this natural beauty and luxury I mentioned. They cannot hike the Cabinets. They cannot go up in the mountains to hunt elk. They can no longer scale down the river bank of the Kootenai to enjoy their favorite fishing holes. Why, might you ask, can't people do that anymore? I will tell you a very basic reason. They cannot breathe. They have such difficulty and struggle so much with the very basic human activity of breathing-- breathing in, breathing out. They are just out of breath. They just cannot breathe. So you are asking, why can't the people of Libby breathe? Why are they struggling so much to breathe? The simple answer is W.R. Grace. Until 1990, a company called W.R. Grace used to mine vermiculite from a mountain called Zonolite Mountain, just on the outskirts of there. Until the mid-1970s, W.R. Grace processed that vermiculite mined in Libby in a nearby mill. I remember years ago when I was meeting people up in Libby, going up to that mill, I was just stunned with how dusty it was, the conditions up there. I assumed it was just a dusty mill, not poisoning the air. If it were, people would know about it. But I was wrong. The people of Libby made that same assumption. The workers made the same assumption, and they were wrong. In fact, the mill was so dusty that workers often could not see their hands when they were sweeping with their brooms. It is hard for me to find the words to describe the situation. I can remember guys coming off the hill, coming out of the mine, getting off the bus, and it was just a dust bag, just caked with dust. I never had seen anything like it. Mill workers swept dust outside and tried to do the best they could. They dumped it. Once they swept the mill, the dust and stuff outside, what did they do with it? They just dumped it down the mountain. And the mill's ventilation stack spewed dust up into the air. The ventilation stack released 5,000 pounds of asbestos every day--5,000 pounds of asbestos every day. When the wind blew from the east, a deadly white dust would cover the town. It would just cover it with dust. For decades, 24 hours a day, the dust fell all over Libby. It fell on Libby's gardens, fell on the homes. Dust fell on Libby's high school track, Libby's playgrounds. Everywhere there was this dust from the mine, this asbestos dust. Now, some of the vermiculite went downtown to a plant, right next to the baseball diamond. I know right where that baseball diamond is: right next to the Kootenai River. Vermiculite is a shiny material. You heat it and it pops like popcorn. People used to pop vermiculite to make building insulation. They called that popped vermiculite Zonolite. The plant popped the vermiculite into Zonolite, and batches of Zonolite spilled all over the plant, all around the plant. What happened? Well, kids played in this stuff. Kids played in the Zonolite. Workers at the mine brought back bags of Zonolite to pour in their attics as insulation. They put Zonolite in their walls for insulation. They put Zonolite in their gardens. I guess it helped make things grow--they thought. They put vermiculite in road beds. Families used vermiculite and ore to build their driveways. They used to use this stuff. But the layers of rock where people found the vermiculite contained harmful asbestos. Nobody knew it at the time. The people did not. The people did not. The company did. And the vermiculite outside Libby is laced with a particularly dangerous type of asbestos. It is called tremolite. This is not ordinary asbestos, which is bad enough. This is a very pernicious, special, terrible kind of asbestos called tremolite. The usual, more common asbestos is chrysotile asbestos. This is not chrysotile asbestos. This is tremolite. Why is tremolite so terrible? Why is it even worse? Well, tremolite has long fibers that are barbed like fishhooks. These fibers work their way into soft lung tissue. These fibers do not come out; like fishhooks, they are stuck. Now, the Zonolite Mountain now sits peacefully with the damage that has already been done. People in Libby are sick--very sick. They suffer from asbestos-related disease at a rate 40 to 60 times the national average--40 to 60 times the national average. People from Libby suffer from asbestos cancer. They suffer from mesothelioma, which is a form of asbestos-related cancer. And they suffer that mesothelioma at a rate 100 times the national average. This sickness does not just affect the people who worked in the mill. W.R. Grace infected the whole town. An article in the journal Environmental Health Perspectives concludes that based on the unique nature of vermiculite contamination in Libby, along with elevated asbestos concentrations in the air, it would be difficult to find Libby residents unexposed. They are all exposed. Every day men from the valley went to the mountain to work in the mine and the mill. Every day, these men came home covered with the fine, deadly white powder. The powder got in their clothes. It got in their curtains. It covered their floors. I talked to one miner. His name was Les Skramstad. And this is when I really got radicalized about this. In talking to Les several years ago in his living room, to hear Les, a young fellow who is very ill now, he has a hard time breathing. He would come off the mine. He would go home to see his wife. His wife would embrace him. His children would jump up into his lap. They all have asbestos-related disease now, not just Les but Les's wife, his children. And the prognosis is not good. The fine fibers of tremolite asbestos are very easy to inhale. Miners inhaled fibers in the mine. Workers inhaled the fibers in the mill. Wives inhaled the fibers when they washed their husband's clothes, and children inhaled the fibers when they played on the carpet or hugged their fathers. The fibers are deadly. They cause respiratory disease. Those fibers caused a serious lung disease called asbestosis. Those fibers caused a serious form of cancer, mesothelioma, which infects the chest and abdominal cavities. Asbestos in Libby is tremolite asbestos. Tremolite asbestos is far different from the other chrysotile asbestos, which is the predominant cause of asbestos-related diseases. Let me explain the difference. Tremolite diseases are highly progressive and also highly deceptive. People with initial markers of chrysotile asbestos, the usual asbestos disease, have a 25-percent chance of progressive illness. Patients with initial markers of tremolite asbestos are more than 75 percent likely to develop more destructive diseases. Because of the W.R. Grace mine and mill, hundreds of people in Libby died from asbestos-related diseases already. Hundreds of current and former area residents are now ill. Hundreds of people live in discomfort, and hundreds of people live in pain. Seventy percent of those affected with tremolite asbestos disease never worked in the mine. Let me introduce you to some people from Libby. Arthur Bundrock worked in the mine for 19 years. He suffered from asbestosis for 21 years and his suffering was made worse from the knowledge that he carried the asbestos dust back home to his family. Arthur's son applied for work at W.R. Grace, had to get an x ray before they would hire him. The x ray showed he already had asbestosis. Grace never told him the results of the screening. The company never told him. Arthur's work in the mine affected his whole family. When Arthur died in 1998, six out of seven members of his family had asbestosis. Then there is Toni Riley. Toni Riley never worked in the mine. But similar to many kids in Libby, she played in piles of vermiculite ore as a child. These piles were all over the town. Similar to playing in a sandbox, kids played in piles of asbestos. Toni Riley was a member of the local research and rescue team and an emergency medical technician with the Libby volunteer ambulance. She was also a reserve deputy at the sheriff's office for 5 years. In 1996, she was diagnosed with mesothelioma. Toni died on December 4, 1998. Toni is 1 of the more than 200 known cases where people from Libby have died as a result of asbestos-related disease. W.R. Grace may have closed its doors, but the people of Libby will be plagued with asbestos for years to come. The company has closed its doors, but the people will be plagued probably forever. These diseases can take 40 years to appear. Hundreds more will fall victim to these diseases in the future. The people of Libby must watch their neighbors struggle to tend their gardens, to walk into the cafe. They must watch their neighbors struggle to provide a future for their children, and they must wonder if they, too, will fall ill. Remember, these diseases can take up to 40 years to appear. In 1999, the Environmental Protection Agency started to investigate. The EPA found tremolite contamination in the air around the nursery. They found it near the ballfields. They found it inside homes. Last year, we learned that trees near the Grace mine contained asbestos. Recently, a University of Montana study revealed another example of the horrific level of contamination in Libby. In the new study, asbestos fibers were found in the bark of trees growing near Libby Middle School. Libby is not a rich city. In 2000, the median family income of Libby was just under $30,000. That compares with just over $40,000 in the whole State of Montana and just over $50,000 in all of America. The median family income is much below the national average. Libby is working to overcome years of asbestos exposure from W.R. Grace. They have been through enough. They did not ask for this lot. That is why I have fought to make sure that asbestos bills working through the Senate address the needs of the people of Libby, MT. The good people of Libby need our help. They are dying up there. The town has risen mightily to the challenge it has faced, but they need our help. They deserve our help. I made a commitment to the people of Libby, and I intend to work together with my colleagues to see that commitment honored. Asbestos disease has devastated many communities across the country, but tremolite asbestos hit Libby hardest of all. Libby is unique. The type of asbestos at Libby is unique. The duration of exposure at Libby is unique. The manner in which asbestos disease manifests itself in Libby is unique, and the communitywide exposure in Libby was unique. That is why the tailored solution that the committee has proposed makes sense. I urge my colleagues to support the Libby provisions in the asbestos bill and help us right this terrible wrong. Help these hundreds of suffering people to get health care and help save the life of this town. There are not many things that I have experienced in the last, roughly, 30 years I have been in public service that equal the tragedy which is Libby, a tragedy caused by W.R. Grace and asbestos, a particularly pernicious form of asbestos in Libby, tremolite asbestos, which is so harmful to the community. Libby is struggling mightily. Libby wants to put this chapter behind them. The people of Libby are doing all they can. They don't complain. It is a wonderful feature of westerners, generally, and especially of the people of Libby, MT. They are not crybabies. They don't whine. But they want justice. They deserve justice. We must take advantage of this unique opportunity we have in the legislation before us to make sure that the people of Libby get their fair due. The provisions in this bill help assure that compensation is given to the people of Libby who are affected by asbestos so they can pay the medical bills, so they can somehow, some way, get back to normal lives, knowing all along that for many of them, for the indefinite future, they are still going to have a terrible infliction and difficulty breathing in and breathing out. I implore my colleagues, please listen to the people of Libby. Please, in your heart, help the people of Libby, MT. That is the very least they deserve. I yield the floor.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I am pleased that later today we will be offering a modification to the Senate amendment to provide a 2-year extension and enhancement to the research and development tax credit. Of course, I have filed legislation with my friend, Senator Hatch, to make a permanent commitment to research-intensive businesses in the United States. This legislation is bipartisan and bicameral. But 2-years is certainly much better than the usual yearly extender. I am already starting to hear from business taxpayers how important a commitment to longer term research projects are, and I agree with them. I am hopeful that we can prevail upon our House conferees to retain this 2-year incentive. You know, just the other night, the President spoke of the importance of the R&D credit to maintaining America's competitive edge. He is right, and that is why I have been a strong supporter of legislation to make the credit permanent for the last few Congresses. Every morning we hear news of some new product or discovery that promises to make our jobs easier or our lives better. Many of these innovations started with a business decision to hire needed researchers and finance the expensive and long process of research and experimentation. Since 1981, when the R&D tax credit was first enacted, the Federal Government was a partner in that business endeavor because of the potential spillover benefits to society overall from additional research spending. But the credit has been hobbled over the years because of its temporary nature. As stated in an analysis last year by the Joint Committee on Taxation, ``Perhaps the greatest criticism of the R&D 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.'' I think we should heed the advice of the experts at Joint Tax and renew this credit for as long as we can. That is why I will support a modified Senate proposal later today for a 2-year extension. Research has shown that a tax credit is a cost-effective way to promote R&D. The General Accounting Office, the Bureau of Labor Statistics, the National Bureau of Economic Research, and others have all found significant evidence that a tax credit stimulates additional domestic R&D spending by U.S. companies. A report by the Congressional Research Service, CRS, indicates that economists generally agree that, without Government support, firm investment in R&D would fall short of the socially optimal amount, and thus CRS advocates Government policies to boost private sector R&D. R&D is linked to broader economic and labor benefits. R&D lays the foundation for technological innovation, which, in turn, is an important driving force in long-term economic growth--mainly through its impact on the productivity of capital and labor. We have many times heard testimony from economists, including Federal Reserve Board Chairman Alan Greenspan, that the reason our economy grew at such breakneck speed during the 1990s stemmed from the productivity growth we realized thanks to technological innovations. There has been a belief that companies would continue to increase their research spending and that the benefits of these investments on the economy and labor markets would continue without end. Unfortunately, that is not the case. According to Battelle's 2005 funding forecast, industrial R&D spending will increase only 1.9 percent above last year, to an estimated $191 billion, which is less than the expected rate of inflation of 2.5 percent. For the fifth year in a row, industrial R&D spending growth has been essentially flat. It is also important to recognize that many of our foreign competitors are offering permanent and generous incentives to firms that attract research dollars to those countries. A 2001 study by the Organization of Economic Cooperation and Development, OECD, ranked the United States ninth behind other nations in terms of its incentives for business R&D spending. Countries that provide more generous R&D incentives include Spain, Canada, Portugal, Austria, Australia, Netherlands, France, and Korea. The United Kingdom was added to this list in 2002 when it further expanded its existing R&D incentives program. The continued absence of a long-term U.S. Government R&D policy that encourages U.S.-based R&D will undermine the ability of American companies to remain competitive in U.S. and foreign markets. This disparity could limit U.S. competitiveness relative to its trading partners in the long run. Also, U.S. workers who are engaged in R&D activities currently benefit from some of the most intellectually stimulating, high-paying, high-skilled jobs in the economy. My own State of Montana is an excellent example of this economic activity. During the 1990s, about 400 establishments provided high- technology services, at an average wage of about $35,000 per year. These jobs paid nearly 80 percent more than the average private sector wage of less than $20,000 per year during the same year. Many of these jobs would never have been created without the assistance of the R&D credit. While there may not be an immediate rush to move all projects and jobs offshore, there has been movement at the margins on those projects that are most cost-sensitive. Once those projects and jobs are gone, it will be many years before companies will have any incentive to bring them back to the United States. We continue to grapple with the need to stimulate economic growth and advance policies that represent solid long-term investments that will reap benefits for many years to come. I repeatedly have pointed to the R&D tax credit as a measure that gives us a good ``bang for our buck.'' I hope my colleagues will join me in supporting a 2-year extension. It is good for American businesses and workers, and we need it to maintain our global competitive edge. Mr. President, I take a few moments to talk about the schedule for the rest of the day. The majority leader will be coming to the floor momentarily. Obviously, he will give a better idea of the schedule. I expect sometime before 11 o'clock this morning the majority leader will come to the floor to offer the Senate substitute in a Grassley- Baucus perfecting amendment. I understand the majority then will fill the amendment tree--that is, offer amendments to fill up the tree-- preventing the offering of amendments this morning. However, Senators on this side of the aisle will be able to offer their amendments. It is just a question of when they can offer amendments. Later in the day Members can offer amendments. It is the managers' expectation Senators will have used or yielded all time back on the bill at 2:15 and we will begin a series of votes that regularly follow debate time on the reconciliation bill; that is, the so-called vote- arama. Roughly at 2:15 we begin the vote-arama. As Senators offer the amendments, at that point we will vote on the amendments. I am hopeful we will have a couple minutes' time for an explanation as to what the amendments actually are. That is the procedure. I discussed the order of amendments to be offered with the Democrat leader, and I have discussed the order with the chairman of the Committee on Finance. Shortly, I will announce the plans for the first 10 amendments the Democrat Senators will offer. Those first 10 amendments in this order are as follows: an amendment by Senator Bingaman on prescription drug implementation; next is an amendment by Senator Menendez, AMT dividends and capital gains, which is germane; third, a Rockefeller amendment on mine safety; fourth, an amendment by Senator Conrad, he will offer the substitute amendment which is fully offset; fifth, an amendment by Senator Kennedy which essentially is the R&D extension for 3 years, and that will be germane; sixth, an amendment by Senator Obama with respect to Katrina child tax credit; next, seventh, an amendment by Senator Cantwell dealing with energy taxes; and No. 8, an amendment by Senator Schumer which is a sense of the Senate on AMT; ninth, an amendment by Senator Harkin with respect to so-called PEP and Pease provisions and dependent care credit; and tenth is an amendment by Senator Landrieu for expansion of the low-income housing tax credit. She wants to expand the tax credit. There will be other amendments later. I am hopeful the additional Democrat amendments can be 10, 12, 14, but I am not sure. I don't want to prejudge that. These are the first 10. We will indicate what the others will be. This is our intention of how to proceed. My expectation is the other side of the aisle will offer amendments. We will work with the chairman of the committee and go back and forth at the appropriate time. That is the general procedure we have in mind. It is not locked in, but that is the general procedure in consultation with the chairman of the committee that we would like to work out. Senators from the other side of the aisle will want to offer their amendments. It will be the managers' intention to alternate between both sides of the aisle. We will seek to obtain copies of amendments and announce information on them as soon as possible. Obviously, if Senators get information on the amendments to us quickly, the more likely we get the amendments up earlier rather than later. With those caveats, those are the first 10 amendments we expect to be offered. Pending that, the majority leader is in the Senate. I am sure he wants to make a statement. I yield the floor.

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

Mr. BAUCUS. Madam President, I very much thank the Senator from California for her terrific service to her State and to the Nation. I yield 10 minutes to the Senator from New Jersey.