Max Baucus

Mr. BAUCUS

Mr. BAUCUS. Just a second. You said, OK, CBO, give me a baseline that I want you to produce. What I want you to produce is a baseline that shows no inflation after the year 2000 on spending caps up to the rest of the 10-year period. If you do that, of course, you get that chart. But that is not the CBO numbers under which the Senate Finance Committee operated. That is not the numbers under which the House operated. That is not the numbers under which the rest of us operated. So that is why I am saying we are not operating off the same numbers. You produced your own numbers by telling CBO to produce them the way you wanted them produced.

Mr. BAUCUS. Mr. President, I yield myself such time as I might consume. The Finance Committee has already rejected this provision. The Finance Committee deliberated this amendment in committee, and, by a large margin turned it down because it is excessive. It is irresponsible, in my judgment. It is not the right thing to do. It says we are going to take the entire on-budget surplus. And because of the tax cut plus the lost interest on the debt, there is nothing left for Medicare, discretionary spending or any other programs which will be cut anyway by a very large margin. It is excessive, too, compared to the bill passed by the committee because it is so backloaded. It is so top heavy. By that, I mean the bulk of the cost of the provisions are at the very end--6, 7, or 8 years from now. No one can predict the future of this country and what position we will be in 6 to 8 years from now. I was speaking to the CEO of a major American company a few days ago, a man we all know, a company we all know very well. He told me they can't begin to plan for the future. They do have 5-year plans but they know the 5-year plans are not going to be accurate. So they have to just do the best they can on virtually a quarterly basis. They have to go ahead in the areas they think are the areas of the future, but it is almost impossible to plan in this modern era. So I say, if we today were to lock in provisions in the law which will hemorrhage this country's budget surplus based upon ephemeral, distant projections which are never accurate, that is not responsible. That is not the right thing to do. And that is what this amendment does. That is why basically, fundamentally, without going into all the details of it, why this does not make sense. It has often been stated during this debate that the time when the baby boomers begin to retire is when these things really start to kick in and the costs explode. I think prudence is the watchword here today. History sometimes is a guide. Look at the 1980s. What happened in the 1980s? There was a huge tax cut. Congress succumbed to the siren song of supply side economics. What was supply side economics supposed to do? It was supposed to make deep tax cuts, spend more on defense, and guess what, folks, that is going to cause the budget to be balanced. That was what supply side economics was supposed to do--advocated, by the proponents of this amendment. It was going to balance the budget. The theory is the trickle down theory: Cut the taxes of the most wealthy, they invest a lot more, it trickles down and the economy starts humming and it balances the budget. That was the Laffer curve. Guess what, it did not work. We kind of knew it was not going to work, but it was such a temptation, such a siren song to vote these huge tax cuts, hoping, hoping, hoping that what the proponents said would come true. Guess what, it did not. It did not come true at all. The tax cut was passed in 1981. Then what happened in 1982? This Congress, a Republican Congress, and President Reagan, had to change course. They had to raise taxes. The Republican Congress and Republican President raised taxes in 1982. Then guess what. This tax increase was not enough because the deficits were just so large. The Republican Congress and Republican President had to raise taxes again in 1984. They had to raise taxes more because the deficit was so large. The national debt in 1980 was roughly about $1 trillion; 8 years later it was roughly $3 trillion, maybe close to $4 trillion. It tripled and quadrupled during that time of the huge tax cuts. Then we had to add more taxes back again in 1982 and 1984. So, in many ways this is history repeating itself. Democrats in the Senate support a tax cut. We support using a third of the on-budget surplus to pay for a tax cut. But we are just saying don't use all of the on-budget surplus for tax cuts with virtually all going to the most wealthy Americans. Do you know what else is going on here? I do believe the proponents of this bill are so--not distrustful, but so opposed to Government that they want these huge tax cuts partly to force down deeper cuts, way below the baseline in spending. I think they want to cut veterans' benefits 30 percent; they want to cut health education 20, 30 percent; want to cut these programs. I think there are really many on that side who want to make these cuts. They want to. As strange as that might sound, they want to. That is another reason for this huge tax cut because it will force cuts in spending later on. We have already cut spending. Discretionary spending has been cut so much by this body over the last 10 years it is unbelievable. And the size of government has gone down, with many fewer federal employees than there were years ago. To sum it all up, we have seen this provision in the Finance Committee. The Finance Committee soundly rejected this amendment. I urge the Senate to also soundly reject this amendment. It is not good policy. I reserve the remainder of our time.

Mr. BAUCUS. Mr. President, I yield 5 minutes to my good friend from Delaware, Senator Roth.

Mr. BAUCUS

Mr. BAUCUS. Reserving the right to object, do I understand from the Senator from Arizona that he will offer his amendment then at a later time?

Mr. BAUCUS. Mr. President, how much time is remaining?

Mr. BAUCUS. I yield all 16 minutes to the Senator from West Virginia, Senator Rockefeller.

Mr. BAUCUS. Mr. President, I yield myself 10 minutes. I begin by asking Members and the public to review the remarks of the Senator from North Dakota, Mr. Conrad, given 15 or 20 minutes ago. It was one of the best summations of the facts and choices we now face that I have ever heard. Senator Conrad is a former tax commissioner of the State of North Dakota and is intimately familiar with tax matters. He also is a very senior member on the Budget Committee. He is very deeply involved in all of the tax and spending matters that face our Federal budget. I urge Senators to review the comments made by the Senator from North Dakota, Mr. Conrad. They were very much on target. As I said, it was probably the best factual summary of the choices facing Members that I have heard in the entire debate. Essentially, we have choices that are quite significant. How are we going to manage this additional surplus? I don't want to say awesome, but it is very unusual for this country to have a budget surplus and be faced with these choices. Not too coincidentally, it is the end of the 1990s that we have the choice, as we face the next century, the millennium. I think the American people sent legislators to the Senate and the Congress to do what is right, to do what is right when we have a big surplus. It has been stated many times, and I will repeat it: The projections over the next 10 years are for a $3 trillion surplus, $2 trillion out of payroll tax additional revenues because more people are working, the economy is doing so well, the payroll tax revenues increase. We have agreed that that $2 trillion generated from the payroll tax increases will go into the Social Security trust fund. We want to make sure the Social Security trust fund is as secure as we can possibly make it. It seems reasonable those revenues go to the Social Security trust fund. That is agreed to here. That is not a problem. The question is: With the remaining $1 trillion of the $3 trillion that comes out of general revenue--from income taxes, including corporate and individual income taxes--what do we do with that? Very simply, it comes down to making choices. Under the choices we make, some people are going to be helped and some people are going to be hurt. That is the nature of choices. Or some people are helped more and some people are helped not quite as much because we have to make choices. So essentially what do we have in front of us? I would like to show a chart that has been presented many times, but it is important to drive this point home. It is a fact. The fact is, our friends on the other side of the aisle do propose a tax cut of about $792 billion over the next 10 years. Because of that tax cut, it means the debt will not be reduced as fast as otherwise might be, which means interest on the debt will be a little more. That additional interest on the debt is about $141 billion. If we add the two together, in effect the tax cut offered by the other side really takes $933 billion out of the roughly $1 trillion surplus. That is a fact. Nobody can deny that. That is a fact. Then the next question is, does that make sense? Who is helped by that? Who is hurt by that? Given the composition of the tax reduction, those helped tend to be the most wealthy Americans at a period in our American history when our economy is doing very well. Who is hurt? The people hurt by this tend to be people who are necessarily going to face very severe reductions in veterans' benefits. It might be in education provisions, it might be the FBI salaries, Head Start, kids not admitted to the program, and so forth. Why do I say that? I say that because the budget tax proposal before us, presented by the other side, necessarily assumes we are going to stick with the budget caps on discretionary spending. My friends around the country watching this ask what in the world are discretionary spending caps? Let me explain to the American public what they are. Essentially, Congress passed a budget, by the other side, entirely by the other side--and by the other side I mean the Republican party--which set very tight budget caps. If those budget caps are projected in the next 10 years, that necessarily means about a $595 billion cut in discretionary spending, which is spending on such things as education, veterans' benefits, Head Start programs, education programs, and so forth. But to make it even worse, that does not take into consideration the probable scheduled increase in defense spending of about $127 billion, which means if you add the two together, this budget means about $775 billion in real discretionary spending cuts. That is necessarily, arithmetically, mathematically, the consequence of this proposal --cuts that deep. That means, if defense is increased $127 billion, all the other discretionary spending will be cut about 43 percent by the year 2009. That means a 43-percent cut in veterans' benefits. Let me tell you a little more about that. What does that mean? That means about 1.5 million veterans will be turned away--turned away because of those cuts. It means about 375,000 kids will be out of the Head Start Program, gone--375,000 kids. That is necessary because of a 43-percent cut in all these programs because this budget assumes no increase in discretionary spending caps and probably, if we are realistic with ourselves, it means the other side is going to add back in defense. That nets out at a 43-percent cut. I am not saying we should increase these programs above the baseline, although perhaps in some areas we could. But at the very least, we should not cut them 43 percent across the board. Let's say we are not going to cut them 43 percent across the board. Let's say we are going to keep Head Start funding. That necessarily means you have to cut something else by more than 43 percent. That is where we are. Nobody can dispute those facts --nobody. Those are the facts. Let me show another chart. To state it differently, take a dollar bill. This is the line--it is hard to see on this chart --of the tax breaks as a consequence of the bill before us. This is the additional interest payment, which is about $63 billion for everything else, and I have already outlined what the consequences of that are. The proposal before us is the Democratic alternative. What is it? Basically, we think it is a wiser set of choices. Again, with roughly a $1 trillion surplus that we are debating, the question is what choices are we going to make? What should we do about it? The choice made by the other side is essentially all of it in tax cuts--all of it. Because if you add interest lost, it basically comes to it all going to tax cuts. That is basically what it is. We say no. First, because that is a projection and we do not know if it will be real; it is so back loaded. You have heard all the arguments. Rather, let's do a little bit here and a little bit there that protects the future. We say let's have about a $300 billion tax cut. Sure, we are for tax cuts. Let's take $300 billion and reduce it. Mr. President, I yield myself an additional 5 minutes.

Mr. BAUCUS. So another third, we say, goes to Medicare. Let's give some to Medicare. I heard a Senator a few minutes ago say it is reckless or it is irresponsible to spend money on programs. I ask the Senator, is it reckless, is it radical to save a little bit for Medicare? The Medicare trust fund is in dire straits, even more so than the Social Security trust fund. Right now it is projected that the surplus in the Medicare trust fund is due to reach zero about 2015. What happens if the economy is not doing as well in the next several years? What does that mean? That means the Medicare trust fund is due to reach zero earlier than 2015. You wonder why the projections for the Medicare trust fund expiration kind of bounce around? It is basically because the economy itself changes. Some years we are doing very well, some years not so well. Right now we are doing well, so that means a 2015 expiration date. So we are saying in the proposal crafted by our leader, the Senator from New York, let's save about a third of this surplus, this $1 trillion surplus, for Medicare. One-third for tax cuts, one-third for Medicare, and we are also saying come on, men and women around here, let's be realistic. I mentioned earlier about the discretionary spending caps and how the budget on the other side assumes we are not going to raise the caps, which means in effect if we add some for defense, about a $775 billion cut in spending. We are saying that is unrealistic. We are not going to cut veterans' benefits nearly that amount. We are not going to take young kids out of the Head Start Program. So we are saying take a third of that $1 trillion, roughly, and let's dedicate that to the discretionary spending programs so the reductions are not as great as we note they otherwise might be. The result is the interest cost that will necessarily result from this proposal. So, again, it comes down to choices. Who is helped? Who is hurt? We say the people who should be helped are seniors on Medicare. We should help shore up the Medicare trust fund, the program. Some of these Medicare dollars could be set aside for drug benefits. We know how many seniors desperately need help with prescription drug benefits. We are saying some could help veterans. What are we really saying? Many say, give back the tax cut, give it back to the people, give it back now to the people. It is a very sympathetic argument. We are saying let's be responsible but let's give it back to our children. Let's give it back to our children in greater deficit reduction. Let's give it back to our children to help their parents with Medicare. Let's give it back to the future. Let's be responsible. I do think we have a moral obligation as representatives of the people to do what we can to leave this country in at least as good a shape, if not better shape, than we found it. That means reducing the debt, it means helping shore up Medicare, it means just meeting people's needs in a very solid, responsible way. The majority plan hurts people on Medicare, hurts veterans, hurts kids in Head Start, hurts the country. We say let's not hurt the country, let's help the country. Let's help the country with a balanced, responsible alternative, one I think the American people really would prefer if they were fully involved in this debate rather than a reckless, irresponsible--I hate to categorize it that way, but I do think it is, quite honestly--a program that takes all of the surplus, $1 trillion, and sends it all back for tax cuts at a time when Mr. Greenspan, the Chairman of the Federal Reserve, says is not the right time for a tax cut. He says it is not the right time because the economy is already heated up and we are dangerously close to the point where, with more stimulus, a bubble could burst and we could be causing a lot more problems than we can even think of at this point. I thank the Chair and yield back my time.

Mr. BAUCUS. Will the Senator inform us as to the nature of the amendment?

Mr. BAUCUS. No objection. Mr. McCAIN. Mr. President, today I am proposing an amendment to authorize a three-year nationwide school choice demonstration program targeted at children from economically disadvantaged families. The program would expand educational opportunities for low-income children by providing parents and students the freedom to choose the best school for their unique academic needs, while encouraging schools to be creative and responsive to the needs of all students. The amendment authorizes $1.8 billion annually for fiscal years 2001 through 2003 to be used to provide school choice vouchers to economically disadvantaged children through the Nation. The funds would be divided among the States based upon the number of children they have enrolled in public schools. Then, each State would conduct a lottery among low-income children who attend the public schools with the lowest academic performance in their State. Each child selected in the lottery would receive $2,000 per year for three years to be used to pay tuition at any school of their choice in the State, including private or religious schools. The money could also be used to pay for transportation to the school or supplementary educational services to meet the unique needs of the individual student. In total, the amendment authorizes $5.4 billion for the three-year school choice demonstration program, as well as a GAO evaluation of the program upon its completion. The cost of this important test of school vouchers is fully offset by eliminating more than $5.4 billion in unnecessary and inequitable corporate tax loopholes which benefit the ethanol, sugar, gas, and oil industries. First, the amendment eliminates tax credits for ethanol producers, eliminating a $1.5 billion subsidy. Ethanol is an inefficient, expensive fuel that has not lived up to claims that it would reduce reliance on foreign oil or reduce impacts on the environment. It takes more energy to produce a gallon of ethanol than the amount of energy that gallon of ethanol contains. Ethanol tax credits are simply a subsidy for corn producers, and the amendment ends the taxpayers' support for this outdated program. Second, the amendment eliminates three subsidies enjoyed by the oil and gas industry, totaling $3.9 billion. It phases out oil and gas industry's special right to fully deduct capital costs for drilling, exploration and development; eliminates the 15% tax credit for recovering oil using particular methods and ends special right of oil and gas property owners to claim unlimited passive losses under income and alternative minimum tax provisions. Subsidizing the cost of domestic production has not been shown to have reduced reliance on foreign oil or directly contributed to more efficient resource use or domestic productivity. The amendment ends these special tax treatments. Finally, the amendment eliminates the special loan program for sugar producers and processors, worth $390 million. The Federal Government is burdened with an unnecessary and unprofitable loan program for big sugar producers and enforcing mandated import quotas on foreign sugar. Sugar price supports also force consumers to pay $1.4 billion every year in artificially inflated sugar prices. The amendment simply eliminates the taxpayer-funded loan program in 2003 and immediately requires repayment of existing loans in cash, rather than sugar. These tax benefits and subsidies were originally intended to serve a limited purpose during times of economic recession and hardship in the 1970s. Our economy has long since recovered and I believe that these subsidies have outlived their purpose. The sunset of these programs will end these corporate welfare programs and return any remaining benefit back to our nation's children. Mr. President, we all know that one of the most important issues facing our nation is the education of our children. Providing a solid, quality education for each and every child in our Nation is a critical component in their quest for personal success and fulfillment, as well as the success of our nation: economically, intellectually, civically and morally. We must strive to develop and implement initiatives which strengthen and improve our education system thereby ensuring that our children are provided with the essential academic tools for succeeding professionally, economically and personally. I am sure we all agree that increasing the academic performance and skills of all our Nation's students must be the paramount goal of any education reform we implement. School vouchers are a viable method of allowing all American children access to high-quality schools, including private and religious schools. Every parent should be able to obtain the highest quality education for their children, not just the wealthy. Tuition vouchers would provide low-income children trapped in mediocre, or worse, schools the same educational choices as children of economic privilege. Some of my colleagues may argue that vouchers would divert money away from our nation's public schools and instead of instilling competition into our school systems we should be pouring more and more money into poor performing public schools. I respectfully disagree. While I support strengthening financial support for education in our Nation, the solution to what ails our system is not simply pouring more and more money into it. Currently our nation spends significantly more money than most countries and yet our students scored lower than their peers from almost all of the forty countries which participated in the last Third International Mathematics and Science Study TIMMS test. Students in countries which are struggling economically, socially and politically, such as Russia, outscored U.S. children in math and scored far above them in advanced math and physics. Clearly, we must make significant changes beyond simply pouring more money into the current structure in order to improve our children's academic performance in order to remain a viable force in the world economy. It is shameful that we are failing to provide many of our children with adequate training and quality academic preparation for the real world. The number of college freshmen who require remedial courses in reading, writing and mathematics when they begin their higher education is unacceptably high. In fact, presently, more than 30 percent of entering freshmen need to enroll in one or more remedial course when they start college. It does not bode well for our future economy if the majority of workers are not prepared with the basic skills to engage in a competitive global marketplace. I concede that school vouchers are not the magic bullet for eradicating all that is wrong with our current educational system, but they are an important opportunity for providing improved academic opportunities for all children, not just the wealthy. Examination of the limited voucher programs scattered around our country reveals high levels of parent and student satisfaction, an increase in parental involvement, and a definite improvement in attendance and discipline at the participating schools. Vouchers encourage public and private schools, communities and parents to all work together to raise the level of education for all students. Today, we have the opportunity to replicate these important attributes throughout all our Nation's communities. Thomas Jefferson said, ``The purpose of education is to create young citizens with knowing heads and loving hearts.'' If we fail to give our children the education they need to nurture their heads and hearts, then we threaten their futures and the future of our nation. Each of us is responsible for ensuring that our children have both the love in their hearts and the knowledge in their heads to not only dream, but to make their dreams a reality. The time has come for us to finally conduct a national demonstration of school choice to determine the benefits or perhaps disadvantages of providing educational choices to all students, not just those who are fortunate enough to be born into a wealthy family. I urge my colleagues to support this amendment and put the needs of America's school children ahead of the financial gluttony of big business. I hope my colleagues will consider this. It is time we got rid of wasteful and unnecessary subsidies. It is time we had a national test voucher program to find out if vouchers, indeed, will live up to the promise that many of us believe is there as a result of giving parents a choice, the same that wealthy parents have in this country. Amendment No. 1397, Withdrawn Mr. President, I thank the Senator from Delaware and the Senator from Montana, and I ask unanimous consent that the amendment be withdrawn.

Mr. BAUCUS. I ask the Senator whether he would agree to the lockbox the House passed?

Mr. BAUCUS. Withdrawn.

Mr. BAUCUS. Mr. President, reserving the right to object, this is not what I understood the procedure was going to be. I suggest the absence of a quorum.

Mr. BAUCUS. Madam President, I suggest the absence of a quorum, and in so doing state to my colleagues the next amendment will be offered by the Senator from Florida. He will be here momentarily.

Mr. BAUCUS. Madam President, one more brief question?

Mr. BAUCUS. Mr. President, I yield myself 5 minutes. Mr. President, a couple of points. I heard my good friend, the Senator from Missouri say, as has often been stated, they are using only 23 percent of the surplus for tax reduction. I think it is important to get the facts out so the American public can decide what the truth is. The fact is, about $3 trillion is projected over the next 10 years. Mr. President, $2 trillion off- budget, Social Security surplus; $1 trillion on-budget surplus. No one disputes that. We also agree that the roughly $2 trillion generated by the payroll tax, the off-budget surplus, should be reserved for Social Security. We all agree to that. What is in dispute is the $1 trillion remaining on- budget surplus. The Republican tax cut essentially uses it all, roughly $800 billion, plus the interest expense added on because the tax cut will increase interest, which amounts to a 97-percent tax cut of the on-budget surplus. So that we have our facts straight, it is roughly 25 percent of the total, if we include the $2 trillion for Social Security that we all agree to protect. What is in dispute is how much of the $1 trillion on budget is used for a tax cut. The answer to that is about 97 percent, including the interest. If interest is not included, maybe about 60 or 70 percent of the surplus is used for a tax cut. Decide which numbers to use. Those are the facts. I will not stand here and say it is necessarily 97 percent or it is necessarily 23 percent. I think people should recognize what the truth is. I have a couple of points. This is about choices. Either we choose to set aside one-third of the on-budget surplus for Medicare for seniors, or we don't. That is the choice. That is the choice we have between the two lockbox amendments. One says lockbox Social Security only; the other says lockbox Social Security and Medicare. We believe the proper choice is to protect Medicare. There is a deeper choice I want to talk about for a moment. It is a choice that many senior citizens in our country make each day. Do they choose to use their income to pay for drugs or do they choose their income for food, to pay the rent, or to pay for the bus? That is the choice that many senior citizens make each day. About 16 million Americans are faced with that choice a day. That is, 16 million Americans rely solely on Social Security for their income. About 30 percent of American senior citizens rely solely on Social Security for their income, which comes out to about $750 a month. Seniors with a total income of about $750 a month have to make choices. Choose for drugs, choose to pay the rent, choose to pay the food bill, the bus, taxi service--those are the choices. They have to decide which among the choices to make. We are saying let's help the seniors with that choice. Let's help seniors pay the drug bill. Let's help seniors pay a little more of the doctor bill. If there is anything that obsesses senior citizens, it is their health. I will never forget when I was walking across Montana campaigning for Congress 24 years ago, I was walking toward Butte, MT, near Elk Park. I was walking down the highway, and I could see perpendicular to me an older fellow hunched up way off in the distance walking toward his mailbox. I could tell we were going to meet at the mailbox. I had my brochure in my pocket in my campaign for Congress. Sure enough, we met at the mailbox. I pulled out my brochure and said: Sir, I am Max Baucus. I am running for Congress. Is there anything on your mind you want to talk about? Anything that is really bothering you that you want to talk about? He said: Oh, nothing except the perplexities of health. It is certainly true for seniors, and he very much was a senior citizen. In summation, this is about choices. I think the choice is for Medicare, not against Medicare. The choice is also to help those senior citizens pay for their medical benefits. I hope Senators choose for seniors. I yield back the remainder of my time.

Mr. BAUCUS. Mr. President, I yield 20 minutes to my good friend, the Senator from New Jersey.

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

Mr. BAUCUS. Just say the yellow is an illusion, it is not there, because most of us, if we are realistic, are going to assume we are going to at least keep up with inflation over those years. If we do not keep up with inflation over those years, then we are going to dramatically cut programs. How much are we going to cut? The figure is about a 54-percent cut in domestic spending. By saying there is no inflation rate considered past the year 2002, for the rest of the term, these numbers represent, in effect, a 54- percent cut in discretionary spending. That is what it comes out to. That is pretty big. So that is why I say that yellow is an illusion. It is not going to happen. If I could address another point. My colleagues on the other side of the aisle made two basic charges. First, they say that this is a smokescreen. That we really do not want a lockbox. My good friend, the Senator from New Mexico, said: Well, we have the points of order. It is true, we create an additional point of order, but it is a supermajority point of order--60 votes. It is pretty hard to get more than 60 votes around here. Witness the waiver on the Byrd rule did not get 60 votes. Oh, that side really wanted to waive the Byrd rule. They could not do it. They could not get 60 votes. Sixty votes is a pretty big hurdle. Make no mistake, we are very serious about protecting medicare. You can also tell that we are serious because we are proposing a lockbox that is very similar to the House lockbox which passed by an overwhelming margin. Why is the Senate lockbox not a good idea? I will tell you why. Because it says the debt limit has to go down on a step basis, depending upon what CBO's projections really are for the debt. That is what it says. That is going to force all kinds of votes here to raise the debt limit if it does not work out that way. We know all the charades around here, all the politics, all the nonsense that goes on around here, because of votes on raising the debt limit, whether or not to pay bills we know we have to pay anyway. It just doesn't make sense. It just does not make sense to tie the debt limit to what CBO says the projections are going to be on the debt. We already have a lockbox which works--at least the House thinks it works. The House approved it. I think only a handful of House Members voted against it. So we are saying the House lockbox basically works. House Republicans voted for it; House Democrats voted for it. But we want to go one step further. We are also saying, let's reserve some money, a third of the surplus each year, reserve that for Medicare. If it is not used, if structural reform takes care of it and we do not have to use it, it can be used for tax cuts, it can be used for defense spending, it can be used for whatever this body thinks makes the most sense. But only with a supermajority vote. My good colleagues on the other side of the aisle also made an argument about shifting $328 billion. That is a red herring. That argument has nothing to do with this issue. It is irrelevant. The only point I am making is that of the $1 trillion on-budget surplus, we ought to at least set aside a third in a reserve fund for medicare. Congress can decide what it wants to do in helping protect Social Security and Medicare. We can decide to provide for prescription drug benefits. We can address the problems caused by the balanced budget amendment cut backs. We can extend the solvency of the trust fund. That is what this amendment is all about. It is about reserving the funds necessary to help America's seniors. It is actually very simple. Again, I go back to my basic question, Where is the beef? How do our colleagues on the other side of the aisle assure that are going to provide for Medicare, provide for seniors, provide for drug benefits for our elderly men and women? That is the problem. I urge Senators, cut through all the rhetoric. Listen carefully to the underlying words. Sometimes, what people don't say is just as telling as what they do say. In this case, our good colleagues make no pretense of guaranteeing funds for medicare. Whereas we say, very simply, let's save a third of the surplus each year in a reserve fund. If we need it, fine. If we do not need it, fine--we can reduce the debt and leave our options open. We have this opportunity because we have the large projected on- budget surplus in the future. We do not have these opportunities very often. How many Senators can remember times in the past having a $1 trillion on-budget projected surplus? I can't. I do not think anyone else can either. What is the likelihood that is going to continue? What is the likelihood we are going to have this opportunity 5 years from now? What is the likelihood we will have it 8, 10 years from now? Pretty slim; not very likely, in my judgment. So we have an opportunity. We have an opportunity to put aside the funds necessary to extend the solvency of Medicare. We have the opportunity to put aside the funds necessary for structural reforms. We have the opportunity to put aside the funds for a prescription drug benefit. I am saying, let's preserve this surplus--let's keep our options open. Do you know what else our lockbox does? Deficit reduction. People want deficit and debt reduction. They are tired of being saddled with this debt. They don't want their children similarly constrained. That's why this lockbox is such a good proposal. If we don't need the funds for the next, say, 10 years--because the Medicare trust fund will be solvent at least until 2015--that is a $300 billion reduction in the national debt. That is what it comes down to. So, again, I do not hear anything from the other side aisle about any guarantees to help Medicare except for words--maybe something in the future about structural reform, but certainly not in the budget tax debate--I repeat again, not one red cent for Medicare. Helping to provide for Medicare is not a smokescreen because we do have a Social Security lockbox that works. Our lockbox is very similar to the one that the House passed. They passed it. If they passed it by such a large margin, providing a supermajority point of order, it makes sense to me that we should do it. But let's go farther and protect Medicare. Let's have both. Let's protect Social Security. Let's also protect Medicare. It is very simple. They are two parts of the same package, if you will, to help the elderly. We have a lot of very poor elderly. About a third of the American elderly rely solely on Social Security for income--about a third. There are a lot of people who just do not have any money. Virtually one-third are dependent upon it. There are about 44 million people on Social Security including folks with disabilities. The average payment is about $750 a month. That is all. If a third are relying on only $750 a month, that means, clearly, they really need the help. So, again: A lockbox for Social Security that works and a lockbox for Medicare that also works. I reserve the remainder of my time.

Mr. BAUCUS. My question is, Where's the beef? There is nothing on the other side about what they want to do to help Medicare--nothing. The Senator from Pennsylvania started out by saying: Gee, there's money for Medicare. Then he shifted his argument to say we should not use general revenue. Then he shifted his argument to say that the amendment we are offering is a charade, a smokescreen. But if you listen to the words, there is not one word of what he wants to do to help Medicare and help Medicare beneficiaries, to provide money for drug benefits, to help address the balanced budget agreement overcut, and to help the solvency of the trust fund. I ask again: Where's the beef? Not one word on that side about what they want to do to help Medicare. As a matter of fact, what I hear in the words is, first, we need some kind of structural reform. Let's get structural reform, but let's not use general revenue. There has been reference to the Breaux commission. Senator Breaux admits we need resources in addition to structural reform to help solve the Medicare problem. He said that. He is the chairman of the commission. He said we need it. I think he is right. The problems facing Medicare will require both structural reform as well as some additional resources to help solve the problem. At least that is his view, and he is chairman of the Breaux commission. He ought to have some idea of what is necessary. I also remind my colleagues that structure reform is not easy. I will never forget catastrophic attempts several years ago. That was about $4 on seniors to pay for catastrophic and people went berserk. That thing was repealed faster than a New York minute because of the politics and the difficulty of addressing Medicare reform. The Breaux commission did not come up with any super-majority recommendation. They could not. It is so difficult, which is not to say we should shirk from structure reform. Of course, we should work on structural reform, but we also need general funds to help with Medicare. I was very perplexed when I saw the chart put up by the chairman of the Budget Committee. I want to ask him where he got his numbers. I know where he got his numbers. They are his own numbers, not CBO numbers. For example, the CBO baseline projection over the next 10 years is a surplus of about--it is on the chart--of about $2.896 billion. That is CBO. If you look closely at the chairman's chart, down below in the corner it says: Source. What is the source? It is CBO and the Senate Budget Committee, not just CBO. We have the Senate Budget Committee--I am trying to avoid the phrase ``cooked the books.'' I will tell you what it did to come up with the chart the chairman was showing. Here is what it did: The Congressional Budget Office said, OK, we are going to freeze the caps as required under the budget through the year 2002. Then CBO said: We are going to assume a baseline at the rate of inflation for the remainder of the term up to about 2009. That is how they got this number, $2.896 billion. What did the chairman of the Budget Committee do? He said: I know what I am going to do because the Democrats are really right. What I am going to do is come up with a different number to show there are more savings. How did he do it? He said: OK, I am going to freeze the baseline after the year 2002 for discretionary spending, and that is going to mean that I get to come up with additional--that is the yellow, domestic priorities. The fact is, that is very unrealistic and it's not what CBO projects. I think we ought to use the same numbers. A lot of us on our side think CBO is a little tainted; it has become a little political over the years. But I suggest we all start with the same numbers, and the best place to start is CBO. If the Senate Budget Committee majority can come up with its numbers, I suppose the Budget Committee minority can come up with its own numbers. It is no different. That is where we are. It is important for Senators to know those are not CBO numbers, those are Senate Budget Committee numbers. Those are the majority's numbers, not CBO's numbers.

Mr. BAUCUS. Mr. President, I have heard a lot of words.

Mr. BAUCUS. May I ask the Senator a very gentlemanly, civil question?

Mr. BAUCUS. I will yield at the appropriate point. We have two amendments before us. One is the Republican alternative, which is the lockbox only for Social Security, that is all and, I might say, in a way which is very dangerous. It will cause train wrecks. It is going to cause the precipitation of confrontations in government. It is very reckless--very reckless. That is one alternative--only Social Security in a reckless way. The other alternative before us, of the two amendments, is a lockbox that protects Medicare also, but in a nonreckless way. Those are the two choices. It is very simple. We say that in these times of tremendous projected surpluses, at least a third of the on- budget surplus should be protected for Medicare--at least a third. My colleagues on the other side of the aisle says zero--they want to put aside nothing for Medicare. We say a third, and we lock it in. We lock it in to the same degree as both sides want to in some way lock in Social Security protection. We lock it in, and we provide for it. The other side has not one red cent for Medicare, not one red cent, not a penny, not a dime, not a quarter, nothing. If they come back and say, we have some money for Medicare, that is a wish. They don't lock it in. They just say maybe. Because of the big tax cut, it is not going to be there. It is just a hope and a wish and a prayer. We say we lock it in. That is the difference. I strongly urge my colleagues to take advantage of this situation by locking in a third of the on-budget surplus for Medicare. Another reason for doing this is, all of us have heard in the last year, roughly, about how we went too far in 1997 with the Balanced Budget Act provisions which cut providers' benefits. We have all heard that, that we have cut hospitals, too, that we cut home health care too much, and so forth. Let me show my colleagues this chart. If they can see this chart, basically it shows the projected cuts under Medicare were about $100 billion over 5 years. Now it has turned out that the actual cuts are almost twice that, almost $200 billion over 5 years. We have all heard that. To be a little more specific, look how big the differential is between anticipated cuts under the BBA 1997 and the actual cuts. In the anticipated cuts, the differential is greatest for home health care-- big difference. It turns out that the actual cuts for home health care are more than twice what we anticipated. And the actual cut under skilled nursing homes is about 60 percent more than we anticipated. So I will summarize and say that the choice between us is very simple. We have two amendments we are considering. One is a lockbox with only Social Security, in a very dangerous way because it is tied to projections by the CBO. CBO determines what the debt limit is under their amendment. The other choice is ours, which is not only to protect Social Security but also to protect to the same degree Medicare, at a time when the American Government faces a surplus, a surplus of about $1 trillion over 10 years. It is very simple: Save a third of the surplus for Medicare, for seniors. Help them pay those health care bills. Help them get those prescription drug benefits. Help us relieve the undue pressure we have caused on home health care agencies, on nursing homes, on hospitals, particularly rural hospitals. This is a no-brainer, Mr. President. This is pretty simple stuff. It is a matter of choices. Do we want to help people on Medicare or do we not? We say yes, we do want to help people on Medicare. We want to help those seniors. This amendment we are offering enables people who are senior citizens to get the health care protection and the health care benefits that we think are so important. I reserve the remainder of my time. Mr. Abraham addressed the Chair.

Mr. BAUCUS. Mr. President, this is a motion to recommit the bill and send it back to the Finance Committee with instructions. The instructions would be to change the tax bill to ensure that 100 percent of the off-budget surplus--that is, the Social Security surplus--be set in a lockbox that is in reserve, and it also provides that one-third of the on-budget, or non-Social Security surplus, be set aside for Medicare. You might remember that although both sides generally agree that of the roughly $3 trillion projected surplus over 10 years, $2 trillion would be reserved for Social Security--that is the Social Security lockbox part of this amendment--we have not reached agreement on the $1 trillion projected on-budget surplus, and this amendment reserves one- third of that for Medicare. Why is this amendment so important? Plainly, simply, we believe that a portion of the budget surplus should be reserved for Medicare. Americans very much believe in Medicare. Americans want Medicare. Americans want the Medicare program to be in good shape. They want to have the security of knowing that seniors will have a better chance to have a portion of their health care bills provided for, and that means we need Medicare. There are several problems facing us with Medicare right now. One of them is solvency. I would like everybody to look at this chart behind me. Very simply, it shows that the Medicare trust fund will become insolvent, under current projections, by the year 2015. That assumes the economy stays as strong in the next 15 years as it is today. That is the assumption. If for some reason economic growth in America declines slightly, inflation rises slightly, if for some reason there is a reduction in the stock market boom, a reduction in markets, if for some reason interest rates go up, then the insolvency of the trust fund moves back to the left; that is, before 2015. The Medicare trust fund is in much worse shape than Social Security. Projections are with this lockbox amendment that the Social Security trust fund will be in good shape way off in the future. That is not true for the Medicare trust fund, not true at all. In fact, this chart shows that, optimally, the trust fund is going to reach a deficit situation--the surplus will be zero--and Medicare payments will therefore have to be decreased under the hospital trust fund, at the very latest by the year 2015, probably earlier. Why is that doubly important? We are reserving a portion for Medicare, one-third of the on-budget surplus for Medicare, not only because the solvency of the trust fund is in a difficult position, but also because the baby boomers are due to reach retirement age at about 2011 and on through to about 2020. The baby boomers are going to reach retirement, and that is going to cause much more pressure on the trust fund. We believe it is prudent today to reserve a portion of the on-budget surplus --a third of it--to meet that problem, to meet that demographic condition that is going to occur; namely, more baby boomers. We think it is only prudent to preserve Medicare for that reason. There is another reason to save for Medicare, and that is very simply to help make it easier for us in the Congress to provide prescription drug coverage for seniors. If we have heard anything lately with respect to Medicare, it is that seniors want and deserve some kind of Medicare prescription drug coverage. Why is that? One reason is that today, essentially, Medicare does not provide for drug coverage out of hospital. There are some exceptions for that, but as a basic rule Medicare does not provide for prescription drug coverage for seniors except when they are in the hospital. That is a problem. Roughly 30 percent of Americans over age 65 depend entirely on Social Security for their income. There are a lot of seniors who are not very wealthy. A lot of seniors who desperately look for that Social Security paycheck and who desperately are trying to figure out how to balance their individual or family budget to pay for prescription drugs, to pay for heating bills, to pay for food. This is not some cataclysmic scare tactic. It is not some wild story. All of us in this Chamber who go to drugstores to get prescription drugs run across an elderly lady or an elderly man talking to the druggist, trying to balance things out, trying to fill a prescription and trying to find enough money to pay for it all, and asking the druggist, ``Well, maybe just half,'' because they don't have enough money. I have seen it. I will bet that most Members of this body have seen either that or something similar to it. When I first ran for office, I knocked on virtually every door in Missoula County, MT, a lot of doors. One thing that struck me--and I know it gets everybody who does the same thing--there are a lot of people who are really poor, who are really hurting, and most of them are seniors. There are seniors who are having a hard time making ends meet. They are lonely. And we know, too, that drug benefits, drug coverage is more and more important to seniors. Seniors rely much more on drugs today than they did 20, 30 years ago. In part, that is because pharmaceuticals have come out with lots of different drugs that affect people's medical condition, help people's health, especially for seniors, whose health needs more attention in later years. That is clear. We all know that. When I talk with folks when I am home--it is with some frequency--I see it everywhere. You are reminded just how many people in our country are really in tough shape and they need help. Most of them are seniors. A lot of seniors need a lot of help. Our proposal is simple--a third of the on-budget surplus should be saved for Medicare. Now the alternative from the other side has no coverage for Medicare--zero, nothing, not a red cent for Medicare, nothing.

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