Dale Bumpers

Mr. BUMPERS

Mr. BUMPERS. Mr. President, I urge my colleagues in the Senate to carefully consider this issue. It is very important for the continued vitality of Main Street America, and I invite you to join in this effort to ensure fair competition in American business. Mr. President, I ask unanimous consent that the bill and outline be printed in the Record.

Mr. BUMPERS

Mr. BUMPERS. Mr. President, I urge my colleagues in the Senate to carefully consider this issue. It is very important for the continued vitality of Main Street America, and I invite you to join in this effort to ensure fair competition in American business. Mr. President, I ask unanimous consent that the bill and outline be printed in the Record.

Mr. BUMPERS. Mr. President, I rise today to introduce legislation to resolve a serious problem facing consumers and Main Street businesses in America. This problem allows consumers to be misled regarding their tax liabilities and puts Main Street businesses at a competitive disadvantage vis-a-vis out-of-State companies. The problem of which I speak is the loophole that allows companies to ship goods across State lines without collecting the taxes due on those goods. My bill, The Consumer and Main Street Protection Act of 1998, will give States the option if they choose, of removing this unfair advantage enjoyed by out-of-State companies. The legal effect will be to authorize a State or local jurisdiction to require out-of-State companies to collect use taxes on sales of personal property delivered into that State or local jurisdiction, if that State taxes its own citizens on retail sales. This bill does not create a new tax. Indeed, it doesn't create a tax at all. It merely deals with how existing taxes are collected. Specifically, it would allow States, if they choose, to shift the burden of collecting and remitting use taxes from the consumer to the company. At this point, I should clarify the meaning of the term ``use tax.'' A use tax is a tax on goods purchased in one jurisdiction for use in another jurisdiction. For example, goods purchased in Tennessee for use in Arkansas are subject to an Arkansas use tax. Use taxes are used to keep people from avoiding sales taxes. If a State doesn't have a use tax, its citizens can avoid paying sales taxes by making purchases in another State. By imposing a use tax equal to its sales tax, States can remove the incentive to engage in tax circumvention. Therefore, in the 45 States which presently have sales and use taxes, consumers are legally obligated to pay those taxes, whether the purchases are made at a local department store, via mail order, or over the internet. Unfortunately, catalog companies typically do not make their customers aware of this obligation--in fact, some mislead customers into believing that out-of-State purchases are ``tax free.'' This, of course, is patently false. The company may be exempt from collecting use taxes, but the customer is still liable for paying those taxes directly to the State revenue department on every out-of-State purchase. This situation causes three serious problems. First, consumers are often shocked to discover that their ``tax-free'' purchase is not really tax free. State revenue departments inform tens of thousands of consumers every year of this sad fact. The consumer finds he is liable for back taxes, interest and penalties. Second, Main Street retailers are placed in an unfair position vis-a- vis mail order houses. This occurs because mail order products if no tax is collected, are cheaper than if bought in Main Street department stores. Not only do most mail order houses not collect use taxes, they don't tell their customers that they are legally liable to pay the tax. Third, State and local governments lose revenues because billions of dollars of the taxes are never collected. According to the Advisory Commission on Intergovernmental Relations, State and local governments lose over $3.3 billion a year for this reason. This occurs, even as mail order companies impose significant costs on State and local governments by sending an avalanche of catalogs and product packaging to municipal landfills. Every year over 3 million tons of third class mail, most of which is catalogs, goes to landfills in this country. This is not surprising considering the billions of catalogs which consumers receive in the mail every year. One company alone, Fingerhut, Inc., mails out nearly 500 million catalogs annually. With mail order sales growing by approximately 6 percent per year, this burden on State and local government will increase significantly in coming years.

Mr. BUMPERS

Mr. BUMPERS. Mr. President, what is the parliamentary situation?

Mr. BUMPERS

Mr. BUMPERS. Mr. President, prior to introducing my bill, let me just lend my support to the remarks just made by the Senator from South Carolina. He and the Senator from North Dakota, Senator Dorgan, have made speech after speech after speech on the floor of this body about how we do not have truth in budgeting. We do not have a balanced budget. We are not even close to a balanced budget and are not going to be for some time to come. And the idea of people talking about tax cuts or using the budget surplus, which does not exist, to using that surplus to cut taxes or to increase spending is an absolute absurdity. I think this year, 1998, we are anticipating a $100 billion surplus in Social Security. So I lend my support to what the President said the other night. And I lend my support to what the Senator from South Carolina just said. (The remarks of Mr. Bumpers pertaining to the introduction of S. 1586 are located in today's Record under ``Statements on Introduced Bills and Joint Resolutions.'')

Mr. BUMPERS

Mr. BUMPERS. I have included this history of funding to show how the amount of appropriations for FDA salaries and expenses has increased every single year since fiscal year 1988 except for the period between fiscal year 1995 and fiscal year 1997 when the level was held at a freeze. I also want to note that the 3-year period connecting fiscal year 1995 and fiscal year 1997 was a period in which the 602(b) allocation to our subcommittee fell by 11 percent. I hope my colleagues see in this history a commitment by our subcommittee to recognize the importance of FDA's activities. Further, I hope my colleagues see that even during a time when nearly all other programs under our jurisdiction had to take significant reductions, FDA was held harmless. I believe this history reflects well on the commitment and good faith of our subcommittee. An obvious result of the provision contained in FDA reform will be continuing further reductions in other programs under the jurisdiction of our subcommittee. Those programs will again have to suffer unless, in the unlikely event, we receive substantial increases in our future 602(b) allocations. There are many, many other programs for which our subcommittee is responsible that are important to people and communities all across the Nation. Our bill provides funding for all activities at the U.S. Department of Agriculture--except the Forest Service--and the Commodity Futures Trading Commission. At USDA alone, there are hundreds of programs essential to rural and urban America that will be harmed, again, if our subcommittee is expected to provide FDA, and FDA only, with inflation increases through fiscal year 2002. USDA programs have already been radically cut by our subcommittee over the past several years while, as noted above, FDA was provided substantial increases or, at least, held constant. I understand a few other proposals were suggested, and rejected, during consideration of the FDA reform legislation. One proposal was to hold FDA to a freeze, something which we have shown we have done historically. Another proposal would have specifically protected the FDA activities for drug approvals. That approach would have better addressed the concerns I outlined above. I understand this proposal to protect FDA drug approvals was rejected due to objections from nondrug related industries concerned that FDA resources might be transferred from their own specific priority areas to drug approvals. Ironically, that is the same concern I have heard from groups fearful about what the provision in FDA reform will do to USDA and CFTC programs. Mr. President, at times I feel there is an outright assault on the appropriations process. Too many times in recent years we have seen requirements imposed on the Appropriations Committee by other legislative and procedural vehicles that continuously impairs our ability to respond to agency needs and responsibilities to our states and the American people. Based on administration projections, the trigger mechanism contained in FDA reform would force the appropriations subcommittee to increase the FDA salaries and expense account from the current $857 to $876 million in fiscal year 2002. According to the President's 1998 budget, the projected request for FDA salaries and expenses for fiscal year 2002 is only $691 million. This is a difference of nearly $200 million, an amount worthy of deliberate consideration by the appropriations subcommittee. Additionally, the FDA reform provision does not account for the possibility of a tobacco settlement that might replace current appropriations expenditures, consolidation of food safety functions in some agency other than FDA, or other potential changes that would affect, and possibly reduce, the budgetary requirements of FDA. Even though the provision does attach the trigger to the lesser of the consumer price index or changes in the growth of national domestic discretionary spending, there is no guarantee that any increase in overall domestic discretionary totals will be reflected in the 602(b) allocation for our subcommittee. For the coming year, I can assure my colleagues that I will work with Senator Cochran and others to assess the requests of all agencies and departments that will come before our subcommittee. I strongly believe that we have been fair in our setting of priorities and that we will continue to consider the merits of all requests in order to balance the fiscal demands and resources in a manner consistent with our abilities, good judgment, and the recommendations of all Senators.

Mr. BUMPERS. Mr. President, on September 23 of this year, my colleague, Senator Cochran, chairman of the Appropriations Subcommittee on Agriculture, Rural Development, and Related Agencies, rose on the floor of the Senate to express objection to a provision of the FDA reform bill that would direct the appropriations subcommittee to provide established levels for salaries and expenses of the Food and Drug Administration through fiscal year 2002. If the appropriations bills did not meet those levels, referred to as trigger, the FDA would not be able to collect or use receipts authorized by the Prescription Drug User Fee Act [PDUFA]. The effect of the provision Senator Cochran found so troublesome would have been to place a budgetary gun to the head of the appropriations subcommittee under threat of PDUFA fees not being collected and the Nation's drug approval process placed at risk. As ranking member of the appropriations subcommittee, I shared Senator Cochran's concerns, but honestly hoped that the problem he highlighted would be corrected before we were faced with final passage of the conference report on FDA reform. While the conference report before us today does provide some relief in fiscal years 2001 and 2002 from the earlier Senate language, I am still disappointed that more progress was not achieved to inject a greater dose of realism into the expectations of the FDA authorization committees of the House and Senate. I do not mean to detract from the very important work of the FDA nor to minimize the need to push ahead aggressively with drug approvals. I equally appreciate the concerns of the prescription drug industry, which will be responsible for paying the PDUFA fees, that their considerable contributions will be used to supplement, not supplant, the drug approval process. However, an unfortunate charade has been employed to suggest the language now contained in FDA reform is going to protect, in fact guarantee, increases in the level of Federal funds appropriated for FDA drug approvals. I must point out to my colleagues that the language before us does nothing to assure that very goal and I feel compelled to highlight the provision's failing. FDA reform would require the appropriations bills for fiscal years 1999 through 2002 to provide levels for the FDA salaries and expenses account at levels no lower than the fiscal year 1997 level adjusted by the lesser of inflation based on the consumer price index or changes in growth of national domestic discretionary spending. The FDA salaries and expenses account contains funding for all activities of FDA, including drug approvals, subject to an appropriation other than amounts for buildings and facilities. The FDA reform legislation contains no requirement that FDA allocate any portion of the salaries and expenses account for drug approvals. Therefore, while our appropriations subcommittee may comply with the full letter of FDA reform requirement, that act alone would provide no assurance to the drug industry that the FDA appropriation would be used as they expect. FDA certainly has other pressing budgetary demands such as the need to account for the rental space arrearage for which the General Services Administration is threatening action against FDA, and continued work on tobacco issues. FDA will also need increased attention in the area of food safety which continuing headlines, such as that appearing in the Washington Post this weekend about the more than 700 people made ill by contaminated food in southern Maryland, will no doubt place greater workload on the agency. An arbitrary appropriation trigger will produce no magic bullet aimed solely at the problem of drug approval backlogs. Mr. President, I might have a little more understanding for the concerns of the drug industry if there was any merit to their claim that the appropriations subcommittee would not hold faith with their requests. Over the past 10 years, our subcommittee has increased new budget authority for FDA salaries and expenses from $456,004,000 to $857,501,000. In fact, I would like the Record to reflect the amounts provided in that account on a year-to-year basis since fiscal year 1988 to the present, and I ask unanimous consent the year and amounts be printed in the Record.

Mr. BUMPERS

Mr. BUMPERS. Senator, if I could just make one last comment. This is not in defense of the IRS, just simply an observation. The truth of the matter is a lot of people resent the taxes they have to pay. That is a given. My salary is paid by the taxpayers, but every April 15 I get a little vexed, just like every other taxpayer does, about what I have to pay. But having said that, I think it would be remiss if we didn't point out that we lose $100 billion a year in taxes to the Federal Treasury by people who defraud the system, the underground economy. Consider the fact that 1997, this year, the people of this country will pay about $650 billion in personal income tax. The corporate tax, as you know, yields much less than that. But just take the personal income tax. If we are losing $100 billion from people who absolutely refuse to live by the law--and that is who IRS ought to be after, of course--that is one of the reasons the rest of us have to pay more, because a lot of people don't. I just wanted to make that point and to say I think the IRS generally tries its best to collect the appropriate amount of taxes. The thing that gets all of us in more trouble than anything else is when honest, hard-working people are pilloried by a bureaucratic agent or auditor from the IRS. The agent may be right. It is usually not so much a question of whether the agent is right or not; it is their conduct that is offensive to people, and that is one of the reasons their public relations is so poor.

Mr. BUMPERS. I think an additional 800 pages in the code.

Mr. BUMPERS. My question is, if you do recover the $5,000 in tax court, are you automatically entitled to attorney's fees under this bill?

Mr. BUMPERS. Will the Senator yield for a couple of comments and then a question?

Mr. BUMPERS. First of all, when I was Governor of my State, one of the first orders I issued was that any employee of the Arkansas Revenue Department would be summarily fired if it was found that that employee, without provocation, was rude to a taxpayer. And within 3 weeks we fired one employee, and it had an unbelievable impact on the conduct of everybody else. We had very little trouble out of the revenue department during my 4 years as Governor. No. 2, insofar as the Speaker's proposal to spend a minimum of $30 million doing a survey, sending out a questionnaire to the taxpayers of this country asking how do you feel about your taxes and how do you feel about the IRS, I can save him that $30 million. I already know the answer. Every Member of this body knows the answer to that question. People think they are overtaxed and they think the IRS is filled with a bunch of arrogant bureaucrats whose whole purpose in life is to make people miserable. Finally, my question concerns this matter of attorney fees. Could you tell us what the criteria is in tax court? Let me walk through a case. Let's say the IRS sends you a notice and says we have determined in looking over your tax return that you owe us an additional $5,000, and here is why. And you write back and say I disagree. At that point, the burden is on you to prove that you don't owe $5,000, and under this bill the burden will remain on you to prove that you don't owe $5,000. If the IRS feels that they have won the argument, that you in fact do owe $5,000, and they refuse to relent, the normal method for you to challenge that is for you to pay the $5,000 and then go to tax court to recover it. Is that a fair statement?

Mr. BUMPERS. Now, assuming that the IRS does not get a conviction in that case, then is the taxpayer entitled to attorney fees?

Mr. BUMPERS. Let me ask you this question. Let's say we have a criminal case where the IRS charges you with tax evasion, that is, deliberately defrauding the Federal Government by evading or cheating on your income tax return. Then the U.S. attorney's office will indict you and haul you into court for a criminal trial. At that point the IRS, of course, does have to sustain the burden, is that not correct?

Mr. BUMPERS. I don't know the answer either. I think under existing law, and certainly under the Hyde amendment, you would be entitled to attorney fees if you were--I forget the exact language, something to the effect that if you have been frivolously or vexatiously charged and tried, you are entitled to attorney fees. But there is an existing statute which provides attorney fees if the court decides that this case should never have been brought, and several other criteria. But I just wondered if this bill changed any of that regarding criminal trials.

Mr. BUMPERS

Mr. BUMPERS. Mr. President, I thank my distinguished colleague from Washington State for his eloquent remarks. I just wanted to say how honored I am to have him join me on this bill, and reiterate one other thing because Senator Gorton and I want to be totally honest to the people of this country as we go forward with this bill. I think one thing that I must say is that, in my opinion, this $220 billion industry can cope with this bill--not only cope with it, but that industry, business, and the consumers of this country will all benefit from this, and the Nation will benefit because it is a global economy where we are competing so strenuously with the other nations of the world. Electricity is such a big part of our producing industry, and the less they pay the more competitive we become. That ought to be a real incentive for the people of this body to look very seriously at this bill.

Mr. BUMPERS. Mr. President, I rise to day to introduce the Transition to Electric Competition Act of 1997 along with my colleague from the State of Washington, Senator Gorton. This bill provides for the transition toward deregulation and competition in the electric utility industry. While few people find a discussion of the electric utility industry and the many laws and regulations governing the industry exciting, the fact is that electricity is an extremely important commodity which affects everyone on a daily basis. Any event that increases or reduces electric rates can impact: First, the lives of the poor and those on fixed incomes that depend on electricity to heat their homes in the winter and cool them in the summer; second, the price of goods we buy every day; as well as third, the competitiveness of our factories. In addition, decisions made by electric generators often have a direct effect on our environment as well as our energy security. It is not at all inconsequential that the electric utility industry, which has remained relatively static for the last 60 years, is undergoing a fundamental change. Instead of the traditional vertically integrated local utility, which generates power at its own plants, transmits that power over its own lines and sells that power to all consumers in a particular area, consumers in some States are starting to be bombarded with all sorts of offers from companies competing to become their power supplier, and other entrepreneurs will be seeking to buy large blocks of power to serve certain kinds of consumers. Naturally, these changes are bound to create considerable apprehension among both utilities and consumers. Mr. President, in January I introduced S. 237, the Electric Consumers Protection Act, because I believed that retail electric competition was inevitable and Federal legislation was necessary to ensure that certain consumers were not disadvantaged in the process. Several States were proceeding to introduce competition in their jurisdictions and a number of others were examining the matter. Since that time I have become even more convinced that competition is on the horizon. Eleven States have now enacted legislation or issued regulations requiring retail competition by a time certain. Almost every other State currently has the matter under review. Some argue that there is no need for the Federal Government to intervene; that the States are doing just fine on their own and they should decide when and how to proceed with retail electric competition. Mr. President, I couldn't disagree more. A State-by-State approach will likely produce a lot of unintended consequences which will limit the benefits associated with retail competition and could disadvantage certain consumers. Electric generation markets are becoming increasingly regional and even multi- regional. What happens in one State can have direct and indirect impacts on consumers and utilities located in another State. Utilities operating in more than one State can be subjected to conflicting regulatory regimes which could impact the way they operate their systems and the electric rates paid by consumers. This phenomenon is best illustrated by the multistate utility holding companies registered under the Public Utility Holding Company [PUHCA]. I have had a lot of experience with registered holding companies because two of them serve my home State of Arkansas. These holding companies generally plan for and operate generating facilities on a system-wide basis for the benefit of customers in the entire region served by the company. If restructuring proceeds on a State-by-State basis, these holding companies would find themselves subjected to different requirements which could negatively impact consumers. A State-by-State approach to retail competition also present problems where utilities operate entirely within a single State. It would make no sense for a utility in a State that does not require retail competition, to be able to sell power at retail in an adjoining State that requires retail competition, while a utility subjected to retail competition is unable to mitigate its losses by competing for customers in the adjoining State. Such a result both increases stranded costs and distorts the generation marketplace. Moreover, the States can't adequately address issues associated with the use of transmission lines that provide for the transportation across a number of States or the ability of a utility with significant market power to dominate electricity generation in an entire region. Clearly these are issues that need to be resolved at the Federal level. When I introduced S. 237 there weren't many calling for Federal action. However, interested observers are increasingly coming to the conclusion that Federal electric restructuring legislation is not only helpful, but is necessary. Even some of the States are calling on the Federal Government to act. The legislation we are introducing today is an updated version of S. 237. The bill includes the following provisions: All consumers would have the right to choose their power supplier by January 1, 2002. States could choose an earlier date for their residents if they wish. Utilities would be able to recover their legitimate, prudent and verifiable costs that they would have been able to recover from ratepayers if retail competition had not been implemented. Consumers located in States that currently have low cost electricity would be protected from rate increases by ensuring that utilities can't use their existing assets to sell power in more lucrative markets to the disadvantage of their existing customers. All utilities selling retail power would be required to generate a portion of that power using renewable resources. All of the interstate transmission facilities throughout the country would be managed by independent system operators to ensure that electricity flows in an efficient manner and that markets are competitive. FERC would be given greater authority to protect against the use of market power by utilities to inhibit competition. Both the Public Utility Holding Company Act [PUHCA] and the Public Utility Regulatory Policies Act [PURPA] would be repealed in conjunction with the implementation of retail electric competition. In addition, Mr. President, the legislation attempts to address some of the issues that relate to the impact of retail electric competition on two Federal entities--the Bonneville Power Administration [BPA] and the Tennessee Valley Authority [TVA]. Senator Gorton is especially knowledgeable about the special problems facing BPA and I expect that he will work closely with the other Members of the Senate from the Pacific Northwest in developing a consensus approach. With regard to TVA, our bill attempts to develop an approach that will enable retail competition to be smoothly introduced in the Tennessee Valley and will help TVA pay off its tremendous debt. The bill also requires the TVA board to prepare a study examining whether TVA should be privatized. I know that some observers may be concerned that this could be a first step toward the privatization of the Federal Power Marketing Administration [PMA's]. Mr. President, there is no connection whatsoever between TVA and the PMA's. The PMA's market power generated at hydroelectric facilities located at Federal dams. These dams perform a variety of public services and cannot be privatized. TVA, on the other hand, generates the bulk of its power from coal and nuclear plants that serve no public purposes. In addition, the Federal PMA's pay for themselves through power sales. TVA, on the other hand, has an enormous level of privately held debt which it must find a way to pay off, since the Federal Government is not responsible for it. Mr. President, I am especially pleased that Senator Gorton has decided to join with me in the effort to enact comprehensive electric restructuring legislation. He has a reputation as a very bright and thoughtful Member of this body and is a distinguished member of the Energy and Natural Resources Committee, which has jurisdiction over the matter. I know that he shares my desire to move this legislation through Congress quickly next year. Senator Murkowski, the chairman of the Senate Energy Committee, recently indicated that he expects the committee to mark up electric restructuring legislation next year. Both Senator Gorton and I want to work with him and the other members of the committee in moving forward. I look forward to undertaking this important task. Mr. President, I want to say how honored I am to have one of our most distinguished Senators, Senator Gorton of Washington, as my chief cosponsor on this bill. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record. Mr. President, I ask unanimous consent that a section-by-section analysis of the Transition to Electric Competition Act of 1997 be printed in the Record.

Mr. BUMPERS

Mr. BUMPERS. Mr. President, I rise to day to introduce the Transition to Electric Competition Act of 1997 along with my colleague from the State of Washington, Senator Gorton. This bill provides for the transition toward deregulation and competition in the electric utility industry. While few people find a discussion of the electric utility industry and the many laws and regulations governing the industry exciting, the fact is that electricity is an extremely important commodity which affects everyone on a daily basis. Any event that increases or reduces electric rates can impact: First, the lives of the poor and those on fixed incomes that depend on electricity to heat their homes in the winter and cool them in the summer; second, the price of goods we buy every day; as well as third, the competitiveness of our factories. In addition, decisions made by electric generators often have a direct effect on our environment as well as our energy security. It is not at all inconsequential that the electric utility industry, which has remained relatively static for the last 60 years, is undergoing a fundamental change. Instead of the traditional vertically integrated local utility, which generates power at its own plants, transmits that power over its own lines and sells that power to all consumers in a particular area, consumers in some States are starting to be bombarded with all sorts of offers from companies competing to become their power supplier, and other entrepreneurs will be seeking to buy large blocks of power to serve certain kinds of consumers. Naturally, these changes are bound to create considerable apprehension among both utilities and consumers. Mr. President, in January I introduced S. 237, the Electric Consumers Protection Act, because I believed that retail electric competition was inevitable and Federal legislation was necessary to ensure that certain consumers were not disadvantaged in the process. Several States were proceeding to introduce competition in their jurisdictions and a number of others were examining the matter. Since that time I have become even more convinced that competition is on the horizon. Eleven States have now enacted legislation or issued regulations requiring retail competition by a time certain. Almost every other State currently has the matter under review. Some argue that there is no need for the Federal Government to intervene; that the States are doing just fine on their own and they should decide when and how to proceed with retail electric competition. Mr. President, I couldn't disagree more. A State-by-State approach will likely produce a lot of unintended consequences which will limit the benefits associated with retail competition and could disadvantage certain consumers. Electric generation markets are becoming increasingly regional and even multi- regional. What happens in one State can have direct and indirect impacts on consumers and utilities located in another State. Utilities operating in more than one State can be subjected to conflicting regulatory regimes which could impact the way they operate their systems and the electric rates paid by consumers. This phenomenon is best illustrated by the multistate utility holding companies registered under the Public Utility Holding Company [PUHCA]. I have had a lot of experience with registered holding companies because two of them serve my home State of Arkansas. These holding companies generally plan for and operate generating facilities on a system-wide basis for the benefit of customers in the entire region served by the company. If restructuring proceeds on a State-by-State basis, these holding companies would find themselves subjected to different requirements which could negatively impact consumers. A State-by-State approach to retail competition also present problems where utilities operate entirely within a single State. It would make no sense for a utility in a State that does not require retail competition, to be able to sell power at retail in an adjoining State that requires retail competition, while a utility subjected to retail competition is unable to mitigate its losses by competing for customers in the adjoining State. Such a result both increases stranded costs and distorts the generation marketplace. Moreover, the States can't adequately address issues associated with the use of transmission lines that provide for the transportation across a number of States or the ability of a utility with significant market power to dominate electricity generation in an entire region. Clearly these are issues that need to be resolved at the Federal level. When I introduced S. 237 there weren't many calling for Federal action. However, interested observers are increasingly coming to the conclusion that Federal electric restructuring legislation is not only helpful, but is necessary. Even some of the States are calling on the Federal Government to act. The legislation we are introducing today is an updated version of S. 237. The bill includes the following provisions: All consumers would have the right to choose their power supplier by January 1, 2002. States could choose an earlier date for their residents if they wish. Utilities would be able to recover their legitimate, prudent and verifiable costs that they would have been able to recover from ratepayers if retail competition had not been implemented. Consumers located in States that currently have low cost electricity would be protected from rate increases by ensuring that utilities can't use their existing assets to sell power in more lucrative markets to the disadvantage of their existing customers. All utilities selling retail power would be required to generate a portion of that power using renewable resources. All of the interstate transmission facilities throughout the country would be managed by independent system operators to ensure that electricity flows in an efficient manner and that markets are competitive. FERC would be given greater authority to protect against the use of market power by utilities to inhibit competition. Both the Public Utility Holding Company Act [PUHCA] and the Public Utility Regulatory Policies Act [PURPA] would be repealed in conjunction with the implementation of retail electric competition. In addition, Mr. President, the legislation attempts to address some of the issues that relate to the impact of retail electric competition on two Federal entities--the Bonneville Power Administration [BPA] and the Tennessee Valley Authority [TVA]. Senator Gorton is especially knowledgeable about the special problems facing BPA and I expect that he will work closely with the other Members of the Senate from the Pacific Northwest in developing a consensus approach. With regard to TVA, our bill attempts to develop an approach that will enable retail competition to be smoothly introduced in the Tennessee Valley and will help TVA pay off its tremendous debt. The bill also requires the TVA board to prepare a study examining whether TVA should be privatized. I know that some observers may be concerned that this could be a first step toward the privatization of the Federal Power Marketing Administration [PMA's]. Mr. President, there is no connection whatsoever between TVA and the PMA's. The PMA's market power generated at hydroelectric facilities located at Federal dams. These dams perform a variety of public services and cannot be privatized. TVA, on the other hand, generates the bulk of its power from coal and nuclear plants that serve no public purposes. In addition, the Federal PMA's pay for themselves through power sales. TVA, on the other hand, has an enormous level of privately held debt which it must find a way to pay off, since the Federal Government is not responsible for it. Mr. President, I am especially pleased that Senator Gorton has decided to join with me in the effort to enact comprehensive electric restructuring legislation. He has a reputation as a very bright and thoughtful Member of this body and is a distinguished member of the Energy and Natural Resources Committee, which has jurisdiction over the matter. I know that he shares my desire to move this legislation through Congress quickly next year. Senator Murkowski, the chairman of the Senate Energy Committee, recently indicated that he expects the committee to mark up electric restructuring legislation next year. Both Senator Gorton and I want to work with him and the other members of the committee in moving forward. I look forward to undertaking this important task. Mr. President, I want to say how honored I am to have one of our most distinguished Senators, Senator Gorton of Washington, as my chief cosponsor on this bill. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record. Mr. President, I ask unanimous consent that a section-by-section analysis of the Transition to Electric Competition Act of 1997 be printed in the Record.

Mr. BUMPERS. Mr. President, I thank my distinguished colleague from Washington State for his eloquent remarks. I just wanted to say how honored I am to have him join me on this bill, and reiterate one other thing because Senator Gorton and I want to be totally honest to the people of this country as we go forward with this bill. I think one thing that I must say is that, in my opinion, this $220 billion industry can cope with this bill--not only cope with it, but that industry, business, and the consumers of this country will all benefit from this, and the Nation will benefit because it is a global economy where we are competing so strenuously with the other nations of the world. Electricity is such a big part of our producing industry, and the less they pay the more competitive we become. That ought to be a real incentive for the people of this body to look very seriously at this bill.

Mr. BUMPERS

Mr. BUMPERS. I will try to make this short.

Mr. BUMPERS. Mr. President, from 1993 to 1997, the Navy retired seven Los Angeles class attack submarines--seven in that 4-year period. In that same period, we were in the process of building three Seawolf submarines at a cost of $13.2 billion. Not one of those submarines that we have decommissioned, all of which had a 30-year life expectancy, not one that we retired had less than 12 years left on its life expectancy, and several of them had 14 years left on their life expectancy. In that same period of time, we retired two nuclear-powered guided- missile cruisers, the Virginia and the Mississippi. Both of those ships had 20 years left on their life expectancy. And just last month, the Navy decommissioned another Virginia class guided missile cruiser, the U.S.S. Arkansas. That ship is near and dear to my heart because my wife Betty christened it. The U.S.S. Arkansas, incidentally, had sailed for only 18 years, and had a life expectancy of 20 years left on it. CGN- 41. That stands for cruiser, guided missile, nuclear. In that same period of time, 1993 to 1997, we decommissioned five frigates, everyone of which had anywhere from 14 to 16 years left on their 35-year life expectancy. In that same period of time, we also decommissioned nine guided- missile frigates, every one of which, but one, had a 21-year life expectancy left. Now, Mr. President, the Navy and the Pentagon has told the Defense Subcommittee on Appropriations on which I sit, as does the Presiding Officer, that tight budgets were requiring them to do more with less and that we are wearing out our ships and exhausting our crews because of the high operating tempo we are demanding of them. I have had reason to reevaluate what those officials have told us. First, Congress added $720 million to the 1998 defense budget to increase from three to four the number of DDG-51 Arleigh Burke class destroyers we will buy this year. The Arleigh Burke destroyer is a very fine ship, and it carries the Aegis air defense system. But let me repeat that this extra ship cost $720 million. Secondly, I learned, as I said, that the Navy would retire the U.S.S. Arkansas while it still has 20 years of useful life left. That ship is now being broken up for scrap. You have to ask yourself, why are we retiring perfectly good multimission surface ships when the cost for a comparable new ship is staggering? So I decided to look into this early warship retirement, and here are some of the things I have learned. Those ships that I mentioned that we retired between 1993 and 1997, the five regular frigates and nine guided-missile frigates and the two nuclear-powered guided-missile cruisers and the Los Angeles attack submarines, all of those ships, as I said, had 12 to 21 years left on their lives. During that same period of time, Congress appropriated about $18 billion to acquire two new submarines and 16 Arleigh Burke destroyers. It seems to me that this is awfully penny-wise and pound-foolish to be retiring these ships and spending so much to replacing them with fewer ships. We could keep a lot more ships in service at a lot less cost if we canceled or delayed procurement of just one or two of the submarines or destroyers the Navy plans to buy over the next 4 years. Listen to this. It costs $200 million to refuel a Los Angeles class submarine and about $30 million a year to operate it. So the Navy could refuel three Los Angeles attack submarines and operate them until the year 2014, 16 to 17 years from now, for the price of buying one New Attack Submarine. In addition, it costs about $25 million a year to operate a guided- missile frigate. So, for the cost of the one Arleigh Burke destroyer that we added to the fiscal 1998 budget, the Navy could operate three Perry class frigates until the year 2007. I know that the Los Angeles class submarine is not quite as good as a Seawolf, or New Attack Submarine. I know a guided-missile cruiser or frigate is not quite as capable as an Arleigh Burke destroyer, but those older classes were good enough for the cold war when they were expected to cope with a highly sophisticated air and sea threat from the Warsaw Pact. Here are some comments by Admiral J. Paul Reason, the Commander in Chief of the Atlantic fleet. You don't have to listen to what I have to say, but listen to what the commander of the Atlantic fleet has to say, Admiral Reason. He says, according to the Norfolk Virginian-Pilot, that the fleet might be better served by cheaper ships in greater quantity: ``I would rather have three hulls that have one-third the capability of an Arleigh Burke.'' If from a pure military standpoint three cheaper ships are sometimes better than one expensive new one, why are we spending money mothballing or scrapping perfectly good ships with a 20-year life expectancy and then spending staggering sums to build new ones? Mr. President, I am not going to pursue this. The question is very simple. I intend to get into it in depth next year when we have hearings before the Defense Appropriations Subcommittee with the Navy. But I will tell you--and I serve notice on them right now--I will tell you what I think is going on. I don't think that the reasons given us are legitimate. They make no sense to me. I am not, admittedly, a Navy man, but when you look at the dollars and cents and when you look at the threat and you look at the life expectancy on magnificent ships--I can vouch for the U.S.S. Arkansas, I have been on it more than once, and it hasn't been that long ago when it was the state of the art. And I don't buy this business that we have to pay any price to get the absolute added technological edge on every one of our systems. This is a terribly expensive program the Navy is undertaking, doing away with perfectly good ships, with long lives left, to replace then with fewer hugely expensive ships. I agree with the admiral down in Norfolk when he says that sometimes he would rather have three cheaper ships that will do one-third of the job than have one ship to replace them. So I think that what we are doing is retiring perfectly good ships in order to keep the shipyards of America working. What does that mean? It means we have a lot of people in this body who have shipyards in their jurisdictions, and they want to keep those jobs busy. I understand that. If I had one in my State, I would be wanting those workers to stay busy, too. But I tell you the enormous cost to the taxpayers of this, in my view, is nothing short of outrageous. I do not buy the rationale for it. Mr. President, I yield the floor.

Mr. BUMPERS. Mr. President, I am not here to necessarily engage the chairman and the ranking member of the Senate Armed Services Committee----

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

Mr. BUMPERS. Will the Senator from Michigan yield--this won't take long.

Mr. BUMPERS

Mr. BUMPERS. Mr. President, this morning, I was reading the New York Times and came across an article truly exhilarating to me. It dealt with a matter that the Presiding Officer is all too familiar with, too. A number of large States are in the process of negotiating an agreement with some of the biggest mail order houses in the country, under which those mail order houses will, in the future, pay sales tax on merchandise they send into States that have either a use tax or a sales tax. It was in the 1992 Quill decision the Supreme Court ruled that Congress could authorize the States to require collection of sales and use taxes by mail order houses shipping goods across State lines. But Congress would have to make that decision formally by legislation. So I sponsored such legislation because I was a former small town merchant--I practiced law, I ran cattle, I had a small hardware retail and appliance store, and I even owned a cemetery one time, Mr. President. I did anything I could do to make money. Even back in those days, a lot of people ordered things from catalogs. I resented it. I was on Main Street collecting sales taxes, paying a corporate franchise tax to the city, paying all the taxes that make a decent place to live, and I was being competed against by people from other States who paid nothing. In 1994, and again in 1995, I introduced legislation to authorize the mandated collection of interstate sales taxes. I got a vote on it and, of course, didn't get nearly enough to pass. Everybody got up and wept and wailed and said, ``This is another tax, all you tax and spenders.'' As I say, I did it because I am a former retailer and I resented having to compete against people who did not have to collect a sales tax, which gave them a big competitive advantage on big-ticket items like refrigerators, television sets, and so on. So I admit I came into the debate because of my personal experience. But I also felt very strongly that equity was on my side. I never will forget the distinguished junior Senator from Utah, in a Small Business Committee hearing one day, making a point, after having heard several mail order catalog executives talk about how this was going to be a terrible burden on them and some of them would go broke, and it was an impossible administrative nightmare to collect taxes for 50 different States and a lot more jurisdictions than that because cities and counties also have sales taxes. I will never forget the little lecture that the Senator from Utah delivered, describing his own personal experiences, and that it had not been a burden for his company. I will always be grateful to the Senator for having helped out so magnificently that morning. Now, Mr. President, annual catalog sales are approximately $210 billion. Now, there are a few good citizens like Home Shopping Network who collect sales taxes on everything they sell. But most do not collect the taxes except when their physical presence creates a nexus with the State which requires that collection activity. Let me explain that requirement. If a mail order firm has a physical presence in a State, the State may require that firm to collect sales taxes on the goods it sells in the State. If a company has a presence, for example, in the State of Arkansas and sells something through their mail order catalog to an Arkansan, the physical presence of that shop in Arkansas requires them to collect sales tax on any mail order sales to the Arkansas resident. But if they do not have a presence in Arkansas, they can send all the merchandise they want to into the State and not collect a dime in sales tax. It is also unfair to the State and local governments which bear increased burdens because of mail order activity. For example, every year million of tons of catalogs go into the municipal landfills of this country, and State and local governments must pay for that. I think much of that comes to my house every year, frankly. Here it is, getting close to Christmas, and every night when I go home, I can't open my front door because there are so many catalogs behind it. But yet mail order companies pay virtually nothing to help States dispose of those millions of tons of waste. So, Mr. President, I have always felt that this was terribly unfair to Main Street merchants in America. There is not a great incentive to avoid taxes on small ticket items, but on big ticket items there is a huge incentive. A few States, like Wisconsin and Maine, have put a provision in their State income tax return for taxpayers to list the value of merchandise purchased through mail order. Last year, Wisconsin collected $1.3 million from that provision. But there is no telling what the State should have collected had all mail order sales taxes been collected. The $1.3 million came from people who were honest and voluntarily put on their State tax return what they purchased by mail order catalog and paid the sales tax on it. But there is no way the States can enforce an effective sales tax collection system on mail order goods. Forty-five States impose sales taxes on mail order purchases, but they have no effective way to collect it. Sometimes the States do collect the taxes on big-ticket items, however, and then the customer gets a rude awakening. I remember the story of a family in Florida which went up to North Carolina and bought some $25,000 worth of furniture because that company in North Carolina had advertised no sales tax. The family furnished their entire house all with new furniture, loaded it onto a van, and took it back. And, lo and behold, they were stopped at the Florida border and had sales tax assessed against them. The tax came to several hundred dollars, and it was a rude shock to that couple. There are a number of illustrations like that. But I do not want to take up too much of the Senate's time on this issue. All I want to say is that when mail order companies fail to collect sales taxes on their sales, it is unfair for the Main Street companies who do collect such taxes. It is not right for some to do it and the rest to be exempt. Now this agreement, which will reportedly be announced tomorrow between the largest States and the largest mail order houses, is a giant step in the right direction. I do not want to say anything tonight that would in the least hinder those people negotiating that agreement from finishing it. On the contrary, I applaud them, I thank them for doing what is right. Mr. President, I yield the floor and suggest the absence of a quorum.