Kent Conrad

Mr. CONRAD

Mr. CONRAD. Could we do it for 12?

Mr. CONRAD

Mr. CONRAD. I yield an additional 4 minutes to the Senator from Massachusetts on the resolution.

Mr. CONRAD. Mr. President, how much additional time does the Senator need?

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 President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. CONRAD. Mr. President, I listened to the very able Senator from Kentucky. His description of this budget does not quite fit the budget I have seen, both in the Senate and in the committee. He talks about deficit reduction. There is no deficit reduction here. Let's be clear with people. There is no deficit reduction. He talks about the deficit reduction bill offered last year by the Republicans. They called it ``deficit reduction,'' but there was no deficit reduction. They cut taxes $70 billion, cut spending $40 billion. Do the math. That did not reduce the deficit. It increased the deficit. Is the deficit going to be lower this year after their deficit reduction bill? Or is it going to be higher? It is going to be higher. There is more deficit after their deficit reduction bill of last year. Not only is there more deficit, but there is a whole lot more debt. Let me say to my colleagues, here is what is happening under our colleagues' fiscal plan. Here is what is happening to the debt of the country. When President Bush came in at the end of his first year--we do not hold him responsible for the first year because that is operating under the previous year's Presidency--at the end of his first year the debt was $5.8 trillion. At the end of this year, the debt will be $8.6 trillion. If this budget is adopted, this 5-year budget, at the end of the 5 years the debt will be $11.8 trillion. And they are talking about deficit reduction? Where? Where is it? Show me. Show me where they are reducing the deficit. This is the debt of the country. The debt is skyrocketing under their plans. Now the Senator talks about their deficit reduction plan of last year. This is last year. The deficit was $319 billion, one of the biggest ever. In fact, in the 5 years of this Presidency, he has had-- count them--four, when this year is complete, four of the biggest deficits in the history of the country. In dollar terms, the four biggest. Last year, the deficit was $319 billion. The Congressional Budget Office says if this budget is agreed to, this year the budget will be $371 billion based on the President's proposal. Actually, the proposal in the Senate is a little worse, at $371 billion. Is $371 billion more of a deficit than $319 billion or less? This is after their big deficit reduction plan. There is no deficit reduction. What about going forward? What will happen going forward? Here is what will happen, going forward, to the debt of the country. They say the deficit will go down each and every year of this budget. Well, not quite. The last year they say it blips up a little. They claim the deficit will be going down. But, of course, they have left out some pretty big things. They have left out any war costs past 2007. They have left out any cost to fix the alternative minimum tax passed this year. Over 10 years, that costs $1 trillion to fix. That is a big item. They have left out the associated interest costs of those items, which is ``other'' on the chart. They have also left out the money they are taking from Social Security each and every year of this budget, all of which gets added to the debt, all of which has to be paid back. So when we add it all up, here is how much the debt is going to grow under the plan before the Senate: In 2007, it will go up $680 billion. Not the deficit they are talking about of $319 billion; the debt will go up $680 billion. The next year it will go up $656 billion; the next year it will go up $635 billion; the next year it will go up $622 billion; the next year it is going up to $662 billion. Is there any improvement here? They are talking about deficit reduction, they are talking about their improving the fiscal picture of the country. No, they are not. The debt is going to grow every year by more than $600 billion. The result is going to be at the end of this period, the debt of our Nation will reach $11.8 trillion. Now I project at the end of this year it will be $8.6 trillion. By the way, they are getting ready to increase the debt limit by almost $800 billion in 1 year. We are going to have that vote this week. So when they say they are reducing the deficit, it is just talk. There is no reduction in the deficit going on here. In the deficit reduction package they say they had last year, the deficit went up, and the deficit is going up under their deficit reduction package. So let's be straight with people. Now, my colleague called the economy ``stunningly robust.'' No, the economy is not stunningly robust. In fact, the unemployment rate just went up. The unemployment rate just went up from 4.7 to 4.8 percent. That is not good news. That is going the wrong way. But I think of more concern is, if you compare this recovery to the nine previous recoveries since World War II, what you see is this one is far weaker than the average of the nine previous recoveries. Let's look at what the numbers show. Here is real median household income, as shown on this chart. Now, this would tell us whether the economy is doing well. If this is such a robust economy, why isn't household income going up? It is not going up. It is going down. Real median household income has declined 4 years in a row. To try to determine what is happening with this economy, we went and looked at all the recoveries since World War II. Here is what we found. On average, at this stage of recovery, the economy would be growing at 3.2 percent a year. That is what we have seen in the previous recoveries: 3.2 percent growth; this recovery: 2.8 percent. It is weaker than the average of the nine previous recoveries. That is not the only indicator that things are not going as well as we have seen in other recoveries. For the nine other recoveries since World War II, this dotted line on the chart shows business investment. The black line shows this recovery. It is 62 percent behind the average of the nine previous recoveries. My colleague just talked about how strong job growth has been. No, job growth has not been strong. We went and looked at the nine previous recoveries since World War II. This dotted red line on the chart shows the average. This black line shows this recovery. And, look, we are 6.6 million private sector jobs short of the typical recovery. So when they say things are going great, that is not what any serious analysis reveals. What any serious analysis reveals is that this recovery is lagging in a substantial way behind the nine recoveries since World War II. It is lagging in business investment by 62 percent. It is lagging in economic growth--3.2 percent is the average of the nine previous recoveries, and in this period, 2.8 percent. On job creation, we are 6.6 million private sector jobs behind the average of the nine other recoveries since World War II. But I said this morning the debt is the threat. And here it is, as shown on this chart. Our friends on the other side have been in charge since 2001. This is their record. This is what has happened under their fiscal plan. The President told us if we adopted his fiscal plan, he would have maximum paydown of the debt. Remember? He was going to virtually eliminate the debt. It has not worked out that way. Not only has there been no reduction in the debt, the debt has skyrocketed, and the debt has gone up approaching--well, with this latest increase that is being sought that they want to vote on this week--the debt under this President will have gone up $3 trillion. If we adopt this plan, it is going to go up another $3 trillion. That is the hard reality of what we see before us. If you love debt, you are going to love this budget plan. Our friends on the other side accuse us of tax and spend. They are guilty of spend and borrow. Borrow and spend, borrow and spend, spend and borrow, borrow and spend, spend and borrow--that is their policy, to drive us deep into debt. As I showed on the Senate floor, one of the most alarming things is, increasingly, this debt is financed by foreigners. About half of our debt now is held abroad. This morning I showed what an incredible legacy this President is going to leave because it took 42 Presidents 224 years to run up $1 trillion of external debt, debt held by foreigners. This President has more than doubled that in 5 years. That is truly stunning. Let me repeat, it took 42 Presidents 224 years--in fact, here is the chart I used this morning that shows it--it took all these Presidents, from George Washington to Bill Clinton--42 Presidents--224 years. Some of them were sons of Virginia. The occupant of the chair is a proud representative of Virginia. They were much more careful with public money than this President. It took all these Presidents--42 of them-- 224 years to run up $1 trillion of external debt. This President has more than doubled it, in fact, substantially more than doubled it, in just 5 years. Now, as a result of this, we owe Japan over $700 billion. We owe China over $250 billion. Here it is, as shown on this chart: Japan; China; the United Kingdom, my favorite; the Caribbean banking centers. We owe the Caribbean banking centers $111 billion. I sometimes ask audiences back home: Are any of you doing your banking in the Caribbean? I get very few takers on that. Somebody is doing their banking in the Caribbean, and we are borrowing huge amounts of money from them. We owe Taiwan over $70 billion. We owe South Korea over $66 billion. Now, whatever else is going on, No. 1, this fiscal plan is not working as advertised. The President said, very clearly, he was going to have maximum paydown of the debt. The debt is skyrocketing, and when our friends come out here and say, well, they have a deficit-reduction plan, where is it? It certainly is not in this budget that is going to increase the debt over $3 trillion over the next 5 years. This year, the deficit, according to the Congressional Budget Office, is going to be bigger than the deficit last year, after our friends came out here and said they had a deficit reduction plan. In fact, they passed it and they labeled it ``deficit reduction,'' but the deficit is going up, not down. So their deficit reduction plan, like all these other plans they have come out with, has not worked. The President said he was going to have maximum paydown of the debt. The debt is increasing. They say they have a deficit reduction plan. The deficit is increasing, not being reduced. And talk about economic recoveries, this is one of the weakest economic recoveries of the nine we have had since World War II. Something is not working. I believe one of the things that is not working is that this pileup of debt is creating an enormous weight on our country. At some point we have to take this on. This budget does not do it. My own belief is, the only way we are going to take this on is to do it together, Democrats and Republicans. Democrats certainly cannot do it. We are in the minority. I do not think Republicans can do it alone because they have proven they are not going to do it. And if they wanted to do it, I do not believe they could do it on their own. I think this is going to take us working together. And the sooner we get together and the sooner we face up to this, the better off our country will be. I thank the Chair and yield the floor.

Mr. CONRAD. Mr. President, I thank the Senator. I don't consider it a tax increase to actually collect the taxes that individuals or companies already owe which they are not paying. That is not a tax increase. No tax rate is increased. That is not creating a new tax; that is collecting the taxes that are already owed. The Revenue Commissioner testified before the Senate Budget Committee that the tax gain--the difference between what is owed and what is actually being paid--is $350 billion a year. The deficit is going to be $371 billion, and we are not collecting $350 billion of revenue that is owed. I don't consider that a tax increase. I think that is simply enforcing the laws that already exist. I want to again alert colleagues. We are trying to change the way the budget debate occurs. The chairman and I are trying very hard. We have heard the complaints of our colleagues about vote-aramas. A vote-arama typically occurs because time runs out before the amendment that has been offered has a chance to be voted on under the rules of the Senate. We are trying to make sure that the people have a chance to debate those amendments and get a vote and dispense with some of these votes before we get to Thursday night. I hope very much that colleagues are going to agree to the timeframe that we have set out in order to accomplish that purpose. If people resist that, then we are going to be right back in a vote-arama Thursday night and voting until the wee hours of the morning. If people want a reform of the way we do business here, we need them to cooperate and help us. Perhaps the chairman could review what the order of business is going to be for the rest of the afternoon and this evening in terms of the opportunities that are going to exist for colleagues to come to the floor tonight and talk about their amendments and make their opening statements. We are going to be in business to the extent that people take advantage of the time that is available.

Mr. CONRAD. Mr. President, I thank the chairman for working this out, as well. I thank our colleagues for their willingness to cooperate and to say to other colleagues that this sets a good example. I hope very much other colleagues and their staff are listening and that they understand if we continue on this course, we could have a much better budget debate and not wind up in that vote-arama, voting four times an hour with very little discussion or debate intervening. I hope very much colleagues are listening and that they will continue to cooperate. I am especially grateful to the six colleagues who have already agreed in this order to these time limits, at these times. I yield the floor and suggest the absence of a quorum.

Mr. CONRAD. Mr. President, I yield 20 minutes to the Senator from North Dakota.

Mr. CONRAD. Mr. President, reserving the right to object--I certainly will not object--this is something both sides are in complete agreement on. I ask my colleagues to understand that this is a technical matter to make certain that the resolution conforms to what was done in committee.

Mr. CONRAD. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. CONRAD. I see the Senator from Massachusetts seeking recognition. I yield the Senator 20 minutes off the resolution.

Mr. CONRAD. Mr. President, I thank my colleague, the Senator from North Dakota, for his comments and for his insights. I especially like his picture of the building in the Cayman Islands that is the home to more than 12,700 companies. Why is it their home? Because they are engaged in a giant tax dodge, that is why. What they are doing is acting as though they are doing business in the Cayman Islands so they can show their profits in the Cayman Islands, because the Cayman Islands do not have any taxes. What these companies are doing, many of them are operating in the United States where they earn their money, but they don't show their profits here. They have a series of subsidiaries and they show the profits of the subsidiaries in the Cayman Islands so they avoid their taxes here. That is what is going on. It is a giant scam. That is not the only scam. There are all kinds of scams going on. One of perhaps the most remarkable scams is that companies in the United States are buying sewer systems of cities in Europe and depreciating them on their books in the United States to reduce their tax burden here. Then they lease back the sewer systems to the cities in Europe that are actually using them. If that isn't an outrageous scam, I don't know what is. They are not just doing it with sewer systems, they are doing it with metro systems, they are doing it with all kinds of public infrastructure. That should not be permitted. Some say if you shut that down you are increasing taxes. I don't think so. I think you are collecting taxes that were legitimately owed in the first place and you are stopping a scam. That is what we did in the Budget Committee. When we offered additional spending--and we did, we offered $126 billion of additional spending and $104 billion of it was one amendment. Some might say, there the Democrats go again, spending money. What were we spending money on? What was that amendment about? I will tell you what it was about. It was to make the assistance for veterans in this country mandatory, not discretionary. I think people will be surprised to find out that the way our budget is devised, support for our veterans is considered discretionary. Medicare is considered mandatory, Social Security is considered mandatory, but aid to our Nation's veterans is considered to be discretionary. We thought that was not right so we proposed switching aid to veterans from discretionary accounts to mandatory accounts because we think that is what the American people intend. I don't think they think it is a discretionary matter, to provide assistance to young men and women who have been fighting for us in Afghanistan and Iraq. So we proposed putting that on the mandatory side of the budget. That shows up as a cost--$104 billion. We offset it by proposing closing tax loopholes in the tax gap. The tax gap is now running at $350 billion a year. The difference between what is owed and what is being paid is $350 billion a year, according to the testimony of the Revenue Commissioner of this administration. He said it before the Senate Budget Committee, and he said we could capture $50 billion to $100 billion a year without fundamentally changing the relationship of taxpayers to the Revenue Service. We should do that. Some say that is a tax increase. I don't think that is a tax increase; I think that is collecting taxes that are already due and owed but aren't being paid. If we are not going to start insisting that everybody pays, we are just going to run a system where some pay, then shame on us, shame on the system. That is unfair to the vast majority of people who are paying what they owe. The vast majority of people and the vast majority of companies pay what they owe, but unfortunately we have an increasing number of people and an increasing number of companies that aren't. That is unfair to all the rest of us, and it is dramatically increasing the debt of our country at the worst possible time.

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

Mr. CONRAD. Mr. President, we have Members who are now on their way to the floor to speak on the budget. I again implore colleagues, if they want to make an opening statement, tonight is the opportunity to do so. If they want to talk about an amendment and not offer it tonight but talk about it, tonight is the opportunity. As we get into tomorrow, the time is going to be very scheduled in a very disciplined way so that we can make maximum progress. It is going to be that way Tuesday and Wednesday and Thursday until we finish. Tonight is the opportunity to make opening statements. Tonight is the night to talk about amendments that you might otherwise not get time to talk about. Again, this won't be the time to actually offer amendments, but you can describe it, you can debate it, and you can discuss it. Please. We are giving colleagues this opportunity tonight so that tomorrow we can get amendments up and vote on amendments and get the work of the Senate concluded. I thank the Chair.

Mr. CONRAD. Mr. President, I say to colleagues on our side of the aisle, what we are attempting to do is change the way we handle the budget debate this year and to do it in a way that will have more of the votes occur before the vote-athon on Thursday night. That is what Senator Gregg and I are attempting to accomplish. It is going to take cooperation. What we are doing with our colleagues now, we have agreed on the first six amendments to be debated and the time for each. What we are asking our colleagues to do is agree to exchange time for certainty-- certainty of when their amendment would be considered, certainty for the amount of time they would have but less time than they could have under the rules. People can disagree and they can say: No, we won't agree to that. If they don't agree, we are going to be right back in the soup, and we will be here until the wee hours Thursday. We don't think that is the best way to debate this issue. We don't think that is the best way for colleagues, all of our colleagues, to have the best chance of having their amendments considered. So I am sending this message out to colleagues: If we work together, I think we can improve this budget debate process and have a whole series of votes tomorrow afternoon that we won't then have to have Thursday and do it again the next day and do it again the next day. That is what we are asking colleagues to do. Mr. President, would 20 minutes be sufficient for the Senator from North Dakota?

Mr. CONRAD

Mr. CONRAD. Mr. President, I ask unanimous consent that Senator Akaka and Senator Lautenberg be authorized to speak on the death of Senator Inouye's wife, Maggie, and then that Senator Wyden be recognized for 12 minutes, Senator Murray for 15 minutes, and Senator Baucus for 15 minutes.

Mr. CONRAD

Mr. CONRAD. Mr. President, the New York Times, in its Monday edition editorial, said: There's nothing Congressional Republicans would like more than to escape the inescapable need to raise the Nation's debt limit. The upcoming increase, from $8.18 trillion to nearly $9 trillion, will be the fourth major hike in the last 5 years. The editorial went on to say: It will come as no surprise if Senate leaders squelch debate on the debt limit until Congress is ready to begin its next week-long recess on March 17. Then, up against the Treasury's default deadline, the increase would be put to a voice vote so that no individual would have to go on record as approving the measure-- Increase in the debt. If anybody thinks that the New York Times is just imagining that there will be an attempt to avoid a debate on this massive increase in the Nation's debt, this is what the chairman of the Finance Committee said: Senator Grassley told Reuters that the goal would be to get the debt limit legislation passed with the least debate. He went on to say: I would like to see a bill on any Thursday night just prior to a recess. Why do our colleagues on the other side of the aisle want to avoid a discussion of the Nation's debt? Perhaps it is revealed in this chart which shows what is happening to the Nation's debt under their leadership. Our friends on the other side of the aisle have controlled Washington policymaking since 2001. They have controlled the Senate. They have controlled the House. They have controlled the White House. Here is their record on debt. At the end of the President's first year, the debt was $5.8 trillion. I think it is fair to leave out the first year. He is not responsible for the first year. Look at what happened since. The debt has gone up each and every year--and up dramatically. At the end of this year, it is predicted, if the President's budget is adopted, that the debt will have reached $8.6 trillion. Every Member of this body will recall when the President embarked on this fiscal strategy. He told us not only that he would not increase the debt but that he would have maximum paydown of the debt. He said his plan would virtually eliminate the Nation's publicly-held debt. There is no elimination going on here. Instead, the debt has exploded. We anticipate that it will be $8.6 trillion at the end of this year, if the President's further 5-year program is adopted. The debt will skyrocket to $12 trillion in 2011, at the worst possible time before the baby boomers retire. One of the results of their disastrous fiscal strategy is the debt held by foreigners has exploded at an even more alarming rate. It took 42 Presidents--all the Presidents pictured here--224 years to run up $1 trillion of external debt. This President has more than doubled that amount in 5 years. This is the legacy of debt that will haunt this country for generations to come. This is the hard reality. This is a fiscal plan and a fiscal strategy that has failed--failed miserably, and failed by any measure. The Senator from Montana raised a question of who is holding our debt. Here it is: Japan--we now owe them $685 billion. We owe China over $250 billion. We owe the United Kingdom over $230 billion. And in fourth place--who would have ever believed this--we now owe the so- called Caribbean banking centers over $100 billion. Now it comes to this year and a further continuation of the Republican plan to load the Nation with debt. I do not know how else you can term it because here is what has happened. By the way, from 1998 to 2001, there was no need to increase the Nation's debt limit. In fact, we were paying down the Nation's publicly-held debt under the administration of President Clinton. But in 2002, we had to raise the debt $450 billion; in 2003, we had to raise the debt $984 billion; in 1 year, 2004, another $800 billion increase in debt; and now, in 2006, they are seeking to raise the debt another almost $800 billion. You add this up and the debt will have already increased under this President by $3 trillion. When he came into office it was more than $5 trillion. And we now know, if his next 5-year plan is adopted, he will add another $3 trillion to the debt. This is not a sustainable strategy or plan, and it is time for Congress to face up to it. It is time to begin the debate on what we do to confront these rapidly growing debts. I hope very much that we will have a chance for a full debate on the debt limit and to consider stringent pay-go legislation, the device which we have had in the past to provide budget discipline. It simply says: If you want more spending, you have to pay for it. If you want more tax cuts, you have to pay for them. That is a basic notion that we used with great effect in the 1980s and 1990s to reduce what were then record deficits and debt levels--levels that have been greatly exceeded by the massive runup of debt under this administration. I hope we have that opportunity. The Nation deserves as much. I thank the Chair and yield the floor.

Mr. CONRAD

Mr. CONRAD. I thank the Chair and I thank my colleagues.

Mr. CONRAD

Mr. CONRAD. Mr. President, today, I am reintroducing, with Senator Rockefeller, a bill to make some small but important changes to the Qualified Zone Academy Bond, QZAB, program. The QZAB program helps qualifying schools renovate and update school buildings. Schools issue special bonds to finance the cost of renovation. Purchasers of the bonds receive a Federal tax credit in lieu of interest on the bond, thus helping to reduce the cost to the school. Most States are now using this program to modernize their school facilities. The QZAB program expired in 2005, but the Tax Reconciliation bill that will soon be considered by a conference committee extends the program. We are proposing to make modest changes in the QZAB program to make it even more useful to schools across the country. Our bill would expand the pool of bond purchasers to include all taxpayers, both individuals and other entities. Currently, only financial institutions can buy QZABs, which precludes pension funds and mutual funds from purchasing QZABs. Our bill would also allow QZABs to be ``stripped'' so the purchaser could then sell separately the principal portion of the bond and the tax credit. This will encourage the development of a secondary market for the bonds and reduce the discount costs making more of the proceeds available for school-related expenses. It will also open the market to nonprofit entities such as public employee pension funds. The bill revises the allocation formula to the States to better align with Title I, the program for disadvantaged students. Current law requires that allocations be made on the basis of a State's population living below poverty. This change simplifies and updates by tying funding to the formula used to distribute Title I funding for disadvantaged students. Unused bonding authority would be reallocated to other States. A few States have not used their allocations, and their bonding authority has lapsed. However, the demand in many States now far exceeds their allocation. Allowing funds to be reallocated would maximize the potential of the QZAB program. Finally, our bill would allow QZABs to be used for new construction and to purchase land for school buildings. We believe QZABs have been proven to be a cost-effective method for financing school renovation. With this additional flexibility, States can effectively reduce their construction backlogs. School districts across the country have praised the QZAB program for helping them to address serious problems in their buildings. This is a good program. We can make it even better by enacting these small reforms. I urge my colleagues to join us in supporting this important measure.

Mr. CONRAD

Mr. CONRAD. Mr. President, today, I am reintroducing, with Senator Rockefeller, a bill to make some small but important changes to the Qualified Zone Academy Bond, QZAB, program. The QZAB program helps qualifying schools renovate and update school buildings. Schools issue special bonds to finance the cost of renovation. Purchasers of the bonds receive a Federal tax credit in lieu of interest on the bond, thus helping to reduce the cost to the school. Most States are now using this program to modernize their school facilities. The QZAB program expired in 2005, but the Tax Reconciliation bill that will soon be considered by a conference committee extends the program. We are proposing to make modest changes in the QZAB program to make it even more useful to schools across the country. Our bill would expand the pool of bond purchasers to include all taxpayers, both individuals and other entities. Currently, only financial institutions can buy QZABs, which precludes pension funds and mutual funds from purchasing QZABs. Our bill would also allow QZABs to be ``stripped'' so the purchaser could then sell separately the principal portion of the bond and the tax credit. This will encourage the development of a secondary market for the bonds and reduce the discount costs making more of the proceeds available for school-related expenses. It will also open the market to nonprofit entities such as public employee pension funds. The bill revises the allocation formula to the States to better align with Title I, the program for disadvantaged students. Current law requires that allocations be made on the basis of a State's population living below poverty. This change simplifies and updates by tying funding to the formula used to distribute Title I funding for disadvantaged students. Unused bonding authority would be reallocated to other States. A few States have not used their allocations, and their bonding authority has lapsed. However, the demand in many States now far exceeds their allocation. Allowing funds to be reallocated would maximize the potential of the QZAB program. Finally, our bill would allow QZABs to be used for new construction and to purchase land for school buildings. We believe QZABs have been proven to be a cost-effective method for financing school renovation. With this additional flexibility, States can effectively reduce their construction backlogs. School districts across the country have praised the QZAB program for helping them to address serious problems in their buildings. This is a good program. We can make it even better by enacting these small reforms. I urge my colleagues to join us in supporting this important measure.

Mr. CONRAD

Mr. CONRAD. Mr. President, it is with great pride that I rise today to recognize a special group of students. It is not often enough that we have the opportunity to acknowledge heartwarming acts of kindness, but the actions of Mrs. Pranke's sixth grade class in Sheyenne, ND, have touched my hearts and the heart of their neighbors and friends. Throughout their years together, this special group of students has worked on more than one occasion to serve their community. As third graders, they collected box tops to purchase new games for schoolmates. When they were in the fifth grade, they initiated a fundraiser and donated the proceeds to benefit the Ronald McDonald House in Fargo, ND. As one final project, Mrs. Pranke's sixth graders decided to treat themselves to a class trip to celebrate their years together before moving on to junior high school. The students began holding fundraisers for their trip. Shortly after all the funds had been raised, they learned that the father of one of their classmates had fallen critically ill. The students quickly realized that they were faced with unique circumstances. After learning of their classmate's situation and the medical costs the family would bear, the children chose to donate the funds to their classmate's family and forgo their class trip. By choosing to help with their hard-earned money rather than keep it for themselves, these extraordinary students proved that their hearts are deep and their love for one another is real. Again, I commend Mrs. Pranke's exceptional group of sixth graders. Their selfless act has reaffirmed that values and kindness have not been lost in a world that so often focuses on the negative. I wish them all the best as they finish their final year together and continued success as they begin a new chapter of their education next year.

Mr. CONRAD

Mr. CONRAD. Mr. President, first, I want to acknowledge the extraordinary amount of work that the chairman of the committee and the ranking member have put into this bill, and how much I admire the diligence they have brought to the task. I rise today on the question of a budget point of order that has been raised by the Senator from Nevada. That budget point of order is clearly well taken. A number of months ago, my technical staff on the Budget Committee came to me and said they had been reviewing this legislation and they wanted to alert me that they believed this legislation was underwater, that it was underfunded, that it would lead to severe consequences not only for taxpayers but also for those who were the victims; it might also lead to severe consequences to companies that thought they were escaping the court system. Why is that? Well, it is true because the analysis that has been done demonstrates it is much more likely this fund will go insolvent than not. Why? First, because claims and administrative expenses are likely to exceed the contributions to the asbestos trust fund. Second, upfront claims will far exceed contributions, so the trust fund will have to borrow substantial amounts, and that borrowing will come from the Federal Treasury, increasing the ultimate cost. Third, small adjustments in the amount and timing of the assumptions quickly bankrupt the trust fund. Finally, it is very unrealistic to assume that the trust fund, once initiated, will ever terminate. Mr. President, CBO said in a letter today: CBO cannot estimate any costs or savings that might result from several features or consequences of the legislation. A number of those features could add to the cost of the legislation. What are those features? Here are a number of things that CBO said they could not estimate. They said they made no provision for dormant claims. Dormant claims are cases that were brought previously but for which there is nobody to pay under the current system. No. 2, we also know there are trusts that are only paying cents on the dollar. Those dormant claims could come back against this fund. Second, exceptional medical claims: Exceptional medical claims are claims that don't fit neatly into one of the nine categories provided for in this bill. CBO said they could not make an estimate for those. Third, CBO made no estimates for family members' claims; that is, family members who have been affected because a loved one comes home with asbestos on their work clothes. I had a family come to me where both the mother and the daughter became ill because the husband brought asbestos home on his work clothes and that made them ill. They will have claims. Then there was no provision for CT scans, which were omitted; that is, costs associated with using CT scans for plural abnormalities as evidence of asbestosis. It also omitted the cost of compensating victims at other Libby-like sites. Libby is an unusual circumstance, but it is not the only one where an entire community has been badly hurt. That will increase the cost. We have only found one area where there might be potential savings, and that is the medical studies area. That is a circumstance where there could preclude some tier VI cancer claims, and that could reduce costs. But it will affect fewer than 1 percent of claims. There are additional areas of uncertainty in the CBO analysis: the number of future cancer claims. CBO estimated 78,000 new cancer claims. The Tilling-Hast study, financed by Johns Manville--so it is not financed by the trial bar or by labor unions, not financed by companies who are against this legislation. Instead, it was financed by the Johns Manville trust. The Tilling-Hast study did 14 different scenarios. They concluded, on average, there would be 133,000 new cancer claims, not the 78,000 provided for in the CBO analysis. If they are right, this bill is $295 billion underwater instead of the $150 billion we have assumed, based on increasing the cancer claims from the 78,000 in the CBO study to 90,000. The percent of nonmalignant claims is another area we believe will increase costs. CBO says only 15 percent of the people will fall into tier II and tier III. Tier II gets $25,000 cash reimbursement. Tier III gets $100,000. They say only 15 percent of the claims will fall there. Other objective experts say it is more like 10 to 40 percent. We took the midrange of that estimate, 25 percent. We think that is a more prudent estimate of the amount of financing costs on fund borrowing. We have heard over and over that this will only cost $120 billion to $140 billion or $120 billion to $150 billion, depending on the estimates, and that CBO has said there is an assumption that the claims will cost in that range: $120 billion to $150 billion. That leaves out something. That leaves out something pretty important. That leaves out the financing costs because everyone acknowledges that the early claims will be far in excess of the early revenue. The result is an enormous mismatch between funds going out and funds coming in. That borrowing is going to be made from the Federal Treasury. The interest cost on that money has not been calculated in the work of CBO. They acknowledge that. That is the biggest single difference we have identified. You have to include financing cost. In addition to that, the amount of revenue in the trust fund may well reduce revenue. In fact, CBO notes that revenues will be, at most, $140 billion, and that revenues could be significantly less. When we put all of these factors together, our analysis, using very conservative assumptions, including the asbestos trust fund, faces a shortfall of at least $150 billion over its lifetime or $50 billion in net present value. Using what I believe is a more realistic estimate of future cancer claims, the 133,000 average in the Tillinghast study, the shortfall would grow to nearly $300 billion. That really shouldn't be a surprise because if we look at what has happened with other funds like this, what we have found is that very often the initial estimates are entirely wrong. If we look at the original range of the Manville claims, this estimate was done back in the late 1980s, and they estimated there would be 50,000 to 200,000 claims. Already, there have been 690,000 claims. They now estimate there will be 1.4 million, for a final total of over 2.1 million claims. When they initially started, they said there would be 50,000 to 200,000. They were wrong by a country mile. We looked at the black lung fund. Back in the late 1960s when it was initiated, they said the total cost would be $3 billion. We are at $41 billion today and counting. The hard reality is that CBO has reaffirmed there is a significant likelihood that the asbestos funding is inadequate. Here is what they said in a letter today: CBO's analysis indicates that the proposed trust fund under Senate amendment 2746 might not have adequate resources to pay all valid claims. There is a significant likelihood that the fund's revenues would fall short of the amount needed to pay valid claims, debt service, and administrative costs. Let there be no doubt. This is what it says. In the point of order which has been brought by the Senator from Nevada, it shall not be in order to consider any bill, joint resolution, amendment, motion, or conference report which would cause a net increase in direct spending in excess of $5 billion in any of the four 10-year periods beginning in 2016 through 2055. S. 852 creates an entitlement. The language could not be more clear. It says in section 131: An asbestos claimant who meets the requirements of section 111 shall be entitled to an award in an amount determined by reference to the benefit table and the matrices developed under section (b). Are these all just words? Are all these just numbers on a page? Or does this have some real-world consequence? We can look to the Johns Manville trust for the answer to that question. Because they estimated incorrectly, because they dramatically underestimated the number of claims, claimants today are getting 5 cents on the dollar. Five cents on the dollar. That could happen to victims. The other possibility, of course, is that people will come to Congress and say: Look, you designed this fund. You said it was going to produce. You said it was going to work. Now it has failed. You have to pony up. You have to pay. What do my colleagues think is the most likely outcome in the years ahead? CBO has also confirmed that the long-term spending point of order exists against this legislation. Here is what they said, and this was on February 13, yesterday: Substantial payments from the fund would continue well after 2015. Consequently, pursuant to section 407 of H. Con. Res. 95, CBO estimates that enacting the bill as amended would cause an increase in net direct spending greater than $5 billion in at least one of the 10-year periods from 2016 to 2055. CBO also reaffirmed that the fund is governmental: Operating the Asbestos Injury Claims Resolution Fund would be an entirely new governmental task, and CBO and other analysts have little basis for judging how the fund's administrator would implement the legislation. CBO's estimate shows that the asbestos bill will worsen the Federal deficit by $7 billion over the first 10 years. We believe that is very conservative. We believe the amount of increase to the deficit will be far in excess of that when we adjust for the dormant claims, when we adjust for the debt service, when we adjust for the other expenses that have been left out. There have been some who have said: Well, these really aren't Federal funds. Oh, yes, they are. These are Federal funds because the money, just as it is in all of these instances of trust funds, is considered Federal--in the airport and airway trust fund, in the black lung disability fund, in the hazardous substance Superfund, in the highway trust fund, and in the unemployment insurance fund. It doesn't matter that, yes, there are private funds here; without question, that is part of the picture, but it is not the whole picture. In every one of these cases where we have private funds being mixed with Government funds, the final result is considered governmental payments. The above trust funds receive ``private'' receipts that are designated for specific purposes. Spending from these trust funds is treated as Federal. At the end of the day, we have to make a judgment. Some have said: The Federal Government's exposure is limited, it is restricted, because after $40 billion, it shuts down. I think we have to ask ourselves: Is that likely? Is that really likely to occur? Can we imagine the companies being told they owe $40 billion back to the Federal Treasury and they are exposed to going back to court? If we want a march on Washington, enact this legislation, because it will go insolvent in the second 10-year period, according to our estimates, and we will have a run on Washington unlike anything we have seen in the modern age. I yield the floor.

Mr. CONRAD

Mr. CONRAD. Mr. President, I have listened with great interest to the interpretation of my colleague on the Budget Committee. I must say, I come to a totally different conclusion based on the law and based on the Congressional Budget Office's own reports. Here is the report from the Congressional Budget Office itself with respect to the issue of whether the point of order raised by the Senator from Nevada has merit or not. The Congressional Budget Office, which is nonpartisan, has said very clearly that this does involve Federal direct spending, does involve deficit spending. A point of order clearly lies.

Mr. CONRAD. Yes, I will be happy to yield to the Senator.

Mr. CONRAD. Yes. I have talked directly to the chairman of the Budget Committee, and he has said to me he believes that clearly this budget point of order does lie. And he is buttressed, I might say to my colleague, by the Congressional Budget Office itself, which says on page 2 of their report on this legislation called S. 852, the Fairness in Asbestos Injury Resolution Act, in the last paragraph: Pursuant to section 407 of H. Con. Res. 95 (the Concurrent Resolution on the Budget, Fiscal Year 2006), CBO estimates that enacting S. 852 would cause an increase in direct spending greater than $5 billion in at least one 10-year period from 2016 to 2055. That is the point of order raised by the Senator from Nevada. It is absolutely appropriate, and it clearly lies. People can come out and be unhappy about the result, but the reality is we have a problem. And we have a big problem here. Why? Well, we have done an analysis, my professional staff. Here is what they found. The claims and administrative expenses will likely exceed the contributions to the trust fund. No. 2, that upfront claims will far exceed contributions, so the trust fund will have to borrow substantial amounts. I have heard over and over it stated on the floor that there is no Federal money, there is no Federal money. Really? Why is it, then, that in the legislation they provide for borrowing Federal money? Why is that? Because everybody knows that point No. 2 is true, that the upfront claims are going to greatly exceed the revenue, and the result will be borrowing. And guess who they are going to borrow from. They are going to borrow from the Federal Treasury. It is also our conclusion that small adjustments in the amount and timing of the assumptions quickly bankrupt the trust fund; and, finally, that it is unrealistic to assume the trust fund will ever terminate. Because the other thing they are saying is: Well, the legislation provides, if they run out of money, we will terminate the trust fund. Let's think about that for a moment. Companies will be on the hook for tens of billions of dollars that they will have to pay back that have been borrowed, and then they are thrown back in the court system too. Can you imagine the outcry that will come from them? Let me go to the next chart. I had hoped to not be engaged in this debate, frankly, but we were asked to do a report. And we have done that report. Professional staff did it. These are the conclusions. They looked at the CBO estimates, and here is what we found. CBO did not score many items that are likely to increase the costs, including dormant claims. Those are claims that are not currently being pursued but would have a possibility of getting recovery if they went after this pot of money. No. 2, exceptional medical claims. There are nine categories that people can fit into. But if you do not neatly fit into those, there is an opportunity for the costs to rise. And third, CBO did not score any claims of family members of workers who were exposed to asbestos. We also--the professional staff found that CBO's estimate of the number of future cancer claims is likely to be too low. The CBO analysis concluded there would be 78,000 new cancer claims. The Tillinghast study--which we believe is the most objective study out there, which was done by the Johns Manville trust--ran 14 different scenarios. They found, on average, 133,000 new cancer claims is the likely result, not 78,000. By the way, if they are right, if the midpoint of their range is correct, the increase in cost will be very dramatic. Finally, CBO's estimate of the percent of nonmalignant claims that will receive a cash award is likely too conservative. In this legislation, there are five tiers for non-malignant claims. Tier 1 gets medical monitoring. They do not get money. Tier 2 gets cash awards of $25,000; tier 3, $100,000. CBO has estimated only 15 percent of claimants will get cash awards. When our people went out and talked to experts, they said the range is 10 to 40 percent. Our people took the midpoint of that range, 25 percent. The Tillinghast study suggests it will be in the range of 23 or 24 percent. That increases the cost over CBO's analysis. The conclusion of the Budget Committee staff on the minority side is that the shortfall over the period of the fund will be $150 billion, the net present value difference being $50 billion. In other words, the $150 billion shortfall is over the life of the fund. That turns into a net present value of $50 billion. But to show you how sensitive this is, we were very conservative in terms of new cancer claims. CBO said 78,000. Our study said 90,000. Tillinghast, in 14 different scenarios, on average found 133,000 new cancer claims. If they are right, this number is not $150 billion, it is $295 billion, with a net present value of $85 billion. Let's reality test for one moment. We went out and looked at what has happened in other cases where funds were set up, what the initial estimates were and then what actually happened. In the case of the Manville trust, the original range was that there would be on the low end 50,000 claims and on the high end, they said 200,000 claims. Here is how many there have actually been to date--not 50,000, not 200,000-- there have already been 690,000 claims. That is not the end of it. They now estimate there will be another 1.4 million claims on top of that, for a total of over 2 million claims. So what is the result? The result is, people who were promised certain recovery are getting 5 cents on the dollar. That is what they are getting now, 5 cents on the dollar. We also looked at the black lung fund. In the black lung fund they projected at the beginning, the original estimate, it would cost $3 billion. Here is what it has cost so far--$41 billion. That is through 2004. The assertion has been made that CBO has said this is paid for. That isn't their conclusion. CBO said this in the letter: The proposed trust fund might or might not have adequate resources to pay all valid claims. There is a significant likelihood that the fund's revenues would fall short of the amount needed to pay valid claims, debt service, and administrative costs. If you look at the numbers behind the numbers, I think it is very hard to conclude anything other than what my professional staff concluded. The strong likelihood is that this fund is way under water. Our conclusion is $150 billion under water. It is entirely possible----