Kent Conrad

Mr. CONRAD

Mr. CONRAD. Mr. President, might I suggest one other refinement, that we agree on no second-degree amendments. That is the agreement we already made between us. Maybe that would give people some comfort.

Mr. CONRAD. National Guard.

Mr. CONRAD. Dorgan amendment on runaway plants.

Mr. CONRAD. If we have a situation that requires a side by side, then the chairman and I will work it out so we get a side by side.

Mr. CONRAD. I think one thing we could say to people is, to make clear what we are trying to do between us, the managers. We are operating in some ways on faith here, faith of trust between us.

Mr. CONRAD

Mr. CONRAD. The reason for their very pessimistic forecast is they are looking at productivity growth and new entrants to the workforce as the two drivers of economic growth going forward. They have a very low number for new entrants into the workforce because of the demographic change. I think we can all understand that. But they also have a very low number of productivity growth for the next 75 years--1.6 percent a year of productivity growth. The fact is, productivity growth has been about double that in the last 5 years. So I, frankly, don't believe the 75-year forecast. That doesn't mean, by the way, that we don't have a challenge. I want to be clear. It reduces the challenge, and if these projections are wrong and they are overly pessimistic, it makes a substantial difference in how big the problem is. We are still left with a challenge of this demographic change.

Mr. CONRAD. Mr. President, if I might say to the chairman of the committee, we also are trying to slot additional votes, if we can make that clear to our colleagues, and the votes would start at about 1 o'clock tomorrow afternoon. We are hoping to have five votes lined up at that time. I think it is important to say that for planning purposes of our colleagues. That is the intention of the managers of this bill. We would slot these times, as has been indicated in the agreement. That intention would be, in addition to the two votes on Amtrak and ANWR, there would be two votes on veterans and a vote on NIH starting at 1 o'clock tomorrow. That is the intention. It is not fully spelled out in this agreement because we do not have language on those amendments at this time. But for the information of our colleagues, that is the intention of the managers.

Mr. CONRAD. Mr. President, the amendment before us is very simple. It says: Social Security first. Very simply, the amendment says: No new mandatory spending or tax cuts until Social Security is solvent, unless the new spending or the new tax cuts are paid for or they can get a supermajority in the Senate. It is a matter of priorities. This says: Social Security first. No new spending, no new tax cuts until Social Security is solvent, unless those amendments are paid for or they get a supermajority vote here in the Chamber. Mr. President, how much time do I have remaining?

Mr. CONRAD. Mr. President, I yield 12 seconds to the Senator from Michigan.

Mr. CONRAD. Mr. President, I yield time to myself. I would support the amendment of the Senator from South Carolina if the amendment did what the Senator just described. That is not what the amendment does. It says, in pertinent part: It is the sense of the Senate that Congress should reject any Social Security plan that requires deep benefit cuts or massive increase in debt . . . I agree with that absolutely. Then it goes on to say: . . . and a failure to act would result in massive debt, deep benefit cuts and tax increases. That part of it is just inaccurate and here is why. When we get to 2052, according to the Congressional Budget Office, and Social Security can only meet 78 percent of its obligations, the result is deep benefit cuts. There are no tax increases that are triggered by the law at that point. What happens is deep benefit cuts. I would just say and urge my colleagues, I think you have to oppose this amendment because, frankly, it states something that is just not accurate.

Mr. CONRAD. I thank the Chair.

Mr. CONRAD. Mr. President, let me close by saying I support this amendment. I think it is a good-faith effort by the Senator to describe the problem in an accurate and honest way. For that reason, I intend to support it. I urge my colleagues to do so as well. I would like to conclude by saying thank you to the Senator across the aisle. I think he has done a great service to all of us who are trying to address this problem. When we wrote an op-ed together, we said there is a problem here. There is a challenge. We need to work together to address it. We should not take on massive new debt to do it. But we ought to consider all the options before us. I thank my colleague and I urge my colleagues in the body to support his amendment.

Mr. CONRAD. Yes.

Mr. CONRAD. I will yield 7 minutes to the Senator from California.

Mr. CONRAD. I yield 30 seconds to the Senator from California.

Mr. CONRAD. Give me a moment to get settled.

Mr. CONRAD. I have tried to be clear on the problem I have with that one word. That said, because I support the thrust of this, I intend to support it. I want to make clear that I believe we should be looking toward 75-year solvency because I think the forecasts are so murky, and we would make a real advance if we were to secure 75-year solvency. With that said, I think the overall direction of the amendment is good. I ask the Chair, where are we in time?

Mr. CONRAD. That is correct.

Mr. CONRAD. That is correct.

Mr. CONRAD. I appreciate that. The one other thing I wanted to mention was, on page 4, it says: The President, the Congress, and the American people including seniors, workers, women, minorities, and disabled persons should work together at the earliest opportunity to enact legislation to achieve a solvent and permanently sustainable Social Security system. I raise the issue about ``permanently.'' I do so for this reason. I know we included that word before. I would like to do that as well. Here is the problem I have with the word. I don't want to send an incorrect signal about my own intentions. The fundamental problem I have is, to do it permanently, one has to have some projection of long- term economic growth, and the long-term economic growth one has to have a projection of is forever. I have very little confidence in these long-term projections. As the Senator knows well, the underlying projection is that the economy is only going to grow 1.8 to 1.9 percent every year for the next 75 years when, in fact, the economy has grown over the last 75 years by 3.4 percent. This shows pictorially what I am talking about. I am very troubled with this long-term forecast. The Social Security Administration assumes growth of the economy is going to slow considerably after 2015. They have a long-term assumption of economic growth, on this red line, of 1.8 percent. That is what they are saying the growth is going to be over the next 75 years. Yet here is what we have seen, going back to 1950. The green bars on the chart are what economic growth has actually been. The red line is what they are projecting going forward. You can see their projection going forward is much lower economic growth than we have actually experienced over the last 55 years.

Mr. CONRAD. It pushes the problem forward. For example, the Congressional Budget Office had told us that the trust fund would go cash negative in 2018. Now, they have updated their forecast to say, no, we won't go cash negative until 2020, because economic growth has been stronger than the underlying forecast. A big reason for that is productivity growth has been much stronger than the underlying forecast. So I think it is very important that we be clear. That is why the word ``permanently'' gives me heartburn in the sense that we are trying to forecast forevermore, and I just flatout don't believe this forecast for 75 years. I want to make clear that we still have a challenge. We still need to address this problem because we have the demographic problem. That is one reason I have tried to talk to my colleagues about not just Social Security but Medicare and the budget deficit and Medicaid, because it is all these things coming together that really presents us with a challenge. It is real. In any event, I don't know what the Senator's disposition is on the word ``permanently,'' if he would be willing to change that or maybe he is wedded to that. I don't know.

Mr. CONRAD. You are willing to strike that one phrase?

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 introduce legislation to make permanent the 15-year depreciation period for leasehold improvements that was enacted on a temporary basis as part of the American Jobs Creation Act of 2004. I am pleased to be joined in this effort by my Finance Committee colleague, Senator Kyl. Leasehold improvements are the alterations to leased space made by a building owner as part of the lease agreement with a tenant. In actual commercial use, leasehold improvements typically last as long as the lease--an average of less than 10 years. However, until last year, the Internal Revenue Code required leasehold improvements to be depreciated over 39 years--the life of the building itself. Economically, this made no sense. The owner received taxable income over the life of the lease, yet could only recover the costs of the improvements associated with that lease over 39 years. This mismatch of income and expenses was alleviated somewhat by our action last year in reducing the recovery period to 15 years. A shorter recovery period more closely aligns the expenses incurred to construct improvements with the income they generate over the term of the lease. By reducing the cost recovery period, the expense of making these improvements has fallen more into line with the economics of a commercial lease transaction. One of the most important goals of this change is to encourage building owners to adapt their buildings to fit the needs of today's business tenant. It is good for the economy to keep existing buildings commercially viable. When older buildings can serve tenants who need modern, efficient commercial space, there is less pressure for developing greenfields in outlying areas. Americans are concerned about preserving open space, natural resources, and a sense of neighborhood. Unfortunately, the recovery period reduction enacted last year is effective only through the end of 2005. If Congress fails to act before the end of this year, the recovery period for leasehold improvements placed in service beginning in 2006 would again be 39 years. I urge all Senators to join us in supporting this legislation to provide rational depreciation treatment for leasehold improvements for the long term. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise today to introduce legislation to make permanent the 15-year depreciation period for leasehold improvements that was enacted on a temporary basis as part of the American Jobs Creation Act of 2004. I am pleased to be joined in this effort by my Finance Committee colleague, Senator Kyl. Leasehold improvements are the alterations to leased space made by a building owner as part of the lease agreement with a tenant. In actual commercial use, leasehold improvements typically last as long as the lease--an average of less than 10 years. However, until last year, the Internal Revenue Code required leasehold improvements to be depreciated over 39 years--the life of the building itself. Economically, this made no sense. The owner received taxable income over the life of the lease, yet could only recover the costs of the improvements associated with that lease over 39 years. This mismatch of income and expenses was alleviated somewhat by our action last year in reducing the recovery period to 15 years. A shorter recovery period more closely aligns the expenses incurred to construct improvements with the income they generate over the term of the lease. By reducing the cost recovery period, the expense of making these improvements has fallen more into line with the economics of a commercial lease transaction. One of the most important goals of this change is to encourage building owners to adapt their buildings to fit the needs of today's business tenant. It is good for the economy to keep existing buildings commercially viable. When older buildings can serve tenants who need modern, efficient commercial space, there is less pressure for developing greenfields in outlying areas. Americans are concerned about preserving open space, natural resources, and a sense of neighborhood. Unfortunately, the recovery period reduction enacted last year is effective only through the end of 2005. If Congress fails to act before the end of this year, the recovery period for leasehold improvements placed in service beginning in 2006 would again be 39 years. I urge all Senators to join us in supporting this legislation to provide rational depreciation treatment for leasehold improvements for the long term. I ask unanimous consent that the text of the bill be printed in the Record.