Kent Conrad

Mr. CONRAD

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 President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. CONRAD. Mr. President, I yield 20 minutes off the resolution to the Senator from Montana.

Mr. CONRAD. I yield another 5 minutes to the Senator.

Mr. CONRAD. Mr. President, I was frankly astonished to hear the Senator from Colorado say that Members of Congress and Federal employees have a choice not to participate in Social Security. That is not true. Since 1983, under the new Federal retirement system, FERS, the Federal Employees Retirement System, all of us are in the Social Security system. Members of Congress don't have a choice, if they have been elected since 1983, as to whether to participate in Social Security. The Senator from Colorado is flat wrong, absolutely wrong. I have heard this on talk shows around the country--that Members of Congress don't participate in Social Security. I want to make very clear that this Member participates in Social Security, and every Member elected sense 1983 participates in Social Security. Anyone saying something else is flat wrong. It is incorrect and not even close to being right. Let us be very clear. Federal employees didn't have a choice as to whether they participated in Social Security. I don't know where the Senator from Colorado got this idea. That is just not correct. Under the Federal Employees Retirement System, since 1983, Federal employees have participated in Social Security. That is a fact. It is important for people to know that. The Senator from Colorado also said other things that I think are incorrect. The Senator from Colorado said the tax cuts produced more revenue. No, they did not. That is factually incorrect. Here is what happened to the revenue since the tax cuts. The revenue as a share of gross domestic product plunged. It didn't go up, it went down. It is amazing to me how facts don't seem to matter when ideology gets in the way. Somebody once said everybody is entitled to their own opinion, they are not entitled to their own facts. The facts are that the revenue of the United States plunged to the lowest level since 1959 after the tax cuts. That is a fact. Here is a second fact. With the tax cuts, the United States suffered the worst multiyear revenue drop since World War II. That is a fact. Revenue did not go up, revenue went down. This is Federal revenues in trillions of constant 2000 dollars. Revenue went down 18 percent over 3 years with the tax cuts. Tax cuts did not generate more money, they generated less money. That is a fact. When I hear the claim that this budget before us is fiscally responsible, that is just words. What are the facts? The facts are, according to their own calculation--this is from their own budget document--the debt goes up each and every year of this budget by over $600 billion. It goes up $669 billion this year, it goes up $636 billion next year, $624 billion in 2007, up $622 billion in 2008, and up $611 billion in 2009. They say they are improving the deficit. No, they are not. This budget before us makes the deficit worse by $130 billion--worse than if we just put the Government on autopilot and made no policy changes. But this budget does make policy changes, and the policy changes that it makes makes the deficit worse, makes the debt worse in 5 years by over $3 trillion of additional debt when we have already got the debt that is running away from us. Amendment No. 144

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

Mr. CONRAD. Mr. President, I send an amendment to the desk.

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

Mr. CONRAD. Mr. President, I thank the Senator from Florida for what I believe is a really important amendment because it sets the terms of this debate on Social Security. What is the intention of the Congress of the United States? Are we going to embrace a plan for Social Security that involves massive new borrowing, massive new debt, and steep benefit cuts? Is that the answer? Or is there another way? I believe, and I have stated publicly, there is a kernel of a good idea to what the President has proposed. I know many do not share that, but I do think there is a kernel of a good idea. I also believe we have a challenge in Social Security. I do not believe it is as acute as the President has presented it because I think the forecasts that it is all based on are overly pessimistic. They are saying economic growth in America for the next 75 years is only going to be 1.8 percent a year, when in the past 75 years, economic growth has been 3.4 percent. I don't buy it. I don't believe it. I think they vastly underestimate the productivity growth of the American economy. In fact, productivity is a key component of their economic growth estimate, and productivity growth has been far in excess of what they are saying productivity growth is going to be for the next 75 years. First of all, I have very little confidence in any forecast of 10 years, much less a forecast of 75 years. With that said, the amendment of the Senator from Florida says, yes, we should move to bring solvency to Social Security, but we should not do it by massive new borrowing, and we should not do it by steep benefit cuts. That is what the President's plan is. The President's plan is to divert money out of Social Security. That is on top of what he is doing in his budget because, remember, in his budget he is taking every penny of Social Security over the next 10 years--$2.5 trillion-- and using it to pay for other things. This is after he says there is a shortfall in Social Security. In the next action, he sends us a budget to take $2.5 trillion in Social Security money and use it to pay for something else. He says, I am not done; I have another idea; let's take another $750 billion out of Social Security to start private accounts. But that is the tip of the iceberg, because the $750 billion of additional taking from Social Security to start private accounts is just the first 10-year cost. The 20-year cost is $4.4 trillion. Others have estimated approaching $5 trillion. I have taken a somewhat more conservative estimate. The President says, Borrow every dime of it. When we already have record deficits, we already have debt that is growing out of control. He says, Don't worry; just borrow more money. That is a reckless course. Why is it reckless? Because much of this borrowing is coming from abroad, coming from China, Japan, and South Korea. We have increased the foreign holdings of our debt just in the first 3 years of this administration by almost 100 percent. It is going up geometrically every year. We have seen two warning shots about the danger of doing that. First, from South Korea. They said, Gee, we are beginning to worry about loaning so much money to the United States. We are going to diversify out-of-dollar denominated assets. What happened? The stock market plunged 170 points in 1 day. The dollar went down again. It already went down 33 percent against the Euro in the last 3 years. We have a problem. The problem is that if there was a precipitous drop in the dollar, the policy options open to this country would be very severe. It would require a dramatic increase in interest rates, steep cuts in spending, dramatic tax increases. That is what is known as the perfect storm. That is the risk being run by this reckless policy of deficits and debt and deficits and debt and borrow and spend and borrow and spend, which, for some reason, our friends on the other side of the aisle have gotten into as a pattern of running the fiscal affairs of this country. The deficit has skyrocketed during this President's term, and here is the course he has us on. Publicly held debt, $3.3 trillion when he took office. They are now saying $9.4 trillion by 2015. The President's answer on Social Security is to cut the benefits dramatically--26 percent by 2042, 46 percent by 2075. That is at the heart of the President's plan: to cut benefits steeply, and then to establish these private accounts by borrowing trillions of dollars. Here is how the private accounts would work. I find people are really stunned when I explain how they work, because this is not the way the President explains it. The President says you can put aside money in your private account and earn, potentially, a higher rate of return. As far as he goes with that description, it is accurate. But he has left out something very, very important, because he assumes that money that is in your private account was loaned to you by the Social Security trust fund, and they expect to be paid back. They expect to be paid back with interest. Has anybody ever heard the President describe the plan in that way? That is how it works. I have spent hours with his people and they have assured me that is how it works. Here is an example. If you set aside $1,000 a year for 40 years and you earn 6.5 percent on that money, at the end of the period, you would have $92,000 in your private account. That sounds pretty good. The problem is that they assume that thousand dollars a year was loaned to you from the Social Security trust fund, and you owe it back with interest. If you pay it back with 5.8 percent interest, which is what the actuaries say would be required, you would owe back $78,000. But you don't pay it back out of our private account under the President's plan; you owe it back by further reducing your already cut Social Security benefits. That is how it works. What happens if you don't get a 6.5 percent rate of return? What happens if you only get a 5 percent rate of return? Guess what? Under that example, you would have $64,000 in your account, but you would still owe back $78,000. I know when I describe this to people, they cannot believe it. I thought the President said, That is your account, your name is on it, nobody can take it from you. That is true, but he has left out this little additional fact: He assumes in his plan that this money was loaned to you by the Social Security trust fund. That thousand dollars a year, which came out of your Social Security payroll tax--the theory is--would have been in the Social Security trust fund earning a rate of return there. So their assumption is that you owe the money back, but you don't pay it back out of your individual account; you pay it back by taking a further reduction in your already cut Social Security benefits. That is how it works. I will tell you, people are going to be mighty surprised to find out that is how it works. That is not the way it has been described. That is not what people have been told. They have been told that is their account, their name is on the account, nobody can take it away from them. All of that is true, but it leaves out something. It leaves out the rest of the story. The rest of the story is, yes, but you owe it back. That money was, in effect, loaned to you by the Social Security trust fund. So goes the President's theory. Therefore, you have to pay it back to the Social Security trust fund--the money loaned to you--and you have to pay it back with interest. Unfortunately, if you don't get a higher rate of return on your invested assets, you could wind up owing back more than is in your account. That can very easily happen because this assumes you have a 5- percent rate of return on your investment. I wrote an op-ed piece with Senator Lindsey Graham of the other side of the aisle saying there is a bipartisan approach to Social Security; we do have a problem; we do have a challenge; we ought to get together to solve it; and the sooner the better. I believe that, and I am prepared to work with my friends on the other side of the aisle to do that. But I am not prepared, and I will not be part of a plan that involves massive new debt. Count me out. I will fight that with every fiber in my being because I think it is reckless for the United States and the economic security of the country. With that, I will be happy to yield to the Senator from Michigan. How much time would the Senator like?

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. Thank you very much.

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. Mr. President, we had the announcement of the vote as 56 and 46; from the math I learned in North Dakota, that adds up to 102.

Mr. CONRAD. If the Chair would advise me at the end of 2 minutes, I would be appreciative. Let me again say to Senator Graham, I appreciate this effort. I appreciate the amendment he has offered. I have already indicated I intend to support this amendment because I think it lays out in some reasonable way the challenge we face. On this question of permanency, I agree with him. We certainly do not want a Social Security solution that leaves people in doubt that they are actually going to get their Social Security benefits. At the same time, when we use the word ``permanently,'' I don't want to have people left with the understanding that this is based on a forecast forevermore. The reason I do not is because that might lead to improper conclusions about what we are doing. These long-term forecasts I have seen over and over are a problem. Let me say why that is the case. The underlying forecast by the Social Security trust fund is that economic growth going forward is going to be 1.8 percent a year. That is the underlying forecast. Every year for the next 75 years, they are saying the economy is only going to grow at 1.8 percent. If we look back over the last 55 years, these green bars show how much the economy has actually grown, and in no time--at no time over the last 55 years, in 5-year increments, have we had economic growth that was as low as their forecast of how much the economy is going to grow over the next 75 years. So I have grave doubts about the accuracy of this forecast.

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. Mr. President, could you advise us on the time remaining on the two sides of the amendment?

Mr. CONRAD. I assume the time in quorum calls is being charged equally.

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, 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. 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.

Mr. CONRAD

Mr. CONRAD. Mr. President, I ask unanimous consent that privilege of the floor be granted to Sara Vecchiotti during the consideration of the budget resolution and rollcall votes thereon.

Mr. CONRAD

Mr. CONRAD. So in a half hour colleagues can expect a vote on the Bingaman amendment. I urge colleagues who might want to comment on that amendment or on the budget to take this time to come to the floor, and I remind colleagues that under the budget resolution we are limited to 50 hours. We took 5 hours off before we started. Today we started at 10 o'clock this morning, so we have used up another 7 hours. So we have roughly 38 hours left at this point. This is time that really should not be wasted. I urge my colleagues to come, make their statements, speak on the Bingaman amendment, and in a half hour we will be voting. I thank the Chair and yield the floor and suggest the absence of a quorum.

Mr. CONRAD. I yield 6 minutes to the Senator from Massachusetts. If he seeks additional time, we may be able to provide that as well.