Robert Bennett

Mr. BENNETT

Mr. BENNETT. I have read those reports as well and I know that the reasons they cite for these deficiencies include relatively fewer credit suppliers, higher costs due to lower credit demand, a lack of professional lending experience in rural and outlying areas, and a lack of liquidity in many rural lending institutions when compared to urban lending institutions. The amendment I was prepared to offer today sought to remedy this situation by creating a pilot project, at no cost to the Federal Government, for 1 year. If the pilot had proven unsuccessful, the project would not have been renewed. This solution would have expanded the authorities of an existing Government Sponsored Enterprise [GSE] to ensure reliable and competitively priced credit from existing lending institutions to rural small businesses nationwide. It was my belief that this was the most expedient legislative approach to take. I believe that the expansion of Farmer Mac's authority in this area makes sense because it is a logical outgrowth of activities it already conducts, such as securitizing commercial loans, operating through thousands of existing commercial credit outlets, and providing access to national capital markets for rural and nonrural borrowers alike. I look forward to working with the Agriculture Committee, which has jurisdiction over this issue, over the coming months to remedy this problem and I thank my colleague Senator Lugar for his willingness to address this important issue.

Mr. BENNETT. I would like to take a moment to discuss an issue in which I know my colleague, Senator Lugar, has a strong interest, that is the need for access to credit by entrepreneurs in the rural areas of this country. I have been concerned about the access to capital for entrepreneurial businesses almost since I first stepped onto the Senate floor after my election in 1992 and I want to make clear that I have pursued a number of different avenues to help create a more liquid credit market in rural areas. Senator Lugar, you and I are no strangers to under served capital needs of rural businesses. I helped sponsor and pass Senator D'Amato's Small Business Loan Securitization bill almost 3 years ago in hopes of helping bring more credit to rural businesses. In past Congresses and in this Congress I have repeatedly approached Senator Bond, the chairman of the Small Business Committee, with regard to the increasing need for rural credit. The Small Business Committee tells me that there will be inadequate funding for rural nonagricultural businesses as included in the SBA 7(a) Program. The Department of Agriculture is concerned that there is inadequate funding for its Business and Industry Program, which lends to rural nonagricultural interests. Additionally, many bankers have voiced their concerns that inadequate credit and liquidity will adversely affect their small business lending and investment programs nationwide.

Mr. BENNETT. Mr. President, I have been monitoring the problems associated with rural credit needs for some time. At a time when the credit availability problems of rural small business and rural infrastructure are being highlighted by various experts and studies, the very institutions that provide credit to these concerns are having their funding reduced. Solutions to these problems are being thwarted by petty bickering and turf battles that do little else than prolong the agony for rural residents and deprive them of the benefits they deserve. I have read with interest the recent reports from the Rural Policy Research Institute [RUPRI], the General Accounting Office [GAO], and the USDA on rural credit needs. I have also reviewed the proceedings of the Kansas City Fed's conference on ``Financing Rural America.'' These documents present no surprises for those of us who represent rural areas. While each study approaches its task in a unique manner, all of these reports are similar in their conclusions. They note that while rural financial markets work reasonably well, not all market segments are equally well served. They all agree that small businesses from rural areas can have a difficult time obtaining financing, have fewer credit options, and may well pay more for their credit than comparable urban enterprises. At a time when small businesses are being recognized for their valuable contributions to our economic growth and stability, small businesses are experiencing increasing credit needs. Unfortunately, USDA's Business and Industry loan program and the Small Business Administration's funding are being limited in fiscal year 1998. The facts are worrisome. As the RUPRI study points out, many rural areas were bypassed by recent employment growth. Existing rural employment is concentrated in slow-growth or declining industries. Job growth in rural areas, particularly rural areas that are not adjacent to metropolitan areas, is biased toward low-skill, low-wage activities. USDA has stated that ``Rural economies are characterized by a preponderance of small businesses, fewer and smaller local sources of financial capital, less diversification of business and industry, and fewer ties to non-local economic activity.'' This does not bode well for my home State of Utah where 25 of 29 counties are classified as rural by the USDA. To further illustrate, USDA's Fiscal Year 1998 Business and Industry [B&I] loan program will be straight-lined at fiscal year 97 levels. Based on data provided by USDA, current B&I loan volume is capped at about $740 million; however, USDA has applications pending for yet another $700 million, with preapplications already on file for still another $200 million. These numbers suggest that adequate private capital is not available. Again, using my home State of Utah as an example, there are over $10 million in B&I loans outstanding. However, due to USDA budget limitations, loans for almost $19 million, associated with pending applications and preapplications, will not be made. This will not be helpful to Utah's economic growth and development, especially in rural areas. Unfortunately, this story of unmet rural credit demand can be replicated for almost all of the 50 States represented by this Congress. All of the above mentioned reports discuss options for addressing the need for rural credit. All of them discuss one or more options associated with GSE funding, which frankly, are the most logical and persuasive alternatives discussed. I, personally, am persuaded that expansion of Farmer Mac authorities is the most effective and the least obtrusive alternative presented to date. It uses existing credit delivery systems and allows lenders to sell their qualifying loans into the secondary market. Other options discussed include expanding the authorities of the Federal Home Loan Bank System, or the Farm Credit System. I am uncomfortable in advocating expansion of a mortgage lender's authorities into commercial lending activity. I am equally uncomfortable with expanding a tax exempt GSE's authorities into direct competition with the private sector. I am open to suggestions and want to consider all options, including merging GSE's or mergers of public and private interests if such options will provide cost-effective and efficient solutions to the problems associated with rural credit availability. Throughout the discussion of the last several weeks, I have become poignantly aware of the strongly held feelings on this issue. I am concerned that a solution to the problems associated with improving rural credit delivery may be beyond the grasp of rural residents and businessmen if the petty bickering and turf battles are not set aside. I commend my esteemed colleague, Senator Lugar, who chairs the Committee on Agriculture, Nutrition, and Forestry for his willingness to hold hearings on this issue. I, for one, am open to any and all reasonable options for improving credit delivery in these rural areas. I believe, as many of these reports point out, that improved economic growth will be the result and national GDP will be enhanced.

Mr. BENNETT

Mr. BENNETT. I thank the Senator from Missouri. It has been pointed out to me in the study of history that the nation that was the most powerful, the most progressive, that had, in modern terms, superpower status some centuries ago, was the nation of China. One of the things the Chinese did was send their explorers around the world. There were Chinese ships that were exploring as far away as the coast of Africa, I am told. Then the Chinese Government decided that that was too expensive, that it was too chancy, that there would be no guarantee that they would learn anything or find anything or profit in any way and, as a cost- cutting measure, the Chinese cut back on their exploration and virtually left the field open to the Europeans. There was very little contact, of course, between the Europeans and the Chinese in that period, but the field was left open in a way that we can look back on in history and say: What might have happened if the Chinese had maintained their exploring activities and maintained their willingness to go into the future? What might have happened, had they not taken those cost-cutting measures? The history of the world would be very, very different. It was the Europeans who went out on their exploration after the Chinese cut back. I don't want to see the Americans cut back on their adventure and their exploration, and then have someone else step into the breach. Because I am convinced that if we cut back on our exploration of space, someone else will step up to it. Who knows what the implications could be, hundreds of years from now? With that, I yield the floor.

Mr. BENNETT. Madam President, we are all going to miss the Senator from Arkansas. He is a good friend, and I use that in the honest term, rather than the kind of puffery that often goes on around here. He takes the floor twice a year to espouse things with which I disagree. First, he wants to do things to the mining law that I don't want to do. And then he wants to kill the space station in a way that I don't want it killed. So I vote against him on both of these occasions, but I look forward to these because he keeps us honest with his concerns. He has not yet convinced me to back away from my commitment to the space station, but I pay tribute to his tenacity and to his integrity. I have answered at some length in previous debates. I will not take the time to do that now. I simply repeat, again, my commitment to the idea of venturing into the unknown even when it seems expensive and sometimes foolish, because we are never quite sure what we are going to find. But, almost always, it comes back to benefit us. As I stand here I am reminded of the quote, I can't give it to you exactly, of the historian who said: History is a chancy thing. America was discovered by someone who was heading for somewhere else, thought he had arrived someplace other than he had, and was named after a man who never came here. History is like that, chancy. We are never quite sure what is going to happen to us, but great things happen to us when we explore. We are launched on this exploration now. We are far enough along that it makes sense for us to continue. Who knows what we will find? I will not pretend to know that we will find the cure for cancer or anything else when we get out there. We will surprise ourselves. It will be chancy. But that has been our history; that has been our destiny. I, for one, want to continue it in this program. I yield the floor.

Mr. BENNETT. Madam President, if I might before the Senator from Texas comes up, I have another historical allusion I would like to share.

Mr. BENNETT

Mr. BENNETT. Mr. President, I would like to make a very brief statement about an action taken earlier this day when I was unable to comment--the adoption of the Smith amendment as it had to do with religious liberty in Russia. I know everyone talked about the importance of religious freedom and independent religious liberty, and how important it is for that value to be established in Russia. And I do not want to repeat those arguments. There is just one point I think that needs to be made here. The psychologists have a term ``xenophobia'' which they use to describe those who have a fear of strangers, or a fear of anything foreign. As we look at the long and troubled history of Russia, and then the Soviet Union, we see that one of the driving forces in that culture has been xenophobia--terrible fear under the czars of any kind of Western influence somehow creeping into Russia; terrible fear under the commissars, or Communist dictators from Lenin and Stalin all the way down through Khrushchev and Brezhnev of anything that they considered to be foreign. It was one of the major problems of the Soviet Union and one of the major difficulties that they had in becoming an accepted part of the world family of nations. We all rejoiced when the Berlin wall came down, when in the spirit of glasnost--or openness--Mr. Gorbachev led the Soviet Union into an atmosphere of much less xenophobia. The thing that distresses me the most is the piece of legislation that passed the Russian Parliament, and that is now sitting on President Yeltsin's desk, is that it is a clear return to the days of xenophobia--fear of anything from outside. Yes. Religious liberty is important. Yes. I voted for the Smith amendment to establish the importance of religious liberty. But I voted for the Smith amendment even more firmly because I believe the Russian people must be told in as firm a fashion as possible that if they returned to the days of the darkest period of the czars, if they returned to the days of the darkest period of the Soviet Union with an unfounded and irresponsible fear of anything that comes from beyond their borders, they will be taking a most serious downward turn in the culture and future of their Republic. So in that, Mr. President, I cast my vote in favor of the Smith amendment hoping to send that message to the people of Russia. I yield the floor. Mr. DeWINE addressed the Chair.

Mr. BENNETT

Mr. BENNETT. Mr. President, the Legislative Branch bill provides $1,537,827,000 in new obligational authority, exclusive of House items, for fiscal year 1998. This is $64,947,000 below the President's request and $51,600,000 above the fiscal year 1997 level. The majority of the increases in the bill account for cost of living adjustments. Mr. President, I wish to correct an impression that is being circulated throughout the press. There is no provision in this bill for a pay increase for Members of Congress. That is the issue that is taken care of in other bills. The Senate items include provisions to reduce the appropriation for official mail from $10 million to $8 million in fiscal year 1998 and combine the franking allowance with the official personnel and office expense allowance--this will reduce paperwork and provide flexibility for offices to meet their needs. The bill eliminates the disparity in staff salaries of Senate employees versus all other Federal employees (including those of the House.) This disparity was caused by the Senate employees not receiving the 2-percent COLA in 1996, which as provided to all other Federal employees. Approximately 80 percent of the Architect's request for capital projects to ensure that certain repairs and maintenance are not delayed. If this maintenance is taken care of now, it should pay off in substantial cost savings in the future. The GAO is provided $346.75 million, which conforms to the commitment to stabilize the GAO budget and staff level (3,500 employees) after a 2-year reduction of 25 percent. This recommendation provides sufficient funds for mandatory cost increases, including the COLA. I want to take the opportunity now before presenting the bill to thank Senator Dorgan, the ranking member on the Legislative Branch Subcommittee, for his cooperation and his work on the bill. I have enjoyed my experience as the chairman of the subcommittee, and Senator Dorgan's cooperative spirit has been a large part of that enjoyment. I pay tribute to him and to his staff for the professional way in which they have handled this responsibility. Mr. President, I believe this bill continues the legislative branch's contributions toward deficit reduction and the goal of the balanced budget by the year 2002. Mr. President, I now ask unanimous consent that the Senate proceed to the consideration of Calendar No. 110, S. 1019, the Legislative Branch Appropriations bill, and, further, the managers' amendment, which is at the desk, be considered as read and agreed to.

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

Mr. BENNETT. Mr. President, I ask unanimous consent that the bill be considered as read a third time and passed, as amended, the motion to reconsider be laid upon the table with any statements related to the bill appear at the appropriate point in the Record. The bill (S. 1019), as amended, was passed, as follows:

Mr. BENNETT. I further ask unanimous consent that the bill not be engrossed, that it remain at the desk pending receipt of the House companion measure. I further ask unanimous consent that when the House companion measure is received in the Senate, all after the enacting clause be stricken, except appropriations for the House of Representatives and House Office Buildings, and that the text of S. 1019, as passed, be inserted in lieu thereof, the Senate insist on its amendments, and request a conference with the House; and, finally, the Chair be authorized to appoint conferees on the part of the Senate. I further ask unanimous consent that when the House bill is passed, pursuant to the previous order, the passage of S. 1019 be vitiated, and that S. 1019 be indefinitely postponed.

Mr. BENNETT

Mr. BENNETT. Mr. President, I ask unanimous consent that there now be a period for the transaction of morning business with Senators permitted to speak for up to 5 minutes each.

Mr. BENNETT

Mr. BENNETT. I move to lay it on the table. The motion to lay on the table was agreed to.

Mr. BENNETT

Mr. BENNETT. Mr. Chairman, as the Air Force determines where fighter units will be located, these decisions will inevitably impact how our test and training ranges are utilized. Consequently, I believe it would also be reasonable for the Air Force to outline how changes in force structure will impact the use of test and training ranges.

Mr. BENNETT. The Quadrennial Defense Review [QDR] outlined a direction for the Air Force to consolidate force structure and reduce manpower. Included in the QDR is a proposal to transfer one active duty fighter wing to the reserve forces. General Fogleman recently informed me that the Air Force was specifically exploring a number of options to accomplish this directive. Because of the changes that may occur as the Department of Defense downsizes, I would expect the Air Force to alert Congress as important decisions are made, and will outline the rationale behind their conclusions. Is it the chairman's expectation that this will be the case?

Mr. BENNETT

Mr. BENNETT. Mr. President, I address today an issue of significant importance to my home State of Utah. As you know, the State of Utah is largely rural. Of 29 counties in the State of Utah, 25 are classified as rural by the U.S. Department of Agriculture [USDA]. For this reason, I have a keen interest in rural issues in general and, as a member of the banking committee, rural credit issues in particular. I have read with interest the recent reports from the Rural Policy Research Institute [RUPRI], the General Accounting Office [GAO], and the USDA on rural credit needs. I have also reviewed the proceedings of the Kansas City Fed's conference on ``Financing Rural America.'' These documents present no surprises for those of us who represent rural areas. While each study approaches its task in a unique manner, all of these reports are similar in their conclusions. They note that while rural financial markets work reasonably well, not all market segments are equally well served. They all agree that small businesses from rural areas can have a difficult time obtaining financing, have fewer credit options, and may well pay more for their credit than comparable urban enterprises. At a time when small businesses are being recognized for their valuable contributions to our economic growth and stability, small businesses are facing increasing demands for credit, and Small Business Administration funding is frequently being challenged. Historically, rural economic activity has been synonymous with agricultural production. Today, this is no longer the case. The number of farms in the United States has declined dramatically from about 6 million in the first half of this century, to about 2 million farms in 1990. While agriculture is still an important component of rural America and its credit needs are reasonably well addressed; the financial needs of rural nonagricultural business require attention now more than ever. While government sponsored enterprises [GSE's] have contributed to the successes of agriculture and rural housing by providing competitive and reliable credit, there has been no GSE financing for rural nonagricultural businesses. As all of these reports point out, credit options for nonagricultural business are relatively scarce, expensive, and sometimes nonexistent. Yet, as the GAO and the Fed reports point out, economic development in these areas is actually hindered by these borrowers' difficulties in obtaining capital. The facts are worrisome. As the RUPRI study points out, many rural areas were bypassed by recent employment growth. Existing rural employment is concentrated in slow-growth or declining industries. Job growth in rural areas, particularly rural areas that are not adjacent to metropolitan areas, is biased toward low-skill, low-wage activities. USDA has stated that ``Rural economies are characterized by a preponderance of small businesses, fewer and smaller local sources of financial capital, less diversification of business and industry, and fewer ties to non-local economic activity.'' Rural nonagricultural businessmen seek to be contributing members of our economic society. They do not seek a Federal hand out. They look for equal credit opportunities and an opportunity to participate fully in the same business activities of their urban counterparts. As a political body, we need to consider the plight of rural nonagricultural businesses and the great potential that they offer our economy. I bring this issue to the attention of my colleagues in the hope we can work together and review constructive solutions to this program.

Mr. BENNETT

Mr. BENNETT. Mr. President, as we prepare to celebrate America's national holiday, I would like to take a moment and pay tribute to the founders of our country. James Madison, in particular, is one of my heroes. I didn't know much about James Madison until I went to college. I went to the University of Utah and majored in political science. I became acquainted with James Madison under the direction of G. Homer Durham, who was chairman of the political science department at the University of Utah. He had a very radical notion about education. He said the most important course in the political science department was political science 1. And he said, ``Since I am the department head it follows that I should teach the department's most important course.'' So as an 18-year-old freshman I sat at the feet of Homer Durham and learned about the Constitution and James Madison. I read the Federalist Papers and began a lifelong love affair with political theory and particularly the political theory that undergirds America starting with Thomas Jefferson, James Madison, and the Constitutional Convention. As we approach the Fourth of July holiday, I am reminded of another important item which we all cherish: the American flag. The flag of the United States is a unique symbol of national unity and represents the values of liberty, justice, and equality that make this Nation an example unmatched throughout the world. The American flag is recognized around the world as an icon of freedom, representing all that we hold dear as citizens of the United States. This preeminent symbol of our Nation has flown in every conflict where American blood has been threatened and shed, and will always deserve our unbending respect and protection. I rise today to support a bill which protects these two sacred items: the Constitution and the American flag. Many of my Republican colleagues advocate passing a constitutional amendment to prohibit flag desecration. I admire and agree with their intent to show proper respect to our flag, but I disagree with their belief that a new constitutional amendment banning flag burning is the best way to protect the flag and punish flag burners. To this end I, along with Senator McConnell, introduce legislation which will successfully and legally prevent the desecration of our national symbol. Our bill provides for the imprisonment and fining of those who damage an American flag intending to incite a breach of the peace. It also punishes anyone who steals a flag belonging to the Federal Government or a flag displayed on Federal property. In a review of our bill, senior constitutional legal experts at the U.S. Library of Congress stated that if enacted, the bill would withstand Supreme Court constitutional scrutiny. I agree with this analysis and believe it is possible to punish the despicable behavior of flag desecration, while still preserving the stability of a document that has served us well for over 200 years. With these comments, I wish my colleagues a happy Fourth of July holiday. May we always remember the liberties and blessings which are ours due to the sacrifice and inspiration of our American patriots.

Mr. BENNETT

Mr. BENNETT. Mr. President, I thank the Senator from New Mexico for his courtesy, and I thank the Senator from North Dakota for his presentation. I think it is a very thoughtful presentation, and there are many parts of it with which I agree. There are a few, however, with which I disagree, and I appreciate the opportunity to put this disagreement close to it in the Record. The Senator is justified in talking about the difference between things as they are now and things as they were 4 years ago when we were debating the 1993 tax package from the President. I am not sure he is entirely correct in saying that the program voted on this floor in 1993 is responsible for the tremendous growth we have had in the economy. I would remind him and other Senators that during that same 4-year period, we constantly heard how terrible Alan Greenspan and the Federal Reserve were behaving and that if, indeed, Alan Greenspan did not open up and make tremendous changes in monetary policy, the economy could crater, that jobs would be lost, that we would have tremendous deficits, and all of these other things would happen. At some other time we can debate whether the tremendous growth we have had is the responsibility of the Clinton administration or the Greenspan Fed. The fact is, no one is really quite sure. The fact is, we have a booming, wonderful economy, and we should be grateful for it, however we apply blame or credit, which brings us to the issue that the Senator is addressing. Will the tax program that we are talking about continue to stimulate that growth and allow it to burgeon, or will it in some way provide brakes on that growth in the name of income redistribution? The Senator says the issue is wealth distribution and how do we distribute the wealth in the fairest possible way. That is the portion with which I would argue. Wealth distribution is not a static question. You do not have the wealthy at the top and the poor at the bottom. You have constant movement up and down the ladder. I always use the example of Donald Trump, who at one time was in the wealthiest 1 percent, and then he made a few bad mistakes and he was bankrupt. Then he made a few smart moves, and he is back up again. Read the list of the people who are the richest people in the United States and you find the list is constantly changing. If I may be personal, there was a time not many years ago when I was clearly at the bottom in this country. I had a year not that many years ago where my earnings were zero and my wealth was going down because I was living on savings, and then when they were gone, I was going deeply into debt. Fortunately, one of my business ventures worked out, and now I would be listed up in that rarefied area that the Democrats seem to want to complain about. My point being that you cannot say you have a static group at one area that is going to be benefited and a static group at the other area that is going to be hurt; you have constant movement going back and forth. The responsibility of the Senate is not to redistribute wealth among these supposed static groups in a way to create fairness. It is to create a program that will stimulate the growth so that there will be more money for everybody. John F. Kennedy said a rising tide lifts all ships. That is not always true in terms of skill problems and educational problems, but I think it is true in terms of economics. We want a tax program that will continue the dramatic growth that we have had in this country, and I respectfully suggest that that which is coming out of the committee is more geared to produce that result. I thank the Chair.

Mr. BENNETT

Mr. BENNETT. In that case, Mr. President, I ask I be recognized for 2\1/2\ minutes.

Mr. BENNETT. I shan't intrude further. I thank the Senator.

Mr. BENNETT. Mr. President, I have addressed this issue before and do not want to spend a great deal of time in repetition. But I think we should focus on what we are really talking about when we talk about capital gains tax. There are many who say, ``Well, the people who have a capital gain are wealthy and we are letting them off the hook if we do not tax that wealth.'' What we are really talking about, in accumulated capital, is where will that capital be deployed? Recently there have been studies as to the number of millionaires in the United States and how they got their money. Overwhelmingly, the money comes from one of two sources: They inherit it or they start businesses. You do not become a millionaire by saving your wages. You become a millionaire by creating something in the form of a company and then seeing it grow. When you die your children inherit it, and then they fall into the first category. That has to do with death taxes. But millionaires come from risk-taking, millionaires come from entrepreneurial activity. Where do jobs come from? They come from risk- taking, they come from entrepreneurial activity. As I have said here on the floor, in the real world as opposed to the classroom, millionaires who are the result of entrepreneurial activity have an itch to stay entrepreneurial. Once they have seen their investment become what they call on the market a mature investment, many, many times they want to move on. They want to take their money out of a mature investment and put it into another entrepreneurial activity. But the present level of capital gains taxation prevents them from doing that, at least psychologically. Again, on the floor I have given examples of people who have seen their investment grow tremendously in a high-risk circumstance. They got the rewards that came from taking that risk and now they want to move on and take another risk, create more jobs and accumulate capital and wealth in this country. When they calculate what happens to them under the capital gains tax they say, ``I am not going to do it. I can't afford it.'' And they leave their money tied up in a mature investment, whereas the opportunity in an entrepreneurial investment is denied them by the capital gains tax. There is one thing that they do, and I have seen this--indeed, if I may, Mr. President, I have done this myself, to my sorrow. With the entrepreneurial itch saying let's put some money in a new startup circumstance, but feeling that your own money is locked up because of the capital gains tax, the itch becomes so strong that you put money into the entrepreneurial activity anyway, only you borrow it. And now the entrepreneurial activity has to carry not only the responsibility of a fair return, but enough money to pay the interest. I will not belabor it because I have given major speeches on this issue before. But I think the cap proposed by my friend from North Dakota, while well-intentioned, would in fact impede the flow of capital, it would move us in a direction that would ultimately redound to the disadvantage of the economy. I remind you once again, the Chairman of the Federal Reserve Board, who is concerned with watching money move around the economy and would like to see as much money as possible into entrepreneurial activity, has recommended to us that the ideal capital gains rate for this country should be zero. I am not bold enough to propose that on the floor because I know it would not pass. But I always remind people of that because that is the direction in which I think we ought to go. For that reason I oppose this amendment.

Mr. BENNETT. Mr. President, will the Senator yield for a question? Does the time permit that?

Mr. BENNETT

Mr. BENNETT. I withdraw my request.

Mr. BENNETT. I thank the Senator from Georgia.

Mr. BENNETT. Mr. President, I have come here because I have seen a series of articles that have appeared in the newspapers. I am not a believer in a conspiracy theory. But I think there is a movement afoot to give us a steady drumbeat of repetition of a particular theme coming out of those who are opposed to any kind of tax relief. And I picked two examples to show what this drumbeat is. The first one appeared in the Washington Post, written by Alan Blinder. Alan Blinder, Mr. President, used to be the Vice Chairman of the Federal Reserve Board. He is now a professor of economics at Princeton. He starts his presentation this way: I have always opposed cutting the capital gains tax, and still do. The case is simple and compelling. No one has yet produced evidence that lower capital gains taxes will lead to higher savings and investment; claims that they are just hunches. But we do know that a lower capital gains tax will shift some of the tax burden from the haves to the have-nots just when income disparities are at postwar highs. Then he goes on to say how terrible the capital gains tax rate is and laments the fact that he and others like him have lost the debate. A few days later Robert Kuttner wrote the following, again in the Washington Post. I would tell you who Robert Kuttner is, if I knew. But I am not as familiar with him as I am Alan Blinder. He says, referring to capital gains tax: . . . with the stock market setting new records, the timing is a bit off. It's hard to argue with a straight face that the prospect of paying capital gains tax is deterring much productive investment. Again, another drumbeat along the idea that cutting the capital gains tax is really nothing more than a way of putting more money into the pockets of the rich--that it will not increase investment, that it will not increase savings. Those who say that it will are ignoring the economic evidence. And these economists make this case over and over again. I submit to you, Mr. President, that they are shooting at a straw man. Either they do not understand the impact of capital gains taxes in the economy, or they don't want us to know what capital gains taxes really do to the economy because I am not going to stand here and argue with Professor Blinder on his turf. I want to take him to my turf, which is the marketplace. I want to take him to the marketplace where real people make real economic decisions in real life, and not the classroom where people argue about it. Let's start out with a little bit of classroom conversation, however, to set the context for this. I submit to you this truth, Mr. President: All wealth comes from accumulated capital. If someone somewhere does not stop spending everything he creates in the way of product and saves some of it, accumulates some of it, there will never be any wealth. Out of accumulated capital comes factories. Out of accumulated capital comes machine tools. Out of accumulated capital comes the infrastructure that then produces more wealth. The argument in society in the last century or so has not been over that truth. It has been over the question of who should own the accumulated wealth. Karl Marx, and others, said that society as a whole should accumulate wealth but that individuals should not. We have already seen one society give us an example of what happens when society holds all of the accumulated wealth and does not allow individual property accumulation. That example was called the Soviet Union, and it is the premier economic basket case of this century. It has wreaked absolute havoc in the lives of all of its people. Still the notion that society should own accumulated wealth has some currency in the world, and there are those who call themselves Socialists based on their notion that society should own everything and that the wealth should be accumulated by society. We have a different notion in this country. We go back to the writings of Adam Smith, who coincidentally wrote his book, ``The Wealth Of Nations'' in 1776, which was a good year for this country: The wealth should be held in private hands, that when private people accumulate wealth, they do better things with it than when society as a whole accumulates wealth. Why is this important? Because the capital gains tax is a tax on movement of accumulated wealth. It is not a tax on the wealth itself, it is only a tax that is levied when there is a movement of that wealth from one entity to another; or, in our circumstance, from one individual to another, one private corporation to another private corporation. I now give you the second great truth that applies in the marketplace. All wealth comes from risk-taking. If someone is not willing to take a risk and invest his or her accumulated wealth in that factory or that machine tool or that plow, with no guarantees that the investment is going to pay off, the wealth that comes from the factory or the machine tool or the plow will never be there. So these two principles guide what we are doing: All wealth comes from accumulated capital and all wealth comes from risk-taking. So, what happens when a private individual or corporation accumulates some wealth, accumulates some capital, takes some risk and creates some wealth, and then decides to move that from one investment to another? The Government steps in and says we will tax that movement. That is what the capital gains tax is all about. We will tax the movement of accumulated capital from one investment to another. This is what happens--real example, real world, not classroom stuff now. I will give you an example of a friend of mine who invested at great risk in a new venture. He is that kind of fellow. He is an entrepreneur. He takes risks. I'll keep the numbers very simple. Obviously there are more accounting details to this, but the illustration is accurate. He made, let us say, $100,000, and to keep it simple let's rule out the tax base. Let's say he has a cost of zero. In fact it was not that, but a gain of $100,000. So now he has $100,000 of accumulated wealth, but what has happened to his investment? Over the years that it has grown from zero to $100,000, it has become what we call a mature investment. That is, it is now earning 10 percent a year and that's about the prospect for this investment from now on. And this guy, because he is an entrepreneur, is restless with a 10 percent return. He wants to take some bigger risks and do some other things with his money. He sees an opportunity over here that will produce him a 20 percent return. Yes, it has a risk. He is willing to take the risk. He is willing to move his accumulated capital from company A to company B. And the Feds step in and say, ``We want 28 percent of that, or $28,000.'' And the States, of course, follow right along. He is going to end up, moving his capital from company A to company B, with $65,000 worth of accumulated capital instead of $100,000. Now, if he earns a 20 percent return on $65,000, for 3 years he will not even break even, back up to his $100,000 where he was. And the $100,000, if he had left it alone, would have earned an additional $30,000. He has to earn a 20 percent return on his $65,000 investment for 5 years just to get even with where he would be if he had left his capital alone. Well, you say, so what? This is a rich man, he has $100,000; why are you concerned about him? I am concerned--not about him. He can take care of himself just fine. I am concerned about the people in company B who will not get jobs because they cannot attract investors. Why can't they attract investors? Because the entrepreneurs have their money locked up in the investment that only earns 10 percent. He can find somebody who can buy investment A very easily. There are lots of people to say we would be satisfied with a 10 percent return in a mature company, absolutely. We will buy your stake and let you go out and run the risk to do something else. But, no, the capital, by virtue of the capital gains tax, is locked into investment A, because the entrepreneur says I can't afford the tax hit to move my investment capital from investment A to investment B. Therefore, I will not be backing the new rising company that needs funds. These people whom I quoted at the beginning say the stock market is going through the roof, and what do they offer as proof of that? The Dow Jones averages. How many people understand the Dow Jones averages are derived from 30 stocks? The Dow Jones Corp. picks 30 companies, baskets them together into a single average, and what happens to the prices of those 30 stocks is described as what is happening to the market as a whole. Yes, they are probably doing a pretty good job of picking some representative stocks, but understand they have only picked 30 companies. The Standard & Poor's index has 500 companies in it, and you know what? It's not going up quite as much as the Dow. Then there is the little known, little followed stock index called the Russell 2000, and as the name indicates, it has 2,000 stocks. But none of the Russell 2,000 stocks are in the Standard & Poor's 500 or even in the Dow 30. These are the new entrepreneurial companies where the jobs for the next decade are going to be created. Do you know what is the story in the Russell index? It is down. It is not up the way the Dow is. It is not up the way the Standard & Poor's is. It is down. These little companies, struggling along, entrepreneurial efforts, need money. Where are they going to get the investment? Are they going to get it from the big venture capitalists who like to back them? Maybe, if they can make their presentation. But they will find, time and again, that the venture capitalists who would otherwise be taken with their presentation and give them backing will say to them, ``I'm sorry, I am locked in by the capital gains tax. I am locked in with an investment that would cost me so much in tax, if I were to sell and back you, that I will not make that money available to you.'' I have personally seen this phenomenon take place. I have been present when discussions of this have gone on, and I know, very differently from the way it may appear in a classroom, that in the real market the capital gains tax at its present level is stopping entrepreneurs from moving their capital from one investment to the other and making capital available to the entrepreneurial companies that would create the jobs of the future. I said on this floor before and I repeat here again, I challenge every Member of this body to go home to his or her home State, gather the venture capitalists in the home State together, gather the real estate investors, if you will, in the home State together, and ask this one question: Are there deals that should be done not being done because of the capital gains tax? I have asked that question in my home State and I am told, almost with a laugh: All over, Senator. Everywhere you look there are deals that should be done, certainly could be done, but are not being done because of the capital gains tax. Now, ask this question: Are the deals that should be done the deals that have the greatest potential for job creation in the future? And the answer is, once again: Yes. So then I ask the question: What is going on? And I am told, look, Senator, there are so many cockamamie trade-outs being done, ways to avoid a realization of any kind of a gain that are being put together by lawyers and accountants because they want to back this in one way or another but they cannot take the hit that will come if they move their capital from investment A to investment B, so they are jerry-rigging all kinds of deals that will ultimately rise up and bite them in ways that will be detrimental. I started off by quoting Alan Blinder, with whom I disagree, and identifying him as a former Vice Chairman of the Federal Reserve Board. I close by quoting the Chairman of the Federal Reserve Board, Alan Greenspan. Alan Greenspan has a reputation of his own. He has a reputation that has brought him praise from Members of this body on both sides of the aisle. I have sat in the Banking Committee and on the Joint Economic Committee and heard my Democratic colleagues congratulate Mr. Greenspan for the deft and intelligent way he has handled monetary policy in this country. Mr. Greenspan tells us what the capital gains tax rate ought to be for the greatest benefit of the economy. He recommends a capital gains tax rate, not of 18 percent, as proposed out of the Finance Committee, not of 14 percent, as proposed by the Dole campaign, but zero. Because he understands the basic principles that I outlined in the beginning: All wealth comes from the process of investing accumulated capital and all wealth comes from risk-taking with that capital. The capital gains tax is a tax on that process. The capital gains tax by definition is a tax that will hold down the creation of wealth. Alan Greenspan understands that the greatest boon that can come for this country is the creation of more and more wealth and that is why he calls for a capital gains tax rate of zero. I think we are being very modest when we call for a capital gains tax rate of 18 percent. I hope those responsible for these articles and these comments in the Washington Post would go back to school at the feet of Professor Greenspan and learn again where wealth comes from and what we need to do in the Government to foster its creation. Mr. President, I suggest the absence of a quorum.