Max Baucus

Mr. BAUCUS

Mr. BAUCUS. Madam President, the R&D tax credit has been an issue before us for quite some time, almost as long as I can remember since I have been in the Senate. The basic questions are, Should we extend the R&D tax credit and, second, should we make it permanent? Much too often the Congress has decided, yes, to extend the credit, which I agree with, but not to make it permanent. For the life of me, I cannot understand why we have not made this credit permanent. I have introduced legislation, bipartisan legislation, which Senator Hatch and myself introduced, to make the R&D tax credit permanent. Similar legislation has also been introduced in the other body by Congresswoman Nancy Johnson and Congressman Robert Matsui, along with other members of each of their parties. This is bicameral. It is bipartisan. We believe very strongly that the research and development tax credit should be made permanent. In fact, there are about 28 sponsors of our legislation in the Senate. It is about evenly divided between both sides. I would like to make a couple of points. The very bottom line is, this amendment will very much help the American economy. Making the R&D tax credit permanent will give U.S. businesses, particularly in the technology sector, the confidence that those companies can invest in research and development and not have to keep guessing whether Congress is going to extend or not extend this tax credit. I can remember years past, sometimes we would extend it and other times the Congress would not extend the R&D tax credit. There would be a hiatus. I have forgotten how long those gaps were, but, as I recall, they were in the nature of 8 months, 10 months, something like that. Technology companies were wondering, is Congress going to extend the credit? They have in the past. Maybe they will in the future--but will they? This causes great uncertainty in the business world. The R&D tax credit has a proven track record. It lays the foundation for technological innovation which in turn is an extremely important driving force in the American economy. Most economists look to productivity gains. When there are productivity gains in the economy, the economy grows. When we have had high productivity gains, our economy has done quite well. In fact, it is important to recall the words of Chairman Alan Greenspan of the Federal Reserve who said, the reason why our economy has continued to grow so well is because of advances in technology that occurred in America and also in the world, which dramatically increased productivity in our country. This is one of the main reasons the economy grew at such a rapid rate in the 1990s. Granted, some of that was, as the Chairman would say, irrational exuberance. There was a bubble in effect at the time. There were too many people investing because the idea sounded good, without looking closely and directly at the bottom line, whether it was a good investment or not. Nevertheless, it is very clear that technology was a driving force in the 1990s. There is extensive research showing that tax credits are a very cost- effective way to promote research and development. The General Accounting Office, the Bureau of Labor Statistics, the Congressional Research Service, the National Bureau of Economic Research, and many others have found significant evidence that the R&D credit stimulates additional domestic R&D spending by U.S. companies. Perhaps more importantly, the R&D investment tax credit benefits American companies and American workers. A full 75 percent of the R&D credit dollars are used for salaries of employees associated with R&D activities. These are good paying jobs. These are not service industry jobs at the local fast food store. These are very high paying jobs. Seventy-five percent of the R&D tax credit dollars are used for salaried employees associated with R&D activities. R&D activity creates some of the most intellectual, stimulating, high-paying, high-skilled jobs in the country, encouraging individuals to pursue advanced science and math degrees in order to obtain these job opportunities. That clearly is a big plus for our economy. They create more disposable income for employees which provides additional indirect returns to the economy. There are ripple effects. Innovations achieved through R&D make a company much more productive, enhances its competitiveness. Downstream companies are also helped. Once a company develops a new product because of research, in most cases, downstream companies get benefits as well--to say nothing of the national security benefits. The more our technology companies engage in research and development, the more likely it is that we are going to have technological advances and developments that help our national security. That, too, is a given. There is no doubt that if R&D is going to decrease generally, national security is also going to decline. Did you know that the United States lags far behind other countries in giving incentives to businesses to invest within its own borders? Most of our trading partners offer very generous tax and nontax incentives to encourage companies in their countries to invest in R&D. These incentives lower the cost of investing in R&D outside of the United States and give companies receiving these benefits outside the United States a competitive advantage over U.S. companies that don't benefit from similar incentives. In 2000, the United States ranked ninth behind other nations, in terms of the amount of tax credit allowances for business R&D spending at large manufacturing firms. Countries that provide more generous R&D tax benefits than the United States include Spain, Canada, Portugal, Austria, Australia, the Netherlands, France, and Korea. This disparity encourages U.S. companies to locate more R&D activities offshore, resulting in a permanent loss of technology advancements, loss of jobs, and a loss of industrial innovation in the United States. Once R&D moves offshore because of other countries giving a tax comparative advantage, then what happens? Then companies tend to manufacture in those same locations and often use available labor in those markets, rather than American workers. Once you are in a location for a period of time, you are more likely to stay. You learn the procedures and the ropes and you feel comfortable. The country starts to be comfortable with you and they start giving you more incentives to stay there. It starts to cascade and go downhill. I remember years ago, in Saudi Arabia, I was talking to officials there, and the big question was, Who is going to provide the technical advice in setting up a phone system in Saudi Arabia? Is there going to be a big German company, such as Siemens, or an American firm? Which firm will provide the technological specifications for a telephone system in Saudi Arabia? Well, guess what happened. A U.S. company lost; the big German company won. What is even more important about that? Guess who built the telephone system? You got it, the German company. In this case, I am talking generally about R&D going offshore. Once your foot is in the door offshore, there is a strong likelihood that there are going to be other benefits that will accrue to those other countries, not to the United States. The timing of this proposal is very important. There is new data compiled for R&D Magazine that projects that U.S. companies spending on R&D will be mostly flat this year, 2003. This makes for flat growth for the second year in a row. This compares with 2001, when R&D spending grew by 5 percent over the previous year. Investment in R&D is not a function of simply economic uncertainty. Businesses often invest less in R&D because of the expense and the long-term planning requirements and the difficulty of capturing all or some of the returns from the investments. Many economists generally agree that without government support, private sector investment in R&D often falls short of the optimal level of spending necessary to provide maximum benefits to the U.S. economy. There has to be some government assistance. I might add that other countries certainly provide a lot more government assistance to their companies than we Americans do for our own U.S.-based companies--at least in the area of R&D. One can debate the degree to which there should be any government support to the private sector. I believe there should be support in some cases. In this case, when it comes to R&D, it is clear that we want to maintain productivity advantages, technological advantages, and good jobs for American workers. We want to be as competitive as we can be in the world because that benefits the United States not only in the short term, but very much in the longer term. Investments by U.S. businesses in research and development can prove very costly over time. Leading edge competitors in Europe and Japan continue to gain ground. To sum up, we are presented with a great opportunity. What is it? That opportunity is to make our current R&D tax credit permanent--at least as much as we can under the constraints of the bill; second, we also have an opportunity to modify the tax credit to include the additions suggested by the Senator from Washington that will make the credit even more meaningful, including the incremental changes in the credit rates and the addition of a third credit option that is in this legislation. Madam President, this is a no-brainer. I cannot, for the life of me, understand why this amendment won't pass. That is not just a glib statement that rolls easily off my tongue into the Senate Chamber. I just think that if the tradeoff is between research and development on the one hand, and helping American companies with more incentives to do more R&D on the other hand, compared with the accelerating reduction of the top rate or, in the alternative, of the dividends proposal, we have to make choices as to which is more likely to help this country get more jobs in the short term and in the long term. I think the answer to that question is pretty easy and clear, and that answer is by making the R&D tax credit permanent. So I argue very strongly in favor of this legislation and this amendment offered by the Senator from Washington. She is on the right track. I think we should pay attention to what she says. She is from Washington. The State of Washington is the home to a lot of high-tech companies.

Mr. BAUCUS. Madam President, besides being willing to accept the amendment offered by the Senator from Pennsylvania, I add that there are some portions of this bill which further make the Tax Code more complex. We often do that as we are trying to, on the one hand, balance the budget or fit within certain budget restrictions and, on the other hand, help a certain tax policy which, in effect, adds a lot more complexity to the code. Regrettably, the code is going to be much more complex after this legislation is passed, and it will be passed, than is the code today. We did, however, include one measure of tax simplification at my behest. It is small, but it is important, I think. There are many definitions in the code. There is a definition of a child for the purpose of the child tax credit or the earned-income tax credit or as an exemption as a dependent or for purposes of a head-of-household exemption. It depends on how many children the household has in terms of what additional credits or exemptions that head of household has. There are five definitions in the code, each different for each of the conditions I mentioned. We simplified that situation. We said, whether it is earned-income tax credit, the child credit, a dependent for the purpose of exemption or head-of-household exemption, the definition of child is the same. That will make the code a bit easier for taxpayers and practitioners. I appreciate the amendment offered by the Senator from Pennsylvania. It is helpful always to look for ways to simplify the code. I am not terribly encouraged we are going to get the code simplified very much in the next several years. It would be great if we could. We should make those efforts. If history is any guide, regrettably the President and the Congress together are making the code more complex every year. Some day the straw will break the camel's back. The code, in my judgment, is going to collapse. It is going to get so complex and finally people are going to get fed up and make significant changes. We are not there. I do not think that will occur for several years. The amendment offered by the Senator from Pennsylvania is a step in the direction toward forcing us in the Congress to grapple with the undue complexity of the code, whether the flat tax, consumption tax, value-added tax--who knows what is the right approach; that is to be decided another day--or just stay with our current code and make a lot of simplifications. For example, phasing out so-called Peps and Peases. That is the section of the code that says we will give you a tax break on the one hand but take them away on the other. We will give a tax break, but it phases out in a few years. There are lots of provisions in the code like that. One major simplification would be to get rid of those provisions. I compliment the Senator for advancing the ball and thinking more about simplification. I thank him for offering the amendment.

Mr. BAUCUS. Madam President, it is my understanding the Senator from Pennsylvania wishes to offer an amendment. I ask unanimous consent that the pending amendments be set aside so the Senator from Pennsylvania may offer his amendment.

Mr. BAUCUS. Yes.

Mr. BAUCUS. Madam President, I yield whatever time the Senator from Louisiana would desire to have.

Mr. BAUCUS. Mr. President, there isn't anybody in this body for whom I have higher respect and more affection than the Senator from Iowa. I must say when I listened to his arguments against this amendment, virtually nothing was said that addressed the merits. In fact, there were some statements which were a little bit misleading. Lawyers like to call them red herrings. That is when you say something to try to get people off track so they don't think about the subject at hand. It is called a red herring. One of the red herrings we heard was that Democrats voted against this amendment in the past, and it was Democrats who voted for this increase in Social Security taxes back in 1993. That was 10 years ago. That is a different time, a different situation, different circumstance. Back then the Congress voted to reduce deficits, and that was part of a large deficit reduction package. This is 10 years later, 2003. We are faced with the question, within a $350 billion tax bill, how should the tax cuts be allocated. That is the question before us. Many of us believe it is a far wiser policy that seniors receive more of the tax benefit as a result of the cuts than is the case under the Senate Finance Committee bill. That is why we think the 1993 provision should be repealed because then seniors will receive significant benefits if it is repealed, and we believe that is a higher priority than giving a lot more dollars to very few Americans who are the elite, the extremely wealthy Americans. Repealing the 1993 tax on Social Security benefits gets an average of $1,500 in the hands of 8 million Americans. Eight million seniors will receive, on average, a benefit of $1,500 under our amendment. Otherwise, if this amendment does not pass, then by contrast, under the committee bill, which gives dividends to all Americans tax free, a few seniors, 5,000 seniors, will get $19,000. We are saying there should be a better priority; that is, the money should be given to people who are going to spend it. It should be spread out more evenly rather than have the benefits, as in the Finance Committee bill, so heavily skewed to the Nation's elite. This should not be an elite bill. This should be an American bill. This should be a bill for Americans, and American seniors should be included as the rest of America. There are other provisions of the bill that give tax benefits other than to seniors. We believe seniors should get a significant part of the benefit. I strongly urge passage of the amendment. The Senator from Iowa also said there is a difference in philosophy: One party wants to put money in the pockets of people; the other does not. That, too, is not a valid argument. We are talking about whose pockets this money should be put into, if you want to put it in those terms. We on our side are suggesting that the people whose pockets should receive the money are the seniors, that they should receive the benefits, much more than is the case in this bill. In this bill, the people who receive the money, whose pockets get the money, are the elite, the wealthy elite of America generally. That is not right. That doesn't work. It is not fair. It is not American. We believe this should be a bill that is more evenly balanced for all Americans. For all those reasons, I urge my colleagues to support the amendment. It is good for America.

Mr. BAUCUS. Mr. President, how much time is remaining on both sides?

Mr. BAUCUS. I thank the Senator. The amendment the Senator from North Dakota is offering, that I cosponsor, is a tax cut amendment. Most Members of this body like to cut taxes. That is what this amendment is all about. It is cutting taxes. Second, which group is getting the benefit of the tax cut under this amendment? Under the amendment offered by the Senator from North Dakota, cosponsored by myself, it is senior citizens who get the benefit of the tax cut. I join the Senator in offering this amendment. It repeals the 1993 tax of Social Security benefits, the tax this body imposed on certain senior citizens in 1993. We are currently debating a $350 billion tax cut reconciliation bill. This bill is about priorities, about values. That is what budgets are about. Part of the budget is $350 billion in tax cuts. The budget we are working under that was adopted by the Congress set those numbers. I am pleased there was a commitment to limit that reconciliation bill through conference to $350 billion. That was the commitment made by certain key Senators on this side. It is within this tax reconciliation bill we debate and decide how the changes in revenues and outlays affect our constituents. The debate is about who the $350 billion benefits: do we give more money to some taxpayers or others? The choices are real. We are here to make decisions. We are here to decide. We need to make sure our Nation's seniors receive a significant benefit. If this bill before the Senate will allocate benefits to certain groups, certainly senior citizens in our country should be a main beneficiary of a tax reduction. This amendment offered by the Senator from North Dakota is just that, a tax reduction for senior citizens. It repeals the 1993 provision which imposed taxes on certain senior citizens. The bill reported by the Finance Committee provides a tax break for taxpayers with dividend income. That proposal costs $81 billion over 10 years out of the $350 billion. That proposal provides a few seniors, not very many, a few with a small amount of tax relief; 77 percent of seniors in our country will receive no relief, no tax reductions, under the Finance Committee bill on dividends; 77 percent of Americans do not receive any of the $81 billion that will go to very few Americans, the most wealthy, the least in our country. In contrast, our amendment will provide 8 million seniors with a significant tax cut. All the cost of this goes back to America's seniors. That means $150 billion over 10 years is put back into the pockets of our senior citizens. The current law enacted in 1993 has two significant flaws. First, in 1993 we changed the rules in the middle of the game for people receiving Social Security benefits. I will never forget. Suddenly that was enacted. It came out of the blue, an additional tax on our senior citizens and their benefits. We began to tax Social Security benefits at a higher rate for individuals at certain income levels. The second flaw in 1993, we failed to adjust the income levels for inflation. For the past 10 years, there has been no adjustment. This means more and more seniors will be subjected to this tax as each year passes. We need to correct those flaws. Again, this debate is about choices. We make choices here. Life is making choices. We think the choice here is clear. If we have $150 billion to spend, spend it on seniors. As such, we offset the cost of our amendment to repeal the tax to Social Security benefits. That is the purpose of the underlying amendment by striking the dividend proposal in the bill and also striking reductions in the top rates. Again, this is a tax cut amendment. Those seniors I mention are currently paying that tax. We are proposing that tax be repealed. That is a tax cut amendment. It is being paid for by a promise to the future. Those provisions of the Finance Committee dealing with dividends are not currently in effect. They are future promises, we suggest, to be repealed so our seniors get the benefit of the repeal of the taxes imposed upon them in 1993. A couple of numbers: Repealing the 1993 tax of Social Security benefits gets an average of $1,500 into the hands of 8 million seniors. Contrast that with the dividend proposal in the Finance Committee bill. The dividend proposal in the bill gets an average of $19,000 to fewer than 5,000 seniors. Again, what is better: $1,500 in the hands of 8 million seniors or $19,000 in the hands of the most wealthy, only 5,000 seniors? And fewer than 1 million taxpayers, regardless of whether they are 65 or 25, would benefit from the top rate reductions. Remember, there are 130 million filers in America. Fewer than 1 million taxpayers who are not seniors, who are between 65 and 25 get reductions from the top rate reductions. Members on the other side of the aisle have supported this in the past. Repealing the 1993 Social Security tax is a better choice for our constituents than enacting dividend proposals in the top rate reductions contained in the underlying bill.

Mr. BAUCUS. Mr. President, I ask unanimous consent that the pending amendment be temporarily laid aside and that the amendment to be offered by the Senator from North Dakota be in order.

Mr. BAUCUS. Mr. President, I very much thank my friend and colleague, Senator Grassley, chairman of our committee. He has done an excellent job working on this bill. As he said, I do not support the bill but I do support the process and the will of the Senate to proceed; let Senators vote as they wish. That is, frankly, why we are standing here--to get things done, although we may not always agree. I now yield to the Senator from Illinois 15 minutes from the time on our side.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, this is the Military Fairness Act. I am offering it, and it is being cosponsored by Senator McCain. Very simply, this is the amendment that is Ping-Ponging back and forth between the House and Senate. We did pass, at one point, provisions that allow National Guard, Reservists, and other military personnel to have a level playing field and not be unfairly taxed, particularly while serving in our Armed Forces. One is the death benefits gratuity and another is the travel expenses. There are similar provisions like that. It is only fair, particularly as we are winding down the war in Iraq--and the hostilities there are not over--about 80 percent of the benefits of this amendment are to our Reservists and National Guard who will always be serving our country. This amendment makes very good sense. It is paid for by slightly reducing the rate reduction at the top rate. It is a very modest change. I think it is only fair and proper. Again, the major cosponsor of this amendment is the Senator from Arizona, Senator McCain. I urge adoption of the amendment at the appropriate time.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, the chairman and I now ask unanimous consent that the following be the vote sequence when we turn to amendments tomorrow: No. 1, the Bunning amendment No. 589 with respect to Social Security; No. 2, the Dorgan amendment No. 556 with respect to Social Security; No. 3, the Grassley amendment No. 555 with respect to fraud; No. 4, the Specter amendment No. 569 with respect to the sense of the Senate on simplification of the flat tax; No. 5, the Baucus amendment No. 570 with respect to child tax credit; No. 6, the Kennedy amendment No. 544 with respect to unemployment insurance; No. 7, the Lincoln amendment No. 578 with respect to child tax credit expansion; No. 8, the Cantwell amendment No. 577 with respect to R&D tax credit; No. 9, the Jeffords amendment No. 587 with respect to marriage penalty relief and EITC; No. 10, the Burns amendments Nos. 559 and 593 with respect to broadband Internet access; No. 11, the Grassley amendment No. 594 with respect to Medicare payments and rural hospitals; No. 12, the Harkin amendment No. 595 with respect to Medicare payments and rural hospitals; No. 13, the Collins amendment No. 596 with respect to State aid; No. 14, the Murray amendment No. 564 with respect to State aid, FMAP; No. 15, the Stabenow amendment No. 614 with respect to Medicare prescription drug program; No. 16, the Warner amendment No. 550 with respect to teacher deductions; No. 17, the Voinovich amendment No. 592 with respect to tax commission; No. 18, the Graham of Florida amendment No. 617 with respect to a substitute amendment; No. 19, the Kyl amendment No. 575 with respect to attorneys fees on tobacco settlements; No. 20, the Landrieu amendment No. 579 with respect to a substitute amendment; No. 21, the Landrieu amendment No. 620 with respect to Reservists; No. 22, the Landrieu amendment No. 621 with respect to renewal communities; No. 23, the Ensign amendment No. 622 with respect to repatriation; No. 24, the Schumer amendment No. 557 with respect to tuition deduction; No. 25, the Conrad amendment No. 611 with respect to child credit; No. 26, the McCain amendment No. 612 with respect to military retirement benefits. Mr. President, I think there is a correction perhaps on one of these. That is the consent request.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, before the Senator proceeds, the Senator has an important statement to make. I urge that all conversations cease, since this is an important statement and out of respect for the substance of his remarks.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, although we are in morning business, I begin by thanking the chairman of the Finance Committee, Senator Grassley, for the way he has approached putting this bill together. He has been a very fair, very honest, and very decent man, a man who keeps his word. Regrettably, he is not in the Chamber at this moment, but he will be spending a lot of time in the Chamber this week. I want the Senate to know how much this Senator regards the chairman of the Finance Committee. He has done a masterful job. He has a very difficult job. Believe me, I know; I have been in that position. He has always conducted the committee's business and the Senate's duties very appropriately, fairly, with courtesy and civility. I deeply appreciate that, and I know I speak for the rest of the members of our committee and the Senate Finance Committee as well as Members of this body. The Finance Committee of the Senate works best when we work together. We then get a better product with broader support from both sides. The Finance Committee has a long and deserved reputation for working together cooperatively. It is with great sadness I note today the passing of the former chairman of the committee, Russell Long, just a couple days ago. He was well known for not only his willingness but his desire to work hard with both sides of the aisle. I served with Senator Long a good number of years ago, and I think he set the model. On occasion, the committee has deviated slightly, and every time it has, I think it has been a mistake. The tradition of bipartisanship has served the committee very well. I know that is Chairman Grassley's inclination as well. I also know that circumstances have not allowed him to carry out this role on this bill as much as he would like. It appears some in the committee have made nonnegotiable demands for what they say ``must'' be in this bill. Rather than pass a bill that would include all the terms with which we can agree, or at least most of us, some insist that the bill must, for example, include tax cuts for dividends. That is an insistence that some members of the committee are making and do not want to negotiate. Some insist this bill must include an acceleration of the tax rates for the 1 percent of American elite with income greater than $311,000. That is something they insist on or there is no bill; that is, rather than pass a bill with overwhelming support and seek a bipartisan vote. The Senate often works because of willingness to compromise. Senators give up what they consider perfect in order to get in the end what will be good. I know Chairman Grassley works to get things done in that way, and so does this Senator. Without compromise, we will get less done. Without compromise, the result will command less popular support. It will be more tenuous, more fragile, and without compromise the Senate will be a much more partisan place, a place that is not much fun in which to work. But this is only Monday. It is early in the debate and there is still time, even at this late date. I believe it is not too late for us in the Senate to work in the Senate's best traditions; that is, work together. Let me take a few moments now to discuss why we are here today. I will also discuss the President's proposal and the congressional reactions to it. Why are we here today? In the first instance, we are here because the budget resolution directs us. The budget resolution expressing the will of the Congress tells us that this month we shall consider a reconciliation bill, so we are carrying out our duty under the budget process. We are also here because the times demand it. The times demand action. On a Montana ranch, when the grass has burned dry and there is just dust in the air, the rancher has to take steps to feed and protect his herd. And when drought hits and times are tough, no Montana rancher would fail to dig down deep, even deeper, rather than fail to find a way to make things work to get his place back on solid ground. On a larger scale, we are here today because the American economy demands it. There is a drought in the American economy, just as there has been in many parts of America, a very severe drought facing agriculture. The week before last, the Government reported that the unemployment rate surged to 6 percent. Since January 2001, just 2 years ago, the private sector has lost, not gained--I might put that in the context of the 2001 tax cut--the private sector has lost more than 2.1 million jobs. The economy has lost more than half a million jobs in the last 3 months alone. We now have the fewest number of jobs in 41 months. Since January 2 years ago, the economy has grown by an anemic average of 1.5 percent, far below the post-World War II average. Business owners tell me they are not investing, despite what the Senator from Arizona just said on the floor, because of so much uncertainty and too much overcapacity. Consumer confidence has dropped. Simply put, there is a lot of uncertainty out there. The reason the investment curve has declined is very simply because the bubble burst. That bill that was run up in the 1990s, whether in the high-tech sector or the telecommunications sector--generally that bubble burst. The price-to-earnings ratio was way too high. Everyone knew it but said maybe they would get on the gravy train, knowing it would not last forever, but trying to stay on as long as it would last. Sure enough, the bubble did burst--no more gravy train. The economy didn't collapse, but we fell into recession. As a consequence, there is amazing business overcapacity. Businesses are not investing now because they have overcapacity. They cannot fully use the capacity they now have because people are not buying as much as they once did. That is why investment is down. The chart the Senator from Arizona pointed out to us a few minutes ago may be interesting. It has two lines on it, but his explanation for the lines is totally inaccurate. It is totally fallacious. There are other reasons to explain why the investment curve is down, and I just explained the main reason it is down. There is a lot of uncertainty in the economy. There is a lot of uncertainty because there are fewer jobs and the unemployment is so high and there is also an increased need for unemployment benefits. We have to increase investor confidence. They tell me, as I am sure they are telling you--businessmen are telling me, as I am sure they are telling you, over and over again, they are unwilling to invest now. They don't want to take that step to invest. They are afraid. They are a little nervous. Why? Because there is no pricing power. They cannot get people out to buy more of their products. The economy is stalled out. There is no great demand. Consumer confidence has fallen off, too, actually. But the main reason for businesses not investing is people won't buy their products. They are waiting for citizens to buy more of their products. That is what is happening today. At least that is what all businessmen are telling me. I talk to Republicans and Democrats, Independents and liberals; I don't care who they are. I ask them, What is going on? What do we need to do? I always get the same answer when I talk to people where the rubber meets the road; that is, business people, not theoretical economists. I don't mean to disparage the economists, but we all know economic prognoses and economic predictions are all over the lot because people are people. What really counts is those financial statements and those buy orders. Business people face the payrolls and the cost structures that business people face. That is what really counts. Business people are telling me they are not investing partly because they have overcapacity already and can't use what they have; second, because there is just no great demand. I also say that after looking at the economy today it is important for us to look at specific goals we think any tax bill, any economic growth bill should contain. One major point about any growth package is that it should take effect as soon as possible. That is what we are talking about here. We are talking about an economy that is stalled out, so any tax bill that is presented before us should take effect as soon as possible. It is an obvious point but one I make because the legislation before us fails totally on that point. It does not take effect soon at all. We should also look at our long-term fiscal situation; that is, our debt. We should not add needless debts, additional burdens on our children and our grandchildren. We must avoid action today which may have the effect of raising interest rates, particularly mortgage interest rates, not far down the road. I remind my colleagues that this is only May 2003. Things can change. Things can happen very quickly. Where are we going to be a year from now? Where are we going to be 2 years from now? What actions are we taking today that will have an effect on long-term interest rates? We are lucky that inflation is low, but I can remember when inflation was high and interest rates were very high and that day, unfortunately, will happen again. We don't know when, but we should not take actions to exacerbate that or make it more likely that interest rates will rise more quickly. We should also address a third goal; that is, we should spread the benefit of the tax reduction among all taxpayers. We are all Americans. We all should benefit, not just the special elite. Let me turn now to the President's proposal. The President proposes a budget, but under the Constitution Congress legislates. We do not merely rubberstamp the President's budget. We have a job to do. After all, we are supposedly elected to exercise our own independent judgment as Senators. Many of the President's proposals command broad support. I support a good number of them. They may not be the most efficient stimulative proposals possible, but they should increase some consumer demand, and I, for one, think that is good. Specifically I support--and I believe Senators broadly do--helping families meet their costs by increasing the child credit to $1,000 right now. I also support speeding up relief for the marriage penalty. Let's eliminate that marriage penalty. I also support expanding the 10-percent bracket immediately, to give immediate relief to most taxpayers. They will spend those dollars. They will spend them right away to help rebuild our economy. Also, I support ensuring we do not worsen the difficulties created by the alternative minimum tax. I am pleased the committee-reported bill includes something on each of these items. But Congress has a role to temper and improve the President's proposals. From my perspective, several areas are key. First, the amount of the tax cut package is critical. The absence of fiscal responsibility over the long term affects interest rates now and in the future. We have a duty to be responsible. We must not worsen interest rates and dampen economic growth by passing an irresponsibly large package. In January, 2 years ago, the Congressional Budget Office projected surpluses of $5.6 trillion for the next decade. That is an important figure to remember. Surpluses were projected 2 years ago of $5.6 trillion for the decade. Today, CBO projects the President's budget will result in deficits--not surpluses but deficits--of $2.1 trillion for the same period. That is a swing of almost $8 trillion in just 2 years, and recent projections make those projections look overly optimistic. I might note other bills we are going to have to pay, whether it is Medicare, prescription drug benefits, more AMT--which we all know we will have to pay for relief for the alternative minimum tax--Iraq. Things are not going well in Iraq. That is going to cost money. Who knows what other events are going to occur around the world? Think a little bit about the burgeoning health care costs which people are facing around this country and how much that is translating into Medicare costs and Medicaid costs, and with the baby boomers starting to retire in just a few years from now. I believe we would be irresponsible by adding significantly to our deficit. Our national balance of payments bill, which is how much more we owe other countries compared to what they owe us, is getting larger and larger on an absolute relative scale each year. Someday we are going to have to pay that bill. We all know we are going to have to pay that bill. The question is, When? What day? I would rather not hasten the day of paying that bill, and that bill will not be hastened the more fiscally responsible we are. The dollar is declining against the euro. The dollar is not tanking. But why is it steadily declining against the euro? Could it be that the investors around the world are beginning to question America's long- term economic policies? I think that is a small part of it. I can't describe all of it. I don't know. But I raise those concerns. Clearly, our fiscal circumstances are much less favorable than when we considered the 2001 tax bill. We are in a different situation today, much different from that of 2001. Today, we must keep the size of the tax bill within narrower limits. Today, we must be more concerned about contributing to higher interest rates. In that regard, I am pleased that the committee-reported bill keeps within the $350-billion limit over the coming decade that was agreed to during consideration of the budget resolution. Second, the President's proposal on dividends is troubling for many of us. It must either be eliminated or even more dramatically scaled down. Yes, the tax treatment of dividends might be a worthy subject--as part of a budget-neutral corporate tax reform debate. But the President's dividend proposal--at roughly $400 billion--is simply too fiscally irresponsible, too complicated, and affects too few taxpayers to be appropriately included in this stimulus package. It borders on irresponsibility. Only 3 out of 10 tax filers report dividend income on their tax returns. They are the only ones who would benefit from the dividend proposal. In other words, seven out of 10 Montanans would see no tax benefit at all from a dividend tax cut as a consequence. The provisions in this bill should benefit taxpayers more broadly across the income spectrum. That way, they can most effectively get money to taxpayers who would spend it and spur the economy. The committee changed the President's dividend proposal. Unfortunately, the committee-reported bill also contains an ill- conceived dividend proposal. The bill would exclude from income all dividend income up to $500. It then includes a 10-percent exclusion for dividend income above $500 from 2004 to 2007. And the exclusion increases to 20 percent for 2008 through 2012. On one hand, the dividend exclusion provides simplification. A capped exclusion of $500 would make it no longer necessary for half of taxpayers with dividend income to report their dividends on their tax returns. But this benefit is overshadowed by the worst part of the proposal-- the 10-percent and 20-percent exclusion for dividends above $500. This provides a very large tax cut to the elite. Take the example of a taxpayer who has $1 million in dividend income. Under the committee-reported bill, that fortunate taxpayer gets to exclude a little more than $100,000 of dividend income--$100,450, to be exact. Applying tax rates to this excluded income, this taxpayer would get a tax cut of about $35,000 a year from the dividend tax cut alone. A third problem with the President's proposal is the acceleration of the rate cuts for that 1 percent of American elite with income greater than $311,000. This proposal alone costs some $35 billion. In better times, I would support a package that included benefits for those making over $311,000. But these are not better times. In better times, I would support a package that included benefits for those who make over $311,000. But with the budget in the shape it is in, now is not the time to accelerate this rate reduction. This provision is just too costly and too narrow to effectively spur demand and rebuild the economy. Fourth, more needs to be done to infuse funds to cash-strapped States and localities. The economic downturn has cut State and local revenues dramatically. But State constitutions--as opposed to the U.S. Constitution--require States to balance their budgets. So State and local governments are forced to make widespread, often painful spending cuts in education, in health, and in other vital programs. More than half the states are still struggling to balance their budgets this fiscal year. And almost all of them are struggling to balance their budgets for the fiscal year that begins in July. These State spending cuts, layoffs, and tax increases, I believe, will offset the gains from tax breaks in this bill. And the economic gains to tax breaks for the elite are overstated or theoretical. Last year, the State of Montana cut benefits for severely mentally ill youth, just in order to make ends meet. The State also made across- the-board cuts in Medicaid provider payments and increased cost sharing--both of which now threaten access to care for low-income Montanans. If those cuts were not drastic enough, this year, the State legislature just cut more than a quarter of a million dollars from Meals on Wheels for seniors. That will mean about 67,000 meals lost over the next 2 years. And budget constraints have also forced my State to put 700 working families on a waiting list for child care. Translating Montana's small population to a national level, those cuts are the equivalent of more than 2 million lost meals nationwide. It's the equivalent of a 22,000-family waiting list for child care. We can pass all the Federal tax cuts we want. But what good will they do if we force States and localities to raise taxes, cut jobs, and reduce benefits.? We can avoid these economically-damaging State and local actions by assisting these governments with their budgets through temporarily raising the Federal Medicaid match and through other, more broad-based methods. I am pleased that the committee-reported bill includes something in State aid. Unfortunately, the committee-reported bill includes $20 billion--only a little more than 5 percent of its total--for this purpose. I would have preferred a package that included $40 billion in State aid; the need is that great. Fifth, making tax cuts refundable will help spur economic growth. Very simply, it works. They will quickly get funds to people who are likely to spend them rapidly, spur demand, and rebuild the economy. The President's proposal accelerated the $1,000 child credit. I supported the increase in the child credit when it was passed in 2001, and I support the acceleration. But the President's proposal did not accelerate the refundability of the credit. Fortunately, during consideration of the bill, the Finance Committee adopted Senator Lincoln's amendment to accelerate the refundability of the child credit. The Lincoln amendment will allow many low-income families to take full advantage of the increase in the credit. Under current law, the credit is partially refundable. Families can take the credit if they pay payroll taxes, but do not have income tax liability. The amount that low-income families can get refunded is set to increase in 2005. Thanks to the Lincoln amendment, this improvement will be accelerated to 2003 along with the increase in the credit. More hard-working low-income families will be able to get up to $1,000 per child in this credit in 2003, thanks to the Lincoln amendment. Sixth, we should increase the bonus depreciation deduction for the year that a business purchases new equipment. In 2001, we saw a sharp drop in direct investment by businesses. The next year, we changed the law to give a larger first-year deduction. The drop; in direct investment leveled, and even increased slightly. We need to provide more in the depreciation deduction for 2003 to encourage even more business investment. And seventh, we need to extend unemployment benefits and help those who have exhausted their benefits. The government has reported that nearly 2 million people have been without work for 27 weeks or longer. The average time people have been unemployed is almost 20 weeks--the longest since 1984. The weak economy has hit everyone. Unfortunately, some more than others. As we rebuild the economy, we should not leave these unemployed workers and their families behind. Any bill to help rebuild the economy must help those most affected by the bad economy. As well, putting funds in these hands will be an effective stimulus. The recipients of unemployment benefits and their families are likely to spend every dollar they get quickly. This spurs demand which, in turn, helps rebuild the economy. We cannot glibly assume that all actions we could take here would be equally stimulative. Not all tax cuts are created equal. Not all spending is equally stimulative, either. A lot depends on when the provision takes effect. A provision that takes effect in 2006 will likely provide less stimulus than one that gets money into the system this year or next. Much also depends on who receives the benefit. A provision that gets money into the hands of working and lower-income families--people who spend more of what they have, and spend it quickly--will be more stimulative than a provision that transfers money to elites who would save more of it. Comparing various options for stimulus, a study by Economy.com concluded that extension of the Temporary Emergency Unemployment Compensation program would provide the most effective stimulus of the options they studied. They concluded that ever dollar in these unemployment benefits generated an estimated $1.73 in demand in the year ahead. In contrast, they estimated that cutting dividend rates and accelerating 2006 rate cuts both would generate less than a dollar's worth of demand in the year ahead for each dollar spent. So, in terms of stimulus, some policy options are better than others, and unemployment insurance would be among the best. Finally, the Finance Committee improved the President's proposal by adopting a series of small but important provisions that will make people's lives better. For example, the committee adopted an amendment that Senators Hatch and Lincoln and I offered to significantly simplify tax return filing for millions of taxpayers. This provision reconciles the five varying child definitions into a single definition for a ``qualifying child.'' It is time for us to stop talking about simplification. It is time for us to do something about simplification. This amendment will at least make it so that we have just one definition of who is a child for purposes of claiming a tax benefit. Another useful improvement that the committee made to the President's proposal was in repealing the special occupational tax relating to alcoholic beverages. This provision will give much-needed relief and fairness to hundreds of thousands of small businesses. Because this tax is levied on a per-location basis, a sole proprietorship must pay the same amount as one of the Nation's largest retailers. Locally owned chains pay as much as, if not more than, the Nation's largest single-site brewery. That is not fair, and this change will help. I make all of these points with the recognition that our differences are not as large as what we have in common. We agree broadly that we need to help create jobs and get the economy moving. We in the Senate should take the steps needed to address these goals. The economic times that face us call us to govern. We should avoid political point scoring. We must pass legislation to improve the lives of the people we represent. Each of us was sent here by the people of our States. They sent us here not to make speeches, not to win debates; they sent us here to make life better. In these difficult times, they sent us here to help create jobs, to rebuild the economy. We have a duty to respond to the times, not the politics. We have a duty to do the people's work. I thank the Chair.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I ask unanimous consent that the following fellows and interns on the Finance Committee be granted the privilege of the floor for the remainder of the week: Alisa Blum, Tyler Garret, Renee Johnson, Mark Kirbabas, Rhonda Sinkfield, and Mike Wiedrick.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I would like to explain why I opposed the nomination of Deborah Cook to the U.S. Circuit Court of Appeals for the Sixth Circuit earlier this week. As I have stated, before, appointees to the Federal bench must be able to set aside their personal philosophies and beliefs. They must be able to administer and enforce the law in a fair and impartial manner. Because the U.S. Supreme Court hears fewer and fewer cases each year, the circuit courts are the court of last resort for many ordinary citizens and businesses. The circuit courts often have the last word on important cases dealing with civil rights, environmental protection, consumer protections, and labor issues, among many others. Circuit court judges must demonstrate a record of integrity, honesty, fairness, and a willingness to uphold the law. It doesn't matter if that person is nominated by a Democrat or a Republican--the standard remains the same. In reviewing Ms. Cook's record, I noted several instances in which she clearly ignored her own State's Constitution or her own court's prior precedent in issuing her opinion or dissent. This was particularly striking in cases involving worker and consumer rights and protections. Her record indicates she lacks the sensitivity and legal integrity so vital to any person worthy of a lifetime appointment as a U.S. circuit court judge. Her record indicates she cannot set aside her own personal philosophies and beliefs in deciding the cases before her. In short, I could not in good conscience, exercising my duty under the Constitution, vote to confirm Deborah Cook to a lifetime appointment on the Sixth Circuit Court of Appeals.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I am introducing a bill today that I hope will take us one step closer to achieving permanent protections for Montana's magnificent Rocky Mountain Front. The Front, as we call it back home, is part of one of the largest and most intact wild places left in the lower 48. To the North, the Front includes a 200 square mile area known as the Badger-Two Medicine in the Lewis and Clark National Forest. This area sits just south-east of Glacier National Park, one of our greatest national treasures. The Badger-Two Medicine area is sacred ground to the Blackfeet Tribe. In January of 2002, portions of the Badger-Two, known as the Badger-Two Medicine Blackfoot Traditional Cultural District, were declared eligible for listing in the National Register of Historic Places. South of the Badger-Two, the Front includes a 400 square mile strip of national forest land and about 20 square miles of BLM lands, including three BLM Outstanding Natural Areas. Not only does the Front still retain almost all its native species, but it also harbors the country's largest bighorn sheep herd and second largest elk herd. The Rocky Mountain Front supports one of the largest populations of grizzly bears south of Canada and is the only place in the lower 48 states where grizzly bears still roam from the mountains to their historic range on the plains. Because of this exceptional habitat, the Front offers world renowned hunting, fishing and recreational opportunities. Sportsmen, local land owners, hikers, local communities and many other Montanans have worked for decades to protect and preserve the Front for future generations. In short, a majority of Montanans feel very strongly that oil and gas development, and Montana's Rocky Mountain Front, just don't mix. The habitat is too rich, the landscape too important, to subject it to the roads, drills, pipelines, industrial equipment, chemicals, noise and human activity that come with oil and gas development. Building upon a significant public and private conservation investment and following an extensive public comment process, the Lewis and Clark National Forest decided in 1997 to withdraw for 15 years 356,000 acres in the Front from any new oil and gas leasing. This was a significant first step in protecting the Front from development that I wholeheartedly supported. However, in many parts of the Rocky Mountain Front, oil and gas leases exist that pre-date the 1997 decision or are located in the Badger-Two Medicine area, where the lease suspension could be lifted soon. These leaseholders have invested time and resources in acquiring their leases. Several leaseholders have applied to the federal government for permits to drill. These leases are the subject of my proposed bill. History has shown that energy exploration and development in the Front is likely to result in expensive and time-consuming environmental studies and litigation. This process rarely ends with a solution that is satisfactory to the oil and gas lessee. For example, in the late 1980's both Chevron and Fina applied for permits to drill in the Badger Two Medicine portion of the Front. After millions of dollars spent on studies and years of public debate, Chevron abandoned or assigned all of its lease rights, and Fina sold its lease rights back to the original owner. Therefore, I think we should be fair to those leaseholders. We want them to continue to provide for our domestic oil and gas needs, but they are going to have a long, difficult and expensive road if they wish to develop oil and gas in the Rocky Mountain Front. My legislation would direct the Interior Department to evaluate non- producing leases in the Rocky Mountain Front and look at opportunities to cancel those leases, in exchange for allowing leaseholders to explore for oil and gas somewhere else, namely in the Gulf of Mexico or in the State of Montana. In conducting this evaluation, the Secretary would have to consult with leaseholders, with the State of Montana, the public and other interested parties. When Interior concludes this study in two years, the bill calls for the agency to make recommendations to Congress and the Energy and Natural Resources Committee on the advisability of pursuing lease exchanges in the Front and any changes in law and regulation needed to enable the Secretary to undertake such an exchange. Finally, in order to allow the Secretary to conduct this study, my bill would continue the current lease suspension in the Badger-Two Medicine Area for three more years. This lease suspension would only apply to the Badger-Two Medicine Area, not the entire Front. That's it, that's all my bill does. It doesn't predetermine any outcome, it doesn't impact any existing exploration activities or environmental processes. It just creates a process through which the federal government, the people of Montana and leaseholders can finally have a real, open and honest discussion about the fate of the Rocky Mountain Front. I would also point out that the Administration recently completed an inventory of the onshore oil and gas reserves on federal lands in five basins in the Interior West, including the Rocky Mountain Front, also known as the Montana Thrust Belt. The Administration's study found that this area contains the smallest volumes of oil and gas resources of all five of the Western inventory areas. For example, the mean estimate of all natural gas reserves in the Uinta/Pinceance Basin in Colorado and Utah is 22 trillion cubic feet. In the Front, the mean estimate is only 8.6 trillion cubic feet. Additionally, the study concluded that in reality, the vast majority of Federal lands in the interior West are available for leasing with few if any restrictions. Although a large percentage of federal lands in the Front are currently unavailable for leasing, many of those lands are unavailable because they lie under Glacier National Park, Indian lands, and already established wilderness areas, which comprise much of the Federal land in the Front. So, not only is the Front relatively poor in terms of oil and gas reserves, many of those reserves--by Congressional mandate, executive order or treaty--will never be available for leasing. We should look for ways to fairly compensate leaseholders for investments they've made in their leases if they decide to leave the Front rather than waste years and millions fighting to explore for uncertain--and small--oil and gas reserves. A lot of Montanans just don't want to see the Front developed, and they will fight to protect it. Including me. So, developers can wait years, or decades, or most likely never, for oil and gas to flow from the Front. Or we can look at ways to encourage domestic production much sooner, in much more cost effective, appropriate and efficient ways somewhere else. That is what I hope this legislation will accomplish Mr. President, and I hope my colleagues in the Senate will support it.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I would like to briefly explain why I will vote against cloture on the nomination of Priscilla R. Owen to the U.S. Court of Appeals for the Fifth Circuit. Ms. Owen's record reveals that she is a judicial activist and an ideologue. As newspaper editorials and several of our colleagues have pointed out, she has created a strong record of rewriting the law when it does not match her personal convictions and beliefs. For those reasons, she does not deserve a life-time appointment to the U.S. Circuit Court of Appeals. I cannot in good conscience, exercising my duty under the Constitution, allow her to be appointed to as powerful and influential a body as the Fifth Circuit. Appointees to the Federal bench must be able to set aside their personal philosophies and beliefs. They must be able to administer and enforce the law in a fair and impartial manner. Because the U.S. Supreme Court hears fewer and fewer cases each year, the circuit courts are the court of last resort for many ordinary citizens and businesses. The circuit courts often have the last word on important cases dealing with civil rights, environmental protection, labor issues, and many others. Circuit court judges must demonstrate a record of integrity, honesty, fairness, and a willingness to uphold the law. Ms. Owen fails this test. For example, Ms. Owen has published opinions and dissents that have drawn criticism from other conservatives and Republicans as inconsistent with the law or facts in front of her. We've heard over and over about her decision in FM Properties v. City of Austin, where the majority on the Texas Supreme Court--consisting of two current Bush appointees and current White House counsel Alberto Gonzales--called her dissent ``nothing more than inflammatory rhetoric.'' Additionally, in her dissent to the Texas Supreme Court decision In re Jane Doe 1, Owen proposed to require a minor to show knowledge of religious arguments against abortion. In a separate concurrence, Mr. Gonzales said that to the interpret the law as Owen did ``would be an unconscionable act of judicial activism.'' The administration has every right to appoint judges who share the President's philosophy and beliefs. That is entirely proper. However, that does not give the President the right to appoint judicial activists who have not demonstrated a respect for the law, or an ability to set aside their personal beliefs in order to interpret the law in a fair and impartial manner. Additionally, a President has never resubmitted a previously rejected circuit court nominee for the same vacancy, as this President has with Ms. Owen. And, the Judiciary Committee for the first time approved a nominee that it had previously rejected. That nominee is Ms. Owen. So not only does her record of judicial activism disqualify her for a life-time appointment to the Fifth Circuit, her approval by the Judiciary Committee and consideration by the full Senate is highly unusual and without precedent. For all of the above reasons, I must oppose Ms. Owen's nomination to the Fifth Circuit and vote against cloture on her nomination.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, I am introducing a bill today that I hope will take us one step closer to achieving permanent protections for Montana's magnificent Rocky Mountain Front. The Front, as we call it back home, is part of one of the largest and most intact wild places left in the lower 48. To the North, the Front includes a 200 square mile area known as the Badger-Two Medicine in the Lewis and Clark National Forest. This area sits just south-east of Glacier National Park, one of our greatest national treasures. The Badger-Two Medicine area is sacred ground to the Blackfeet Tribe. In January of 2002, portions of the Badger-Two, known as the Badger-Two Medicine Blackfoot Traditional Cultural District, were declared eligible for listing in the National Register of Historic Places. South of the Badger-Two, the Front includes a 400 square mile strip of national forest land and about 20 square miles of BLM lands, including three BLM Outstanding Natural Areas. Not only does the Front still retain almost all its native species, but it also harbors the country's largest bighorn sheep herd and second largest elk herd. The Rocky Mountain Front supports one of the largest populations of grizzly bears south of Canada and is the only place in the lower 48 states where grizzly bears still roam from the mountains to their historic range on the plains. Because of this exceptional habitat, the Front offers world renowned hunting, fishing and recreational opportunities. Sportsmen, local land owners, hikers, local communities and many other Montanans have worked for decades to protect and preserve the Front for future generations. In short, a majority of Montanans feel very strongly that oil and gas development, and Montana's Rocky Mountain Front, just don't mix. The habitat is too rich, the landscape too important, to subject it to the roads, drills, pipelines, industrial equipment, chemicals, noise and human activity that come with oil and gas development. Building upon a significant public and private conservation investment and following an extensive public comment process, the Lewis and Clark National Forest decided in 1997 to withdraw for 15 years 356,000 acres in the Front from any new oil and gas leasing. This was a significant first step in protecting the Front from development that I wholeheartedly supported. However, in many parts of the Rocky Mountain Front, oil and gas leases exist that pre-date the 1997 decision or are located in the Badger-Two Medicine area, where the lease suspension could be lifted soon. These leaseholders have invested time and resources in acquiring their leases. Several leaseholders have applied to the federal government for permits to drill. These leases are the subject of my proposed bill. History has shown that energy exploration and development in the Front is likely to result in expensive and time-consuming environmental studies and litigation. This process rarely ends with a solution that is satisfactory to the oil and gas lessee. For example, in the late 1980's both Chevron and Fina applied for permits to drill in the Badger Two Medicine portion of the Front. After millions of dollars spent on studies and years of public debate, Chevron abandoned or assigned all of its lease rights, and Fina sold its lease rights back to the original owner. Therefore, I think we should be fair to those leaseholders. We want them to continue to provide for our domestic oil and gas needs, but they are going to have a long, difficult and expensive road if they wish to develop oil and gas in the Rocky Mountain Front. My legislation would direct the Interior Department to evaluate non- producing leases in the Rocky Mountain Front and look at opportunities to cancel those leases, in exchange for allowing leaseholders to explore for oil and gas somewhere else, namely in the Gulf of Mexico or in the State of Montana. In conducting this evaluation, the Secretary would have to consult with leaseholders, with the State of Montana, the public and other interested parties. When Interior concludes this study in two years, the bill calls for the agency to make recommendations to Congress and the Energy and Natural Resources Committee on the advisability of pursuing lease exchanges in the Front and any changes in law and regulation needed to enable the Secretary to undertake such an exchange. Finally, in order to allow the Secretary to conduct this study, my bill would continue the current lease suspension in the Badger-Two Medicine Area for three more years. This lease suspension would only apply to the Badger-Two Medicine Area, not the entire Front. That's it, that's all my bill does. It doesn't predetermine any outcome, it doesn't impact any existing exploration activities or environmental processes. It just creates a process through which the federal government, the people of Montana and leaseholders can finally have a real, open and honest discussion about the fate of the Rocky Mountain Front. I would also point out that the Administration recently completed an inventory of the onshore oil and gas reserves on federal lands in five basins in the Interior West, including the Rocky Mountain Front, also known as the Montana Thrust Belt. The Administration's study found that this area contains the smallest volumes of oil and gas resources of all five of the Western inventory areas. For example, the mean estimate of all natural gas reserves in the Uinta/Pinceance Basin in Colorado and Utah is 22 trillion cubic feet. In the Front, the mean estimate is only 8.6 trillion cubic feet. Additionally, the study concluded that in reality, the vast majority of Federal lands in the interior West are available for leasing with few if any restrictions. Although a large percentage of federal lands in the Front are currently unavailable for leasing, many of those lands are unavailable because they lie under Glacier National Park, Indian lands, and already established wilderness areas, which comprise much of the Federal land in the Front. So, not only is the Front relatively poor in terms of oil and gas reserves, many of those reserves--by Congressional mandate, executive order or treaty--will never be available for leasing. We should look for ways to fairly compensate leaseholders for investments they've made in their leases if they decide to leave the Front rather than waste years and millions fighting to explore for uncertain--and small--oil and gas reserves. A lot of Montanans just don't want to see the Front developed, and they will fight to protect it. Including me. So, developers can wait years, or decades, or most likely never, for oil and gas to flow from the Front. Or we can look at ways to encourage domestic production much sooner, in much more cost effective, appropriate and efficient ways somewhere else. That is what I hope this legislation will accomplish Mr. President, and I hope my colleagues in the Senate will support it.

Mr. BAUCUS

Mr. BAUCUS. Madam President, I rise today to offer legislation, along with my colleagues Senator Enzi and Senator Dorgan, that would end the restrictions placed on travel to Cuba. I understand our colleagues in the House will introduce companion legislation in the coming weeks. I look forward to working with my colleagues in both chambers, and on both sides of the aisle, as we move forward. With this legislation, we are undertaking a serious cause. Repeal of the travel ban is long overdue. There are numerous reasons to introduce this legislation, but I want to focus today on just two: first, the current situation in Cuba; and second, our troubled economy here at home. Introduction of this legislation comes at a crucial time in U.S.-Cuba relations. Last month, nearly 80 Cuban dissidents were arrested. All of them have been sentenced to an average of almost 20 years in prison. Democratic governments around the world, as well as human rights organizations and others, including myself and my colleagues in the Senate and House Cuba Working Groups, have harshly criticized the Castro regime for these appalling acts of repression. Yet, throughout all of this, the Castro regime has remained defiant and undaunted. Why? In my view it is because Castro wants the embargo to continue. Observers have noted an emerging pattern: every time we get close to more open relations, Castro shuts the process down with some repressive act, designed to have a chilling effect on U.S.-Cuban relations. Castro fears an end to the embargo. He knows the day the embargo falls is the day he runs out of excuses. Without the embargo, Castro would have no one to blame for the failing Cuban economy. Nor would his way of governing be able to survive the influx of Americans and democratic ideas that would flood his island if the embargo were lifted. Now, some Cuba watchers have predicted that the dissident arrests and the resulting decline of U.S.-Cuba relations are a death knell to the engagement debate in Washington. I strongly disagree. And I think now, more than ever, a genuine, honest debate about the merits of the embargo is needed. Some people seem to think tightening the embargo is a rational response to the Castro regime. I guess if you think an embargo can hurt Castro without hurting the Cuban people, then tightening the embargo might make some sense. But it does not work that way. The embargo actually hurts the Cuban people much more than it hurts Castro. This is why many Cuban dissidents, including Oswaldo Paya, the founder of the Varela Project, oppose our embargo and support engagement. Indeed, after 43 years, it ought to be clear to everyone that the embargo has failed to weaken Castro. A better approach is to reach out to the Cuban people. Ending the travel ban is the first and best way to do this. If Castro fears contact between the Cuban people and the American people, the rational American response is to send more Americans, not fewer. Of course, ending the travel ban would have benefits not only for the Cuban people, but also for Americans. Ending the travel ban would have an immediate and direct economic impact, beyond even the immediate travel sector. Most importantly for my home state of Montana, ending the travel ban would help farmers and ranchers. Americans are currently allowed to sell food and medicine to Cuba on a cash basis. But there is a lot of red tape thrown in their way. And without the ability to travel to Cuba and develop the business contacts, the full potential of these sales is not realized. In fact, one study has suggested that lifting the travel ban could result in an additional quarter billion dollars of agricultural sales, and create thousands of new jobs. Ending the travel ban would bring benefits to both Cubans and to Americans. And that, after all, is what this debate should be about. Supporters of the embargo are so focused on hurting Castro that they actually strengthen him--at the expense of the Cuban people, and at the expense of our own economy. I hope my colleagues will join me in co-sponsoring this important legislation. I believe it is the best way to show that we truly care about the Cuban people And indeed, if we truly care about democracy, then let us send Cuba exactly that. Let us travel to Cuba and show them democracy in action. I yield the floor.

Mr. BAUCUS

Mr. BAUCUS. Madam President, I rise today to offer legislation, along with my colleagues Senator Enzi and Senator Dorgan, that would end the restrictions placed on travel to Cuba. I understand our colleagues in the House will introduce companion legislation in the coming weeks. I look forward to working with my colleagues in both chambers, and on both sides of the aisle, as we move forward. With this legislation, we are undertaking a serious cause. Repeal of the travel ban is long overdue. There are numerous reasons to introduce this legislation, but I want to focus today on just two: first, the current situation in Cuba; and second, our troubled economy here at home. Introduction of this legislation comes at a crucial time in U.S.-Cuba relations. Last month, nearly 80 Cuban dissidents were arrested. All of them have been sentenced to an average of almost 20 years in prison. Democratic governments around the world, as well as human rights organizations and others, including myself and my colleagues in the Senate and House Cuba Working Groups, have harshly criticized the Castro regime for these appalling acts of repression. Yet, throughout all of this, the Castro regime has remained defiant and undaunted. Why? In my view it is because Castro wants the embargo to continue. Observers have noted an emerging pattern: every time we get close to more open relations, Castro shuts the process down with some repressive act, designed to have a chilling effect on U.S.-Cuban relations. Castro fears an end to the embargo. He knows the day the embargo falls is the day he runs out of excuses. Without the embargo, Castro would have no one to blame for the failing Cuban economy. Nor would his way of governing be able to survive the influx of Americans and democratic ideas that would flood his island if the embargo were lifted. Now, some Cuba watchers have predicted that the dissident arrests and the resulting decline of U.S.-Cuba relations are a death knell to the engagement debate in Washington. I strongly disagree. And I think now, more than ever, a genuine, honest debate about the merits of the embargo is needed. Some people seem to think tightening the embargo is a rational response to the Castro regime. I guess if you think an embargo can hurt Castro without hurting the Cuban people, then tightening the embargo might make some sense. But it does not work that way. The embargo actually hurts the Cuban people much more than it hurts Castro. This is why many Cuban dissidents, including Oswaldo Paya, the founder of the Varela Project, oppose our embargo and support engagement. Indeed, after 43 years, it ought to be clear to everyone that the embargo has failed to weaken Castro. A better approach is to reach out to the Cuban people. Ending the travel ban is the first and best way to do this. If Castro fears contact between the Cuban people and the American people, the rational American response is to send more Americans, not fewer. Of course, ending the travel ban would have benefits not only for the Cuban people, but also for Americans. Ending the travel ban would have an immediate and direct economic impact, beyond even the immediate travel sector. Most importantly for my home state of Montana, ending the travel ban would help farmers and ranchers. Americans are currently allowed to sell food and medicine to Cuba on a cash basis. But there is a lot of red tape thrown in their way. And without the ability to travel to Cuba and develop the business contacts, the full potential of these sales is not realized. In fact, one study has suggested that lifting the travel ban could result in an additional quarter billion dollars of agricultural sales, and create thousands of new jobs. Ending the travel ban would bring benefits to both Cubans and to Americans. And that, after all, is what this debate should be about. Supporters of the embargo are so focused on hurting Castro that they actually strengthen him--at the expense of the Cuban people, and at the expense of our own economy. I hope my colleagues will join me in co-sponsoring this important legislation. I believe it is the best way to show that we truly care about the Cuban people And indeed, if we truly care about democracy, then let us send Cuba exactly that. Let us travel to Cuba and show them democracy in action. I yield the floor.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, today, we are introducing the ``Government Settlement Transparency Act of 2003.'' Over the past several months, we have become increasingly concerned about the approval of various settlements that allow penalty payments made to the government in settlement of a violation or potential violation of the law to be tax deductible. This payment structure shifts the tax burden from the wrongdoer onto the backs of the American people. This is unacceptable. The issue of tax deductibility is particularly relevant in the settlement of various SEC investigations into violations or potential violations of the securities laws. The corporate meltdown of the past two years has caused investors to lose confidence in the stock market. To address investors' loss of faith, Congress passed the Sarbanes-Oxley Act last July. However, Sarbanes-Oxley begins to address only part of the corporate reform problem, as it applies solely to future corporate activity. To more fully restore confidence in the markets, America's State and Federal regulators are also working to hold accountable the corporate executives and others in corporate America responsible for damaging investor confidence. With these efforts to achieve greater accountability in the business community and ensure the integrity of our financial markets, it is important that the rules governing the appropriate tax treatment of settlements be clear and adhered to by taxpayers. Section 162(f) of the Internal Revenue Code provides that no deduction is allowed as a trade or business expense under section 162(a) for the payment of a fine or penalty to a government for violation of any law. The enactment of section 162(f) in 1969 codified existing case law that denied the deductibility of fines and penalties as ordinary and necessary business expenses on the grounds that ``allowance of the deduction would frustrate sharply defined national or state policies proscribing the particular types of conduct evidenced by some governmental declaration thereof.'' Treasury regulations provide that fine or penalty includes an amount paid in settlement of the taxpayer's actual or potential liability for a fine or penalty. The legislation introduced today modifies the rules regarding the determination of whether payments are nondeductible payments of fines of penalties under section 162(f). In particular, the bill generally provides that amounts paid or incurred, whether by suit, agreement, or otherwise to, or at the direction of, a government in relation to the violation of any law or the investigation or inquiry into the potential violation of any law are nondeductible. The bill applies to deny a deduction for any payment, including those where there is no admission of guilt or liability and those made for the purpose of avoiding further investigation or litigation. An exception applies to payments that the taxpayer establishes are restitution. It is intended that a payment will be treated as restitution only if the payment is required to be paid to the specific persons, or in relation to the specific property, actually harmed by the conduct of the taxpayer that resulted in the payment. Thus, a payment to or with respect to a class broader than the specific persons or property that were actually harmed, for example, to class including similarly situated persons or property, does not qualify as restitution. Restitution is limited to the amount that bears a substantial quantitative relationship to the harm caused by the past conduct or actions of the taxpayer that resulted in the payment in question. If the party harmed is a government, then restitution includes payment to such harmed government, provided the payment bears a substantial quantitative relationship to the harm. However, restitution does not include reimbursement of government investigative or litigation costs, or do payments to whistleblowers. The bill would be effective for amounts paid or incurred on or after April 28th, 2003, except that it would not apply to amounts paid or incurred under any binding order or agreement entered into before such date. We ask unanimous consent that the text of the bill be printed in the Record.

Mr. BAUCUS

Mr. BAUCUS. Mr. President, today, we are introducing the ``Government Settlement Transparency Act of 2003.'' Over the past several months, we have become increasingly concerned about the approval of various settlements that allow penalty payments made to the government in settlement of a violation or potential violation of the law to be tax deductible. This payment structure shifts the tax burden from the wrongdoer onto the backs of the American people. This is unacceptable. The issue of tax deductibility is particularly relevant in the settlement of various SEC investigations into violations or potential violations of the securities laws. The corporate meltdown of the past two years has caused investors to lose confidence in the stock market. To address investors' loss of faith, Congress passed the Sarbanes-Oxley Act last July. However, Sarbanes-Oxley begins to address only part of the corporate reform problem, as it applies solely to future corporate activity. To more fully restore confidence in the markets, America's State and Federal regulators are also working to hold accountable the corporate executives and others in corporate America responsible for damaging investor confidence. With these efforts to achieve greater accountability in the business community and ensure the integrity of our financial markets, it is important that the rules governing the appropriate tax treatment of settlements be clear and adhered to by taxpayers. Section 162(f) of the Internal Revenue Code provides that no deduction is allowed as a trade or business expense under section 162(a) for the payment of a fine or penalty to a government for violation of any law. The enactment of section 162(f) in 1969 codified existing case law that denied the deductibility of fines and penalties as ordinary and necessary business expenses on the grounds that ``allowance of the deduction would frustrate sharply defined national or state policies proscribing the particular types of conduct evidenced by some governmental declaration thereof.'' Treasury regulations provide that fine or penalty includes an amount paid in settlement of the taxpayer's actual or potential liability for a fine or penalty. The legislation introduced today modifies the rules regarding the determination of whether payments are nondeductible payments of fines of penalties under section 162(f). In particular, the bill generally provides that amounts paid or incurred, whether by suit, agreement, or otherwise to, or at the direction of, a government in relation to the violation of any law or the investigation or inquiry into the potential violation of any law are nondeductible. The bill applies to deny a deduction for any payment, including those where there is no admission of guilt or liability and those made for the purpose of avoiding further investigation or litigation. An exception applies to payments that the taxpayer establishes are restitution. It is intended that a payment will be treated as restitution only if the payment is required to be paid to the specific persons, or in relation to the specific property, actually harmed by the conduct of the taxpayer that resulted in the payment. Thus, a payment to or with respect to a class broader than the specific persons or property that were actually harmed, for example, to class including similarly situated persons or property, does not qualify as restitution. Restitution is limited to the amount that bears a substantial quantitative relationship to the harm caused by the past conduct or actions of the taxpayer that resulted in the payment in question. If the party harmed is a government, then restitution includes payment to such harmed government, provided the payment bears a substantial quantitative relationship to the harm. However, restitution does not include reimbursement of government investigative or litigation costs, or do payments to whistleblowers. The bill would be effective for amounts paid or incurred on or after April 28th, 2003, except that it would not apply to amounts paid or incurred under any binding order or agreement entered into before such date. We ask unanimous consent that the text of the bill be printed in the Record.

Mr. BAUCUS

Mr. BAUCUS. That is what the Senate Parliamentarian wrote in a letter to Senator Daschle 2 days ago. The operative question is, What is the instruction given to the Finance Committee? I suggest there are two possibilities: $550 billion and $350 billion. The case for the $550 billion is technical. Section 201(b) of the bill before us states: The Senate Finance Committee shall report a reconciliation bill not later than May 8, 2003, that consists of changes in laws within its jurisdiction sufficient to reduce revenues by not more than [$550 billion]. The case for $350 billion--that is what is the instruction given to the Finance Committee--is substantive. The instruction to the Senate Finance Committee is conditional. The very next section of the budget resolution, Section 202(a), provides: It shall not be in order for the Senate to consider a bill reported pursuant to section 201, or an amendment thereto, which would cause the total revenue reduction to exceed [$350 billion] . . . Taken together, the instruction to the Senate Finance Committee regarding reconciliation is $350 billion. I believe if you were to ask 100 Senators what the size of the tax cut is going to be in the Finance Committee-reported bill, they will tell you, it will be $350 billion-- not more. Everyone in this Senate, this body, knows that is what is going to be reported. The budget resolution says it is not in order to consider a tax bill greater than $350 billion. If the Chair rules that the instruction to the Finance Committee is for $550 billion, then I believe that approval of this resolution would eviscerate a significant part of the Byrd rule. The Senate will have created a mechanism to, at a minimum, eliminate the effect of the Byrd rule provision in consideration of conference reports. Under this ruling, there would be no basis for stopping further erosion of the Byrd rule. The drafters could eliminate the use of the Byrd rule provision by setting a very high instruction number to the committee, and setting points of order at lower amounts at whatever steps along the way were necessary to command the votes sufficient to pass a bill. For example, the budget resolution could instruct the Finance Committee to report a bill costing $1 trillion. The resolution could then set a point of order applicable to the Finance Committee bill at $200 billion, set a point of order applicable to Senate floor consideration at $300 billion, and set a point of order applicable to the conference report at $400 billion. The Byrd rule would then be inapplicable provided the cost of the tax cut bill was not more than $1 trillion, an artifice. That is exactly what is going on here in this budget resolution. That result is absurd, and I believe this interpretation renders portions of the Budget Act moot or ineffective. If these actions go forward, this ruling will come back to haunt the Senate. It may enhance the Senate's ability to pass bigger tax cuts. It may enhance the Senate's ability to pass larger spending increases. It may do both. But it will not help the Senate reduce the deficit, which was the purpose of the reconciliation provisions. I urge every Member of this body to fully examine the effects this ruling will have on the Senate and on our Nation. It is irresponsible to go forward with this plan, and I cannot support the procedural scheme cooked up in this budget. I urge my colleagues to look at the long run, not the immediate short run, and vote against this resolution. In addition to my earlier comments expressing my disappointment and serious concern regarding the procedures adopted with respect to this budget, I would like to also speak against certain funding provisions included in this budget conference report. I'm especially concerned by the insufficient level of highway funding and by Title III. Highway funding is one of the most effective ways to create jobs and send needed assistance to the States--in my State of Montana and across the nation. It is unacceptable to cut transportation funding at this time when states are facing record deficits and unbalanced budgets. In addition to highway funding levels being set too low in the budget resolution, the reserve fund provisions won't allow us to increase the highway program unless we raise taxes. In order to build on the success of TEA 21 and pass a TEA 21 reauthorization bill, we must ensure that our budget resolution can accommodate higher levels of spending for highways and transit. These higher levels of spending will enable the successor to TEA 21 to become law. Increasing funds into the Highway Trust Fund is the sole responsibility of the Senate Finance Committee. Senator Grassley and I have been working very hard to find ways to grow the highway and transits programs, without raising taxes. I can't emphasize enough how the single principal feature of any new highway reauthorization bill has to be its increased funding for the program, something that will help Montana and help our country. The blueprint that the budget resolution sets for our fiscal year 2004 budget fails when it comes to transportation funding. I am also troubled by provisions that were included in Title III of the budget resolution. Similar to the deceptive procedures that are being used to rush this budget to a final vote, Title III includes misleading findings in order to justify possible future cuts to programs that are essential for working Americans. Title III includes findings on waste, fraud, and abuse in Federal programs and instructions for the tax-writing committees to examine these programs for savings. Many of the programs included in Title III involve aid to low income Americans. Included in this group are millions of veterans and members of our current armed forces. Title III includes findings addressing the earned income tax credit (EITC). EITC works to reduce the tax burden on low income Americans, while giving a powerful incentive to work. I am concerned by a section of Title III that would crack down on erroneous payments of the earned income tax credit, stating that the OMB has found that $8 billion a year is paid erroneously for EITC claimants. I have no tolerance for people who commit fraud and steal benefits paid for with the tax dollars of hard working Americans. However, I believe the OMB findings are largely due to errors, not fraud. And I believe that the complexity of the tax credit and complex living situations are responsible for the high error rate. Publication 596, the instructions and forms for the EITC, are 54 pages long. The number of pages explaining the EITC is longer than those describing the alternative minimum tax. Many of the claims paid ``erroneously''-- according to the study on 1999 tax returns--are not paid fraudulently. Often a payment made in ``error'' is simply made to a mother living in the same house as her grandmother--who should have claimed the credit-- and is consequently marked as paid in ``error.'' Senator Nickles argued earlier today that we have never addressed these issues before. With all due respect for my good friend from Oklahoma, we have worked in a very bipartisan way over the last several years to address the issue of EITC noncompliance. In 1997, we passed a provision allowing the IRS to access the Federal Case Registry to determine if a child is qualifying. This registry is still a work in progress. We also established kid-link, which as of today, only affects children aged four and up. In 2001, Senator Grassley and I worked together to include significant provisions in the bipartisan tax cut that were aimed at reducing error. These changes include the AGI tiebreaker provision and giving the IRS math error authority to prevent deadbeat dads from claiming the EITC. It should be noted that almost none of these changes were in place when the study Senator Nickles refers to was done on 1999 returns. President Reagan hailed the expansion of the EITC in 1986 as ``the best anti-poverty, the best pro-family, the best job creation measure to come out of Congress.'' It has been estimated that nearly 4.8 million people, including 2.6 million children, are lifted out of poverty every year because of the earned income tax credit. In 1999, then Presidential candidate, Governor Bush, told reporters ``I don't think they ought to balance their budget on the backs of the poor.'' Mr. President, I hope we take these words to heart when we consider this budget.

Mr. BAUCUS

Mr. BAUCUS. Madam President, although I voted in favor of the conference report on S. 151, I must register my profound concern with certain provisions that were added to the conference report that have nothing to do with protecting children. I am referring to title IV of the conference report that mandates sweeping changes to the Nation's sentencing laws and guidelines. These provisions stem from an amendment added to the bill in the House, and later modified under unusual circumstances in the conference committee. These provisions will drastically impact the discretion and independence of Federal judges and the judiciary to impose just sentences not just for child and sex abuse crimes, but for all crimes. These provisions will alter the sentencing laws of the United States, with little or no public debate or hearing on the issue, and with little or no research or study on whether too many Federal judges are in fact abusing their discretion or improperly granting departures from mandatory minimum sentences. As my colleague from Massachusetts pointed out, if the majority on the conference committee had limited these changes to the serious crimes of sex abuse of children and child pornography, there would be little or no objection to these provisions. But they didn't. They allowed the de novo appellate review and other provisions to stand, provisions which will restrict the ability and discretion of Federal judges to grant downward departures for all offenses. Unfortunately, as the majority is well aware, the child abduction notification provisions and virtual child pornography provisions of S. 151 are too important to delay any longer than necessary. I cannot vote against those provisions--we must do everything we can to strengthen the hand of State, Federal, and local law enforcement, as well as prosecutors, to protect our children from sexual predators. It is just unfortunate that this must-pass legislation was taken advantage of to move sweeping reforms of the larger U.S. criminal justice system, reforms the Senate did not debate and on which no hearings were held. I hope we will be able to revisit this matter in the near future.