Max Baucus

Mr. BAUCUS

Mr. BAUCUS. I yield that to the Senator from Arkansas.

Mr. BAUCUS. Mr. President, is there any of my time remaining?

Mr. BAUCUS. Mr. President, I send an amendment to the desk and ask for its consideration.

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

Mr. BAUCUS. Mr. President, I yield 1 minute to the senior Senator from Arkansas.

Mr. BAUCUS. Mr. President, this amendment is critical to my home State of Montana and to most States in the Nation. It is agriculture. Agriculture is the financial engine that drives, certainly, my State's economy. It brings in $2 billion of annual revenue plus benefits to rural communities and to our State generally. One in five Montana workers is employed in agriculture or a related field. But this amendment is important not just to Montana; it is important to the Nation. America's agricultural producers provide us with the safest and highest quality food supply in the world. We all know that. It is worth repeating. It is worth remembering. Sometimes we take things for granted. Our agricultural producers in America provide us with the safest, highest quality food supply in the world. Americans are extremely fortunate to enjoy those benefits. Agriculture is a small part of the Federal budget, but it is expected to shoulder huge cuts, very disproportionate cuts in this budget resolution. The Senate budget resolution calls for a reduction in mandatory agricultural programs of $5.4 billion over 5 years. The budget resolution puts $2.8 billion of those savings on fast track through reconciliation. I was one of the farm bill negotiators and supporters of that legislation, but I disagree with some of the provisions within the law. The 2002 farm bill represented a delicate balance between diverse interests. It was very tough to put that together. The 2002 farm bill was a 6-year bill, not an on-and-off bill but a 6-year bill, and people had reason to expect it settled farm policy for 6 years. People have to plan, to have a sense of what is going on. It is not just farmers, but bankers, equipment suppliers, and farm implement dealers. Producers and bankers who made financial decisions to enter into contracts with the understanding that the farm bill would not be renegotiated until 2007, that was their understanding. If Congress proceeds with the agriculture cuts in this budget resolution, we will be cutting nutrition, not just the six basic crops in the farm bill, but cutting nutrition, conservation, and forestry programs. These cuts are not directed solely at the commodity programs. In fact, they are directed at many other segments of the whole agriculture bill. The Senate should put off the policy discussions that are behind these cuts until we begin debate on the new farm legislation. That is the appropriate time to debate these policy discussions, not in the budget resolution to cut for the sake of cutting. The commitment that Congress and the President made to farmers, to conservatives, and the neediest in our society should be maintained until a new farm bill is developed. Proposed mandatory spending cuts will also unilaterally disarm our trade negotiators, especially our agricultural trade negotiators. The United States recently lost its appeal of the World Trade Organization dispute panel decision concerning domestic cotton. It is not widely known, but it should be well understood, the implications of that decision. At the same time, we are negotiating a new global trade agreement with the WTO, of which agriculture is a critical part. That decision is going to put our agricultural producers and our agriculture program in jeopardy. We should, therefore, not commit to the substantial agriculture policy changes that this resolution would require while we are engaged in those trade talks. We should not unilaterally disarm. It makes no sense, and I cannot understand for the life of me why this budget resolution unilaterally disarms our farmers before we go into negotiations. Some argue the proposed cuts are good for our negotiators because they demonstrate to other countries that the United States is serious about agriculture reform. I have learned through very hard, bitter experience that no country altruistically, out of the goodness of its heart, if it has any sense, is going to lower a trade barrier. They do not unless they have to. You have to provide leverage. There are many examples where the United States had to exercise leverage to get other countries to lower a trade barrier. It takes leverage. They just do not do it out of the goodness of their heart. If we do that, think what the Europeans are going to do. They are going to say: Oh, those Americans, they have already eliminated their agriculture program, they have cut their supports, so we Europeans do not have to go quite so far. I tell you, it makes no sense, no sense whatsoever for this Congress to pass a budget resolution which cuts agriculture by such a dramatic amount. In 2002, total EU domestic supports plus export subsidies totaled $37 billion. What was ours? What was the U.S. comparable figure? It is about $17 billion, and that is just actual spending. Look at that: Europeans have twice the amount of agricultural support payments that we have, twice as much as the United States has--more than twice as much as the United States has. Yet we are coming before this body and saying we are going to cut agriculture even more, while the Europeans have close to three times the amount of subsidies we have. I do not think that makes much sense. The total amount agreed to in the WTO Uruguay Round is $81 billion for the EU and $19 billion for the United States. Just think of that. That was the Uruguay Round. That was a mistake. Mr. President, 81 for them, 19 for us. These cuts contained in the budget resolution, to which I am opposed, are, therefore, clearly ill timed. This is the wrong time to do this. Developing countries, in particular, have offered very little in agricultural talks. If we pass this resolution, they are going to ask themselves: Why should they? They can keep their sky-high tariffs on agricultural products and still get the United States to cut its support of U.S. agricultural programs. We also lose bargaining power to push for changes to the European's agricultural policy. That policy transformed postwar Europe from the world's largest food importer to one of the world's largest net exporter of agricultural products. Let me state what happened. This pretty much demonstrates what happened in this country, why agricultural producers in the United States are in tough shape. In the 1970s, the European Union was the world's largest net importer of agricultural products. They decided that is wrong; we have to do something about it. So they did. What did they do? They implemented massive agricultural support payments for their farmers so that in a 10-year time in the mid-1980s, Europe became the largest net exporter of agricultural products. It was a big shift from the world's largest importer to the world's largest exporter in 10 years, and that is where they stayed. That is what we face. That is why it is wrong right now in this budget resolution to further cut agricultural payments which are disproportionate right now. Our farmers and our ranchers can compete with anybody in the world just as long as the playing field is level, but we should not put American farmers and ranchers at a disadvantage by cutting U.S. programs just as we are seeking changes in other countries' programs. We should not unilaterally disarm. We should not unilaterally disarm agriculture just as the trade talks reach a critical point. They are upcoming. To do so would not just be unwise, it would be reckless. Agriculture is being asked to make a substantial and disproportionate contribution to spending reductions. This is unjustified. There are other cuts in this budget not nearly as great as the ones agriculture will face. I just think it is sensible to support this amendment so we do not cut agriculture the way proposed in this resolution. It makes no sense. I see some of my colleagues on the floor who wish to speak on this amendment. I see Senator Conrad. I yield 5 minutes to the Senator from North Dakota.

Mr. BAUCUS. Mr. President, how much time is remaining on this side?

Mr. BAUCUS. I yield 1 minute to the Senator from Arkansas, Mr. Pryor.

Mr. BAUCUS. I thank the Senator. I yield 2 minutes to the Senator from North Dakota.

Mr. BAUCUS. Mr. President, I ask the distinguished Senator from North Dakota if he might have time he can allocate to other Senators, insomuch as the time remaining on this amendment has virtually expired.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, the description of the intent of the reserve fund offered by my colleagues from Massachusetts and from New Hampshire also reflects my understanding of the intent of including this fund in the budget resolution. I commend the chairman and ranking member of the Budget Committee for their leadership in including this reserve fund in the Senate budget resolution. And I commend my colleagues from New Hampshire and Massachusetts and others for their willingness to work toward this signal of our bipartisan commitment to improving the quality and safety of health care in this country, and to addressing the problem of health care costs. These are critically important issues facing our nation today, and I look forward to continuing our bipartisan dialogue, making the best use of this important reserve fund, and working together on legislation to encourage the adoption of health information technology for quality improvement and to develop performance-based payment systems. amendment no. 204

Mr. BAUCUS

Mr. BAUCUS. I have 4 minutes, Mr. President. I don't know if I will be able to use my 4 minutes.

Mr. BAUCUS. Madam President, I very much appreciate the indulgence of my good friends from Colorado and Alaska and others who have let me make this statement which is not on the subject at hand. I thank them all and yield the floor, and I particularly thank my friend from Colorado.

Mr. BAUCUS. Madam President, I rise to oppose the reconciliation instruction in this budget resolution directing the Finance Committee to cut Medicaid by $15 billion over 5 years. These cuts will tear the fabric of our Nation's safety net at a time when Medicaid is needed more than ever. I plan to cosponsor an amendment to strike these instructions and instead establish a bipartisan Medicaid Commission. Medicaid is just too important to be subject to arbitrary budget cuts. It is a critical public program that provides a lifeline of health coverage and long-term care services to more than 53 million of our Nation's most vulnerable individuals. For example, Medicaid ensures access to health coverage for more than one in four children. Just think of that: one in four. It is the Nation's largest single purchaser of long-term care services and fills the gaps in Medicare's coverage for more than 6 million low-income senior and disabled individuals. It is an essential provider of health care services for women, the leading purchaser of family planning services, and it pays for more than 40 percent of all births in America. Medicaid pays for more than 40 percent of all births in America. Medicaid funding is a major source of support that keeps the doors open at thousands of community health centers, public hospitals, nursing homes, and other facilities. While Medicaid is a critical component of our health care system, it is certainly not perfect. For that reason, I am open to talking about changes in Medicaid. I am open to talking about better accountability, the need for more State flexibility. And I am willing to consider any other area where improvements or clarification to existing Medicaid law is needed. But we should not cut Medicaid for the sake of meeting an arbitrary budget number. That is clear. And we should not be cutting Medicaid under the guise of ``program integrity'' without a better understanding of what the States are doing--and what that really means--without knowing whether the activities singled out in the President's budget are truly abusive--we need to know that, too--and without knowing what impact these cuts will have on the people who depend on Medicaid--we don't know that either. So to enact these arbitrary cuts without knowing and having some semblance of the answers to those questions is just plain reckless. Yes, Medicaid costs are growing. Recent cost growth at the State and Federal level is cause for concern. But most of this cost growth is due to an increase in enrollment and the same health care cost inflation that affects every insurance plan. From 2001 to 2003--this is pretty important--during the last recession, Medicaid added 7.5 million people to the rolls. It was during the recession, because of the recession. Most of these people were insured but lost coverage because their employer dropped coverage or they could not afford the premiums. These 7.5 million would likely be uninsured if it were not for Medicaid. This growth in enrollment shows that Medicaid is doing its job, growing to meet the need when times are tough. That is the whole point of Medicaid. And times were tough. We were in a recession. Employers laid people off. People needed health care, so they had to go to Medicaid. Even though Medicaid costs are increasing, just as in Medicare and the private sector, it is important to keep in mind that Medicaid growth is lower on a per person basis. A recent study showed that Medicaid cost growth is 6.1 percent per person, compared to a 12.6- percent cost growth for private coverage. The growth in the cost of health care in Medicaid is half the growth per person under the private insurance plans which most Americans are offered today. So Medicaid is not a wasteful program. We also pay more for Medicaid because of the critical role it plays in filling Medicare's benefit gaps for seniors and people with disabilities. More than 40 percent of all Medicaid spending goes to pay for long- term care, for prescription drugs, other coverage and cost-sharing for low-income individuals who are eligible for both Medicaid and Medicare. That is 40 percent of Medicare's costs, even though dual eligibles make up only about 14 percent of all Medicaid enrollees. In essence, Medicaid picks up the tab for what Medicare should be covering. The new Medicare drug benefit should provide some new assistance with costs for the dual-eligibles. However, States will still be responsible for a substantial share of total spending in the form of so-called clawback payments. Medicaid deserves its own policy debate, just like we had with Medicare. And whatever policy we support must address the root causes of the challenges facing Medicaid: the growth in enrollment; rising health care costs; and the increasing cost of providing long term care and other services to dual eligible beneficiaries. We need the right diagnosis before we can get the prescription right. That is why I support creating a bipartisan Medicaid commission to advise Congress on how to sustain Medicaid well into the future. By contrast, the budget resolution we are now debating would constrain us to finding savings that meet a target number--even if that means cutting services and benefits, shifting costs to states, or dramatically restructuring the program. The budget resolution frames these cuts as the amount that is misspent on so-called waste and abuse in the system. Without a doubt, everyone wants to make Medicaid more efficient. And everyone agrees that we need to root out fraud and abuse in Medicaid. In fact, Congress has acted to root out fraud and abuse in Medicaid every time we have discovered it. Like with upper payment limits, disproportionate share hospital payments, and provider taxes. And we stand ready to correct any misappropriation of federal funds. But in the case of the administration's proposals, it is not entirely clear that there is evidence of abuse--or that the policy they have proposed will address the issue. For example, in the case of the President's proposal to limit intergovernmental transfers--IGTs--the Congressional Budget Office failed to score any savings. CBO lacked sufficient detail on the policy. In fact, Senator Grassley and I have been asking the Administration for specific information--for over a year now--about which states are currently out of compliance with the IGT rules, and how their policy on IGT enforcement may have changed. But they have not provided the information that we have requested. I caution my colleagues in the Senate against buying the administration's pig in a poke on this issue. So let's be clear on what the President's proposal would do. It would change the rules of the game on how states can finance their Medicaid programs, pure and simple. And the bottom-line impact on States could be devastating. In Montana, proposed cuts in the budget resolution would result in a net loss of more than $133 million Federal dollars from state's Medicaid program. In human terms, this funding cut could mean a loss of coverage for 2,800 seniors or more than 12,000 children. Lost Federal funds could also mean State revenues and jobs created by Medicaid spending. For every $1 million Montana spends on Medicaid, more than $4.7 million in new business activity is generated and just over 57 new jobs are created. Montana can ill afford to lose this business revenue and economic development. Beyond the statistics and economic impact statements, there are real people who will be hurt if we cut Medicaid. Last month I heard from Kaaren Rizor, director of the Ashland Community Health Center in Ashland, MT, who told a powerful story about how Medicaid has helped her community and what cuts might mean for her center's ability to serve those in need. She wrote: I can't imagine what our population in Ashland, Montana would do without Medicaid. Talk about impacting underfunded Community Health Centers! [Medicaid cuts would] mean accepting more patients for sliding fee scale discounts with no means of recouping the cost of their care. The concept of more Community Health Centers is noble and good, but we aren't magicians. We can't pull money out of a hat to survive. Our clinic has tripled to quadrupled the number of annual patient encounters. Along with that, we see more and more families living at 100 percent of poverty. Without Medicaid, we carry a tremendous burden to see all who come to us, without the funds to provide quality care. Let me reiterate that I am open to working on improvements to Medicaid. But we should not throw the proverbial baby out with the bath water. This program is too important to too many people. And program cuts or funding caps will have a real impact on real people. Finally, I would note that the House budget includes reconciled cuts in these programs that are much deeper than those in the Senate. We cannot act as though all such savings can somehow be achieved by wishing away fraud, waste, and abuse. I am deeply concerned about conference deliberations on this matter. The amendment to strike this reconciliation instruction and instead establish a bipartisan Medicaid commission enjoys widespread support from many Governors, health care providers, and more than 131 national organizations dedicated to helping the Nation's Medicaid beneficiaries, among countless others. I applaud the leadership of Senators Smith, Bingaman, and Coleman in proposing this amendment. I urge my colleagues to join me and Senators Smith, Bingaman, and Coleman in supporting this important amendment.

Mr. BAUCUS. Madam President, I very much appreciate that of the Senator from Colorado and also I beg the indulgence of my colleagues; I am going to speak on another subject for about 5 minutes. It is not the subject at hand. I ask consent my remarks appear apart from the debate on ANWR.

Mr. BAUCUS. Mr. President, I rise today to express my strong support for Senator Stabenow's amendment to restore funding for our first responders, including local law enforcement. I am proud to cosponsor this amendment. We cannot continue to cut justice assistance program funding, particularly Byrne grant, local law enforcement block grants, and COPS funding. The Byrne Grant Program, which was merged last year with the LLEBG program in a move I did not support, is vital to the efforts of local law enforcement in Montana to combat methamphetamine and other illicit drugs. I have heard this again and again and again, from local law enforcement agencies to the Montana Narcotics Officers Association to the Governor's office to the attorney general's office. The Byrne program helps communities hire additional local law enforcement, operate drug task forces, and send local law enforcement to drug training. Unfortunately, the President's budget proposes an elimination of the Byrne Grant Program. This combined with cuts proposed by the President to the high intensity drug trafficking area HIDTA, program and other justice assistance programs, would be a disaster for Montana. It would set the clock back years in our efforts to fight the rapid spread of methamphetamine in Montana. According to the Montana Board of Crime Control, this is what will happen to Montana if the President's fiscal year 2006 budget is enacted: 1. Montana will lose its multijurisdiction drug enforcement capacity, including seven multijurisdictional drug task forces. This means that already stretched local law enforcement agencies will have to do what they can to address drug enforcement at the local level, without broader support from the drug task forces. 2. Montana will lose 33 drug enforcement offices throughout the State. 3. Montana will experience a significant increase in drug availability, manufacturing and trafficking and drug-related crime. 4. Montana would experience an increase in clandestine labs that manufacture methamphetamine. 5. Montana would experience a reduction in the amounts of illegal drugs and guns removed from our communities. 6. Montana would experience the elimination of funds for rural law enforcement agencies' manpower, equipment, and training. The above impacts translate to a complete loss of rural drug enforcement in Montana and are only the tip of the iceberg. The manufacturing, trafficking, drug addiction, and crime will have a ripple effect throughout the State in our public health and correction systems and the courts, negatively affecting public safety and the quality of life in Montana. The Byrne program and similar programs support the majority of pro- active drug enforcement in the 56 counties of my State. This is because we are spread so thin across a vast area with a small population and an international border--Byrne is essential to us. To protect our kids and our communities--our homeland--we have to continue aggressive drug enforcement across Montana. We have to continue teaching hundreds of classes to the good citizens helping to stop the spread of drugs like meth, including realtors, retailers, civil groups, and other local law enforcement agencies. Byrne funding is the difference between stopping a few street level drug sales and stopping drug manufacturing and distribution on a much larger scale. Working hand-in-hand with Byrne Grant Program funding is the COPS Program. The COPS Program helps pay for all meth lab cleanups in Montana, protecting children and others from the harmful health impacts of the chemicals used to make meth. Additionally, the COPS Program helps provide for more law enforcement in drug enforcement units, while maintaining enough police officers patrolling our streets. According to the president of the Montana Association of Chiefs of Police, COPS funding is necessary to maintain an adequate number of police in the field to protect our communities. He has told me that without COPS funding, the number of crimes, especially violent crimes, will begin to rise again. And currently, there is no other alternative to the COPS Program. He tells me that the COPS Program is one of those programs that works, one of those programs that is directly responsible for protecting our communities, for getting the officers out on the street to protect us all. In short, the Byrne and COPS Programs represent a relatively minor Federal investment in our local communities that pays huge dividends in terms of the health and safety of our citizens. We are also talking about communities that cannot foot the bill by themselves, particularly in a rural, low-population State like Montana. We just can't kid ourselves that the money will magically appear elsewhere. I guarantee that Montana is not the only State that will suffer a dramatic loss in drug enforcement capability under the President's proposed budget. Therefore, I urge my colleagues to support the important amendment of the Senator from Michigan. We cannot shortchange our law enforcement--stopping the spread of illegal drugs is important to the security of our homeland, too. I yield the floor and suggest the absence of a quorum.

Mr. BAUCUS. I might say with respect to State plans, most State plans have both Social Security and private plans, but there are a few States that do have only private plans. That is because in those few States they are so lucrative, the employees have a good deal compared with other States. But most States by far have both. Colorado is the exception, a State that has one, the main point being we are talking about choice, Thrift Savings, and choosing different kinds of investment equity that is in a private account today for Federal employees outside of and in addition to Social Security, not carved out of Social Security. We are talking about a carve-out. So it is totally different.

Mr. BAUCUS. If I might respond?

Mr. BAUCUS. Mr. President, I thank my friend. I might say, in regard to the recent statement by my good friend from Colorado with respect to privatization accounts--with all due respect, I want to point out, I don't know if he is quite accurate. I would like his response to this. Isn't it true, though, that today Federal employees have both Social Security and private accounts? In addition to Social Security, that is, you have your Thrift Savings Plan. Federal employees have the Thrift Savings Plan, and they also pay into Social Security, which is not the President's program at all. The President's program is to take money away from Social Security and put it into a personal account. Even with the so-called personal account, they wouldn't be able to keep it, as we would our Thrift Savings. They have to give it back to Social Security. It is not even apples and oranges compared to the President's plan, it is watermelons and peanuts. There is no comparison. The fact is, again to make it very clear, we Federal employees have both Social Security and the private accounts, separate, outside Social Security. We get to keep all we put into our private account because that is our money, whereas in the President's plan, money is taken away from Social Security into a privatization account and the person who has that account is not able to keep very much of that money. So, as I said, it is not apples and oranges, it is really watermelons to peanuts. Isn't that accurate?

Mr. BAUCUS. Mr. President, that is why the senior Senator from Florida, Mr. Nelson, is going to offer an amendment on Social Security later this week. It is why I urge my colleagues to support it. We want to keep Social Security, in the words of that man from Helena, as ``the only solid, dependable program that [we] can rely on.'' They want to keep it. They should keep it. We want to keep it. It is ``the only solid, dependable program'' seniors can rely on. We want to keep it, in the words of Laura from Baker, MT, a ``system [that] has worked well for many, many years.'' And we want to keep a system that can work well for ``many, many years to come.'' I very much thank my good friend from North Dakota. I yield the floor.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I ask unanimous consent that the following fellows and interns of the Finance Committee be granted floor privileges during consideration of the budget resolution: Brian Townsend, Mary Baker, Janis Lazda, Richard Litsey, Cuong Huynh, David Schwartz, Stuart Sirkin, Janellen Duffy, Ashley Fingarson, Jessica Heringer, Serena Maxwell, Jesse Woodson, Briana Schwandt, Emily Meeker, Waylon Mathern, and Adrienne Frazier.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I am pleased to again join with my friend, Senator Hatch, in introducing legislation to make a permanent commitment to research-intensive businesses in the United States. This legislation is bipartisan and bicameral. A companion bill will be introduced in the House of Representatives by Congresswoman Nancy Johnson and Congressman Ben Cardin. 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. Research has shown that a tax credit is a cost-effective way to promote R&D. The Government Accountability 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. Over recent years, industry-financed R&D declined from 1.88 percent to 1.65 percent of GDP in the United States between 2000 and 2003, while R&D performed by the business sector declined from 2.04 percent to 1.81 percent of GDP. Japan, in contrast, saw a steep increase in business-performed R&D--from 2.12 percent to 2.32 percent of GDP between 2000 and 2002--and modest gains were posted in the EU. Moreover, just last week, the World Economic Forum released its annual Global Information Technology Report. The rankings, which measure the propensity for countries to exploit the opportunities offered by information and communications technology, ICT, revealed that Singapore has displaced the United States as the top economy in information technology competitiveness. As a matter of fact, the United States has dropped from first to fifth place in this ranking. Iceland, Finland and Denmark are the countries ranked two, three and four out of the 104 countries surveyed. Iceland moved up from tenth last year. These numbers should be a wake up call for all of us. As research spending falls, so too will the level of future economic growth. 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 U.S. 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. Senator Hatch and I repeatedly have pointed to the R&D tax credit as a measure that gives us a good ``bang for our buck.'' I hope this year we can enact a permanent tax credit that is effective and more widely available. I encourage my colleagues to join us in this effort. As we have in years past, our proposal would make the current research and experimentation tax credit permanent and increase the Alternative Incremental Research Credit, AIRC, rates. And, in this legislation we take one additional but necessary step. We propose a new alternative simplified credit that will allow taxpayers to elect to calculate the R&D credit under new computational rules that will eliminate the present-law distortions caused by gross receipts. This revised and improved R&D credit did pass the Senate last year on a 93-0 vote, but a straight short-term extension of current law was enacted instead. There is no good policy reason to make research more expensive for some industries than for others. While the regular R&D tax credit works very well for many companies, as the credit's base period recedes and business cycles change, the current credit is out of reach for some other firms that still incur significant research expenditures. To help solve part of this problem Congress enacted the AIRC in 1996 and now we propose a way to address the rest of that problem. Under current law, both the regular credit and the AIRC are calculated by reference to a taxpayer's gross receipts, a benchmark that can produce inequities and anomalous results. For example, many taxpayers are no longer able to qualify for the regular credit, despite substantial R&D investments, because their R&D spending relative to gross receipts has not kept pace with the ratio set in the 1984-88 base period, which governs calculation of the regular credit. This can happen, for example, simply where a company's sales increase significantly in the intervening years, where a company enters into an additional line of business that generates additional gross receipts but involves little R&D, or where a company becomes more efficient in its R&D processes. Our proposal would correct this by allowing taxpayers a straightforward alternative research credit election. Taxpayers could elect, in lieu of the regular credit or the AIRC, a credit that would equal 12 percent of the excess of the taxpayer's current year qualified research expenditures, QREs, over 50 percent of the taxpayer's average QREs for the 3 preceding years. Unlike the regular credit and the AIRC, this credit calculation does not involve gross receipts. The R&D tax credit has proven it can be an effective incentive. We need to act to make it a permanent part of the tax code that U.S. businesses can rely on. The best thing we can do for our long-term economic well-being is to stoke the engine of growth--technology, high- wage jobs and productivity. I look forward to working with Senator Hatch and all my colleagues on this important issue. I urge my colleagues to support this important piece of legislation.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I am pleased to again join with my friend, Senator Hatch, in introducing legislation to make a permanent commitment to research-intensive businesses in the United States. This legislation is bipartisan and bicameral. A companion bill will be introduced in the House of Representatives by Congresswoman Nancy Johnson and Congressman Ben Cardin. 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. Research has shown that a tax credit is a cost-effective way to promote R&D. The Government Accountability 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. Over recent years, industry-financed R&D declined from 1.88 percent to 1.65 percent of GDP in the United States between 2000 and 2003, while R&D performed by the business sector declined from 2.04 percent to 1.81 percent of GDP. Japan, in contrast, saw a steep increase in business-performed R&D--from 2.12 percent to 2.32 percent of GDP between 2000 and 2002--and modest gains were posted in the EU. Moreover, just last week, the World Economic Forum released its annual Global Information Technology Report. The rankings, which measure the propensity for countries to exploit the opportunities offered by information and communications technology, ICT, revealed that Singapore has displaced the United States as the top economy in information technology competitiveness. As a matter of fact, the United States has dropped from first to fifth place in this ranking. Iceland, Finland and Denmark are the countries ranked two, three and four out of the 104 countries surveyed. Iceland moved up from tenth last year. These numbers should be a wake up call for all of us. As research spending falls, so too will the level of future economic growth. 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 U.S. 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. Senator Hatch and I repeatedly have pointed to the R&D tax credit as a measure that gives us a good ``bang for our buck.'' I hope this year we can enact a permanent tax credit that is effective and more widely available. I encourage my colleagues to join us in this effort. As we have in years past, our proposal would make the current research and experimentation tax credit permanent and increase the Alternative Incremental Research Credit, AIRC, rates. And, in this legislation we take one additional but necessary step. We propose a new alternative simplified credit that will allow taxpayers to elect to calculate the R&D credit under new computational rules that will eliminate the present-law distortions caused by gross receipts. This revised and improved R&D credit did pass the Senate last year on a 93-0 vote, but a straight short-term extension of current law was enacted instead. There is no good policy reason to make research more expensive for some industries than for others. While the regular R&D tax credit works very well for many companies, as the credit's base period recedes and business cycles change, the current credit is out of reach for some other firms that still incur significant research expenditures. To help solve part of this problem Congress enacted the AIRC in 1996 and now we propose a way to address the rest of that problem. Under current law, both the regular credit and the AIRC are calculated by reference to a taxpayer's gross receipts, a benchmark that can produce inequities and anomalous results. For example, many taxpayers are no longer able to qualify for the regular credit, despite substantial R&D investments, because their R&D spending relative to gross receipts has not kept pace with the ratio set in the 1984-88 base period, which governs calculation of the regular credit. This can happen, for example, simply where a company's sales increase significantly in the intervening years, where a company enters into an additional line of business that generates additional gross receipts but involves little R&D, or where a company becomes more efficient in its R&D processes. Our proposal would correct this by allowing taxpayers a straightforward alternative research credit election. Taxpayers could elect, in lieu of the regular credit or the AIRC, a credit that would equal 12 percent of the excess of the taxpayer's current year qualified research expenditures, QREs, over 50 percent of the taxpayer's average QREs for the 3 preceding years. Unlike the regular credit and the AIRC, this credit calculation does not involve gross receipts. The R&D tax credit has proven it can be an effective incentive. We need to act to make it a permanent part of the tax code that U.S. businesses can rely on. The best thing we can do for our long-term economic well-being is to stoke the engine of growth--technology, high- wage jobs and productivity. I look forward to working with Senator Hatch and all my colleagues on this important issue. I urge my colleagues to support this important piece of legislation.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I rise today to congratulate one of Montana's fine educational institutions on its first national championship title. Rocky Mountain College, located in Billings, is Montana's oldest institution of higher education. Last weekend, the men's ski team became the overall national champions at the 27th Annual US Collegiate Ski Association Championships. Montana's schools may be smaller than the ( average universities around the Nation, but Rocky Mountain College has again proven that smaller schools can achieve giant results. Under Coach Jerry Wolf's leadership, the men's ski team made history for Rocky Mountain College by leading the men's ski team to their first national championship in the school's history. However, the men were not the only ones from the Big Sky State to shine that day. The Women's ski team finished 10th overall. Both teams have made it to the national championships for the last 4 consecutive years but never with this excellent combination of results. I want to recognize three students who finished events with times in the top 10: Pete Petry, Erik Willborg, and Johanna Aaker. I know how hard all of the students on the ski team worked to achieve these fantastic finishes, and I am pleased to represent such talented individuals. To both the men's and women's ski teams of Rocky Mountain College, congratulations on your fantastic seasons.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I rise today to congratulate the University of Montana, which for the first time since 1997 will watch both its men's and its women's basketball teams advance to the NCAA tournament, and we do so with Big Sky tournament championships fresh in hand. The University of Montana men's basketball team will head to the tournament for the sixth time in school history. The Grizzlies now face a daunting task, facing the No. 1 seed University of Washington, and we are going to beat them. Under Coach Larry Krystkowiak, we have a coach and a team that is going to win. Larry was a legendary basketball player for the Grizzlies in the 1980s, rising all the way up to the NBA, and now in his first year as head coach of the Grizzlies, he is a champion. We won the tournament. We are going to beat those characters over in the State of Washington. We are going to win the next round. The Lady Griz basketball team is leading to the tournament for the 16th time in school history. They will face Vanderbilt, and I am quite confident head coach Robin Selvig--just a terrific coach--will have his team ready to play. Both teams represent that which is great about college athletics: fellowship, sportsmanship, and fair play. They are great kids. The student athletes conduct themselves with dignity and class, and I am very proud how well they have represented my home State, and we are very proud to see them compete on a national stage for the national championship. All I have to say is, watch out, Vanderbilt; watch out, University of Washington. Montana is coming.