Kent Conrad

Mr. CONRAD

Mr. CONRAD. Mr. President, I think the chairman of the Budget Committee just summed up the position of his party when he said we have to borrow the money because we have the debt. That is exactly right. Their party has put us on a fiscal course to explode the debt. And when the Senator talks about deficit reduction, which is on the cover of the book of the matter that we are discussing today--it says deficit reduction--it just doesn't have any credibility because it is part of a package. The package is the budget that was passed earlier this year. This reconciliation process we are going through now was authorized by that budget. That budget didn't reduce any deficit; it increased the deficit. Most seriously, it exploded the debt. Well, here it is. The budget we are working to conclude increases the debt by $3.4 trillion over the next 5 years. The spending cut they have out here right now is $39 billion. By the way, they are about to reduce that because the first amendment from our colleagues on the other side is a spending amendment. But let's look at the whole package, the whole package that our colleagues have offered the country, have offered the Senate. If doesn't reduce the deficit, it doesn't reduce the debt, it dramatically expands the debt--not by my calculation but by their calculation. Here is their calculation of the increase in the debt of their 5-year budget proposal. They are going to run up the debt $3.4 trillion. This spending out here over 5 years of $39 billion basically does not touch it. Now, my colleague had a whole list of possible tax cuts and said, well, maybe we are for increasing the taxes on the American people, on those various items. I support extension of many of those tax cuts, but I believe they ought to be paid for. That is the way we used to do business around here. We used to have a provision we called pay-go, and if you wanted to increase spending or you wanted to have more tax cuts, you could do it, but you had to pay for it. There is an old-fashioned idea: pay for it. Our colleagues over here don't want to pay for anything. They want every tax cut, they want every spending provision-- this increase in spending. They are in control. The spending they are complaining about, they passed it. They control the Senate of the United States. They control the House of Representatives. They control the White House. Every dime of this spending that they are complaining about, they passed--every dime of it. The President has not vetoed one spending bill. Every dime of this spending they supported. But here is what they did on the revenue side. This is what has happened to the revenue. The revenue side of the equation collapsed, and, yes, we have had an upkick in the last year, absolutely. The Senator is correct. Revenue has increased in the last year. But look at where it is. It is way below the historical level. The result of this combination of their spending increases and their tax cuts has been to explode the deficits. We have had in the last 3 years the largest deficits in the history of the country. They have exploded the debt-- not by my calculation but by their own calculation and by the historic record. Look, when this President came in, the debt was $5.7 trillion. In 5 years he is going to have added $3 trillion, if this budget plan passes. They ran up the debt another $551 billion for the last year alone. They are going to increase the debt of this country in the 5 years of this Presidency by $3 trillion, and in the next 5 years they are going to run it up another $3 trillion. Now, facts are stubborn things. It is very interesting that my colleague on the other side, when he put up the possible tax cuts they are talking about, left this one out. You didn't see this. You didn't see this one mentioned, the capital gains and dividends tax cuts. Here is the distribution of those tax cuts, who gets them: Those earning over $1 million a year will get, on average, a $35,000 tax cut. Those earning less than $50,000 a year, this is what they get: $6--$6. That is what my colleagues on the other side of the aisle think is a fair distribution of the tax cuts--$6 for those earning less than $50,000 a year, $35,000 for those earning over $1 million a year. And one of the ways they reduce the cost of all this is to take from the least among us. Go look at what the House of Representatives is proposing by way of their spending cuts. They are going to cut Medicaid, they are going to cut food stamps, the things that go to the least among us so that they can give additional tax cuts to those who have the most among us. That is not a value that I have read in any Bible. My Bible does not say take from the least among us to give to the most among us. I have not seen that in any chapter of the Bible or, for that matter, in any holy book. Virtually every religion--perhaps every religion--has as a value that we help the least among us. We don't take from the least among us to give to those who have the most. But that is exactly what is before us in this proposal. Again I say to my colleagues, you can't separate out the first chapter of the book they have labeled deficit reduction; you have to read the whole book. You have to read all the chapters. If you read the chapters of this book, what you find is in chapter 1, they cut a little bit of spending, in chapter 2 they cut even more revenue, and in chapter 3, they explode the debt by $781 billion. And they call it deficit reduction? Please. If you look at the whole book, if you read the entire book, what you find is they are going to increase the debt of our country by $3 trillion over the next 5 years. And they are out here talking about deficit reduction? No, that dog won't hunt. I rise to offer an amendment with Senator Nelson and Senator Feingold to restore some budget discipline. We want to go back to the pay-as- you-go rule that served this country so well in previous years. I thank Senator Nelson and Senator Feingold for their leadership on this issue. I see Senator Feingold is on the floor. Our amendment is simple. It restores the original pay-go rules preventing new mandatory spending and new tax cuts unless they are paid for. My colleague talks about all the additional tax cuts he wants. That is fine. I will support a lot of them, but we have to pay for them. Otherwise, we are borrowing money from China, Japan, the Caribbean Banking Centers, and all the rest to give tax cuts that, in many cases, go predominantly to the wealthiest among us. What a bizarre strategy that is. The proposal we are making today eliminates a loophole in the current pay-go rule which exempts tax cuts and spending increases that are provided for in the budget resolution. We don't have to pay for them if they are in the budget resolution. This huge loophole encourages fiscally irresponsible behavior, which is exactly how I would characterize the budget that is before us. It is fiscally irresponsible--fiscally irresponsible to increase the debt by $3 trillion when we have already almost $8 trillion of debt. If people are serious about fiscal discipline, this is their chance to prove it. I would like to take a moment to remind my colleagues of the history of pay-go and why it is important to reinstate the original pay-go rule. The rule was adopted in 1990 at a time when the Federal Government was facing unprecedented deficits, just as we are today. Originally, the pay-go rule created a 60-vote point of order against tax cuts and mandatory spending that would increase the deficit. Tax cuts and increased spending either had to be paid for or face a 60-vote point of order. Back in the nineties, the budget discipline of pay-go helped us turn record deficits into record surpluses. But the pay-go rule we have now has lost its teeth. What we are left with is a pale reminder of what pay-go used to be. The current pay-go rule exempts all policies assumed in every budget resolution. As a result of these changes, the budget resolution this year advocated borrow-and-spend policies. Here is what our current fiscal picture looks like: record budget deficits as far as the eye can see; an ocean of red ink. That is where we are now, and that is where we are headed. In this year's budget, the majority paved the way for these reconciliation bills that are before us now that will actually increase the budget deficit. How? By shaving $39 billion of spending over 5 years, but then by cutting revenue $70 billion. The combined effect is to increase the deficit by $31 billion, and we already have record deficits. The whole idea of reconciliation was to provide fast-track protection to deficit reduction. Now it has been hijacked, and they are using these special provisions and special protections to increase the deficit. It is a perversion of the process. Federal Reserve Chairman Alan Greenspan opposes tax cuts that are financed by increasing the deficit. Here is what he told Congress last year. Question from Congressman Spratt: Let me ask you this. You said you were for extension of the original pay-go rule, which would apply to tax cuts as well as to entitlement increases. Does that mean you would advise us that as we approach these sunsets and expirations in existing tax cuts, that they be offset before the renewal be passed? Mr. Greenspan: Yes, sir. That is the answer the chairman was perhaps seeking. He wants to extend these tax cuts. Many of them I do as well. But I want to pay for them. That is what pay-go provides. Here is what the Fed Chairman had to say on the question of restoring the original pay-go: ``Yes, sir,'' when asked a direct question if we should restore pay-go. Earlier this year in testimony before the House Budget Committee, Chairman Greenspan again reiterated his support for fully offsetting the costs of all tax cuts: If you're going to lower taxes, you shouldn't be borrowing essentially the tax cut. And that over the long run is not a stable fiscal situation. That is what we are doing here: Put it on the charge card, run it up, borrow the money. Where are we borrowing it? Increasingly we are borrowing it from abroad. Under this President, we have increased our debt held by foreign countries by over 100 percent. It took 42 Presidents 224 years to run up a trillion dollars of external debt. This President has doubled it in 4 years. That is an utterly unsustainable course. Chairman Greenspan said before the House Budget Committee earlier this year: All I'm saying is that my general view is that I like to see the tax burden as low as possible. And in that context, I would like to see tax cuts continued. But, as I indicated earlier, that has got to be, in my judgment, in the context of a pay-go resolution. That is what we are offering today, a pay-go resolution. You can have more spending; you have to pay for it. You can have more tax cuts; you have to pay for them. That is the budget discipline we had earlier in the nineties, and it worked well in drawing us out of record deficits and back into surplus. In the past, the chairman of the Budget Committee has agreed with the Fed Chairman's wise counsel. During the fiscal year 2002 supplemental bill, the Budget chairman had this to say. This is Chairman Gregg: The second budget discipline, which is pay-go essentially says if you are going to add a new entitlement program or you are going to cut taxes during a period, especially of deficits, you must offset that event so that it becomes a budget-neutral event that also lapses. He went on to say: . . . If we do not do this, if we do not put back in place caps and pay-go mechanisms, we will have no budget discipline in this Congress and, as a result, will dramatically aggravate the deficit which, of course, impacts a lot of important issues, but especially impacts Social Security. The Budget Committee chairman was right then, and if he took the same position now, he would be right now because the measure we are offering is pay-go. If you want to have new spending, pay for it. If you want to have more tax cuts, pay for them. That is critically important given the fact that the deficits and debt are going up, up, and away under this underlying budget resolution. What we are offering today eliminates the pay-go loophole. The current pay-go rule exempts all tax cuts and mandatory spending increases assumed in any budget resolution, no matter how much they increase deficits. Our proposal is to go back to what has worked in the past. It is traditional pay-go. It says all mandatory spending and all tax cuts that increase deficits must be paid for or they have to get a supermajority vote of 60 votes. Mr. President, I yield to my colleague from Wisconsin such time as he may use.

Mr. CONRAD. The Senator can see here the answer to the question he posed to me. I would ask: Who is holding the debt?

Mr. CONRAD. I would be happy to ask the Senator from Maryland a question, if he would yield for that purpose.

Mr. CONRAD. He had asked who was holding the debt, and this is who is holding the debt.

Mr. CONRAD. I interpreted a question from the Senator.

Mr. CONRAD. Well, we owe Japan over $680 billion.

Mr. CONRAD. The Senator is correct. So we have had a swing from projections of a $5.6 trillion surplus to more than a $4 trillion deficit. That is a swing of $10 trillion.

Mr. CONRAD. Mr. President, I understand the frustration of my colleague because his party has given him an impossible task--to come out and defend a budget plan that explodes the debt. You notice there was not one comment by the Senator about the debt. Here is why there was no comment about the debt. Here is what has happened to debt under their watch. When President Bush took office, the gross debt of the United States was $5.6 trillion. Each and every year, the debt has gone up by $500 billion or $600 billion. In 2002, it went up to $6.2 trillion, a $500 billion increase; in 2003, $6.8 trillion, it went up another $600 billion; the next year, $7.4 trillion, another $600 billion; the next year, $7.9 trillion, it went up another $500 billion. Here is what it is slated to do under the budget plan they have put in place. The debt keeps going up, up, up, by $600 billion a year by their own calculation, and they are out here touting that they have a deficit reduction package. Excuse me. Have words lost their meaning? They are out here talking about reducing the deficit, and their fiscal plan has done nothing but explode the debt of our country from $5.7 trillion when they took over and we are headed for over $11 trillion of debt by the time they are done. And they are out here touting a plan of deficit reduction. Come on. Come on. That doesn't pass the laugh test. I understand the Senator from South Carolina was up here with a chart the other day that he called the Democratic Spend-O-Meter chart. Let me address that. The Democratic Spend-O-Meter chart of the Senator from South Carolina is a complete concoction. He claims that the Democratic amendments this year would cost $470 billion. Absolute nonsense. Their Spend-O-Meter ignores the fact that many of the Democratic amendments were offset. He didn't count those offsets. In fact, because they included additional deficit reduction, the net effect of all Democratic amendments on the budget resolution would have reduced deficits by $57 billion. Their Spend-O-Meter also double-counts the cost of some Democratic amendments because they treat them as if they were a package instead of offered individually. Some Democratic amendments covered the same subject area as an earlier amendment and would never have been offered if that earlier amendment had passed. Their Spend-O-Meter also overstates the cost of Democratic amendments by misleading and falsely assigning 5-year costs to 1-year amendments. Most of these Democratic amendments were for only 1 year, but they have taken them and made them into 5-year amendments. Those weren't our amendments. That is your concoction. That is your fabrication. That is not right. Democratic amendments to the 2006 budget resolution would have reduced the deficit by $57 billion. Republican amendments to the 2006 budget resolution actually worsened the deficit by $79 billion. That is the real story of what happened earlier this year--net cost of GOP amendments: $79 billion of additional red ink; net effect of Democratic amendments: $57 billion of reduction in the deficit. I also want to respond to the more general accusation that Democrats just want to spend. I would like to remind my colleagues of the record. Under the last Democratic administration, spending as a share of the economy came down steadily year after year, falling from 22.1 percent of gross domestic production to 18.4 percent of gross domestic production. During the term of the Democratic administration, spending went down. Now I will compare that to the time since the Republicans gained control. Under our Republican friends, spending has gone from 18.4 percent of gross domestic production to 22.2 percent of gross domestic production. Who are the big spenders? When we were in control, spending went down. When they have been in control, spending has gone up. That is not the end of the story. The bottom line is deficits. Here is the difference in the deficit records of various administrations going back to the Reagan administration. They were in significant deficit the entire period of the Reagan administration. The Bush administration, Bush 1, dramatically increased the deficits. Under the Clinton administration, we pulled out of deficit and actually went into surplus for 3 years. In fact, 2 of the 3 years we were actually able to stop raiding Social Security trust funds. Here is the deficit record under the second Bush administration: They plunged us right back into deep deficits and massive increase in debt. Now they have a budget plan that, by their own terms, by their own calculations, increases the debt of the country by $3 trillion over the next 5 years--and they are out here talking about reducing the deficit. I suppose they can make the claim, but I don't think it will stand up very well. I don't think it will stand up to much scrutiny because we can look at the package--even this little package before the Senate right now. The fact is, there are many chapters to this book. The first chapter cut spending $39 billion. That is in the face of increasing the debt by $3.4 trillion over the next 5 years. They talk about it being a good start. I would say it is virtually no start. It is no start when you consider the second chapter which will cut the revenue by $70 billion. The combined effect is to increase the deficit. If anyone wonders, go to chapter 3 where they increase the debt in 1 year alone by $781 billion. And they call themselves fiscally conservative? My goodness, that is conservative? That is not any definition of conservative I have read anywhere. Let's see what is happening to the debt under our friends. They came in and it was $5.7 trillion and they have already run it up to $8 trillion. Here is what their budget proposal is doing now. If we adopt the 5-year budget plan, they will have run the debt of the country from $5.7 trillion to over $11 trillion. That is their record. What are the results of these policies? The results of these policies are to build a wall of debt. Every year, debt is going up $600 billion a year under their budget plan. These are their numbers. Not my numbers, their numbers. What does that translate into? That translates into an increase of debt by over $1 million a minute. That is the fact. That is what we are talking about. What is the result? The result is in 4 years, they have doubled the debt held by foreign countries. U.S. debt held by foreign countries and foreign investors has doubled. It took 224 years to run up $1 trillion of foreign-held debt. In only 4 years, they have doubled it. Here is the record, looking at the other 42 Presidents in American history. It took them 224 years to run up $1 trillion of external debt. This President has exceeded them in 4 years. This President has run up over $1 trillion of foreign-held debt in his term: $1.05 trillion versus 42 other Presidents, $1.01 trillion. It is pretty stunning what has happened. And the result? Here it is: We now owe Japan over $684 billion. We owe China $248 billion. We owe the United Kingdom over $174 billion. We owe the Caribbean Banking Centers over $100 billion. This strengthens the country? How does that strengthen the country? They do not want anyone to read chapter 3 of the book. No. They want to talk about deficit reduction. It is a wonderful title, but it has no relationship to the facts. The budget they have before the Senate does not reduce any deficit. They increase the deficit. They explode the debt. Under their own calculations they will increase the debt over the 5 years of this budget proposal by over $3 trillion. They have the chutzpah to come out here and talk about deficit reduction. Let's read the third chapter of their book. The third chapter increases the debt limit of the United States in 1 year by $781 billion. And they are out here talking about deficit reduction? Come on. The chairman said accurately we did not present a budget. That is exactly right, we did not present a budget. Why didn't we present a budget? Because they are in control. They are in control of the White House. They are in control of the Senate. They are in control of the House. We first had to try to defeat their proposal. Only then would we have had an opportunity or a chance to offer an alternative. The first test was, can we defeat their budget? I tried my darnedest. The chairman knows that. I tried very hard to defeat the budget proposal they put before our colleagues because it exploded the debt by their own calculations by more than $3 trillion over the next 5 years. But I didn't succeed. They won. They passed their budget. If we could have stopped them, if we could have defeated them, then an alternative would have been in order and I would have been happy to offer an alternative if we had a chance to prevail. There was no chance to prevail. They won. The country lost, but they won. The country lost because their budget did not reduce the deficit. It increased the deficit and it exploded the debt. By their own calculations, this 5-year budget they have put together will increase the debt of our country by $3 trillion. That is a fact. I yield the floor.

Mr. CONRAD. Mr. President, I have recognition.

Mr. CONRAD. Mr. President, let me say that on our side we have enjoyed working with the chairman of the committee very much. He is absolutely professional and fair and his word is good. We have had a very good working relationship on the Budget Committee. Obviously, we have disagreements about policy, but on the committee we have tried not to disagree in a disagreeable fashion. I have respect and admiration for the chairman of the committee, and we are going to try to work together to handle amendments in an expeditious and professional way so the time is well used. I yield the floor.

Mr. CONRAD. Mr. President, the subject under discussion is the matter before us entitled the ``Deficit Reduction Omnibus Reconciliation Act of 2005.'' Big words that are meant to communicate, but it reminds me a little of the old saying: You can't tell a book by its cover. If there was ever a case of that, this is it. You need to know that this is a book of many chapters. We need to read all of the chapters to know the conclusion. I can assure you the conclusion is not deficit reduction. No, this budget has nothing to do with deficit reduction. This budget is all about increasing the debt and increasing the deficits. Describing this package as deficit reduction is a little like the blindfolded man describing an elephant by only touching its tail. The blindfolded man might describe the elephant by just holding its tail as small, long, and slick. Well, that is not the whole story. That is an accurate description as far as it goes, but it misses the larger truth. That is the case with describing this budget action as deficit reduction. It is only the first chapter. You have to read all of the chapters to get the full meaning. The truth is, this budget increases the deficit and explodes the debt. That is the larger truth. The budget that was enacted earlier this year actually increases the deficit by $168 billion over the 5 years of its life. It does not reduce the deficit. It increases the deficit. We would have less of a deficit if we put the whole budget on cruise control, but that was not the choice the majority made. They made a choice, consciously, to write a budget that, even in the face of record deficits and massive increases in debt, increases the deficits even further. I know it is hard to believe, but that is the fact of the matter. The budgets that have been written by our colleagues on the other side of the aisle increase the deficits. Budget reconciliation is a part of the overall budget process. Budget reconciliation is special provisions, fast-track provisions that enjoy special protection under the rules of the Senate. But remember, what we are dealing with this week is the first chapter. The first chapter contains spending cuts of $39 billion. But that is only part of the package. The next chapter will have tax cuts of $70 billion. If you put those two chapters together, you don't have a reduction of the deficit, you have an increase in the deficit of over $30 billion. Chapter 3 is the chapter our colleagues on the other side of the aisle hope you will not read. Chapter 3 increases the debt of the country by $781 billion. That is what this book is all about: increasing the debt of the country when we have already taken on record amounts of debt. Back to chapter 1 and chapter 2. Chapter 1 cuts spending by $39 billion, but it is quickly followed by chapter 2 that cuts taxes $70 billion. The combined effect of chapters 1 and 2 is very clear. It is not deficit reduction, not what is on the cover of the book; it is a deficit increase, an increase in debt. If we go back to what the President told us when he started us down this course, he told us in 2001: [W]e can proceed with tax relief without fear of budget deficits, even if the economy softens. That is what he told us. Look at what has happened. Now we can look back and we can check the record and we can see whether the President was right or was he wrong. Back at the time in 2001 that the President proposed these massive tax cuts, this was the outlook according to the Congressional Budget Office and the administration. This was their outlook going forward, a range of possible outcomes from a worst-case scenario to the best-case scenario. They adopted the midline that told us we were going to experience some $6 trillion of surpluses over the next 10 years. But look what happened in the real world. Look what happened in actuality. We didn't get the worst possible outcome under the projections that were provided. We got way below the worst possible outcome. This red line is what actually happened compared to the projections, and instead of trillions of dollars of surpluses, what we have are trillions of dollars of debt. I can remember when we were having that debate. My Republican colleagues told me when I warned them that you can't bet on this 10- year forecast, that it is highly unlikely to come true, many of my Republican colleagues told me: Kent, you are far too conservative. Don't you understand, when we have these big tax cuts, we are going to get even more revenue. We are not going to be at this midrange of forecasts of possible outcomes; we are going to be well above it because these tax cuts are going to generate much more revenue. Again, now we can go back and check the record as to what actually happened. We did not get some great boost. Instead what we got was an ocean of red ink. Instead what we got were these massive deficits. Previous Presidents have said that facts are stubborn things. Facts are stubborn things. And the facts are that this fiscal policy has taken us deep into the deficit ditch. Despite all of the President's promises that would not occur, he was simply wrong. The next year the President told us: . . . [O]ur budget will run a deficit that will be small and short-term. . . . We can go back and check the record on that as well. He said that in 2002. Look what has happened since. The deficits have exploded. In 2003, we had what was then the largest deficit ever. In 2004, the deficit got even bigger. In 2005, the deficit was the third largest we have ever had. So, again, the President was simply wrong in his prediction. If we look at this from a historic vantage point and look back to 1980 and look at the outlays or spending of the United States and the revenues, we see some very interesting things. This is all expressed as a percentage of our gross domestic product, which is what economists say is the best way to make these comparisons because it takes out the effect of inflation and real growth. So we are comparing apples to apples here. Look what has happened. This is the spending line of the United States. It was up over 23 percent of gross domestic product in the previous Bush administration. Then we got to the nineties, and the Democrats put in place a plan that led us to reduce spending, and each and every year spending came down as a share of GDP. In 2000, we had a change of administration, and here is what has happened to spending. Spending has gone up. Spending has gone up, but it is still well below where we were in the eighties and nineties. These are facts. Why did the spending go up? The spending went up largely for three reasons. One, national defense; two, homeland security; three, rebuilding New York and bailing out the airlines. All of us supported on a bipartisan basis this increase in spending. This was in response, obviously, to 9/11 and a national emergency. So, yes, spending went up. Virtually all of it is accounted for by defense, homeland security, and rebuilding New York and aid to the airlines. Now we are at a place where spending is at about 20 percent of gross domestic product. But look what happened on the revenue side of the equation. Again going back to the eighties, we were at about 19 percent of gross domestic product on revenue. We had a series of tax cuts then that opened up deficits as spending was not reduced to make up the difference. Then we got to the nineties and again we had a plan that was put in place. Revenue increased every year until we actually got to the circumstance in which we were running surpluses. For 2 years, we not only ran surpluses, but we stopped using Social Security money for other purposes. Then in 2000, with the change of administration, a series of tax cuts was put in place, and we experienced an economic slowdown and the revenue side of the equation collapsed. Until last year, we had the lowest revenue as a share of gross domestic product since 1959. We have had an increase in this last year, but the forecasters are saying that will level out going forward as a share of gross domestic product, leaving us with this very large gap between spending and revenue and, hence, ongoing massive deficits. That is the reality we find ourselves in today. The next year, in 2003, the President told us: [O]ur budget gap is small by historical standards. I think if you measure it fairly, what you find out is that is not the case either. What the President has been focusing on is only the deficit. The deficit this last year was $319 billion, but that isn't what got added to the debt. What got added to the debt of the country was not $319 billion, it was $551 billion. The largest part of the difference is Social Security because last year, under the President's plan, $173 billion of Social Security money was taken to pay for other programs. That all gets added to the debt, but it is not counted in the deficit calculation. When you add in those items that were not counted in the deficit, what you find is that the increase in the debt was, instead of the 2.6 percent that many have asserted, the actual difference between spending and revenue, the actual difference in addition to the debt was 4.5 percent of gross domestic product, and that number is a danger sign. Most economists say your deficits should not be above 2.5 percent of GDP. The truth is, what got added to the debt last year was 4.5 percent of GDP. In the European Union, you cannot be a member in good standing if you run deficits in excess of 3.0 percent of GDP. The big difference is what is happening with Social Security because back in the eighties, the deficits had almost nothing to do with Social Security. Social Security was running very small surpluses at the time. In fact, if you go back to 1983, there was no Social Security money to take to spend for other programs. There was no surplus in Social Security. But look what has happened since. Social Security surpluses have grown dramatically. This was intended, this was designed to prepare for the retirement of the baby boom generation. The whole idea was to use these surpluses to pay down debt or to prepay the liability. That is not what has been done. Under the President's policy, all of this Social Security money is being taken to pay for other programs. That is what is happening. All of it is getting added to the debt, all of it has to be paid back, and there is no plan to do it. This is the difference between the eighties and now. In the eighties, almost no Social Security funds were available to be taken to pay for other items, now we have--just last year--$173 billion in that year alone. Over the next 10 years, under the President's plan, they are going to take $2.4 trillion of Social Security money to pay for other things. That is a dangerous course. Now, the President told us just last year: So I can say to you that the deficit will be cut in half over the next 5 years . . . All of his assertions so far have been proved wrong. Now he tells us: Do not worry, we are going to cut the deficit in half over the next 5 years. First, I do not think that is the appropriate test because we are in the sweet spot of the budget cycle. This is the time when we should not be running deficits at all because this is right before the baby boomers retire, and we are running these massive surpluses in Social Security. Those funds should have been used to either pay down debt or prepay the liability. Instead, the money has been hijacked. The money has been taken to pay for other things--digging a much deeper hole for the future. So when the President says the deficit will be cut in half over the next 5 years, that is not even the right test. This is not a time when we should be running deficits at all. Beyond that, if one pierces the veil on the President's claim that the deficits are going to be cut in half, here is what they find out: He got there by just leaving out things. He just left out war costs, did not have any war costs in his budget past September 30 of this year. Does anybody believe the war costs ended on September 30 of this year? That is what the President's budget said. He did not just leave out war costs, he left out the cost of dealing with the alternative minimum tax. The alternative minimum tax, which is the old millionaire's tax and is rapidly becoming a middle-class tax trap. It costs $700 billion to fix. The President just left that out of his budget. The President wrote a 5-year budget instead of the 10-year budgeting that used to be done because at the end of the fifth year, the cost of his tax cut proposals explodes, driving us deeper into deficit and deeper into debt. Apparently, he did not want to share that information with the American people. When one looks at the long-term outlook with those things added back in that the President left out, what one sees is a slight improvement in the deficit in the short term, but then it just explodes beyond the 5-year budget window. Why is that the case? Well, I have mentioned some of the reasons. The first reason is war costs. In the mid-session review, the President had included $50 billion for ongoing military operations, but the Congressional Budget Office tells us that $50 billion does not begin to cover the real costs. They say the real cost is going to be $333 billion. So the President has left out a big chunk of spending that others say we will experience. Second, by adopting a 5-year budget--it used to be 10-year budgets-- the President is hiding this fact: The cost of his tax cut proposals explodes right beyond the 5-year budget window. Is this not interesting? This dotted line is the end of the 5 years of the budget proposal presented by the President. Look what happens to the cost of his tax cut right beyond the fifth year. The cost of the President's tax cut proposal explodes right beyond the end of the fifth year. Maybe it should not be a surprise that the President switched from 10-year budgeting to 5-year because he would have had a very hard time explaining how his plan will reduce the deficit when factoring in the exploding cost of his tax cuts, the additional cost of war, and the cost to fix the alternative minimum tax. By the way, the pattern is much the same with the alternative minimum tax. The alternative minimum tax, which virtually everyone says needs to be reformed, the President did not put one thin dime in his budget proposal to deal with that. According to the Congressional Budget Office, it will cost $774 billion to fix. The President does not have any of it in his budget. Look at the pattern. Here again, the dotted line is the end of the 5- year budget proposal of the President. Here is the pattern of costs of fixing the alternative minimum tax. What happens if we do not fix the alternative minimum tax? Well, here is what happens: In 2005, 3.6 million taxpayers were affected. If we fail to act, by 2010, 29 million taxpayers will be affected. So people are in for a big surprise. They thought they were going to get a tax cut? Instead, they are going to get into the swamp of the alternative minimum tax: 3.6 million people affected this year, 29 million affected 5 years from now if we fail to act. It costs $770 billion to fix, and there is not one dime in the President's budget to do it. Here is what the President said in 2001 about the importance of paying down debt. The President told us at the time: . . . (M)y budget pays down a record amount of national debt. We will pay off $2 trillion of debt over the next decade. That will be the largest debt reduction of any country, ever. Future generations shouldn't be forced to pay back money that we have borrowed. We owe this kind of responsibility to our children and grandchildren. The President was right about one thing. We do owe that responsibility to future generations, but he did not pay down any debt. Instead, the debt has exploded. The budget that my colleagues on the other side of the aisle passed and the budget that we are moving to take final action on does not pay down any debt. It explodes the debt. It takes the debt from $7.9 trillion now, and it increases it by more than $600 billion a year each and every year of the life of this budget--this after the President told us he is going to have maximum pay-down of the debt. There has been no pay-down of the debt. He is exploding the debt. Every minute in 2005, the budget policies of our colleagues on the other side of the aisle increased the national debt by over $1 million. Every minute of every day, they have increased the debt by over $1 million. What are the consequences of this fiscal failure? The consequences are very clear. Foreign holdings of our debt have exploded. It took 200 years to run up $1 trillion of debt held by foreign countries and foreigners. This President has doubled it in 4 years. We have gone from $1 trillion of foreign holdings of our debt to $2 trillion. That is an utterly unsustainable course. That is the outcome of the fiscal policy of this administration. It is not conservative; it is reckless. This is a policy of exploding our debt. Who holds this debt? Well, I might add it is interesting that President Bush did in 4 years what 42 Presidents took 224 years to do. Forty-two Presidents ran up $1 trillion of external debt. This President exceeded them in 4 years. This President ran up more debt held by foreigners in 4 years than the other 42 Presidents combined in the history United States. Let me repeat that. This President ran up more debt held by foreigners in 4 years than 42 other Presidents ran up in 224 years. That is a record of fiscal failure unmatched in the history of this country. They call themselves conservatives? Why, they should call themselves borrowers because that is what they are doing. They are engaged in the greatest borrow-and-spend spree in American history. Who are we borrowing the money from? Increasingly, we are borrowing it from foreigners, from foreign governments, from foreign investors. Now we owe Japan over $684 billion. We owe China over $240 billion. We owe the United Kingdom over $170 billion. My favorite, the Caribbean Banking Centers, we owe the Caribbean Banking Centers over $100 billion. Where did they get their money? Anybody here do their banking in the Caribbean? We owe them over $100 billion. This is conservative? What is conservative about this? Some say this is strengthening the country. How is that? How does it strengthen the country to borrow more and more money from abroad? This is all happening at the worst possible time--before the baby boomers retire. We are facing a demographic tsunami, and here it is: This is a depiction of the numbers of people in the baby-boom generation. We have less than 40 million people who are eligible for Social Security and Medicare now, and we are headed for 81 million. That changes everything. Instead of preparing for it, this President has dug the hole deeper and deeper. There is nothing conservative about what is being done. Let us go back to the so-called budget reconciliation that is before us today. The cover on the book says: Deficit Reduction. One has to read the book. They have to read every chapter of the book to find out the conclusion, and the conclusion has nothing to do with deficit reduction. Oh, no. The first chapter cuts spending $39 billion, but the second chapter cuts revenue $70 billion. So guess what: No deficit reduction here. The deficit is increased, not reduced. Then one has to read the third chapter of the book. What is found there? They are going to increase the debt $781 billion--one of the biggest increases in our national debt ever. If they get that increase, this President alone, in the 4 years he has been in power so far, will have run up the debt by $3 trillion. In the next 5 years, he is going to run up the debt another $3 trillion. There used to be a TV show--what did they call it--the ``Six Million Dollar Man''? We have the $6 trillion President because the effect of his policies will be to run up the debt of this country by $6 trillion. That is truly stunning. Here is the record. In 2002, debt was increased by $450 billion. In 2003, debt was increased by $984 billion. In 2004, it was increased by $800 billion. Now our friends on the other side want to increase the debt by $781 billion. That is a grand total of more than $3 trillion of additional debt. We know that, if this budget is passed, they are going to add another $3 trillion of debt over the next 5 years--a combined total of this President's policies of $6 trillion. That is this President's plan. Unfortunately, that is the plan of this Congress. Don't take my word for it. This is a budget they euphemistically call a deficit reduction plan. If this weren't so serious, this would be very amusing. They place the title of ``Deficit Reduction'' on this plan. Come on. Here is what this plan does according to their own tables. Go and look in the conference report on the budget that was done earlier this year by the majority party in the House and the Senate. This is their conclusion about what is going to happen. This is their conclusion. You see the debt going up every year by more than $600 billion. That is their plan. If you look at the next 5 years, the debt under their plan is going to increase by more than $3 trillion, and they are out here with this book entitled ``Deficit Reduction Act,'' and their plan increases the debt by $3 trillion over the next 5 years. Have words lost their meaning? They call this deficit reduction. They are increasing the debt over $3 trillion, and they label this deficit reduction. That is breathtaking. Chapter 2 of this book is to extend certain tax benefits, tax cuts. Many of those I support, but some of them are just overwhelmingly directed at the most wealthy among us. If you look at chapter 1 being written here, and chapter 1 being written over on the House side--by the way, the House budget is very clear. It is going to cut food stamps. It is going to cut Medicaid. The House bill takes from the least among us so that they can give to those who have the most. When I say ``give to those who have the most,'' let me talk about two provisions that are in their tax plan. Extending dividends and capital gains cuts will, on average, give a millionaire a tax break for 1 year of over $35,000. Those earning less than $50,000 a year will get $6. Those earning from $50,000 to $200,000 a year, on average, will get $112. Those earning from $200,000 to $1 million a year will get, on average, $1,480. Those earning more than a million dollars a year will get $35,000 a year. It is a very interesting set of values. It is a very interesting set of priorities, to cut Medicaid and cut food stamps. This is not the Senate bill I am talking about. I am talking about the House bill. The House bill cuts food stamps, cuts Medicaid, cuts aid for those who are the least among us, takes the resources and gives them to those who have the most. I don't know in what Bible they read that. I have not read any Bible that says the value ought to be take from those who have the least and give to those who have the most. In fact, I don't know of any holy book of any religion that says that is a value, that what we ought to be doing is taking from those who have the least among us to give to those who have the most among us. I don't know of any religion that has that as a value. I know our colleagues on the other side will say: Wait a minute here. These tax cuts have fueled economic growth. There are tax cuts that are helpful to economic growth. That is undeniable and clear. In 2001, I supported a significant package of tax cuts, tax cuts that the Congressional Budget Office told us would get a large bang for the buck in terms of economic growth. Part of those were included in the package. In fact, many of them were, and I supported those. But many of these provisions simply went too far in terms of their cost and have pushed us over into a sea of red ink, massive deficits, and massive debt. They simply went too far. Here is the record on revenues as a share of gross domestic product. In 2000, we were at a historic high. That is absolutely clear. Tax cuts were justified in 2000. I didn't think the magnitude of the tax cuts were justified, but clearly we needed tax cuts, partly to give lift to the economy. My own proposal to our colleagues actually had more tax cuts in the short term, much more than the President's plan, to give lift to the economy because that made good economic sense. But they put tax cuts on top of tax cuts on top of tax cuts and plunged revenue to 16.3 percent in 2004. That is the lowest it has been since 1959, and far below the level of spending for which they have all voted. So the result is red ink, massive red ink. Here is what the Chairman of the Federal Reserve has said about deficit-financed tax cuts, because that is what is going on here now. We are borrowing the money to give tax cuts. From whom are we borrowing the money? Increasingly, we are borrowing it from the Japanese, the Chinese, Caribbean banking centers, to give tax cuts to the most wealthy among us. Does that really make sense? Is that really defensible? I don't think it makes any sense. I am not alone. Chairman Greenspan, in his testimony before the Budget Committee last year, said: If you are going to lower taxes you should not be borrowing essentially the tax cut. That over the long run is not a stable fiscal situation. Chairman Greenspan has it right. We should not be borrowing to provide tax cuts, and we certainly should not be borrowing from foreign governments and foreigners to finance tax cuts. We certainly should not be borrowing more and more money from Japan and China and Caribbean banking centers and who-all knows who else in order to finance these tax cuts, driving us deeper and deeper into the deficit ditch before the baby boomers retire. About the baby boomers, that is not a projection. They are alive today. They are going to retire. They are going to be eligible for Social Security and Medicare. About all I hear from the other side is they will cut Social Security, and they will cut Medicare in order to fill in the difference. That is where this is all headed. Make no mistake about it. Our colleagues on the other side of the aisle, their full intention is to shred Social Security and to shred Medicare in order to avert a fiscal disaster. We are headed for a train wreck. It is just as clear as it can possibly be. What have our colleagues done? They have come out with this very, I would say misleading title on a book, saying it is a Deficit Reduction Act. When you read all the chapters of the book, it is not a deficit reduction proposal. It increases the deficit and explodes the debt. Chapter 1, yes, they cut spending $39 billion over 5 years. Chapter 2, they cut revenue $70 billion over the same time. That increases the deficit by $31 billion. But chapter 3, that is the one they do not want you to read. You will not hear them talking about chapter 3 at all out here because they do not want you to know about chapter 3. In chapter 3, they are going to increase the debt by $781 billion. This is after they have already run up the debt over $2.5 trillion over the last 4 years. Now they are fixing to increase the debt another $3 trillion over the next 5 years, and they are out here with a book called ``Deficit Reduction.'' Oh, no, I don't think the American people are going to buy that. I don't think the American people are going to be fooled by that. I don't think the American people are going to conclude that what this is about is reducing the deficit because it is not. The simple truth is, this budget plan increases the deficit and it explodes the debt. Mr. President, how much time do I have remaining?

Mr. CONRAD. I would say to the Senator, if I could, the situation is even much worse. Why is it much worse? Because the deficits understate what is happening to the debt. Last year, for example, the deficit went up by something over $300 billion, but the debt went up by $551 billion. Most of the difference is the money they are taking from Social Security. Last year, they took, under the President's plan, $173 billion of Social Security money and used it to pay for other things. It all gets added to the debt, but none of it counts toward the deficit calculation.

Mr. CONRAD

Mr. CONRAD. Yes, from that list. I won't name one. I will name 10. The Bingaman amendment on education, completely and totally offset; the Stabenow amendment on first responders, completely and totally offset; the Byrd amendment on Amtrak, completely offset; the Akaka amendment on veterans, completely offset; the Harkin amendment on education, completely offset; the Kennedy amendment on education, completely offset; the Dayton amendment on IDEA, completely offset; the Dorgan amendment on tribal programs, completely paid for; the Biden amendment on COPS, completely paid for; the Byrd amendment on transit highway, completely paid for, offset. That chart is a total and complete concoction and fabrication. These are budget resolution matters I have talked about where the combined effect of Democratic amendments was to reduce the deficit $57 billion because they were offset. In addition, what that chart does is, it takes on appropriations bills amendments that were offered for 1 year, and our friends on this chart have multiplied them into 5-year amendments. They weren't 5-year amendments. They were 1-year amendments. Appropriations bills are for 1 year, not for 5 years. They have taken them and multiplied them by 5. That is false. Beyond that, those amendments were not offered as a package. They were offered individually. So they would offer an amendment. The amendment was defeated. The money was still available for a different amendment. To then add them up and multiply it by 5 and forget about the offsets and put out a chart here on the Senate floor that suggests that is a fair representation is way beyond the pale.

Mr. CONRAD. I would.

Mr. CONRAD

Mr. CONRAD. Mr. President, I ask unanimous consent to speak as in morning business for as much time as I shall consume.

Mr. CONRAD. Mr. President, I come to the floor today to talk about a recent report in the Washington Post about the fiscal condition of the country. This was an article that appeared Saturday in the Washington Post, reporting on the budget deficit. It had this very hopeful headline: ``Federal Deficit Fell in Past Year.'' While that is true, I think it is largely misleading as to the financial condition of the country. When I went into the article, I read this paragraph: The 2005 deficit was the third-largest ever. But it was not only markedly smaller than the record $412.85 billion [deficit] for 2004, it was also well below the forecasts for the year issued in February. As a proportion of the economy-- it equaled about 2.6 percent of gross domestic product--the deficit was within bounds that most economists consider manageable, and far from the levels of the 1980s, when the deficit reached nearly 6 percent of GDP. I think if the average person were to read that, they would think: Gee, things are headed in the right direction. The deficit is down. The deficit is, as a share of GDP, gross domestic product, well below where it was in the 1980s. The problem with this report is, I think it is completely misleading to the American people as to our true fiscal condition. Why? Well, first, because the deficit calculation that is used so broadly by the press--and I am not singling out the Washington Post here. I would also point the finger at almost all of the mainstream media that continually refer to the deficit and never talk about the debt. Here is the difference. While it is true the deficit last year was $319 billion, that is not the amount by which the debt increased. This is a critically important difference people need to understand. The debt last year did not increase by $319 billion, the advertised deficit. The debt increased by $551 billion. I find repeatedly, when I go around my home State of North Dakota, there is great confusion about the deficit and the debt. Most people believe the increase in the deficit matches the increase in the debt. But that is not the case. The debt is increasing by much more than the reported deficit. Here is the biggest reason why: Social Security funds that are being used to pay for other things. In effect, the Social Security trust funds are being raided consistently, repeatedly, in order to pay other bills. If any private sector entity tried to do what is being done here, they would be on their way to a Federal institution, but it would not be the Congress. It would not be the White House. They would be on their way to a Federal penitentiary because it is a violation of Federal law to take the retirement funds of employees and use them to pay operating expenses. That is exactly what is going on here. It happened last year to the tune of $173 billion. It is not included in the deficit calculation. Why not? Because that is borrowing of one Government entity from another Government entity. So they don't include it in the deficit, but it is included in the increase in the debt. Every penny of this has to be paid back. What is happening is, the general fund of the United States is, in effect, borrowing money from the Social Security trust fund. It is using that money to pay other bills--not using it to pay down debt, not using it to prepay the liability, it is using it to pay other bills. It is adding to the debt. So last year the debt increased not by $319 billion, which we read in every press report. You didn't read in any press report that I can find, not one, that the debt increased by $551 billion last year. When you then correct for what has been left out, instead of an operating deficit of 2.6 percent of GDP, which was reported in the story by the Washington Post on Saturday, which is, they say, within acceptable bounds of most economists--most economists say about 2.5 percent of GDP is the danger point--when you make an adjustment for what the debt increased by, what you see is an operating hole in the United States of 4.5 percent of GDP, far beyond what most economists say is acceptable. In fact, in the European Union, to become a member, you have to have an operating deficit of 3 percent of GDP or less. The United States wouldn't qualify under that standard because in truth our operating deficit is now well in excess of 4 percent of GDP. The other thing that is important to understand, the article referenced the deficit as a share of GDP was higher back in the 1980s, not much higher, and in most years not higher when you put in the calculation of the money being taken from Social Security. Here is the pattern of Social Security surpluses that are being used. You can see back in the 1980s there was almost no money being used from the Social Security trust fund. Back in those days, you can see we were running very small surpluses. In fact, until 1983, we weren't running any surpluses in Social Security. Then they were very modest, but most of this time well below $50 billion. Look at where we are now. We are up here now, $170 billion a year. That is a profound difference in the calculation. Nobody seems to pay any attention to it. This gives you a very different look at the true fiscal condition of the country. In addition to that, back in the 1980s, you had time to get well because the baby boomers were not going to retire for over 20 years. Now there is no time to get well because the baby boomers are poised to retire. That is not a projection. The baby boomers are alive today. They have been born. They are living. They are going to retire. They are going to be eligible for Social Security and Medicare. We are headed for a train wreck. What we get from the mainstream media are these happy talk reports that the deficit is down. No attention is paid to the increase in the debt. No attention is paid to where this is all headed. This is serious business. This chart shows, going back to 1980, the relationship between spending and revenue. The red line is the spending line as a percent of GDP in the United States. The green line is the revenue line as a percent of GDP. Let's stop there and ask, Why do we use that calculation? Why aren't we showing in dollar terms the relationship between spending and revenue over a long period of time? The reason is very simple: Economists tell us, if you use gross domestic product, you then take out the effects of inflation and real growth, so you are comparing apples to apples. That is what we are trying to do here, get a sense of what is happening to our spending, what has happened to our revenue over an extended period of time. This chart shows that the spending level of the United States, back in the 1980s and for much of the 1990s, was significantly higher than it is today. You can see the spending line back here. This goes back to 1980. Through the 1980s, the spending line--and much of the 1990s--was well above where it is today, even though in the 1990s spending came down each and every year as a share of gross domestic product. Now we have had this uptick in spending, quite a substantial increase as a share of gross domestic product, but still we are well below where spending was in the 1980s and for much of the 1990s. Ninety-one percent of the increase in discretionary spending was from three factors: Defense, homeland security, and rebuilding New York. So the spending line has had a substantial increase but still well below where Federal spending was as a share of our national income going back to the 1980s and 1990s. Look at the revenue line. The revenue line back in the 1980s was approaching 20 percent of GDP. Then there were the tax cuts, and it went down to just over 17 percent of GDP. Then it kind of jiggled and jagged around here. And then in the 1990s, as the spending line came down each and every year, the revenue line went up each and every year. So that in the year 2000, revenue was at a historic high, about 20.9 percent of GDP. Look what has happened to the revenue line since 2000. The revenue line has collapsed. Revenue last year was the lowest as a share of gross domestic product since 1959. Anybody who is serious about doing something about the deficit has to address both the spending line and the revenue line. Very often our colleagues on the other side of the aisle only want to talk about the spending line. They vote for all the spending, but they don't want to address the revenue side of the equation. They don't want to cut the spending to meet the revenue line, and they don't want to raise the revenue to meet the spending line. What we have here is a complete lack of responsibility. There are a lot of speeches about fiscal responsibility, but there is no reality of responsibility. Our Republican friends want to focus on the spending side, and indeed we need to focus on the spending side, although they voted for this increase in spending. These have not been Democratic budgets. These are not Democratic spending bills. Our Republican friends are in charge of the Senate and the House and the White House. They are responsible for every dollar of increase in spending. Every dollar they voted for. But they don't want to be responsible to match their spending with revenue. They don't want to cut the spending to match the revenue line, and they sure don't want to raise the revenue to match the spending line. They are happy passing it off to our kids, just tack it on to the debt. They say they are fiscally responsible. No. This is not fiscal responsibility. What is most alarming is where all this heads. While it is true we have had an uptick in revenue in the last year--very welcome--we see that we are still way below the spending line. This is before the baby boomers retire. Somebody may be listening and will say: Well, Senator Conrad is giving a passionate speech to raise taxes. No, don't misunderstand me. I am giving a speech about making this all add up. We either have to cut the spending down to the revenue line or we have to raise the revenue line to our spending appetite or some combination. That means we either have to cut spending down to the revenue that we are willing to levy or we have to be willing to raise the revenue line or some combination. By the way, the first thing we ought to do on revenue is not a tax increase on anybody. The first thing we ought to do is focus on the tax gap. That is the difference between what is owed and what is being paid. That tax gap now is over $350 billion a year. The fact is, the vast majority of Americans pay what they owe. But increasingly, individuals and companies aren't paying what they owe. The Revenue Service says that has now reached $350 billion a year, money that is owed that is not being paid. There has been precious little being done about it. The hard reality, what is so different from the 1980s and now, is this demographic tsunami that is coming at us. This is a representation of the increase of people eligible for Social Security and Medicare. We are under 40 million now eligible for Social Security and Medicare. We are headed for 81 million. It profoundly changes everything. The President's budget that claims it is going to reduce the deficit over the next 5 years misses the point. The only way he gets to cutting the deficit in half is he leaves out some items--war costs past September 30, the cost to fix the alternative minimum tax. A 5-year budget hides the larger truth. The larger truth is the President's long-term plan makes this whole situation much worse. Why? Because the President's tax cuts absolutely explode right beyond the 5- year budget window. We used to do 10-year budgets. Then the President changed to a 5-year budget. I believe the key reason for that change was he knows what these numbers show, just as I do. He and his people know exactly what is going to happen beyond the 5-year budget window. The cost of his tax cuts explode. This is going to happen. The 10-year cost of the President's tax cuts are $1.8 trillion. Here is what happens right beyond--the dotted line is the end of the 5-year budget window. Here is what happens to the President's tax cut proposal right beyond the 5 years. It explodes. It is not just that cost that explodes; it is also the cost to fix the alternative minimum tax which, by the way, there is not a penny in the President's budget to deal with. The alternative minimum tax, the old millionaire's tax, now is becoming very rapidly a middle class tax trap. Three million people were affected last year. It is going to be 30 million people affected 10 years from now, if we don't do something. It costs $774 billion to fix, and not a penny of it is in the President's budget. Again, the same pattern, right beyond the 5-year budget window, this dotted line, the cost of fixing the alternative minimum tax skyrockets. What is the answer that we get on the budget? We get what is called reconciliation, and we are told this is a deficit reduction plan. No, it is not. There is no deficit reduction in this plan. This increases the deficit. Why? Because while it is true it has $35 billion of spending cuts, it also has $70 billion of tax cuts. And so the combined effect is to actually increase the deficit. What sense does this make when we have a debt crisis looming? The debt increased $551 billion last year. The forecasters are telling us it is going to increase $600 billion this year--or more. And the answer is a reconciliation package cloaked as deficit reduction that actually increases the deficit. I don't know how anybody can, with a straight face, claim this is what the country needs. This is the increase in the debt over the next 5 years of the President's budget plan. You take the President's budget plan. You adjust it for the war costs he has left out--not Kent Conrad's projection of the war costs, the projection of the Congressional Budget Office--you put in the cost to fix the alternative minimum tax and the President's budget policy, the debt of the country is going to go up $3.4 trillion over the next 5 years. And our colleagues are out here talking about cutting spending $35 billion. It is farcical. It is farcical. They talk about fiscal responsibility. They are sending off a plan to increase the debt $3 trillion, and they run out here with a plan to cut $35 billion of spending. And by the way, that is not deficit reduction because they are also going to cut taxes $70 billion, so they are actually going to make the deficit worse, in the face of $3 trillion of additional debt before the baby boomers retire. Come on. This is what is happening to the debt under this plan--this budget plan that was passed in the Senate before Katrina. This is what it is going to do to the debt. These are not Kent Conrad's numbers. This is what's going to happen to the debt. It is going to go up $600 billion a year each and every year for the next 5 years--more than $600 billion. It went up $550 billion last year. You talk about building a wall of debt--and all at the worst possible time before the baby boomers retire. Now, the Comptroller General of the United States has come to us and said, You have an utterly unsustainable situation on your hands. You are running these massive deficits, huge explosion of debt before the baby boomers retire and guess what. You have a shortfall in Medicare alone of $29.6 trillion. You have a Social Security shortfall that is projected at $4 trillion. In those two alone, that is $33 trillion of unfunded liabilities. Is anybody paying attention? Does anybody understand where this is all headed? This is a train wreck. That is where we are headed--a train wreck. And what is the answer? To come out here with a package that increases the deficit some more? They have got to be kidding. They have got to be kidding. Mr. President, I do not believe this $4 trillion of shortfall in Social Security. I think that is a very bad estimate. I think the shortfall in Social Security is much less. Why? Because the assumption behind this projection is that the economy is only going to grow 1.9 percent a year for the next 75 years. Over the previous 75 years, the economy grew at 3.4 percent a year. If the economy were to grow in the future as it has in the past, 80 percent of the Social Security shortfall would disappear. Eighty percent would disappear. If the economy grows in the future as it has in the past, 80 percent of the Social Security projected shortfall would disappear. So I think it is a very pessimistic forecast. On the other hand, the shortfall in Medicare that is seven times, more than seven times the projected shortfall in Social Security, I think that is, unfortunately, realistic because it is based on two basic assumptions. No. 1, the retirement of the baby boom generation. And that is no projection. They have been born. They are alive today. They are going to retire. They are going to be eligible. And No. 2, medical inflation is running well ahead of the underlying rate of inflation, and all of us know that is true. So the Medicare shortfall is much more likely to come true than the Social Security shortfall. And the hard reality is we already can't pay our bills. The hard reality is we are already mushrooming the debt in a way that is utterly unsustainable. Senator, when you say the increase in the debt is unsustainable, what do you mean? Here is what I mean. Foreign holdings of our debt have gone up 104 percent in the last 4 years. It took over 200 years of American history to run up an external debt of $1 trillion. In the last 4 years, we have managed to more than double it. Is anybody listening? Is anybody paying attention? Is there anybody who is writing these news columns who is connecting the dots? Is anybody paying attention to what is going on here with the fiscal condition of the country? Does anybody care? And what do we get from the mainstream media? Happy talk; the deficit went down. Debt went up, the deficit went down. Yes, it went down to the third biggest ever. And the size of the deficit completely masks the true seriousness of our fiscal condition because it misses how much the debt increased. The debt increased by $551 billion. The result is--here it is--we are borrowing more and more from abroad--more than a 100-percent increase in the foreign holdings of our debt in 4 years. Does anybody believe that is a sustainable course? I do not. And here it is. Here is the result. We owe Japan $684 billion. We owe China almost $250 billion. We owe the United Kingdom over $170 billion. And here is my favorite, the Caribbean Banking Centers--the Caribbean Banking Centers. We owe them over $100 billion. Where do they get their money? We owe them over $100 billion. We owe South Korea almost $60 billion. Mr. President, it is an utterly unsustainable course. The Comptroller General of the United States has told us it is unsustainable. The head of the Congressional Budget Office has told us it is unsustainable. Alan Greenspan, chairman of the Federal Reserve, has told us it is unsustainable. We are building up massive debt before the baby boomers retire, and the mainstream media run their stories saying the deficits have improved. There is no attention to what has happened to debt, no attention to the train wreck that is coming. It is really a disconnection from reality that does not serve our country well. The American people deserve better. The American people deserve to be told honestly how deep this ditch is and how much it is going to take to fill it in because we cannot continue to run around the world with a tin cup asking more and more countries to loan us more and more money. To have foreign countries increase their holdings of our debt by over 100 percent in 4 years is utterly unsustainable. It is reckless and it is wrong. It has to be stopped. To have our colleagues come out on this floor with a reconciliation package that makes it all worse is profoundly irresponsible, profoundly. I thank the Chair and yield the floor. I note the absence of a quorum.

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

Mr. CONRAD

Mr. CONRAD. Mr. President, today I am announcing my support for Judge John Roberts to be Chief Justice of the United States. From the beginning, I told the White House I would like to see a nominee that the vast majority of the American people would say, yes, that is the quality of person who ought to be on the Supreme Court. When the nomination of Judge Roberts was first announced, my initial impression was that he met that test. I had a chance to visit with him personally at some length in my office, and I concluded from that visit that Judge Roberts is exceptional. Not only is he of high intelligence and strong character, he also is someone of midwestern values of honesty and decency. I have looked at his record. I find that he is in the judicial mainstream. Yes, he is a conservative, but my own belief is that the Court is strengthened by a range of views. I don't think we should have all progressives or all conservatives. We need to have people of differing views and differing backgrounds to make the Supreme Court function appropriately. When Judge Roberts came to my office, I asked him about his association with Judge Friendly. He clerked for Judge Friendly. He is reported to be very impressed by Judge Friendly's service. I asked him what impressed him about Judge Friendly. He told me one of the things that most impressed him is that Judge Friendly did much of his own work. He didn't just rely on clerks to do the work. I also asked him what else impressed him about Judge Friendly. He said: You know, you could not tell whether he was a liberal or a conservative, a Democrat or Republican. All you could tell from his rulings was that he had profound respect for the law. I thought that was a pretty good answer. I went on to ask him: Judge, at the end of your service, how would you want to be remembered? He said: I would want to be remembered as a good judge, not as a powerful judge but as a good judge. I said to him: What does that mean to you, being a good judge? He said to me: Listening to both sides, putting aside one's personal prejudices to rule based on the law. He said: I have a profound respect for the law. In the confirmation hearings, we saw Judge Roberts perform brilliantly. His mastery of the law, his judgment, his demeanor confirmed for me that he is someone who deserves my support. Beyond that, I had a chance to talk to Judge Roberts again on the phone last week. I said: Judge, I saw in your confirmation hearings that you said you are not an ideologue. He said: Senator, I can tell you, I do not bring an ideological agenda to the court. What I bring is a profound respect for the law. I told him I believed him. I think he is absolutely conservative. That is not disqualifying. I also think he is somebody of extraordinary talent and somebody who will listen to both sides and rule based on the law. He has a healthy conservatism, believing that the job of a Justice is not to make the law but to interpret the law. That is the appropriate role for a judge in our system. He has it right with respect to that issue. I believe Judge Roberts has the potential for greatness on the Court. Rarely have I interviewed anyone in my 19 years who so impressed me with the way their mind works and their basic demeanor. I have interviewed others who struck me as arrogant and pompous and filled with themselves, somebody I would never want to have in a position of power over the people I represent. I do not feel that way in the least bit about Judge Roberts. He is someone who is steady and even. He is somebody who is thoughtful and quite exceptional. I know there are groups who feel very strongly on one side or another. There are colleagues who have made different judgments. I respect that. But I believe Judge Roberts is the kind of nominee who deserves our support, and he will have mine. I thank the Chair and yield the floor.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise today to honor a community in North Dakota that is celebrating its 100th anniversary. On September 2 through September 5, the residents of Alexander, ND, celebrated their community's history and founding. Alexander is a small town in the northwestern part of North Dakota with a population of 216. Despite its size, Alexander holds an important place within North Dakota's history. It began on July 24, 1905, when the city was platted by Frank B. Chapman. That same year, a wide variety of businesses were constructed in the town, including the Dakota Trading Company Store, the Alexander State Bank, and the Alexander Hotel. Later that year, the McKenzie County Chronicle began publication in an office of the Alexander State Bank. In 1918, the town suffered a devastating fire; however, the town rebuilt and continued to grow. Today, Alexander remains a proud community with an economy bolstered by farming, ranching, and oil extraction. In the city's park, hamburgers are served every summer Saturday evening. The town is also home to the Lewis and Clark Trail Museum, which is housed in the old school house. Each room in the museum highlights a different and unique view of the area's history. Mr. President, I ask the Senate to join me in congratulating Alexander, ND, and its residents on their first 100 years and in wishing them well through the next century. I believe that by honoring Alexander and all the other historic small towns of North Dakota, we keep the pioneering frontier spirit alive for future generations. It is such places as Alexander that have helped to shape this country into what it is today, which is why this community is deserving of our recognition. Alexander has a proud past and a bright future.

Mr. CONRAD

Mr. CONRAD. Mr. President, I thank my colleague from Utah for his graciousness, and my colleague from Wisconsin as well. I appreciate this opportunity to speak. (The remarks of Mr. CONRAD pertaining to the introduction of S. 1730 are printed in today's Record under ``Statements on Introduced Bills and Joint Resolutions.'')

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

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise today to join Senator Voinovich of Ohio in introducing a new Social Security lockbox proposal, the Truth in Budgeting Act of 2005. For years, I have urged my colleagues to stop what I believe is the reckless practice of raiding Social Security trust fund surpluses to pay for other things. By failing to save these surpluses, we are putting future generations in the position of having to borrow trillions of dollars to make good on our Social Security, Medicaid, Medicare, and other commitments. The legislation Senator Voinovich and I are introducing today would not only take Washington's hand out of the Social Security cookie jar, it would literally take the cookie jar away. If our bill is adopted, Social Security surpluses and other trust fund surpluses would no longer be used to fund other functions of Government and to mask the size of the Federal deficit. Instead, Social Security payroll taxes would be used to provide future Social Security benefits, as they were always intended. Our bill would end the practice of spending trust fund surpluses. Instead, it would require those surpluses to be set aside and invested in a broadbased bond index fund that will be drawn on to finance our future obligations. In many ways, this legislation is a truth-in- budgeting bill because it will force us to recognize the true size of our fiscal deficit. It is our hope this will force Congress and the President to work together to address not only our current budget imbalances but our long-term entitlement challenges. Let me take a few minutes, if I could, to explain why I think this legislation is so important. Our budget situation has taken a dramatic turn for the worse. Over the last 5 years, we have gone from record surpluses to record deficits. The 2005 deficit is now projected to be $331 billion, the third worst in U.S. history. That is before Katrina. The increase in debt this year will be far higher. This is something that I find confuses the American people, confuses my constituents, confuses the media, and perhaps even confuses our colleagues: The advertised deficit--$331 billion before Katrina--is not the amount the debt will increase by this year. The amount the debt will increase by is much larger, approaching $589 billion, and that is before Katrina. Why the difference? Because in the deficit calculation, borrowing from trust funds is ignored. It is not ignored when you consider how much the debt is increasing. It is ignored in the deficit calculation. But, for example, the $173 billion this year that will be borrowed from the Social Security trust fund and used to pay for other things, is not included in the deficit calculation. It is added to our debt. It has to be paid back. It is not included in the deficit calculation. There are $85 billion of other transactions, such as that one, that will add up to a total of a $589 billion increase in the debt. Again, that is before Katrina. Looking forward, our current budget takes every penny of Social Security surplus over the next 10 years to pay for tax cuts and other spending priorities. Over the next 10 years, under the budget that has been passed here, every penny of Social Security surplus is being taken to pay for other things--$2 .5 trillion. The reported shortfall in Social Security over the next 75 years is $4 trillion on a net present value basis. I, frankly, do not believe that. I think that shortfall is significantly overstated. But if it were real, if it were $4 trillion, look at the comparison here on this chart: We are taking $2.5 trillion in Social Security money over the next 10 years, using it to pay for other things, when we say Social Security has a $4 trillion shortfall on a net present value basis. What sense does this make? We are digging the hole deeper before starting to fill it in. I said something I want to go back to because I indicated I do not believe the projected $4 trillion shortfall in Social Security is correct. That is the estimate of the actuaries. I think they are wrong. Why do I think they are wrong? Because their whole scenario is based on economic growth for the next 75 years averaging 1.9 percent a year. Over the previous 75 years, the economy has grown at 3.4 percent a year. If the economy were to grow in the future as it has in the past, 80 percent of the Social Security shortfall would disappear. Does that mean we do not have a problem? No. I wish it did. We have a huge problem. The problem we have, I believe, is a budget problem. The problem we have is, first, we are running very large deficits now before the baby boomers retire. No.2, the shortfall in Medicare is 7 times the shortfall in Social Security, approaching $30 trillion. There is the real 800-pound gorilla. In Social Security, the problem is not so much the shortfall, at least from my perspective. I think the problem is that the assets in the Social Security trust fund--and there are assets there. Anybody who tells you there are no assets there is wrong. There are assets there. They are special-interest Government bonds, backed by the full faith and credit of the United States, that are in the trust fund. The problem is, those bonds have to be redeemed out of current income. That is the problem. Those bonds sitting in the Social Security trust fund have to be redeemed out of current income. We already have a circumstance in which we are running massive deficits. We have this looming shortfall in Medicare. Oh, yes, we have a problem. We have a big problem, and the sooner we get at it, the better. The first thing to do is stop diverting Social Security money to use for other purposes. As I have indicated, this increase in debt is happening at the worst possible time, right on the brink of the retirement of the baby boom generation. The number of Social Security beneficiaries is projected to climb to 81 million people by 2050. This is not a projection. It is not a projection. The baby boomers have been born. They are alive today. They are going to retire, and they are eligible for Social Security and Medicare. That has enormous implications for the future. As stunning as it may seem, we are only 3 years away from the beginning of the retirement of the baby boom generation. Social Security trust funds are running surpluses now. But starting in 2017, payroll tax revenue will no longer be sufficient to pay for benefits. Those bonds we are issuing to the Social Security trust fund will have to be redeemed out of current revenues at the time. At this point, as shown on the chart, the Social Security surpluses will turn into Social Security deficits--out here in 2017. When that happens, a serious budget crunch will ensue, unless we find a way now to save those surpluses. Another way of looking at this is by looking at the total balances in the Social Security trust funds, which are expected to peak at over $6 trillion in 2026. As shown on this chart, this is the pattern of the Social Security trust fund assets. You can see, right now we are at about 2005, about right here, and we are still in the buildup phase. There are massive surpluses being run in the Social Security accounts. But instead of the money being used to prepay the liability or to pay down debt, the money is being used to pay for other things. So here we have it. We have this massive buildup. In 2026, roughly, the trust fund assets peak at $6 trillion, and then they begin being drawn down precipitously. We have a problem. It is a serious problem. It is a problem that is inexorable. Unfortunately, our current budget policy is contributing to the problem because it is taking the amount that is in surplus every year and using it to pay other bills. That is comfortable. That is easy. But it does not help us deal with the problem. In 2001, I urged my colleagues to set aside $900 billion of what was then projected to be surplus to either prepay the liability or pay down debt. For those who are advocates of personal accounts, the money could have been used to establish personal accounts, not borrowing it but putting real assets behind it. For those who do not like personal accounts, the money could have been used to pay down debt to better prepare ourselves for the time when the baby boomers retire. The chart I was showing before perfectly illustrates why this is no time to permanently or continually divert Social Security and other trust fund surpluses to other purposes. Failing to return to a fiscal path of saving trust fund surpluses will severely limit Congress' ability to address the looming pension and health care needs of the baby boomers and will shift a larger debt and tax burden on to future generations. Any private-sector corporation that behaved like the Federal Government is behaving would find its chief officers on their way to a Federal institution, but it would not be the Congress of the United States, it would not be the White House. Anybody who was running a private-sector entity that took trust fund assets, retirement fund assets of its employees, would be guilty of a Federal crime. They would be on their way to a Federal institution. It would not be Congress; it would not be the White House; they would be on their way to a Federal penitentiary. What is happening here is a shell game, and it is a shell game with enormous consequences, not like a shell game where somebody bets on some corner deal and loses $10 or $20. This is a shell game being played by society. I believe it is time to put a stop to this practice of borrowing against future commitments. That is why I am proud to join Senator Voinovich to introduce a newly designed bipartisan lockbox bill to stop the raid on Social Security and other trust funds. This legislation says enough is enough. The raid on Social Security and other trust funds has to stop. It is time to start saving Social Security surpluses for Social Security and to stop raiding the Social Security piggy bank to pay for other priorities. With this bipartisan legislation, Senator Voinovich and I intend to finally put Social Security in a lockbox that works. Our bill takes a new tack on the lockbox concept by fundamentally changing the way in which Social Security and other trust fund surpluses are invested. The legislation would create a new Office of Trust Fund Administration at the Treasury Department that would be charged with investing Social Security and other trust fund surpluses in safe, non-Federal debt instruments, including State municipal bonds, corporate bonds, mortgage-backed securities, and bond index funds. These interest- bearing investments could only be used to meet the obligations of Social Security and other Federal trust funds. Under our proposal, trust fund surpluses would no longer be used to fund the general operations of Government, and the true size of the Federal deficit would be revealed, forcing us to tackle these deficits head on. This bill, if passed, would force Congress, the President, and the public to recognize the true cost of Federal borrowing, and it would force the Federal Government to invest in real assets that could be used to finance future financial obligations. I believe our Nation is in a precarious financial position. Unfortunately, our current budget policies have worsened our outlook by driving the Nation further into deficits and debt. We need to begin by returning to budget discipline and paying down debt. It is time for us to take a new direction. I believe this legislation is an important first step. I thank my colleague, Senator Voinovich, for his work on this matter. He has spent months pursuing the issue. I am honored to join him. I believe this is an important policy change for the country and for the Congress. I hope that my colleagues will support it.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise today to join Senator Voinovich of Ohio in introducing a new Social Security lockbox proposal, the Truth in Budgeting Act of 2005. For years, I have urged my colleagues to stop what I believe is the reckless practice of raiding Social Security trust fund surpluses to pay for other things. By failing to save these surpluses, we are putting future generations in the position of having to borrow trillions of dollars to make good on our Social Security, Medicaid, Medicare, and other commitments. The legislation Senator Voinovich and I are introducing today would not only take Washington's hand out of the Social Security cookie jar, it would literally take the cookie jar away. If our bill is adopted, Social Security surpluses and other trust fund surpluses would no longer be used to fund other functions of Government and to mask the size of the Federal deficit. Instead, Social Security payroll taxes would be used to provide future Social Security benefits, as they were always intended. Our bill would end the practice of spending trust fund surpluses. Instead, it would require those surpluses to be set aside and invested in a broadbased bond index fund that will be drawn on to finance our future obligations. In many ways, this legislation is a truth-in- budgeting bill because it will force us to recognize the true size of our fiscal deficit. It is our hope this will force Congress and the President to work together to address not only our current budget imbalances but our long-term entitlement challenges. Let me take a few minutes, if I could, to explain why I think this legislation is so important. Our budget situation has taken a dramatic turn for the worse. Over the last 5 years, we have gone from record surpluses to record deficits. The 2005 deficit is now projected to be $331 billion, the third worst in U.S. history. That is before Katrina. The increase in debt this year will be far higher. This is something that I find confuses the American people, confuses my constituents, confuses the media, and perhaps even confuses our colleagues: The advertised deficit--$331 billion before Katrina--is not the amount the debt will increase by this year. The amount the debt will increase by is much larger, approaching $589 billion, and that is before Katrina. Why the difference? Because in the deficit calculation, borrowing from trust funds is ignored. It is not ignored when you consider how much the debt is increasing. It is ignored in the deficit calculation. But, for example, the $173 billion this year that will be borrowed from the Social Security trust fund and used to pay for other things, is not included in the deficit calculation. It is added to our debt. It has to be paid back. It is not included in the deficit calculation. There are $85 billion of other transactions, such as that one, that will add up to a total of a $589 billion increase in the debt. Again, that is before Katrina. Looking forward, our current budget takes every penny of Social Security surplus over the next 10 years to pay for tax cuts and other spending priorities. Over the next 10 years, under the budget that has been passed here, every penny of Social Security surplus is being taken to pay for other things--$2 .5 trillion. The reported shortfall in Social Security over the next 75 years is $4 trillion on a net present value basis. I, frankly, do not believe that. I think that shortfall is significantly overstated. But if it were real, if it were $4 trillion, look at the comparison here on this chart: We are taking $2.5 trillion in Social Security money over the next 10 years, using it to pay for other things, when we say Social Security has a $4 trillion shortfall on a net present value basis. What sense does this make? We are digging the hole deeper before starting to fill it in. I said something I want to go back to because I indicated I do not believe the projected $4 trillion shortfall in Social Security is correct. That is the estimate of the actuaries. I think they are wrong. Why do I think they are wrong? Because their whole scenario is based on economic growth for the next 75 years averaging 1.9 percent a year. Over the previous 75 years, the economy has grown at 3.4 percent a year. If the economy were to grow in the future as it has in the past, 80 percent of the Social Security shortfall would disappear. Does that mean we do not have a problem? No. I wish it did. We have a huge problem. The problem we have, I believe, is a budget problem. The problem we have is, first, we are running very large deficits now before the baby boomers retire. No.2, the shortfall in Medicare is 7 times the shortfall in Social Security, approaching $30 trillion. There is the real 800-pound gorilla. In Social Security, the problem is not so much the shortfall, at least from my perspective. I think the problem is that the assets in the Social Security trust fund--and there are assets there. Anybody who tells you there are no assets there is wrong. There are assets there. They are special-interest Government bonds, backed by the full faith and credit of the United States, that are in the trust fund. The problem is, those bonds have to be redeemed out of current income. That is the problem. Those bonds sitting in the Social Security trust fund have to be redeemed out of current income. We already have a circumstance in which we are running massive deficits. We have this looming shortfall in Medicare. Oh, yes, we have a problem. We have a big problem, and the sooner we get at it, the better. The first thing to do is stop diverting Social Security money to use for other purposes. As I have indicated, this increase in debt is happening at the worst possible time, right on the brink of the retirement of the baby boom generation. The number of Social Security beneficiaries is projected to climb to 81 million people by 2050. This is not a projection. It is not a projection. The baby boomers have been born. They are alive today. They are going to retire, and they are eligible for Social Security and Medicare. That has enormous implications for the future. As stunning as it may seem, we are only 3 years away from the beginning of the retirement of the baby boom generation. Social Security trust funds are running surpluses now. But starting in 2017, payroll tax revenue will no longer be sufficient to pay for benefits. Those bonds we are issuing to the Social Security trust fund will have to be redeemed out of current revenues at the time. At this point, as shown on the chart, the Social Security surpluses will turn into Social Security deficits--out here in 2017. When that happens, a serious budget crunch will ensue, unless we find a way now to save those surpluses. Another way of looking at this is by looking at the total balances in the Social Security trust funds, which are expected to peak at over $6 trillion in 2026. As shown on this chart, this is the pattern of the Social Security trust fund assets. You can see, right now we are at about 2005, about right here, and we are still in the buildup phase. There are massive surpluses being run in the Social Security accounts. But instead of the money being used to prepay the liability or to pay down debt, the money is being used to pay for other things. So here we have it. We have this massive buildup. In 2026, roughly, the trust fund assets peak at $6 trillion, and then they begin being drawn down precipitously. We have a problem. It is a serious problem. It is a problem that is inexorable. Unfortunately, our current budget policy is contributing to the problem because it is taking the amount that is in surplus every year and using it to pay other bills. That is comfortable. That is easy. But it does not help us deal with the problem. In 2001, I urged my colleagues to set aside $900 billion of what was then projected to be surplus to either prepay the liability or pay down debt. For those who are advocates of personal accounts, the money could have been used to establish personal accounts, not borrowing it but putting real assets behind it. For those who do not like personal accounts, the money could have been used to pay down debt to better prepare ourselves for the time when the baby boomers retire. The chart I was showing before perfectly illustrates why this is no time to permanently or continually divert Social Security and other trust fund surpluses to other purposes. Failing to return to a fiscal path of saving trust fund surpluses will severely limit Congress' ability to address the looming pension and health care needs of the baby boomers and will shift a larger debt and tax burden on to future generations. Any private-sector corporation that behaved like the Federal Government is behaving would find its chief officers on their way to a Federal institution, but it would not be the Congress of the United States, it would not be the White House. Anybody who was running a private-sector entity that took trust fund assets, retirement fund assets of its employees, would be guilty of a Federal crime. They would be on their way to a Federal institution. It would not be Congress; it would not be the White House; they would be on their way to a Federal penitentiary. What is happening here is a shell game, and it is a shell game with enormous consequences, not like a shell game where somebody bets on some corner deal and loses $10 or $20. This is a shell game being played by society. I believe it is time to put a stop to this practice of borrowing against future commitments. That is why I am proud to join Senator Voinovich to introduce a newly designed bipartisan lockbox bill to stop the raid on Social Security and other trust funds. This legislation says enough is enough. The raid on Social Security and other trust funds has to stop. It is time to start saving Social Security surpluses for Social Security and to stop raiding the Social Security piggy bank to pay for other priorities. With this bipartisan legislation, Senator Voinovich and I intend to finally put Social Security in a lockbox that works. Our bill takes a new tack on the lockbox concept by fundamentally changing the way in which Social Security and other trust fund surpluses are invested. The legislation would create a new Office of Trust Fund Administration at the Treasury Department that would be charged with investing Social Security and other trust fund surpluses in safe, non-Federal debt instruments, including State municipal bonds, corporate bonds, mortgage-backed securities, and bond index funds. These interest- bearing investments could only be used to meet the obligations of Social Security and other Federal trust funds. Under our proposal, trust fund surpluses would no longer be used to fund the general operations of Government, and the true size of the Federal deficit would be revealed, forcing us to tackle these deficits head on. This bill, if passed, would force Congress, the President, and the public to recognize the true cost of Federal borrowing, and it would force the Federal Government to invest in real assets that could be used to finance future financial obligations. I believe our Nation is in a precarious financial position. Unfortunately, our current budget policies have worsened our outlook by driving the Nation further into deficits and debt. We need to begin by returning to budget discipline and paying down debt. It is time for us to take a new direction. I believe this legislation is an important first step. I thank my colleague, Senator Voinovich, for his work on this matter. He has spent months pursuing the issue. I am honored to join him. I believe this is an important policy change for the country and for the Congress. I hope that my colleagues will support it.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise today to recognize the outstanding achievements of the School of Medicine and Health Sciences at the University of North Dakota, UND, as it celebrates 100 years of excellence, innovation and service. On September 30 through October 1, the students, faculty, and alumni of the UND School of Medicine and Health Sciences will gather to celebrate their institution's history and founding. As the only medical school in the State of North Dakota, the School of Medicine and Health Sciences has played a key role in ensuring access to quality health care in our region. When the School was established by the North Dakota State Legislature in 1905, most of the State's citizens were farmers living in areas with little or no medical care. Throughout the past 100 years, the UND School of Medicine and Health Sciences has maintained its focus on training health professionals that seek to practice in rural areas. The school has educated nearly half of all practicing doctors in North Dakota and almost 80 percent of the physician assistants and physical and occupational therapists. The school has also trained medical doctors and other health professionals for service on reservations through its Indians Into Medicine program. One of the most notable offices within the School of Medicine and Health Sciences is the Center for Rural Health. As one of the Nation's top resources for rural health research and policy, the Center for Rural Health has been recognized again and again for its work in studying and improving rural health. The center is home to the Nation's only Rural Assistance Center, a clearinghouse for rural health providers and communities to access the full range of funding and research opportunities. The School of Medicine and Health Sciences has also focused resources on medical research. As one of eleven nationwide sites with the advanced technology to study neurodegenerative diseases, the school has utilized its scientists and resources to study diseases and conditions that affect people in the Midwest region, including diabetes, cancer, fetal alcohol syndrome, and Parkinson's. Over the past 10 years, the school has attracted nearly $30 million in Federal grant funding. The UND School of Medicine and Health Sciences has provided a century of excellence, innovation, and service to not only its students and faculty, but to the entire State of North Dakota. The school has grown and expanded over the past 100 years, but has remained committed to educating future health care providers. I ask the Senate to join me in congratulating the School of Medicine and Health Sciences on its first 100 years of service to North Dakota and in wishing it well as it embarks on the next century. By honoring the UND School of Medicine and Health Sciences, we recognize the unique contributions that smaller, community-based medical schools have made to our Nation's health care system, particularly in rural areas.

Mr. CONRAD

Mr. CONRAD. Mr. President, we know the country has been hit by the catastrophe of Katrina. We know hundreds of lives have been lost. We know tens of billions of dollars of property damage has been done. We know there are thousands of people who have been displaced, who are without their homes. We know there is widespread devastation across an entire region of the country. We know the insurance losses to the country apparently approach $100 billion. We also know enormous damage has been done to our budget situation with the Federal Government. I thought this was perhaps an appropriate time to come to the floor to talk about the changes in our budget situation and the implications for the future and how important it is that we begin to focus on the damage that has been done to our fiscal condition and to begin the process of thinking through what our response will be. Are we going to stay with the same plan that was in place before, or are we going to recognize a new reality and move to a different plan and hopefully steer the country back to some fiscal course that has better long-term prospects? We know, putting in perspective before Katrina, where things stood; that we faced in this country very large deficits in historical terms. We go back to 2001, when we actually enjoyed a surplus of $128 billion, and each year since that time, the deficits have grown to record proportion. In 2004, the deficit reached a record level of $412 billion. The estimates for 2005, before Katrina, were $331 billion, still an enormous deficit, and in many ways it understates the seriousness of our fiscal condition because, as the occupant of the chair knows very well, the budget deficit is a more conservative look at how serious our situation is in the sense that it understates what is actually happening because the amount of the increase in the debt of our country is far greater than the reported deficit. I find there is a lot of confusion on that as I go around my State. People think the amount of the deficit is what gets added to the debt, but that is not the case. What is added to the debt is much greater. In fact, we anticipate now that the debt will increase in 2005, not by $331 billion, but now with Katrina, well over $600 billion. We now know Katrina has absorbed already $62.3 billion of additional spending. We were last told that the Federal Government was spending about $2 billion a day in response to Katrina, truly a stunning amount of money. That is over and above all other Federal expenditures. And this $62.3 billion is just a downpayment. There was a report in the Wall Street Journal that the first estimates on Katrina costs for Washington hit $200 billion. This is in a story that just appeared on September 7. The lead says: The Federal Government could spend as much as $150 billion to $200 billion caring for the victims of Hurricane Katrina and rebuilding from its devastation, according to early congressional estimates--a total bill that would far surpass the initial costs of recovering from the 9/11 terror attacks and could put Katrina on track to become the most expensive natural disaster in American history. None of us begrudge spending this money to help the victims. We all understand that is a Federal obligation, a tragedy of such sweeping dimension that it requires a full Federal response. But we need to evaluate these enormous expenditures in light of the very deep deficit ditch we are already in in this country, a deficit ditch that is only exceeded by the debt ditch that is being dug by the policies that are being pursued in Washington. I think all of us who have been engaged in these debates know how serious the long-term outlook is. To evaluate what has happened in the past so that we better understand our future, I wanted to go back to 2001. After the 2000 elections, the 2001 Congressional Budget Office, looking ahead, told us this was the range of possible outcomes for the budget going forward. This would be a projection on what the surpluses might look like going forward. They picked this midrange going forward. They were projecting surpluses. That was the long-term outlook. The Congressional Budget Office, the Office of Management and Budget, told us we could expect something like $6 trillion in surpluses over the next 10 years at that time. I remember many of my colleagues told me repeatedly, when I urged them not to be betting on this 10-year forecast: Kent, you are being much too conservative. Do you not understand that when we have these tax cuts, we will get much more revenue? We will not be at the midline of this range of possible outcomes. Instead, we will be significantly above it because if you cut taxes, the theory was there is going to be more money. Well, we can go back now and look at what actually occurred, not what some ideological slogan predicted, but what actually occurred in the real world. In the real world what happened with deficits is this red line. It is far below the bottom of the projections that were made by the Congressional Budget Office. Not only did we not achieve the midpoint of the range, nor anywhere close to that, we were not even at the bottom of the range of possible outcomes. We are far below the bottom. So the theory that if we cut taxes, we get more revenue and this would all work out has not worked very well in the real world. That can be seen if we look at the revenue line in historical perspective. This is the revenue line going back to 1959 as a percentage of our gross domestic product. The economists say that is the best way to look at it because that takes out the effects of inflation year to year. Look what we see. Revenue was almost 21 percent of GDP in 2000. The President at the time said revenue is very high historically, and he was exactly right, revenue was high historically. His answer was to cut taxes. But look at what has happened. Revenue in 2004 was 16.3 percent of GDP, the lowest it has been since 1959. So once again, the notion that if we cut taxes we are going to get more revenue did not work. We cut taxes repeatedly and revenue has collapsed. The result is the gap between spending and revenue has once again opened up and is producing massive budget deficits. If we look ahead, it is all too predictable where we are headed. The administration earlier said they are going to cut the deficit in half over 5 years, but they got that result by leaving things out. They left out the full effect of war costs. They left out the cost of fixing the alternative minimum tax, which costs $700 billion to fix. The alternative minimum tax is the old millionaires' tax. It is now a middle-class tax trap. The alternative minimum tax affected 3 million people this year. Ten years from now it is going to affect 30 million people if we do not respond. So, of course, we are going to respond. We must respond. But it costs money and the money is not in the budget, just as war costs passed September 30 are not in the budget. When these things are put back in, what one sees is a much different outlook going forward, and this is before Katrina. I want to emphasize this is before Katrina. What we see is a deficit picture that gets much worse, especially after this 5-year budget window. The budget the President submitted was for 5 years. Previously we had been doing 10- year budgets. I think one reason the President changed to 5 years is because we see the deterioration that is going to occur if the President's budget proposals are adopted, because the President is saying, spend more money but cut the revenue base as well. In fact, he is proposing over $1.5 trillion of additional tax cuts. If we do a reality test, I think we have to ask ourselves the question, where is this all headed? We cannot pay our bills now. We are running near-record deficits. Spending is exploding. Sixty billion dollars has been appropriated to Katrina alone in the last few days. The President says, cut the revenue base by $1.5 trillion. Most of that cut will occur beyond the 5-year budget window, and this is before the baby boomers retire. What possible sense does this policy make? We have before us a budget plan that makes the situation worse. The budget itself will increase the debt $600 billion a year every year for the next 5 years, and I will discuss that in the next chart. In addition to the budget plan, there is a plan called reconciliation, a process of fast-tracking legislation that was supposed to be used to reduce the deficit. In passing their budget this year, our colleagues decided to use that fast-track process to actually increase the deficit. Why? Because they have $35 billion of spending cuts over the life of the budget but they have $70 billion of revenue cuts. The result is the deficit is increased. The debt is increased--not reduced, but increased. When one looks at the budget that was passed in the Senate and ultimately passed in the House and then passed both Chambers, what one sees is the debt of the country going up dramatically before Katrina. The debt was going to go up over $600 billion a year each and every year of the budget that was passed. I know it is hard to believe, but these are the numbers in the budget document itself. In the budget document itself, their prediction of what will happen to the debt of the country shows that the debt will go up $683 billion this year. That is not the deficit, it is the increase in the debt of the country. Very often I find people are confused between the deficit and the debt. I think we should be focusing at this moment on the debt because that captures the money that is being taken from Social Security and all the other trust funds, money that has to be paid back, but there is no plan to pay it back. The debt is going to increase under the plan of the budget that is before us, before Katrina, $683 billion this year; $639 billion the next year; $606 billion the third year; $610 billion the fourth year; $605 billion the fifth year. There has been some improvement in this year, more than $50 billion of improvement from when this budget resolution was drafted. But, again, that is before Katrina. That improvement this year has been wiped out next year by the two legislative acts we have passed so far to deal with Katrina, over $60 billion in those two, with much more to come. So we are right back in this neighborhood of increasing the debt by these massive amounts. What is most alarming is this increase in debt is occurring in the sweet spot of the budget cycle, before the baby boomers retire. When the baby boomers retire, then we see the real challenge begin. To look visually at what is happening to the debt, I prepared this chart because I think it communicates about as well as I can how we are building a wall of debt. The gross debt of the United States at the end of this year is estimated to be $7.9 trillion. One can see, with the course we are on, that debt is going to be jumping by $600 billion, some of these years more than $600 billion, each and every year for the next 5 years; massive increases in debt. At a time the President told us if we adopted his plan back in 2001, one will recall he said there is going to be maximum paydown of the debt. Do we see any paydown of the debt occurring? No paydown of the debt. The debt is skyrocketing. There is not much interest in this town, or perhaps elsewhere, about this problem. But there will be. I predict there will be because, one, the markets cannot be fooled; reality cannot be fooled. The reality is, we are going deeper and deeper into hock. Who are we going into hock to? Well, increasingly we are going into debt with other countries around the world. We owe Japan over $680 billion. We owe China over $240 billion. We owe the United Kingdom over $140 billion. My favorite is the Caribbean banking centers. We owe the Caribbean banking centers over $100 billion. I like to ask audiences back home if anyone is doing business with the Caribbean banking centers. I have never had a hand go up. I do not know where the Caribbean banking centers get their money, but we owe them $108 billion. The debt is skyrocketing at the worst possible time, before the baby boomers start to retire. Because this debt is skyrocketing, we owe more and more countries around the world. In the last 4 years alone, foreign holdings of our debt have increased more than 100 percent. Think about that. Other countries' holding of debt has gone up more than 100 percent in 4 years. That is utterly unsustainable. It has taken us over 200 years to build up a debt around the world and we have doubled it in the last 4. That is not a sustainable circumstance. Couple that with the trade deficit--the trade deficit running over $600 billion a year--it seems to me it is very clear that as a country we are living beyond our means. There are real consequences to doing so. Here is the pattern of Social Security beneficiaries. Of course, the same chart would apply to Medicare. We are just below 40 million people now eligible. By 2050, there are going to be 81 million. This is the demographic tsunami that is headed our way, and it is going to swamp a lot of boats. Our country has to get ready. We have to respond. The biggest long-term problem we have is not with Social Security. Social Security's 75-year shortfall is estimated at $4 trillion. I personally do not believe that. I think that overstates the shortfall in Social Security. Why? Because this is based on an assumption. The shortfall in Social Security is based on an assumption that the economy is only going to grow 1.9 percent a year every year for the next 75 years. In the past 75 years, the economy has grown at 3.4 percent a year. If the economy were to grow in the future as it has in the past, 80 percent of this shortfall would disappear. Does that mean we do not have a problem? No. I wish it did, but we have a big problem. The problem we have, as I diagnose it, is first of all those very large budget deficits we are running now, coupled with the shortfall in Medicare, which is seven times the projected shortfall in Social Security. This is the real 800-pound gorilla: Medicare--a shortfall of almost $30 trillion estimated over the next 75 years. This shortfall, I believe, is much more likely to come true than the projected shortfall in Social Security because it is based not only on an aging population but medical inflation that is running far ahead of the underlying rate of inflation. If you put it all together, we have massive budget deficits made much more severe by the war in Iraq and Afghanistan that is adding $6 to $8 billion a month; coupled with Katrina, who knows what the ultimate cost will be? It is at least $60 billion and counting. And then we have these massive long-term shortfalls, especially in Medicare. Then I look at the President's plan. The President says: Steady as she goes. Spend the money, but on top of it add massive additional tax cuts, tax cuts that are represented by these red bars, tax cuts that explode at the very time the Social Security and Medicare trust funds go cash negative. There can only be one possible result, and that is massive red ink, massive deficits, massive debt--a completely unsustainable situation. It is not enough to curse the darkness. We also have to talk about what can be done here to begin to dig out. I believe on the revenue side of the equation, before we talk about any tax increase for anybody, we ought to talk about this tax gap. That is the difference between what is owed and what is being paid. It is estimated now conservatively at over $350 billion a year. The vast majority of us pay what we owe; companies do, individuals do. But increasingly there are people and companies that do not. They now estimate that amounts to $350 billion a year of lost revenue. That is utterly unfair to the rest of us who are paying what we owe, and we ought to insist that everybody pay what they owe. If we could do that, we would close this yawning chasm by some significant amount--nobody knows quite how much. On the revenue side of the equation, I believe that ought to be our first order of business. On the spending side of the equation, the first order of business ought to be to focus on Medicare and the 5 percent of beneficiaries who use 50 percent of the money. Five percent of the people use 50 percent of the money. They are the chronically ill. What can we do about it? What we can do is focus like a laser on those who are the chronically ill and better coordinate their care. A pilot problem was done with 22,000 patients like that; assign nurse-practitioners to every one of those cases to better coordinate their care. The first thing they did was lay out the prescription drugs the patients were taking, and they found in many of the cases they were taking 16 prescription drugs, and they found in many cases half of them they should not be taking or didn't need to take. I did this with my own father-in-law. I went into his home when he was ill. Sure enough, he was taking 16 prescription drugs. I got on the phone to the doctor and I went down the list. About the third drug I listed, the doctor said to me: He should not be taking that. He should not have been taking that for the last 3 years. I went further down the list. About two other drugs, the doctor said to me: He should never be taking those two together. They work against each other. By the time we were done, we had eliminated 8 of the 16 prescription drugs he was taking. I said to the doctor: How does this happen? The doctor said to me: You know, it happens all the time. He said: I am the family practice doctor. He has a heart doctor, he has a lung doctor, he has an orthopedic doctor. He is getting prescription drugs at the hospital clinic, the corner clinic, the clinic down at the beach, and he is getting them mail order. He is sick and confused. His wife is sick and confused. The result is chaos. All too often, that is what is happening. When we put nurse practitioners on the 22,000 chronically ill cases that were studied, they reduced hospitalization 40 percent, they reduced costs 20 percent, and they got better health care outcomes because they got people to stop taking drugs they should not be taking. They got them to stop having duplicate medical tests that didn't have any value but to put them through more stressful procedures. We ought to take that study on 22,000 and we ought to ramp it up to a quarter of a million or something like that and see if we could get those same results on a much bigger universe and see if we could continue to save money and get better health care outcomes. Those are just two ideas, closing the tax gap and dealing with the tremendous explosion in costs in Medicare where, again, 5 percent of the people are using half of the entire budget. We ought to focus like a laser on that half of the expenditure, and we ought to do it quickly. The sooner we act on these problems and challenges, the better off we are. The longer we stay with our heads in the sand, the more Draconian will have to be the solution. Katrina was a disaster of unparalleled dimension. All of us weep for those who have lost family members and friends. We are saddened by the other losses that have occurred as well. But we should not compound the problem by sticking with a fiscal plan that puts this country deeper and deeper into the deficit and debt ditch. That would add to the calamity. That would compound the disaster. We ought to take this opportunity to begin to plan how we dig out. It is imperative that we act sooner rather than later. It is imperative that the Congress and the President begin a plan to put us back on a more sound fiscal footing. It would truly be ironic if this disaster were allowed to spread to an even deeper fiscal disaster, one that could cause the harm of Katrina to spread outside the Gulf region to every part of our country. I am very hopeful that the President will provide leadership and that Congress will respond. If the President does not provide leadership, the Congress should demonstrate leadership and take this bull by the horns and recognize we need a new fiscal blueprint for this country. We need to start digging out of this deficit ditch and prepare a brighter and better future for our country. I yield the floor.