Kent Conrad

Mr. CONRAD

Mr. CONRAD. At this point, if we could get an order for Senator Alexander and Senator Sarbanes.

Mr. CONRAD. All right.

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.

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 President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. CONRAD. Mr. President, I remember sitting in that chair presiding late in the evening when I was first elected. You get lots of opportunities to sit in that chair and preside. When it draws toward the hour of 8 o'clock and 9 o'clock and 10 o'clock, I know the days can get very long, especially when you are sitting in that chair. I think the Chair understands the process here. We have time, and the time is going to be wasted unless it is used. So we intend to use the time. I hope it is more interesting to the Chair to at least have somebody talking than to sit by his lonesome. The Comptroller General warned us earlier this year that the fiscal outlook is worse than claimed. He said in a speech to the National Press Club: The simple truth is that our Nation's financial condition is much worse than advertised. The Comptroller General has it exactly right. The Comptroller General of the United States is head of the Government Accountability Office. He is responsible to Congress to tell us about the fiscal condition of the country. He is warning us that our current budget course is unsustainable. That is a word he uses over and over, ``unsustainable.'' Chairman Greenspan, the Chairman of the Federal Reserve, has used that same word, ``unsustainable.'' It is a word I have used many times to my colleagues that the current budget course is unsustainable. We are running record deficits now. The President says cut revenues some more, add more to spending, and on top of it, we have the baby boomers about to retire. None of this adds up, and the President's budget does not add up. The President has left things out in an attempt to make the numbers look better. One of the things he has left out is any war cost past September 30 of this year. We have $82 billion that the President asked for in a special addition to the budget, called a supplemental, for this year. But past September 30 of this year, he has asked for no additional money, although the Congressional Budget Office tells us that over $380 billion is going to be necessary. It is not just with respect to the war the President has not given us the full story in his budget. He also has not shown us the full cost of his tax cut proposal. This dotted line shows the end of the 5-year budget window. Look what happens to the President's tax proposal right after the 5 years of the budget window. The cost absolutely explodes. None of that is revealed by the President's budget. In addition to the war costs and his tax cuts, he has also not shared with the American people the cost of fixing the alternative minimum tax, the old millionaire's tax that is rapidly becoming a middle-class tax trap. Why do I say that? Because now 3 million people are being caught in the alternative minimum tax. In 10 years, they tell us 40 million people will be caught up in the alternative minimum tax. It is going to be a big surprise to a lot of people. They thought they were getting tax cuts from this administration, but they are going to get tax increases from this administration. Many of them will not get it this year, but more of them will, and more next year, and more the year thereafter. Millions more will be caught up in the alternative minimum tax. It costs $774 billion to fix. The President's budget has nothing, zero, in the budget to cover that cost. Over and over, what the President has done is just leave things out of his budget to claim he is making progress on reducing the deficit. Earlier Senator Bennett was on the floor talking about how well the economy is doing. In some measures, it is doing well, but in many others, the economy of our country is being pumped up by writing hot checks. I remember Senator Bumpers so well during the Reagan era when we had a similar pattern of borrow and spend. He said: Anybody can pump up the economy by writing billions of dollars of hot checks. That is what this administration has done, hundreds of billions of dollars of hot checks, and not just over a 5-year period but every year, every year hundreds of billions of dollars of deficit financing. When the President came into office, he inherited a surplus. He inherited a substantial surplus, $236 billion. He told us if we adopted his plan, there would not be deficits. He was wrong because the deficits have absolutely exploded. And so has the debt. It is not just the deficits. Our friends on the other side of the aisle just want to talk about deficits, but the debt of the country is the real concern. You will remember the President told us in 2001 that he had a plan that would give us maximum paydown of the debt. He was going to eliminate as much of the debt as could be eliminated. Now we see the reality of the President's plan. Instead of debt being paid down, the debt has skyrocketed. It was $3.3 trillion in 2001. We now project it will be $9.4 trillion in 2015. This debt is going straight up. That is the publicly held debt. The gross debt is even worse. The gross debt was $5.8 trillion in 2001. We now project that it will hit $15.8 trillion in 2015 if the President's policies are adopted. This truly is a policy of deficits and debt, and it is also a policy of, in some ways, decline because while we are running these massive deficits and dramatic increases in debt, the value of our currency is in sharp decline. One of the key reasons for that is the massive trade deficits. At the same time we are running huge budget deficits under the President's policies, we are also running massive trade deficits, the biggest trade deficits ever in our history. The trade deficit last year was $618 billion. Why does it matter? It matters because we have to fill in the gap somewhere. The way the President is filling in the gap is to borrow the money. He is borrowing it from all over the world. In the last 3 years--and we only have numbers to 2004--this is what is happening to the foreign holding of our U.S. Treasury debt. Foreign holdings of our Treasury debt have gone up 92 percent in just the last 3 years. Some might say: So what. Everything seems to be going well. That just shows countries have confidence in us. Does anyone really believe America is strengthened by borrowing more and more money from Japan and China and South Korea? Does anybody think that somehow strengthens America? The harsh reality is that all this borrowing has led to this result: The dollar is in decline. Against the Euro, it has already gone down 33 percent since 2002. As we borrow more, people are having less faith and confidence in the value of the U.S. dollar, and the dollar has declined quite dramatically. It is not just the Euro, it is against other currencies as well. Senator Bennett, I am sure, talked about how jobs are now being created. That is true, and that is good news, and all of us are happy for that for the country. But the hard reality is there is an enormous gap between what is happening in this recovery and what has happened in previous recoveries. This dotted red line shows job recovery in the nine recessions since World War II before this one. One can see at this stage of the recovery--and this is the number of months after the business cycle peak--when we get out to this stage of the recovery, generally job recovery is improving very markedly and very dramatically. But look at the gap between this recovery and the average of the job recovery in the nine previous recessions since World War II. There is an enormous gap. In fact, the gap in jobs is 6.2 million private sector jobs short of the typical recovery. Something is wrong here. Something very different is occurring between this recovery and other recoveries. One of the questions we ought to be asking is why? Why is this recovery so weak compared to all the other recoveries since World War II? One of the things we see in addition to that is real weekly earnings during the tenure of President Bush are up only $5.32--and that is a week. Real weekly earnings in January of 2001 averaged $523 a week in this country. You see, this goes back to 1996, and we saw a very healthy run up from $485 to $523 from 1996 to 2001. So that was an increase of $38 a week. In this 4-year period, 2001 to 2005, weekly earnings are only up $5--again an indication that this recovery is weak in comparison to other recoveries. Here is more evidence that something is amiss in this recovery. Here is the share of population at work, and what we see is that it is near a 10-year low, with 62.3 percent of the population employed. We had been up at just about 64 percent, but in this period, with the recession, not surprisingly, the share of population at work was reduced, and still we are not seeing a strong recovery. I am certain also that Senator Bennett talked about what has happened with tax cuts and that tax cuts help fuel the recovery. There is no doubt that tax cuts help a weak economy. I myself proposed to our colleagues very substantial tax cuts in 2001, not as big a tax cut over an extended period as the President but actually bigger tax cuts in the short term than the President first proposed in order to give lift to the economy. I think now our colleagues are basically rewriting history and saying that tax cuts increased revenue. That is not what the record shows. The record shows that tax cuts reduced revenue. Here is what has happened. This chart shows Federal revenues in trillions of dollars, and we can see at the time of the Reagan tax cuts we had a reduction in revenue. At the time of the Bush tax cuts, revenues declined 18 percent over a 3-year period. They did not go up; they went down. This is not a matter of ideology. It is not a matter of partisanship. It is a matter of fact. The fact is, revenue went down. Looking at it in another way, this is the history of revenue going back to 1955 as a percentage of gross domestic product, and we can see that revenue had reached a peak of almost 21 percent in 2000. This led President Bush to say we need to cut taxes. He was right. Taxes were very high historically at that point, but look at what has happened subsequently. Taxes last year were down to 16.3 percent of gross domestic product. That is the lowest since 1959. So, again, when our friends say we get more revenue with tax cuts, no, no. We did not get more revenue. Revenue went down sharply. It did not go up. That is just a factual matter. I remember very well, in 2001, the Congressional Budget Office came to us with--I call this the fan chart. The fan chart was designed to show us the range of possible outcomes of budget deficits going forward. The Congressional Budget Office gave this wide range of possible outcomes depending on various economic scenarios, and they chose this midrange of possible outcomes for the forecast. The administration adopted that same outlook, and they said on the basis of this analysis that we were going to have nearly $6 trillion in surpluses over the next 10 years. Of course, this was back in 2001. My Republican colleagues came to me when we were having these budget debates, and I said, please, do not bet on a 10-year forecast. Let us not be betting the farm on a 10-year forecast because it may not work out. Yes, let us have tax cuts, let us have money set aside to strengthen Social Security, but let us not bet the whole farm on these forecasts coming true. Some of my best friends on the Republican side said: Kent, you are way too conservative. Do you not understand with these tax cuts, we will get a lot more revenue? Do you not understand the way it works? If we have these tax cuts, that will fuel the economy, and we will get much more revenue. We will be way above the midpoint of this range. Well, let us go back and check what really happened. Here is what really happened. It is this red line. We were not at the midpoint. We were not at the bottom of the range of possible outcomes on the deficits; we were way below the bottom. So this theory that tax cuts are going to lead to more revenue did not work out. In the real world, it did not work out. Here is what the Federal Reserve Chairman says. He rejects claims that tax cuts will pay for themselves. He said: It is very rare and very few economists believe that you can cut taxes and you will get the same amount of revenues. He has made other comments on the subject as well. He said last year, on September 8, in testimony before the House Budget Committee: 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 exactly what the budget before us asks us to do. It asks us to borrow more money to finance more tax cuts when the revenue is already the lowest it has been since 1959. I have to say to my friends, at some point the stuff that is being proposed has to add up. If my colleagues do not want to finance the spending they are voting for, then vote to cut the spending to match the revenue they will support. If they do not intend to make those cuts in spending, then raise the revenue to meet the spending they insist on passing. Over and over today, we heard our friends on the other side of the aisle say this budget is one that is fiscally responsible. I will soon have the chart that shows the year-by-year increases in the debt under this budget. Over and over I heard today that this budget is going to cut the deficit in half. Well, that is a worthy goal--going to cut the deficit in half over the next 5 years. The problem with it is they have just left out all kinds of things we know we are going to spend money on. They left out the war costs past September 30. That is $300 billion, according to CBO. They left out $700 billion to fix the alternative minimum tax. They left out $700 billion to fund the President's Social Security plan. It does not stop there because, very interesting, if we go to their own budget document on page 5, here is what we find. This is their analysis of how much the debt is going to increase over the 5 years of their budget. Look at what it shows. These are not my numbers. This was not developed by our side of the aisle. This is our Republican colleagues' own budget document, and here is what they say: If we pass this budget, the debt is going to increase in 2005 by $669 billion. Of course, that budget is already in play. Next year they say the debt will increase by $636 billion; the next year they say the debt will increase by $624 billion; the next year by $622 billion; the next year by $611 billion. How is the debt increase being cut in half? The deficit should be the amount by which the debt increases every year, right? Well, this is what they say the debt is going to increase by, and yet at the same time they are saying they are cutting the deficit in half. How do these two things add up? The only way they add up is by just leaving things out. When you put them back in, what you see is the debt increasing each and every year by over $600 billion, and all before the baby boomers retire. What is going to happen then? Massive debt before the baby boomers retire, and then a doubling of people eligible for Medicare and Social Security. Then we have a train wreck. The hard reality is, this budget does virtually nothing about the deficit situation facing the country. In fact, it only makes it worse. Under this budget before us, the deficit is increased by $130 billion over and above what would happen if we did nothing. If we put the Government on autopilot and walked out of here today, the Congressional Budget Office says the deficit would be $130 billion less than if we pass this budget. Yet we heard all day how this is a fiscally disciplined budget. I wish it were so, but it is not. We now face a circumstance in which the country is living beyond its means. We are running a trade deficit over $600 billion, a deficit on an operating basis over $600 billion, and we are borrowing the money and the President's answer is borrow some more money. Change Social Security, create private accounts, divert money out of Social Security, fill in the difference by borrowing trillions of dollars more. Tomorrow we are going to have a debate and a lengthy discussion on the question of Social Security and what the proper course is. I, for one, believe we do need to fix Social Security. We not only need to fix Social Security, we need to fix Medicare because the shortfall there is eight times the shortfall in Social Security. The President has no plan to address that shortfall. In addition to that, we are running these record budget deficits and the President says make the tax cuts permanent, cut the revenue base some more, and spend more money. This budget spends $100 billion more than last year's budget. I said to my colleagues earlier today, this is almost surreal, talking about this budget, how disconnected it is from reality, how far afield it has become. To hear descriptions of this budget that suggest it is fiscally responsible kind of leaves me shaking my head. Enormous risks are being run. The risks that are being run are that the folks who are loaning us the money decide they are not going to continue to do it. If that were to happen, the dollar would plummet further. I have already indicated it is off 33 percent against the Euro in just the last several years. But if those who are loaning us money-- the Japanese, they have loaned us over $700 billion; the Chinese, they have loaned us over $200 billion; the South Koreans, they have loaned us almost $70 billion--if they decided no longer to continue loaning us these amounts of money, what would we do? What would the options be that would be open to us? How would we pay our bills? That is a question we ought to be thinking about very carefully. If those who are loaning us these vast amounts of money decided that they were running too great a risk, if they decided they were tired of losing the value of their investments because the value of the dollar is constantly eroding, what would be the choices left to us? Very clearly we would have to dramatically raise interest rates. That would have a very serious impact on our economy, very serious, because not only do we have government debt--Federal Government, State government, local government--corporations have debt and individuals have debt-- they have mortgage debt, they have car loan debt, they have student loan debt. What would happen to all of that debt if all of a sudden interest rates had to rise quickly and dramatically in order to get foreign capital back into the country to float this boat because of these massive budget deficits and trade deficits? What then? That is the risk that is being run. That is the risk that is being run with this reckless fiscal policy. Our friends on the other side have described themselves as conservative. There is nothing conservative about the budget policy of this Government. This is a wildly reckless fiscal policy of record deficits, of record increases in debt with no end in sight, and this budget is more of the same. By its own terms, it says it is going to increase the debt every year of this budget by over $600 billion a year. Debt on top of debt. It is not too late. The time is still available to us to change course, to go to the American people and say: You know, we have to trim our sails. We are living beyond our means. We have to take steps to reduce this growth of deficits and debt. Yes, we need more revenue. Revenue is at the lowest it has been since 1959. That doesn't mean the first thing we do is raise taxes because could you get more revenue without a tax increase. You could get more revenue by collecting the taxes that are due now. The Internal Revenue Service tells us that the tax gap, the difference between what is owed and what is being paid, is over $300 billion a year. That is money that is owed that is not being paid. Why should we increase taxes on anybody before we collect taxes from people that already owe it? The vast majority of the American people pay what they owe. But we have a growing number of people and a growing number of companies that are not paying what they owe. The result is the burden gets shifted onto all the rest of us who do pay what we owe. Part of the result is these massive budget deficits. Yes, we have to be tough on the spending side of the ledger as well, without question. We are going to have to be tough on the spending side. But our Republican friends never want to talk about the revenue side. They say deficits are simply a result of spending. No, deficits are a result of the relationship between spending and revenue. What has happened is very clear. The facts demonstrate it conclusively. The revenue side of the equation has collapsed. Last year shows the lowest revenue as a percentage of gross domestic product since 1959, and spending has gone up. I would be the first to say the administration has increased spending with complete bipartisan support. The increase in spending has been primarily in three areas: Defense, homeland security, rebuilding New York. Those are the areas where the spending has gone up. In fact, virtually all of the spending increases are in just those three areas. But that is the reality. Spending has gone up, revenue has gone down. We couldn't pay our bills before, and we sure can't pay them now. The proposal is spend even more, have even less revenue. The deficits get worse and they get worse at the worst possible time, right before the baby boomers retire. That puts enormous strain on the budget of our country. What difference does it make? The difference it makes is somehow you have to pay these bills. If we are not going to cut the spending to match the revenue or raise the revenue to match the spending, then the only alternative is to continue to borrow, borrow, borrow. And increasingly, we are borrowing from countries all over the world. That makes us more vulnerable. I have never heard of a country borrowing its way to power. I have never heard of a country strengthening itself by becoming more indebted to others. I have never heard of a country that built its power on being the biggest debtor nation in the world, which we have now become. We have gone in the last 30 years from being the biggest creditor nation in the world to being the biggest debtor nation. You can do that for a while, just as a family can live beyond its means for a while. But at some point the bills come due. At some point you have to pay up. The challenge for us is to get on a different course and a different trendline as quickly as we can. We have seen this country take on challenges such as this many times before and succeed. The strength of America is our resilience and our ability to change course to meet challenges. We did it in World War I, in World War II, and we did it in the Great Depression. We did it in the 1990s when we were faced with massive deficits as well and we were able to get back on a course that turned deficits into surplus. Now that course is reversed once again. Unfortunately, unlike the 1980s when we had more time to get well, this time there is very little time to get our financial house in order before the baby boomers start to retire. Hopefully, tomorrow we will begin to agree to some amendments to this budget that will reduce the buildup of deficits and debt and begin to set us on a course toward fiscal responsibility. I hope that will happen. We will certainly have a vigorous debate and discussion and amendments tomorrow, and I look forward to it.

Mr. CONRAD. I am happy to yield 10 minutes on the amendment off the amendment time. Amendment no. 143

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. Mr. President, our dear colleague left out one very important fact about this amendment. This amendment does restore the cuts to education, but it does another thing: it reduces the deficit by a like amount. So this amendment restores the cuts to education, but it raises additional money through the closing of corporate tax loopholes to also reduce the deficit by $4.75 billion. When the Senator talks about fiscal responsibility--I know it is a new idea on their side--fiscal responsibility is actually reducing the deficit. This amendment supports education and reduces the deficit. That is something that is critically important that we do. I know the budget from our friends on the other side doesn't reduce the deficit, though they say it does. If you examine the document itself, look on page 5 and see how it increases the debt each and every year by more than $600 billion, by their own calculation. It demonstrates that this is not a fiscally responsible budget. To use ``fiscally responsible'' in attachment to this budget is truly farfetched. The Senator from Massachusetts is seeking time to speak. How much time would the Senator like? We have the vote at 5:30. We should probably retain some time for Senator Bingaman, if he would like to close.

Mr. CONRAD. Mr. President, we are headed for a vote at about 5:30 just so my colleagues who are listening are aware of that situation. For a moment, I want to discuss the pending amendment of Senator Bingaman.

Mr. CONRAD. Mr. President, the Senator from Tennessee raised questions about figures that Senator Bingaman was using in terms of the shortfall in the No Child Left Behind Act, and Senator Bingaman apparently had referenced a shortfall of $39 billion in No Child Left Behind in the last 6 years. The Senator from Tennessee was challenging that number and did not know how it was possible. Well, let me just share with my colleagues why it is not only possible, but it is the reality. Senator Bingaman was talking about the levels of funding that have been authorized in No Child Left Behind versus what has been appropriated. If one looks at 2002, one sees that the appropriation compared to the authorization was $4.2 billion short. If we would look at the succeeding years, what we would find is that the combined shortfall, the difference between what was authorized and what was actually appropriated, is $38.98 billion below what was authorized. I was not privy to the agreements that were made at the time, although I was serving in Congress, serving on the Budget Committee, but the understanding was that new obligations were put on the States and that the Federal Government was going to fund those new requirements. The determination at the time was the amount that was authorized was the amount of money necessary for the Federal Government to cover the new obligations it was requiring. The hard reality here is that the appropriations have not kept pace with what was authorized. As I indicated, in 2002, it was $4.2 billion; 2003, $5.4 billion; $7.6 billion short in 2004; $9.8 billion short in 2005; $12 billion short in 2006; for a total combined shortfall of $38.98 billion. Senator Bingaman was exactly right in his assertion. I just wanted to make that clear. I commend Senator Bingaman for offering his important education amendment. It provides $4.8 billion to restore funding for more than 48 education programs that are eliminated or significantly reduced in the Senate budget plan. I know the Budget Committee chairman will say that his budget resolution does not eliminate or reduce funding for these programs because his budget resolution does not contain specific programmatic assumptions and that the funding levels will be determined by the Appropriations Committee. It is true that the budget resolution does not dictate policy decisions to the Appropriations Committee. Policy assumptions, nonetheless, are embodied in the numbers in the budget resolution and allocated to the Appropriations Committee. Since the spending levels in the Senate GOP budget plan for 2006 are the same as those in the President's budget--except for a $100 increase in the Pell grant maximum, costing something over $400 million--I think it is only fair to assume that the resolution is tied to the President's policies. In fact, I have been assured on numerous occasions that is the case, that the budget they are putting before us in the Senate really embodies the President's priorities. I do not think anybody would expect anything else given that the President's party controls the Senate, controls the House, and they are, in effect, presenting the President's budget. That is why the amendment of Senator Bingaman is important--to pay for these shortfalls in the programs that the President's budget is cutting and that the Senate budget plan adopts. Among the programs proposed for elimination are all vocational education programs. Let me repeat that. The President's budget--and we assume by extension the budget before us by our colleagues on the Senate Budget Committee--eliminates all vocational education programs. Vocational education programs are important. Not everybody is going to go to college. Senator Kennedy presented information moments ago that showed that 40 percent of those who are in the school-age population go to college. Only 18 percent complete college education on time. So a lot of people are dependent on vocational education programs to be competitive in this globalized world economy. If they are going to be able to compete with the best trained, best educated people in other parts of the world, they are going to need additional education. For many people it is vocational programs that offer them that opportunity. The President says eliminate vocational education programs. Eliminate education technology State grants. I must say I think that is a mistake. I have been in the classes that benefit from the technology grant program so that young people have an opportunity to learn the latest technology. The President says eliminate that. TRIO, Upward Bound and Talent Search--again, I have seen the TRIO Programs and the difference they have made in schools all across my State. This provides an area of interest and opportunity for kids who might not be interested in school otherwise. The President says eliminate them. Safe and drug-free State grants--the President's budget says eliminate that. We have an epidemic in my State of methamphetamine abuse. Recently I was at a luncheon. A man was seated next to me whom I have known very well for many years, and I could tell he was very down. He seemed depressed to me. I said to him: What's wrong? He said: Nothing is wrong. I knew something was wrong. I continued to press him. He finally told me that his son had just been picked up as a methamphetamine user, and they had taken him to a treatment center. The treatment center told him that morning that his son was addicted. This is something very prominent back in my home State of North Dakota. He was devastated. Here he has a son hooked on methamphetamine. It has been devastating for the family. It has been a financial disaster. It has been a disaster in every way for that family. We are going to say: We are just not going to do drug-free State grants anymore, forget that--that is what the President's budget says--because it is more important, apparently, much more important to give additional tax cuts to the wealthiest among us. I indicated this morning that under the President's budget, tax cuts for those earning over $1 million a year will cost $32 billion in this next year, and $32 billion is the cost of the tax cuts just for those earning over $1 million year. We could restore the safe and drug-free State grants for $437 million. That is one-eightieth of what we are doing for the very wealthiest among us. Comprehensive school reform, smaller learning communities, teacher quality enhancement grants so that teachers get additional training--he is going to eliminate them all. So Senator Bingaman has come before us and has said: No, we should not be eliminating them all. That does not make sense. Instead, what we should be doing is restoring those programs, and we should pay for it. He says: Don't add to the deficit, don't just spend the money, raise the money to pay for it. If education is critical to our future, and it is, if it is critical to our ability to compete in this intensely competitive world community, and it is, then let's pay for it. Senator Bingaman does. He doesn't just pay for it. He also provides a like amount of deficit reduction. How does he pay for it? He pays for it by closing certain corporate tax loopholes. And, goodness knows, we have loads of them. When I was tax commissioner, I found one company that did business and had a series of shell corporate entities, some of them operating out of the Cayman Islands. The most profitable part of their worldwide company was in the Cayman Islands with one employee. I used to say that was the most successful, the most productive employee anywhere in the world because they showed hundreds of millions of dollars of profit in that one entity because they avoided taxes everywhere else. They showed their profits in the Cayman Islands. They would have pricing between shell corporations, and they would sell at what it cost from one corporation to another in places that had taxes, and then in the Cayman Islands they didn't have any taxes. All of a sudden, they showed hundreds of millions of dollars of profit. It is amazing--one person doing all the work. We have something going on in the country today that is a stunning abuse. We have individual cities and towns that are selling their sewer systems and their transit systems. They are selling them to companies, and then depreciating those assets and taking the tax advantages from it, and then they make a big payment to the localities for the privilege. If that isn't a dodge and a scam, I don't know what is. Let me repeat that. It is hard to believe. We have companies that go out and buy a sewer system from a town, and then depreciate the sewer system, getting the tax advantages from the depreciation. Those sewer systems were bought with taxpayer dollars in the first place. Then the company gives the city a fee, buys the sewer system, at least gets it in their name for tax purposes, and then depreciates the value of the system to cut down their taxes. They do the same thing with transit systems and bus systems. Congress moved, at the request of Senator Nickles and myself last year, to close down some of these abusive operations, but more remain. They didn't do them all. They didn't shut down all of them. We are talking about billions of dollars. Why wouldn't it be a better priority to shut down those scam operations and have vocational education in our schools? That is not what the President's budget does, and that is not what the budget before us does. The largest reductions are in adult education assistance, which is cut by 63 percent in the budget before us. Some people may say, Adults should have gotten educated when they were kids. It is a great idea, but a lot of people didn't get educated when they were kids. They didn't get sufficiently educated. Are we to say to them when they come back, Well, too bad, they are too late. Or, are we going to say, Good for you, we are glad you have come back, and we are going to help make sure that you take every advantage of your God-given talents. To me, that is a wise expenditure. The better educated we are, the better trained we are, the better we are going to do as a society. But that is not the priority of this budget. Let me say I think Senator Bingaman has done a favor to the body by bringing this matter to our attention. I hope my colleagues will support it. On another matter, in these discussions today we have heard repeatedly from our colleagues on the other side that if you cut taxes, you get more money. I don't know where they came up with this idea: You cut taxes and you get more money. That is not what the evidence shows. You cut taxes, you get less money. I have shown repeatedly on the floor today the charts that demonstrate the facts--not some ideological view, but the facts. The facts are that after 2001, with the significant tax cuts that were passed and the subsequent tax cuts that were passed, signed by the President, the revenue of the United States dropped like a rock. For the first time since World War II, we got less money year after year than we had the year before. The last time we saw significant drops in revenue was during the Reagan tax cuts of the 1980s. I don't know where our friends get this idea that when you cut taxes you get more money. It doesn't work that way. In the real world, we can test these theories. It is fine to have a theory, but let us deal with facts. The facts show conclusively that when taxes have been cut, we get less revenue than we would otherwise have received. That doesn't mean you never have a tax cut. In 2001, I supported a $900 billion tax cut because our economy was weak, and it needed a lift. In fact, I supported a much bigger tax cut than the President's initial proposal because he back-ended all of his tax cuts. He didn't design tax cuts to give lift to the economy at a time of weakness. He was back-ending the tax cuts--small at the beginning and large at the end. We wound up with the worst of both. We wound up with large tax cuts in the beginning where we needed them to give lift to the economy and large at the end when we can't afford them, when the baby boomers are starting to retire. I have showed the charts repeatedly here to demonstrate that the President has us on a course that does not and cannot possibly work. What we see in the President's plan is as the trust funds of Medicare and Social Security go cash negative, which happens in the next 20 years, at that very time the cost of the President's tax cuts explodes, driving us right over a cliff into deep deficits and deep debt. And we are already running record deficits. We are already running up unacceptable levels of debt. But for every problem, the President has the same answer: Borrow the money. Got a problem with Social Security? Borrow--borrow over $4 trillion to solve it. You got a problem with financing tax cuts? Don't worry about it, borrow the money. The President is fond of saying, It is the people's money. He is absolutely right. It is the people's money. But guess what. It is also the people's debt. This President is running up the people's debt at a record rate. The debt this year is going to increase by over $600 billion. And every year of this budget that is before us--this budget which they have described as fiscally responsible, according to their own numbers--every year of this budget they are going to drive up the debt of the country by another $600 billion--$600 billion, $600 billion, $600 billion. Do that five times, that is $3 trillion in 5 years of additional debt. The President says, Well, there is a shortfall in Social Security. He is right. He says the shortfall over 75 years is $3.7 trillion. That is what the actuaries say. What is the President's answer for the budget that he has sent us? His answer is, First, take another $2.5 trillion out of Social Security to pay for his tax cuts and other things. Before you are done with that, establish private accounts that cost another $750 billion over the next 20 years. Take that out of Social Security, and borrow that. The President ran as a compassionate conservative. The one thing I know for certain is this is not conservative. There is nothing conservative about record deficits and record debt. The President has said, Well, I came into office and we were attacked, and we had economic slowdown. Fair enough. That is true. We were attacked, and that required us to spend more money. I think virtually every Member here supported that. We had to spend more money for defense and for homeland security. But the President also says he came in a time of economic slowdown. That is also true. That is also fair. So we had tax cuts to give lift to the economy. I didn't agree with his particular mix of tax cuts because they overwhelmingly benefited the wealthiest among us. The top 1 percent received 30 percent of the benefits of the President's tax cuts, and they are not paying 30 percent of the tax load in this country. They are paying substantially less than 30 percent. Yet they got the biggest benefit. We are past the point of having been attacked. We are still at war. That is certainly the case. The President, in his budget, did not provide the funding for the war past September 30 of this year. He did not provide the money for this war. So that misleads the American people as to our true fiscal condition. He did not provide the money to fix the alternative minimum tax. He did not provide the money to make the Social Security changes that he has recommended. That is not really a budget. I don't know exactly what I would term it, but it is not really a budget. A budget is when you put down what you are going to spend and how much money we are going to bring in to pay for that spending. The greatest fault I have with the budget before the Senate is it makes no serious attempt to have the spending match the revenue. Instead, it tries to be all things to all people: More tax cuts for those who want that, more spending for those who want that and, as a result, massive deficits and a massive buildup in debt, all of it at the worst possible time. Why is it the worst possible time? It is the worst possible time because the baby boomers are about to retire. In 2008, just 3 years away, the leading edge of the baby boomers start to retire. Over a very short period of time the number of people eligible for Medicare and Social Security will double. The President talks about that shortfall, but he does not do anything about it. He said, no, he does not want to do anything about Medicare, although the shortfall there is eight times the shortfall of Social Security. He said we just passed a bill, so we should let that work before we do anything. That bill did not help reduce the Medicare shortfall, it increased it. It increased our unfunded liabilities by $8 trillion. The President said in his budget, cut the taxes more, increase the spending, leave out a lot of things that we know are going to cost us money and, lo and behold, he says, it will cut the deficit in half over the next 5 years. My colleagues on the other side of the aisle say the same thing about their budget proposal. They say it will cut the deficit in half over the next 5 years. But when you go to the budget document itself, what you see is quite a different story. When we go to the budget document itself, what you see is what they predict the debt will increase by every year of this budget. What we find is the debt will go up by $600 billion a year each and every year of this 5-year budget. It is in their own document. They say they are cutting the deficit in half. They have a very tortured definition of what the deficit is. When I grew up a deficit was the shortfall. A deficit was a shortfall between what you are spending and what you are taking in. That is a deficit. And the amount of the deficit is added to the debt. They have said in their document the debt will increase by $600 billion a year every year for this 5-year budget. There is no cutting it in half. There is no cutting it. It is almost the same year after year. And all of this before the baby boomers retire. The result is we are borrowing money from all over the world. It is not only the budget deficit. The trade deficit is the biggest factor. That is over $600 billion a year in a trade deficit. Our foreign borrowing in just 3 years under this President has increased almost 100 percent. We had $1 trillion of foreign debt, debt held by foreigners in 2001. Now it is approaching $2 trillion. That is just through December of 2004. We ran a $600 billion trade deficit last year, so the indebtedness, what we owe foreigners, has been skyrocketing. That is utterly unsustainable. That puts us at great risk. If they decided not to show up to take our debt, we would be in big trouble very fast. This budget, I regret to say, does absolutely nothing about the serious problems facing our country. The overarching challenge facing America is a buildup of deficits and debt, without question. The hard reality about this budget is it actually adds to the deficit in each and every year over just doing nothing. If we just put the Federal Government on autopilot and went home, we would be $130 billion better off in the deficit than if we pass this budget. For 2006 alone this budget increases the deficit by $63 billion. Yet they come to the Senate and talk about fiscal responsibility and fiscal restraint and they are doing something about the deficit. They are doing something about the deficit. They are making it worse. We do not ever hear them talk about doing anything about the debt because their budget increases the debt every single year by over $600 billion, according to their own calculations. They will increase the debt of this country by $3 trillion in 5 years. And this is the crowd who said they were going to have maximum paydown of the debt just 3 years ago. The President told us he had a plan, that he could have these big tax cuts, defense buildup, massive tax cuts, that he was going to protect Social Security, going to protect Medicare, and going to have maximum paydown of the debt. The only problem with it is none of it worked. None of it added up. And the result is instead of paying down the debt, the debt has skyrocketed. I see the Senator from Hawaii is in the Chamber. How much time would the Senator like?

Mr. CONRAD. Mr. President, when I read the headlines in the paper and saw across the front page the top headline in the Washington Post, ``Senator Sarbanes to Retire,'' I read that with a heavy heart because there is no one who has made a stronger contribution in this body than Senator Paul Sarbanes. We are going to be expecting him to be helping every day of these last 22 months, and I know that will be the case.

Mr. CONRAD. I would be happy to yield.

Mr. CONRAD. Mr. President, the Senator is correct on both counts. No. 1, there is $70 billion of tax cuts that are in this budget before us; that is, net tax cuts. Ironic, given the fact that we are running record budget deficits. Secondly, with respect to Medicaid, the two drivers that are very adversely affecting Medicaid are, No. 1, we have had millions of additional people come into the system, so the number of people who are dependent on Medicaid is growing dramatically. Of course, as the Senator well knows, medical inflation is running much higher than the underlying rate of inflation. That has put enormous pressure on the Medicaid program. It is also fair to say it is undeniable that there are people who are engaged in spend-down schemes to reduce their assets so they qualify for Medicaid. That is also putting pressure on the overall circumstance we face. We have had, between 2000 and 2003, 8.4 million new enrollments in Medicaid. That is because, as the Senator so well knows, of the economic downturn. The recession meant millions of additional people were pushed onto the Medicaid rolls. That has put enormous pressure on spending. We also have the hard reality, as I mentioned this morning, of the United States not being able to pay its bills. We face an incredible challenge going forward with respect to Medicare. In fact, the shortfall in Medicare is many times the shortfall in Social Security. I indicated this morning, the shortfall in Medicare is eight times the shortfall in Social Security. I wanted to talk a little bit about the Social Security problem because we are going to be addressing that a lot. One of the things that gets too little attention is the underlying assumption about Social Security. The forecast for economic growth that is the basis for the concern about Social Security is a very low rate of economic growth over the next 75 years. They are projecting a rate of economic growth of about 1.8 to 1.9 percent. Economic growth over the previous 75 years was 3.4 percent. One of the major components of economic growth is productivity growth. This chart shows the Social Security actuaries are assuming productivity growth at this red line. They are assuming productivity growth of 1.6 percent for the next 75 years. Yet in recent years, we have been getting much higher rates of productivity growth than their estimates. You can see in 2000 to 2004, the productivity growth has been in the range of 3.6 percent. It is important for people to know that the underlying assumptions about a problem in Social Security assume quite pessimistic views of economic growth, and of course productivity growth is one of the central components of economic growth going forward. The actuaries are assuming over the next 75 years productivity growth of 1.6 percent, when in the most recent 4 years we have had productivity growth of more than double that amount. Here is the problem we face with Social Security, and we face this problem with Medicare and, to an extent, we face it with Medicaid as well. This is the number of Social Security beneficiaries who are going to retire. Currently we are at about 40 million beneficiaries. As this chart shows, that number is going to grow dramatically to over 81 million by 2050. It is this demographic bulge that is putting enormous pressure on the Social Security Program, Medicare Program, the Medicaid Program, and what makes the overall budget circumstance utterly unsustainable. Curiously enough, the President acknowledges we have a shortfall in Social Security of $3.7 trillion. But in his budget, the first thing he does is take another $2.5 trillion out of Social Security over the next 10 years. I want to be clear about this. The President says we have a shortfall in Social Security. He is right. The estimates are widely put at $3.7 trillion over the next 75 years. Again, that is based on a very pessimistic forecast of economic growth, much lower economic growth for the next 75 years than we have had over the previous 75 years. The President's first move is to take all the money that is available to take out of Social Security over the next decade, $2.5 trillion worth, something he had promised not to do. So he is making the problem much worse. In fact, when the President submitted his budget in 2002, he said: None of the Social Security surplus will be used to fund other spending initiatives or tax relief. Now let's look at what he is doing. He is doing precisely the opposite. He is taking every penny of Social Security money that is available and using it to pay for other things. Over the next 10 years, from 2006 to 2015, here are the Social Security surpluses during that period. I use the word ``surpluses'' advisedly because it is really not surplus. It is a temporary surplus. There is more money coming in from the Social Security trust fund than is going out in each of these years for the next 10 years, $184 billion in 2006 income over and above outgo. That builds up by 2015 to a $300 billion surplus in Social Security. That is, we are getting more revenue than we are spending in benefits. Under the President's budget and under the budget that has been submitted by our colleagues, every penny of this money is being used to pay for other things, every penny of it, instead of being used to prepay the liability or pay down the debt to better position us to meet the promise of Social Security. Instead, under the President's plan, he is taking all of it, $2.5 trillion, and using it to pay for other things. When the President says there is a shortfall in Social Security of $3.7 trillion, again that is based on an assumption. The assumption is the economy is going to grow at about 1.8 or 1.9 percent every year for the next 75 years. In the previous 75 years, the economy has grown at 3.4 percent. So this is a very pessimistic forecast. But using that forecast, the shortfall of Social Security over 75 years is $3.7 trillion. Over the same period, the cost of the President's tax cuts is much more--$11.6 trillion. So I hope that helps to put this in some perspective for those who are listening. The President's answer is to, first of all, cut the benefits dramatically. He proposes moving from an indexing of the benefits from a so-called wage indexing to price indexing. The benefit reductions that flow from that decision are the following: Those retiring in 2022 would see a 10-percent reduction; in 2042, a 26-percent reduction; in 2075, almost a 50-percent reduction. So that is what happens to those folks. Then there is another part of the President's proposal that deserves attention, and it has gotten virtually none. That is the offset provision. The way the offset provision works is quite unusual. Under the President's plan, if you set aside money for your private account-- let's say you set aside, over 40 years, $1,000 a year. That account balance assumes a real rate of return of 3.7 percent. Real rate of return is rate of return plus inflation. The rate of return is 6.5 percent. The loan is compounded at a 5.8-percent nominal rate. To put it in plain English, say you put aside $1,000 a year and you get a 6.5- percent rate of return during that period. At the end of the period, you would have $92,000 in your account in today's dollars. But that is not yours free and clear under the President's plan, because they assume the Social Security trust fund loaned you that money. They want to get paid back and they want to get paid back with interest. So when you hear the President say that is your account, you got your name on it, nobody can take it away from you, that is true as far as it goes. But it leaves out a very important fact. The very important fact it leaves out is that you owe the money--underlying money, the thousand dollars a year plus interest--you owe it back. But you don't pay it back out of your individual account. You pay it back out of your other Social Security benefits. Under this scenario, where you have put aside $1,000 a year and you have gotten a 6.5-percent rate of return, you would owe back $1,000 plus the real rate of return of 3 percent, or roughly 5.8 percent, including inflation. So you would owe back $78,000--not out of your individual account, but out of your already reduced Social Security benefits. I have never heard the President describe it this way, but I have gone over his plan in great detail with his people and that is how it works. Let me give you another possibility, because you know this is assuming--the first chart here--a 6.5-percent rate of return. What if you don't get that good a rate? What if you get a lower rate than 6.5 percent on your investment? Under the President's plan, workers earning 5 percent must repay 120 percent of the value of their individual accounts. I know that sounds unbelievable, but that is the way it works, because they are making an assumption that the money that went into your individual account was loaned to you by the Social Security trust fund; they expect to be paid back and they expect to be paid back with interest. Whether you made money on your account or not, they are expecting you to be paying back the money that was theoretically loaned to you, plus interest. So in this case, let's assume you put $1,000 a year aside in your account, and that your account only got a 5-percent rate of return. At the end of the period, you would have $64,000 in your account, but you would owe back $78,000 because they are expecting that thousand dollars a year back, plus interest. They are expecting a real rate of return--3 percent plus inflation--roughly 5.8-percent rate of return on what you have to pay back. Now, I want to go through this again because I don't think a lot of people understand that is how these private accounts work. I hope it is clear to people from looking at this, you could wind up owing back more than you have in your account. OK. Let's go over it one more time so that people have a chance to see how this works. Under the President's plan, you are able to put aside $1,000 a year into your account. You are able to earn a return on that. In this example, over a 30-year period, if you set aside $1,000 a year and you have a 6.5-percent rate of return, you would have $92,000 in your account in today's dollars. But, remember, you have to pay back what was theoretically loaned to you from the Social Security trust fund. You have to pay back the $1,000 a year, plus interest. The interest that they are expecting to get back is 5.8 percent. So you owe back, under this example, $78,000 in today's dollars. Again, you don't pay it out of your individual account or your personal account; you owe it back out of your traditional Social Security benefits. I am going to conclude on this example. I see the leader is here. I want to make sure we go to him next. He has a lot of other things to do. In this example, let's say you only earned 5 percent a year for 30 years. Actually, this example is over 40 years. If you only earned 5 percent a year, you would have $64,000 in your account, but you would owe back $78,000--again, not out of your personal account, but out of your already reduced Social Security benefits. So I think it is very important for people to understand how this works. The final point I will make is, at the very time the trust funds of Social Security and Medicare go cash negative, the cost of the President's tax cuts explodes. Remember, he is making these tax cuts permanent. The cost increases dramatically over time. What this chart shows is the green bars, which are the Social Security trust fund, running, as we described, surpluses now. The blue bar is the Medicare trust fund. When those go cash negative out here, at that time, the cost of the President's tax cuts explodes, driving us right over a cliff into huge deficit and debt. This is a plan that does not add up. It does not make sense and it fundamentally threatens the economic security of the country. I thank my colleagues and yield the floor.

Mr. CONRAD. Mr. President, again, my colleague referred to what Democrats offered in the committee. To be clear, we offered amendments costing $217 billion. We offset that with revenue of $245 billion. But one amendment alone of ours cost $197 billion. What was it? It was to pay for the war. It was to pay for the war. Our friends' budget does not pay for the war. They make believe there are no costs. We do not think it is responsible, so we put the war cost in the budget, and we paid for it. That is fiscally responsible. That is exactly what a budget is supposed to be about. The President sent up a budget with no war cost past September 30 and said it is hard to estimate. Of course it is hard to estimate. That is what a budget is about. There is no family in America which leaves out the utility bill because it is hard to estimate. There is no family in America which leaves out the food cost because it is hard to estimate. They leave out things. It is no wonder we are in deep deficit and a massive increase in debt when they come with a budget and they leave things out. My colleague says the mark has no assumptions concerning discretionary policy, that all he is providing to the Appropriations Committee is a budget authority total and an outlay total. It is true that the budget resolution does not dictate policy decisions to the Appropriations Committee. However, it is also true that there are policy assumptions embodied in the numbers. This is not just numbers on a page. That is not what a budget is about. There are assumptions about how you get to those numbers. And while it is true the Budget Committee cannot and does not dictate to the Appropriations Committee how they use the money allocated to them, it is true there are assumptions behind the budget. As we look at the assumptions in this budget, we see a striking resemblance to those of the President's. Are we to assume it is a mere coincidence that the chairman's mark is nearly identical to the President's request? Did that just somehow happen but it is not connected to any policy recommendations? The President has made quite clear in his budget what he anticipates cutting and what he anticipates increasing. In the budget offered by our colleagues in the Senate, the numbers--the big numbers--are the same as the President's numbers. Now, do they have the same assumptions or different assumptions? Look, I think we all know that they have carefully tracked the President's proposal. They have said that to us themselves. We also know that at the end of the day the Budget Committee says this is the amount of money available; that is it. When you get past that money, it is not going to be available. The budget determines how much money is available for the Appropriations Committee to spend. We don't dictate how they do it. We don't dictate how the Finance Committee raises the money. We tell them how much money to raise. We tell them how much money they have to spend. But these numbers didn't pop out of nowhere. They are based on assumptions of how much each of the committees would get for all of the purposes contained in their area of responsibility. We know this budget is tightly linked to the President's budget. In fact, the numbers of spending are the same. These amendments do send a clear signal on what the priorities are of the Congress.

Mr. CONRAD. Mr. President, the words of my colleague are right on target. I wish the budget matched the words. The Senator acknowledges the need for fiscal discipline. This budget does not provide it. As I have indicated and shown from their own numbers, the debt goes up $600 billion a year under the budget the Senator advocates. That is fiscal discipline? No, no. My belief is that fiscal discipline represents a deficit going down, not going up. My view of fiscal discipline is one that reduces the debt, not increases the debt. The Senator's own budget documents show that he is going to add to the debt $600 billion a year each and every year for the next 5 years. And they call that fiscal discipline? I mean really, this stands words on their head. It reminds me of Orwell: War is peace, love is hate. Fiscal discipline is adding $600 billion a year to the debt? Please. Now, the Senator says we did not offer an alternative in the Budget Committee. That is true. We offered alternatives by amendments. The Senator says we would have added spending. The Senator is correct. We paid for every dime of it and over and above. What was the spending we added? The Senator says we added over $200 billion in spending. The Senator is correct, and $200 billion of it was to pay for the war they do not pay for. Now, who is being straight with the American people-- those of us who paid for the war or those who make believe they do not have to pay for it? We provided the revenue to cover the cost. That is a new idea around here, to actually pay for something. Those are the amendments we offered. If we take out our amendment to cover the war costs, we offered $20 billion of spending and $47 billion of deficit reduction. We had more in deficit reduction than we had in spending, and we paid for the war. That is fiscal responsibility. There is no fiscal responsibility in a budget that adds, by its own terms, by its own calculations, $600 billion a year in debt. That is not my estimate; that is theirs. Let us review the history because history is important. This goes back to 1980. The red line is the spending line of the United States. The green line is the revenue line. One thing our Republican friends have been very consistent about is massive deficits. That is what happened the last time they were in charge back in the 1980s: massive deficits, much more spending than revenue. Then the Democrats took over. The spending went down. The Senator says spending never goes down. Wrong. Spending went down as a share of gross domestic product, which is what the economists say is the best way to measure it because it takes out the effects of inflation. Spending went down from 22 percent of gross domestic product to just over 18 percent of gross domestic product when the Democrats were in charge. The revenue went up. Yes, we raised taxes on the wealthiest among us so we could balance budgets, so we could pay for things. What was the result of those policies? The longest economic expansion in our Nation's history, the lowest unemployment in 30 years, the lowest inflation in 30 years, and one of the strongest periods of business investment in the Nation's history. That is the result of those policies combined with private sector initiatives made possible by real fiscal responsibility. Our friends always want to concentrate on the spending side. They forget that deficits are the result of the relationship between spending and revenue. They never want to talk about the revenue side because look what happened on the revenue side on their watch. It collapsed. Even with spending that increased again under their watch--I am not faulting them for this increase in spending because it was largely defense and homeland security--the fact is the spending increased. Look going forward; their spending continues to go up. Meanwhile, the revenue goes up a little bit, but it is far short of what they want to spend. So what they are telling the American people is, more deficits, more debt, more deficits, more debt. That is their plan. And then what? What are they going to do when the baby boomers retire? I can tell everyone what they are going to do. They are going to slash Social Security. They are going to slash Medicare. That is going to be their answer. Meanwhile, deeper and deeper into debt we sink. Is my colleague seeking time? I am happy to yield time to the Senator off the resolution.

Mr. CONRAD. Mr. President, let me respond briefly by saying, I commend the Senator for putting $50 billion in his budget. I referred in my earlier remarks to the President's budget that had no money past September 30 of this year for the war. In the Senator's budget, it is true, he has put in $50 billion for the coming year. But that is well short of what the Congressional Budget Office tells us is going to be necessary. The amendment we offered on our side in committee was to fully fund the war obligations according to what the Congressional Budget Office has told us would be required. Mr. President, I am happy to yield 20 minutes to my colleague, the Senator from Oregon, who is a valuable member of the Senate Budget Committee.

Mr. CONRAD. Mr. President, I will take a couple of brief minutes to respond to the leader and indicate that the problem I see is the words continue to be good, but the words are almost totally divorced from the reality of this budget. The longer I am here, the more stunned I am at what a gap there is between rhetoric and reality. The rhetoric is all about fiscal responsibility and restraint, but that is not what this budget does. That has almost no connection to this budget. What am I talking about? I am talking about going back and looking at what this budget is doing and adding back the costs it has omitted. The majority leader talked about the $80 billion of the supplemental it has for the war. Yes, it does. Unlike the President, he has no money for the war past September 30. At least this budget has $50 billion in a reserve fund for the war, but nothing beyond that. The Congressional Budget Office says that is not the cost of the war. The cost of the war is over $380 billion, not $130 billion. There is a $250 billion difference. Well, if we put that back in and we put back in the alternative minimum tax that costs $700 billion to fix, there is not a dime in this budget to do it. We all know it is going to have to be done. Three million people were affected last year. Ten years from now it is going to be 40 million people. Does anybody believe we are not going to do anything? Last year, the President at least said, here is the money for 1 year. Now he has nothing. This budget from our colleagues has nothing. The $700 billion is left out. I said to the President's people when they showed me this budget, why did you not leave out some more things and claim you balanced the budget? They said they are going to cut the deficit in half. They are going to cut the deficit in half by imagining. They are going to cut the deficit in half by leaving things out. When we put back the Social Security money that they are taking, $2.5 trillion that they do not count, here is what one sees: Operating deficits every year approaching $600 billion. Somebody out there may be saying, well, that is Senator Conrad. He is from the other side. He is the loyal opposition. He is giving his view of it. No, it is not just my view of it, this is their own budget document. Looking at their own budget document, this is what it shows. This is their projection of what the debt will increase by every year of this budget. This is a copy of their budget document, page 5. Here is what it shows. This is their estimate of how much the debt is going to increase every year if their budget is adopted. Remember what the words were that we just heard. He said the deficit is going to get cut in half over the next 5 years. Is that not what he said? Did he not say he is going to cut the deficit in half over the next 5 years? Well, here is what their budget document says is going to happen. They say the debt is going to increase in 2006 by $636 billion. This year, they say it is going to increase by $669 billion, then $636 billion, then $624 billion, then $622 billion, $611 billion. Does one see it getting cut in half? Where is it getting cut in half? They are talking about a deficit projection that leaves out things. When the things are put back that are left out, the amount that is getting added to the debt every year is not getting cut in half. It is hardly being cut at all. This is their budget document. In this town, words seem to matter more than reality. If the deficit is going down, how can it be the debt is going up so fast? Could it be something is being left out? Here is what has happened to the debt: $3.3 trillion in 2001, headed for $9.4 trillion in 2015. This debt is going up like a scalded cat. And that is the publicly held debt. Here is the gross debt: $5.8 trillion in 2001. We are headed for $15.8 trillion in 2015, all at the worst possible time, right before the baby boomers retire. They can put any characterization they want on this budget. They can use any words they want. They can talk about fiscal restraint and getting serious about the deficit. The numbers do not lie. The numbers in their own budget show the debt going up $600 billion a year every year of this budget. Those are their numbers. So when they say they are cutting the deficit in half and they are being fiscally responsible, it is all words, but it is totally detached from the reality of this document, and it is totally detached from the reality of this budget because their own numbers show--and I will go back to it. This is their document out of their budget. They say the debt is going to go up $669 billion, and then the next year it is going to go up $636 billion, and then the next year it is going to go up $624 billion, and then the next year $622 billion, and the next year $611 billion. Where is the deficit getting cut in half? These are not my numbers. These are their numbers in their budget document. None of this adds up. Running massive budget deficits, running massive trade deficits, $600 billion a year of trade deficits, we are borrowing money all over the world. Foreign borrowing by this President has gone up 92 percent. We had a trillion dollars of foreign holdings of our debt in the first 200 years of this country. Under this President, in 4 years it has gone up almost 100 percent. As a result, we owe Japan over $700 billion. We owe China almost $200 billion. We even owe South Korea $69 billion. So what? What difference does it make? The difference it makes we have seen twice in the last 2 months. We saw South Korea announce they were going to diversify out of dollar-denominated securities. The stock market went down 170 points in a day. The dollar went down sharply. Then, just a week ago, the head of Japan said they are going to diversify out of dollar-denominated securities. The dollar took another big hit. The dollar is down 33 percent against the Euro in the last 2.5 years. Is anybody watching? Is anybody paying attention? Does anybody care? Does anybody understand the consequences of the risks that are being run here, of massive deficits, of massive debt, of massive borrowing from countries all around the world that makes us more and more vulnerable to decisions they make in their central banks, and the warning signs? First South Korea says: Boy, I don't know about holding all these dollars. These dollars keep going down in value. Why should we hold onto them? Maybe we should get into some other currency. The head of Japan says: Boy, this is risky business. I don't know if we should keep doing this. Warren Buffett, one of the most successful investors in the world, says he is betting against the dollar in 2005. Last year, he made a $300 million bet against the U.S. currency, and he made a lot of money on that bet. This is risky business. I indicated the last few weeks I talked with somebody who, last year, had been at the annual meeting of one of the most wealthy families in America. They told him they are getting ready to diversify out of dollar-denominated securities because of these massive deficits that are being run and the risks of a run on the dollar. This budget just continues that risky strategy. I see the Senator from New Mexico is here. I yield 20 minutes off the resolution to the Senator from New Mexico. Amendment No. 143

Mr. CONRAD. Mr. President, I thank the Chair and I thank my colleague, the chairman of the Senate Budget Committee, for the many courtesies he extended to me and to my staff during consideration of the budget in the Budget Committee. He described it accurately and well, that it was a very professional process and we had a good debate on a whole series of issues. Many of those debates will now be out on the Senate floor. I do not think it will surprise people that my take on this budget is somewhat different than the distinguished chairman's take on it. That is what debate is all about. That is what democracy is all about, the chance to have differences and to debate them and to vote on them. That is the genius of our system. The way we arrive at truth, to the extent we do in this system, is we have a debate and a discussion, and we have a contest over ideas. That is a healthy thing. It is a good thing. That is what we are about to go through. As I look at this budget, I see something quite different than the chairman sees. I see a failure to face up to the major challenges confronting the country. I agree with him in terms of his diagnosis of where this is headed with respect to deficits, debt, and the explosion of the costs of the entitlement programs. I agree with that diagnosis. Where I disagree is that this budget does anything in any significant way to confront those challenges. In fact, this budget makes it all worse. That is the fundamental reality. This budget digs a hole deeper. This budget produces more deficits than if we did not have a budget resolution at all. If we put it on autopilot, we would be better off than what this budget does. Each and every year of this budget, the deficit is increased over the so-called baseline budget. That is the reality. Perhaps to understand how we got to this circumstance, we have to look back before we can look forward. We have to look back first to 2001, when the President told us: [W]e can proceed with tax relief without fear of budget deficits, even if the economy softens. That is what the President told us in 2001. But look what happened. The President was wrong. We went from a surplus in 2000, the year before President Bush came into office, and the deficit situation has declined each and every year to now record levels of deficit, the biggest deficit in dollar terms we have ever had. So when the President assured us we could have massive tax cuts and we would not have deficits, he was simply wrong. But he was not just wrong on that issue, because the next year he told us: . . . [O]ur budget will run a deficit that will be small and short term . . . He said this in his State of the Union Address on January 29, 2002. Unfortunately, that was wrong, too, because these deficits are not small and they are certainly not short term. In fact, what we see going forward to 2015 is an ocean of red ink, the biggest deficits we have ever had in dollar terms. So when the President said they would be small, he was wrong. They are very large deficits. When he said they would be short term, he was wrong again. These are long-term deficits and deficits that are as far as the eye can see. That is not just my conclusion, that is the conclusion of the Congressional Budget Office as well. If we put back the things the President has left out, the ongoing war costs, the need for alternative minimum tax reform, and the money he is taking from Social Security--it is an interesting thing because at the same time the President says there is a shortfall in Social Security, under his budget each and every year he takes every dime of Social Security money that is available to take and uses it to pay for other things. Again, the President was wrong when he told us these deficits were going to be small and short term. The next year the President told us in his budget submission: [O]ur budget gap is small by historical standards. Again, the President has simply proved to be wrong. Let us put up that next slide that shows a historical comparison of the deficits under President Bush compared to the three previous administrations. The President says the deficits he is writing are small by historical standards. One can look at the last three administrations and see that his deficits are by far the largest. Let us go to the next slide. The President now says to us, well, we have deficits, so forget about that assertion that there are not going to be any. They are clearly not small and short term. They are clearly not small by historical standards. So now he assures us he is going to cut the deficits in half over the next 5 years. Well, let us look at the reality with respect to that assertion, because what we find is something quite different. This is the President's claim. He says the deficit is going to be cut in half over the next 5 years, but he gets that result simply by leaving out things. He leaves out war costs past September 30 of this year. He leaves out the need to reform the alternative minimum tax, which is the old millionaire's tax which is rapidly becoming a middle- class tax trap. It costs over $700 billion to fix. There is not a dime in this budget to do it. Surprisingly, he leaves out the cost of his major proposal, which is to change Social Security, and the cost of his proposed change is in the trillions of dollars, over $700 billion the first 10 years but over 20 years over $4 trillion of costs. He does not have any of it in his budget. The President also told us back in 2001: . . . (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. We can now look back and check the record and see if the President's assertions were correct or incorrect. Again, he was wrong with virtually every major claim he made on the deficit. Unfortunately, the same is true with respect to the debt. The President said he was going to pay down $2 trillion of debt. Unfortunately, we do not see any paydown in debt. The debt is exploding. The assertion by the President that he was going to pay down the maximum amount of debt available to pay down evaporated, like his claims on the deficit. Instead, the debt is skyrocketing, and under the budget the President has sent to us, we see nothing but continued growth of the debt. When the President came into office, the publicly held debt was $3.3 trillion. We now forecast by 2015 it will be $9.4 trillion, almost a tripling of the debt at a time the President said he was going to have maximum paydown of the debt. One of the most interesting claims I get from colleagues on the other side of the aisle is that these massive tax cuts have nothing to do with the deficits and nothing to do with the growth of the debt. Well, how is that? How can that possibly be true? I remember very well this chart that the Congressional Budget Office showed us back in January of 2001. This chart shows the range of possible outcomes for the deficit, and the administration chose the midpoint of this range in telling us in 2001 we could expect $6 trillion of surpluses over the next decade. But now we are able to go back and see what actually happened. I remember so well, my colleagues on the other side told me, when I warned them against taking this 10-year forecast in the Budget Committee to the bank--I repeatedly warned it was very risky to count on a 10-year forecast--many of my friends on the other side said: Kent, you are being much too conservative. Don't you understand the tax cut will generate even more revenue? Don't you understand, when we put in place these tax cuts, we are going to get a tremendous revenue impact, more revenue than is forecast? They told me we are going to be in the top end of this range. Let's look at what actually happened. We can now see the record. The record is the red line. This is what happened to the deficits. We didn't get more money, we got less money, and the result is, combined with more spending on defense and homeland security and rebuilding New York, that the deficits are far worse than even the low end of the range projected back in 2001. Let's check reality. When our friends say if you cut taxes you get more money, that has not been the experience. The experience has been very clearly when you cut taxes, you get less money. In fact, we got a lot less money, 3 years in a row with less money than the year before. That is unprecedented since World War II. It is not just tax cuts. Tax cuts are about half the reason. The other half is economic downturn and forecasts that were overly optimistic. Nonetheless, I want to go back to the point. I don't want anybody to miss this point. Here is what is forecast, this possible range of outcomes. They chose the midrange on which to base their spending and taxing policies. Many said, with the massive tax cuts you will get more money. But here is the reality. Here is what happened in the real world: A lot less money, much bigger deficits, and an exploding debt. If we look at the budget turnaround since 2000, that is the difference between what was projected and what actually occurred. What we see is that the revenue loss accounts for the bulk of the budget turn around. In fact, reduction in revenue is three-quarters of the reason for the move from dramatic surpluses to dramatic and growing deficits. I think it is very important for us to be dealing in facts here, not rhetoric, not hope, not ideological belief, but facts. The facts are that the revenue side of the equation collapsed. Do you remember, back in 2000, revenue was running at almost 21 percent of GDP? The President said: That is very high by historical standards. And he was right. He said: As a result we need to cut taxes. I must say I also supported cutting taxes. I didn't support the particular plan that he advocated, but I believed we needed to cut taxes to give lift to the economy at the time. But I also believed we needed to reduce the amount of the tax cut over an extended period so that we would avoid going back into deficit and debt. That is where the President and I parted ways. I believed we needed to have tax cuts. In fact, I supported greater tax cuts than the President proposed, to give lift to the economy at a time of economic weakness. But the President wanted to go much further, and here is what happened. We had 21 percent of GDP in 2000 coming in, in revenue. Last year we were down to 16.3 percent of GDP. That is the lowest it has been since 1959. The revenue side of the equation collapsed. Again, about half of that is due to tax cuts. I listened very carefully to my colleague. He talked about the reason the revenue had gone down. He never mentioned the single biggest reason. He never mentioned the tax cuts. But the tax cuts are the biggest single reason for the revenue collapse. Again, I, too, supported tax reductions at a time of economic weakness to give lift to the economy. I didn't think the particular mix of tax cuts was the most effective because, unfortunately, the tax cuts that were put in place were largely weighted to the wealthiest among us. I think we would have been much better targeting the middle class and lower middle class because those are the ones most likely to spend those tax cuts. But beyond that, the question is, going forward, How much can we afford? What is the relationship between spending and revenue? That is what is critical. That is what creates deficits. Our friends on the other side only want to talk about spending. Spending is one-half of the equation, revenue is the other half of the equation. It is the difference between how much you are raising and how much you are spending that leads to deficits. This chart goes back to 1980: The red line is the spending line, the green line is the revenue line. You can see very clearly back in the 1980s we had a big gap between spending and revenue. We were spending much more than we were taking in. As a result, we had record deficits at the time. Then we got spending under control. In fact, interestingly enough, during a Democratic administration spending as a share of our national income went down every year. Spending went down in a Democratic administration and revenue went up. It was that combination of reducing spending and raising revenue that brought us back to balance. In fact, for 3 years we were running surpluses. We even ran surpluses sufficiently strong to stop taking Social Security money and using it to pay for other things. We stopped the raid on Social Security. Then President Bush came into office. We had the tax cuts, we had an economic slowdown, and the revenue side of the equation plunged. We didn't get more revenue from tax cuts, we got less revenue. Is anybody listening? We didn't get more money with tax cuts, we got less money. And spending went up--though still far below where it was in the 1980s and 1990s, but spending went up. I am not faulting the President. We all agree spending had to go up on defense, on homeland security, on aid for New York, on the bailout of the airlines, and 91 percent of this increase in spending was in just those areas: Defense, homeland security, aid for New York, and bailing out the airlines. That is where the increase in spending occurred. Still, the spending is substantially below where it was in the 1980s and 1990s. The biggest culprit in the explosion of deficits was on the revenue side of the ledger. These are facts. This is not an ideological argument. It is just facts. I think that is what we have to concentrate on if we are going to get out of this mess. It is going to take spending discipline without question. We have to deal on this side of the ledger. But we are also going to have to deal on the revenue side of the ledger, and our friends on the other side of the aisle never want to talk about it. This year, the President has said: We've got to do something about the deficit. . . . it's important. He is right. We have to do something about the deficit because these deficits are much too high, and as far as the eye can see there is no reduction anywhere in sight. If we look at the President's budget, what we find in terms of doing something about the deficit is largely rhetorical. What the President's idea is of doing something about the deficit is just leave out things. Leave things out of the budget and that makes the numbers look better. It doesn't really change things though. This is the way you fool yourself, and this is the way others might get fooled. This is how institutions, companies, and individuals get into trouble. They start not quite telling the whole story. Maybe they don't even quite tell the whole story to themselves. When I look at the President's budget, that is what he and his people are doing. They are not really including everything. They are leaving things out to make the numbers look better. What have they left out? First of all, they switched from 10-year budgeting to 5-year budgeting because they know right beyond the 5-year budget window things look much worse. They have left out funding for ongoing war costs beyond September 30 of this year. Just don't include it. They say to me: It is hard to predict what the war costs might be. That is true, it is hard to predict. That is what a budget is all about. Can you imagine a family leaving out their utility bills because they are hard to predict month to month? Can you imagine a family leaving out the food bill because it is hard to predict? But that is what the President has done. He has left out the war costs past September 30 of this year because it is hard to predict. He has left out the cost of alternative minimum tax reform. Alternative minimum tax, that is the old millionaire's tax. It affects 3 million people now, and 10 years from now it is going to affect 40 million. It costs over $700 billion to fix. The President doesn't have one dime in his budget to address this problem. Last year, interestingly enough he had 1 year of fix in his budget. This year he doesn't even do that. I can make a budget look pretty good if I leave things out, and that is what the President is doing. Most remarkably, he has left out completely the cost of his Social Security privatization plan. He doesn't have one dime in his budget to cover the cost of a Social Security privatization plan that in the first 10 years costs over $700 billion. He doesn't have a dime in his budget. Over 20 years, his plan costs over $4 trillion. His answer is, borrow the money. On top of the already record deficits, borrow the money. I am going to, in a minute, get into why that is a very risky course for this country. The President also does something very interesting in this budget. He only provides details on discretionary spending. Those are accounts like education, law enforcement, parks--he only provides what he intends to spend in those areas for 1 year. Not since 1989 has a President failed to tell Congress and tell the American people what the outyear effects of his programs are; what the future years' effects of his programs are. But this President, for the first time since 1989, says he is not going to tell us that. I suspect the reason he is not going to tell us that is because it gets pretty grim by the time you get out to the third, fourth, and fifth year. When the President's people came to me and said they had a plan to cut the deficit in half over 5 years, and they showed me the plan, I said to them: Why don't you leave out some more things and claim you balanced the budget because what you are doing is you are making progress by denial, by leaving things out. When I go back and add in what the President has left out, I get a very different picture than is being presented on this floor about the budget going forward. When I go back and add up the things the President has admitted--the need for alternative minimum tax reform and the war costs, when I put in the amount of Social Security money that the President is taking to pay for other things, to try to arrive at what the real operating deficit of the United States is, here is what I find. I find an operating deficit in 2006 of $579 billion; increasing in 2007 to $584 billion; in 2008 to $586 billion; in 2009 to $595 billion; and improving by $1 billion in 2007 to $594 billion. These are my best estimates of what the operating deficits are going to be under the President's plan. Not an improvement. There is no cutting the deficit in half. Instead, massive operating deficits, adding to the debt by almost $600 billion a year, each and every year for the next 5 years, and after 5 years, it gets much worse. This is not what the American people deserve in terms of being told about the fiscal condition of their country. Let me go back to the specifics of the things the President has left out. In war costs there is $82 billion in a budget supplemental put in this year, but there is nothing past September 30th of this year in the President's budget. The Congressional Budget Office says $383 billion is what we can expect. There is $300 billion left on the cutting room floor, real costs that a real budget would include. It is not only that we see a hiding from the American people of how serious our fiscal condition is. The President's tax cut proposal is where it is most dramatic. The dotted line on this chart is the first 5 years of the President's plan. Making the tax cuts permanent has a modest cost in the first 5 years. But look what happens right outside the budget window: The costs of the President's tax cut plan absolutely explode. Is this, perhaps, a reason the President moved from 10-year budgeting to 5-year budgeting? Did he want to disguise the full effect of what he is proposing from the American people? Did he want to hide it so that people did not see where this is all headed? I have already shown in the next 5 years the operating deficits will be running in the neighborhood of $600 billion a year. Look what will happen if the President's plan is adopted. These deficits are going to skyrocket because the revenue hemorrhage will skyrocket. It is not just the revenue hemorrhage but the other items as well. This is, according to the Congressional Budget Office, the money that is needed to fix the alternative minimum tax. I said it was over $700 billion. It is actually $774 billion. Not a dime of it is in the President's budget. And it gets much worse after the first 5 years. Of course, the President's budget has none of it. That is hidden from the American people. On the President's Social Security plan, the first 10 years cost $754 billion. Here is what is in the President's budget: zero. Nothing. When we get to the 20-year cost, others are saying even more than this. My own projection is $4.4 trillion for the cost of the President's privatization plan. Why? Because if you take some of the payroll taxes and divert them into private accounts, you have to replace the money you have taken from somewhere. The President's proposal is, borrow it. Just borrow another $4 trillion. I am at a loss for words. I feel as though I am involved in a surreal discussion in a surreal exercise on the budget of the United States. We have record deficits now. The President says, cut the revenue some more and add more to the spending, but he leaves a lot of it out of the budget and says he is going to cut the deficit in half. He has been wrong on each and every one of his forecasts. Not wrong by a little bit, but wrong by a country mile. Here is the Comptroller General of the United States, the head of the Government Accountability Office. He warns the fiscal outlook is worse than claimed. He said to the National Press Club in February of this year: The simple truth is that our nation's financial condition is much worse than advertised. That is the truth. That is the truth, right here. Here is a guy who is telling the truth. The simple truth is that our nation's financial condition is much worse than advertised. I go back to the chart. The President says he is going to cut the deficit in half, but he gets there by leaving out things. When you put the things back, what you see is massive deficits, massive additions to the debt. In fact, by 2015, each family's share of the debt will total, according to our calculations, over $73,000. That is where these fiscal policies are leading. When the President says ``the people's money,'' he is exactly right. It is the people's money. It is also the people's debt. The President says let's not pay the people's bills. Let's borrow the money. Guess what. In whose name is he borrowing it? He is borrowing it in our names. He is borrowing it in the names of all of us who are responsible for ultimately paying off this debt. When the President says the people's money, absolutely, it is the people's money; it is also the people's debt. The President is running up the debt in a record way and at the worst possible time, right before the baby boomers retire. There is another part of this that I don't think is being shared with the American people. Where are we borrowing all this money from? Where is it coming from? Increasingly, it is coming from abroad. Here is what has happened. When the President came into office, we owed an external debt. Foreign holdings of our debt were just over $1 trillion. In the short time this President has been in office, that has almost doubled. Foreign holdings of our debt have gone up 92 percent in the term of office of this President. It took 200 years to get external debt of $1 trillion and this President has taken us to $2 trillion in just over 3 years. Here is where the money is coming from. We have now borrowed over $700 billion from Japan. Hard to believe, isn't it? We have borrowed over $700 billion from Japan. I read in the paper the other day that Japan now holds $840 billion of United States dollars. They are sitting on $840 billion of United States dollars. We have borrowed $712 billion from Japan. We borrowed $160 billion from England. We borrowed $69 billion from the so-called Caribbean banking centers. We have borrowed $69 billion from South Korea. We have borrowed $60 billion from OPEC. That is the oil exporting countries. Here we are. We have borrowed money all over the world. And it is increasing dramatically. So what? What difference does it make? The difference it makes is it makes us more and more vulnerable to the decisions of foreign central bankers as to the economic security of this country. It is that simple. It is that important. What happens to your relationship with the banker when you owe money versus when you have a big deposit? Does your relationship change? Sure it does. Our relationship is changing with the rest of the world because we have gone from being the biggest creditor nation in the world to being the biggest debtor nation in the world. So now we are very dependent. When we have a bond action to finance the credit and debt, we are increasingly dependent on foreign governments and foreign central banks to buy this debt. This is a story from January from the Financial Times. ``Central Banks Shun US Assets.'' ``Shifting reserves to eurozone will deepen Bush's difficulties in funding deficit.'' ``Actions likely to undermine dollar's value further.'' Friends, that is the risk being run by these massive budget deficits, by these massive trade deficits. We are more and more dependent on others. We are more and more dependent on Japan loaning us money; on China loaning us money; on South Korea loaning us money. What happens if they decide some day they are not going to continue loaning us money? What happens then? We have had a couple of indications in the last few months. A few weeks ago, February 23, Korea said they were going to limit their dollar holdings. ``Central bank's plan upsets exchanges.'' ``Fears flared anew yesterday that the United States dollar might lose a crucial underpinning of support--purchases by the world's central banks--after South Korea's central bank said in a report that it plans to invest more of its holdings in the currencies of other countries.'' What happened? ``news of the report,'' . . . ``sent the dollar skidding on foreign exchange markets. The Euro was trading at $1.3259 late yesterday, up from Monday's close of $1.3067. The dollar fell against the 104.04 yen . . . '' and ``the greenback also sank against the British pound, the Canadian dollar and Swiss franc. The dollar's slide, together with a rise in oil prices, drove stock prices sharply lower.'' These are the risks being run due to a reckless fiscal policy. This fiscal policy of massive record deficits with no end in sight and record massive trade deficits with no end in sight is putting the economic strength of this country at risk. It is not only Korea. On March 11, last week, Japan followed Korea: Talk in Japan shakes dollar and treasuries. The dollar fell and treasury yields rose yesterday after the Japanese Prime Minister made remarks that suggested the country's industrial bank could be shifting some of its huge reserves out of dollars and treasury securities. What happened? The dollar took another hit. So now we have Korea saying they are going to diversify out of dollars. We have Japan, the biggest lender to our country, warning of the same thing. What would happen if they didn't show up at a bond auction? We hold an auction of United States securities to float the boat to cover these deficits, because when you are spending more money than you are taking in, you have to borrow the money. In the past, we borrowed almost all of it from ourselves. Not anymore. Increasingly, we are borrowing from all over the world. And they are warning us: You are going too far; we might not continue buying this debt. What happens if they don't show up? We all know what happens. We would have to dramatically increase interest rates to entice them back. That would have severe consequences for our economy. It is not only Koreans and Japanese. Here is one of the most successful investors in the history of the United States, Warren Buffett. What is he saying? He says in 2005, he is still betting against the dollar. Warren Buffett, one of the most successful investors in America, is betting against the dollar. When the stock market was soaring in the late 1990s, Warren E. Buffett now says, he should have sold stocks rather than just complain that they were overvalued. Now Mr. Buffett, the billionaire investor, says he is acting on his view that the dollar is still headed down, even though it makes him nervous that so many agree with him. So he has bet a huge amount of money that the dollar is going to continue to decline in value. We have the South Koreans warning us. We owe them almost $70 billion. We have the Japanese warning us. We owe them over $700 billion. And we have Warren Buffett. I can tell you, I was with a man who is one of the foremost financial advisers in the country, and he told me last year he was at the annual meeting of one of the wealthiest families in America and the discussion at their annual meeting was exactly what we are talking about here: the enormous risks being run by the United States with these massive budget deficits, massive trade deficits, leading to unprecedented borrowing, not only from our own people, but from countries around the world. They saw that as a serious vulnerability--this, one of the wealthiest families in America. And the debate was whether they should diversify out of dollar-denominated investments. They concluded, apparently, that they would do that. Now, all we have to do is look at what has happened to the dollar against the Euro since 2002 to see why they might be concerned. Look what has happened to the value of the dollar. It has declined 33 percent against the Euro in just that period of time. That is dramatic. Every dollar we have has lost 33 percent of its value against the European currency. So if you are a central banker in Japan, you are a central banker in Korea, and you have loaned all this money to the United States, and you see that those dollar holdings you have in your central banks have declined in value by almost a third against the European currency, might you conclude that it is time to invest some of your money somewhere else? Friends, this is the risk that is being run by this policy of debt and deficits. These deficits are out of control. They are undermining confidence in the American currency. They are undermining confidence in the long-term economic strength of the country. And this budget does not do anything about it. In fact, this budget makes it all worse. This budget means bigger deficits, not smaller. The Congressional Budget Office put out a baseline budget, if we made no policy changes, of what would happen. But this budget does make policy changes, and you would think that given these facts, the policies would be to reduce the deficits. That is not what this budget does. This budget increases the deficits each and every year compared to a policy of putting everything on automatic pilot. Now, that is a fact. What are the potential consequences here? If the dollar were to decline even more precipitously than it has already, there are very few options left. You have to, first of all, dramatically increase interest rates. What difference would that make? Well, let's look for a typical American family. A 1-percent increase in interest rates will raise the payment on a 30-year home mortgage of $150,000 by $1,200 a year. On a $300,000 mortgage, it would raise it $2,400 a year. On a $450,000 mortgage, it would raise the payment $3,600 a year. And it would not be only on a house mortgage. It would be on a car payment, student loan payment, all the corporate debt that is out there, and all the Government debt. If interest rates rose dramatically in order to offset the effect of foreign central banks being unwilling to loan us more money, the economic consequences here could be severe. When I look at the tax policy that underlies this budget, it also raises the serious question of fairness. Because under the President's plan, the top 1 percent in our country, those who earn over $402,000 a year, get 30 percent of the benefit. The top 1 percent get 30 percent of the benefit. The top 20 percent get over two-thirds of the benefit. They get almost 69 percent of the benefit. We hear a lot from our friends: Well, the higher income people pay more in taxes. That is true. They pay more in income taxes. But our friends on the other side always want to leave out the payroll taxes that everybody else pays. And when you put the two together, you find that the wealthiest among us do pay more, but they do not compare anywhere close to the proportion of the tax cuts they are getting. When we look at 2004 and how the tax benefits stacked up in that year, what we see is, from the combined effect of the 2001 and 2003 tax cuts, a middle-income household got $1,000 and the top 1 percent, those earning over $400,000, got $78,000. If we were going to have a bar on the chart to compare what those earning over $400,000 got in tax benefit as compared to what a middle-income household got, the bar would have to go 17 feet higher. It would go almost to the ceiling of this Chamber to compare what the top 1 percent got in comparison to the middle-income people in the country. Is that fair? That is what the President's tax policy says is fair. Give those who are the top 1 percent $78,000 in tax benefit; give the middle income $1,000. In this budget is a continuation of the dividend and capital gains tax cut. Those cuts will provide a millionaire, on average, with a tax cut of $35,000. Somebody earning $50,000 to $200,000 gets $112. Let me go through this again. This is the Urban-Brookings Tax Policy Center that has done this calculation. The dividends and capital gains tax cut that my colleague was praising gives those who earn less than $50,000 a year, on average, a $6 tax reduction. That is the vast majority of people in this country. For these tax types--dividends and capital gains--the average savings for an American earning less than $50,000 is $6. For somebody earning $50,000 to $200,000, they get a tax savings of $112. And the dividends and capital gains tax cuts are a major part of this budget. For those earning $200,000 to $1 million, they get an average tax cut of $1,480. But for those who earn more than $1 million, they get, on average, a tax cut of $35,000. Now, this is some people's sense of fairness; it is not mine: $6 to those who earn less than $50,000 a year, and $35,000 to those who earn more than $1 million. We have the biggest deficits in the history of the country, and no end in sight, and this is what we are going to do? That is what we are going to do if we pass this budget. Our friends on the other side say: Well, those who are at the top pay more in taxes. That is true. Those who are at the top pay more in taxes. That is absolutely true. But do you know what, they are getting 30 percent of the benefit of this tax cut, and they pay 16 percent of the tax burden. So they pay more, but they are getting much bigger benefit than what they pay. My friends, at some point we are going to have to deal with reality. The reality is, we are not paying our bills in this country. We are not coming anywhere close to paying our bills. And our friends on the other side come with a budget that says we have no intention of paying our bills any time in the foreseeable future. We are not going to come anywhere close to paying our bills. Then you get to the question of priorities, which is a very important question as we go forward. Let me say to my colleagues, for those earning over $1 million in 2006, the total cost of the President's tax cut proposals for that 1 year alone is $32 billion. Let me repeat that. For those earning over $1 million a year in 2006, the tax cuts to them cost $32 billion in that year alone. On the other hand, the cost to maintain veterans funding at the 2005 level would be about $300 million. So in this budget, they are saying it is 100 times as important to give the Bush tax cuts to those earning over $1 million a year as it is to maintain funding for our veterans. Is it 100 times as important? Is it 100 times as important? Well, it is not only veterans. That same question can be asked of the COPS Program that has put 100,000 police on the street to make our cities and towns safer. Again, the cost of the tax cut for those earning over $1 million a year in 2006 is $32 billion for that year alone. The money to restore the COPS Program would be $500 million. So what you have to ask yourself is, is it 60 times as important or could the very wealthiest among us, those earning over $1 million a year, give up one-sixtieth of their tax cut for that year to keep 100,000 police on the street? I think that is a question we should ask. I know what my answer would be. Education. It would cost $4.8 billion to restore the education programs cut in the President's budget. Again, for that same year, the tax cuts for those earning over $1 million cost $32 billion. Would the wealthiest among us be willing to give up one-sixth of their tax cut to restore the cuts to education? The same applies to community development funding. I have heard from virtually every mayor in my State. It costs $1.7 billion to restore the cuts there. At the same time, we are going to give a $32 billion tax cut to those earning over $1 million a year in that 1 year alone. Low-income heating assistance. It costs $220 million to restore the money, a little tiny sliver on the chart--$220 million. At the same time, we are going to spend $32 billion on tax cuts for those earning over $1 million a year. For agriculture, this chart looks at it in a little different way. The President is cutting $7.5 billion there. The cost, over the same period of time, for those earning over $1 million a year is $185 billion. That is 25 times as much. My friends on the other side say that somehow this budget is going to reduce the deficit. No, this budget does not reduce the deficit. If we compare it to the Congressional Budget Office's baseline--there are no policy changes; we continue what we are doing now--this budget increases the deficit each and every year. The biggest increase is in the next year--$63 billion of additional deficit if we pass this budget compared to continuing what we are doing now. If we make no policy changes, just continue what we are doing now, we would have $63 billion less in deficit than if we pass this budget. I want anybody who votes for this budget to go out and explain to the American people why, at a time of record budget deficits, they are passing a budget that increases the deficit. I want to hear that explanation. Again, when we go back and look at the things that have been left out of this budget compared to, if we go back and include the additional war cost that is left out of this budget, the alternative minimum tax expense that is excluded, if we take the money that is being diverted from Social Security and used to pay for other things, here are the operating deficits we see under the budget that is before us. It is a little better than the President's, but not much: $587 billion, $583 billion, $582 billion, $582 billion. What is all this talk about cutting deficits in half? The only way they get there is they leave out things. They leave out the money they are taking from Social Security. They leave out the money for the war. They leave out the money for the alternative minimum tax. Just leave out things. If you put them back, massive deficits. This is what is going to get added to the debt, not the numbers they are talking about. This is what is going to be added to the debt. And if you doubt this is the case, let's look in their budget. Let's look at their own document. This is their own budget resolution. Let's look year by year. I have said that they are going to be adding almost $600 billion a year to the debt. I understated it. I apologize. They are going to be adding much more to the debt than that. I was just doing an operating budget. If we look at what their own document says, they are going to add to the debt every year. For 2005, $669 billion is going to get added to the debt, according to their own calculations. Next year they are going to add $636 billion to the debt. The next year is $624 billion. The next year is 622. By the fifth year, 611. Where is the cutting of the deficit? Where is it? It is magical. There is no cutting. This is what they say about their own budget. This is what they say they are going to add to the debt. This isn't my number. This isn't my presentation. This is theirs. This is from their own budget document. And what does it say? They are going to add to the debt $600 billion every year of this budget. The President says it is important to do something about the deficit. They say it is important to do something about the deficit. They are not doing anything about the deficit. That is their own calculation about what is going to happen. Remember what the President told us about 2008. He told us in January of 2001 that there would be virtually no debt left by 2008. That is what he told us. This is what we now believe the debt will be in 2008. Instead of virtually no debt, we are going to have almost $6 trillion of debt. This is what he said was going to happen. This is what is really happening. The President of the United States has been wrong by a country mile on every one of his major assertions about the fiscal condition of our country. It has real consequences. When we look at the budget that our Senate Republican colleagues have put up, let me just say it is a little bit better than the President's in some ways. But it still has additions to the deficit, bigger deficits, more debt by their own calculations. It still has flawed priorities. Here is veterans funding. It costs $300 million to maintain veterans funding. They are going to give $32 billion in tax cuts to those earning over $1 million a year. On the COPS Program, it costs $500 million to restore the cuts in the COPS Program and put 100,000 police on the street. But they would rather give--in fact, by a sixtyfold margin--tax cuts to the wealthiest among us. That is more important to them. It is more important to them to give those tax cuts to those earning over $1 million a year than it is to restore the cuts to education, six times as important. Are those really the priorities of this country? Is that what this country thinks is important? I will have more to say about this budget as we go forward. But this is a budget that is not facing up to the real challenges facing our Nation. This is a budget that basically ducks and runs. This is a budget that basically says: We don't have to worry about that. We will talk as though we are worried. We will use the words. But the actual budget is not going to do anything about these mounting deficits and debt that fundamentally threaten the economic security of the country. We should be doing much better than this. At some point, I hope it is not a crisis that gets us that. I still believe we have the ability and the will to act to face up to the crisis rather than letting it overcome us. But this budget doesn't face up to it. This budget doesn't do that. This budget just lets the good times roll--more tax cuts, more spending, even though we cannot pay our bills now. I believe deeply that is a fundamental threat to the economic security of our country because we are not just borrowing this money from ourselves anymore, we are borrowing from countries all over the world. That makes us vulnerable to their decisions about whether they are going to continue to loan us money. I believe it is past time for the President to reverse course and to call on Congress and to put his administration to the task of an overall plan to face up to the shortfalls in Medicare, in Medicaid--by the way, the shortfall in Medicare is eight times the shortfall in Social Security. The President has no plan to deal with that, none. He would rather focus on Social Security, which is a challenge, a long- term funding problem. I will repeat, the funding problem with Medicare is eight times as big as in Social Security. My own view is that we ought to be working on it all. We ought to have everything on the table--Medicare, Medicaid. I salute my colleague from New Hampshire who put a focus on Medicaid, where spending is going through the roof in States and for the Federal Government, but we ought to be putting the focus on all of these areas, including the budget deficits, because I believe only in that way will we come up with a plan that really strengthens the country. I yield the floor.

Mr. CONRAD. Mr. President, there is nobody I enjoy listening to more in this Chamber than Senator Sarbanes. I think all of my colleagues know that over the weekend Senator Sarbanes announced that he will not seek reelection, and that is unfortunate for this Chamber and the country. Senator Sarbanes is one of the finest Members of the Senate I have served with in my 19 years. He is brilliant, a Rhodes scholar. More than that, Paul Sarbanes is a wise person. In the time I have been here, I have turned to him repeatedly for his remarkable sense of judgment. Paul just reminded me that he will be here another 22 months. I say to Senator Sarbanes, that is not long enough. This country needs him, and if there was ever a time that it needs him it is now because nobody is perhaps more knowledgeable in this Chamber or in the entire Congress on economic issues than Senator Paul Sarbanes. He has been an important member of the Joint Economic Committee. He has been former chairman of the Banking Committee. He has been a key member of the Budget Committee. I cannot think of anybody I would miss more than Senator Paul Sarbanes, and I say with a heavy heart that I have to acknowledge his determination to retire. He certainly deserves a full and happy retirement, but Senator Sarbanes is someone who is going to be sorely missed in this Chamber and in this Congress. I cannot think of a finer man.

Mr. CONRAD. Mr. President, I alert colleagues that we are going to have a vote on the Bingaman amendment. I ask the Chair, has that vote been set?

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

Mr. CONRAD

Mr. CONRAD. Mr. President, it is with great pleasure that I come to the floor today to wish a legendary North Dakota businessman, George Widman, a happy belated birthday. On Saturday, March 12, George turned 85. He celebrated this momentous birthday yesterday with friends and family. I never forget George's birthday because we share March 12 as our birthdays. George and I have known each other many years, and his resiliency is something I have long admired. Following the disastrous floods and fire that struck downtown Grand Forks in 1997, George was wondering whether or not his world famous Widman's Candy Store would see another day. He told his wife, Betty, they could build the new candy store anywhere in the world, but they both agreed it was best to stay in Grand Forks and rebuild their business they had spent so many years crafting into a downtown Grand Forks landmark. After Grand Forks had started to rebuild following this disastrous flood, George was kind enough to send every U.S. Senator a Widman's chocolate bar with the words ``thank you'' imprinted on it. This describes George's approach to life: give of yourself for the benefit of others. George epitomizes everything North Dakota represents. Growing up during the Great Depression, he learned at an early age that in order to succeed hard work is required. He is very proud of his military service in World War II. He is a Navy veteran and served on the USS Bunker Hill from 1942 until his ship was hit in battle in 1945, He is devoted to his family, his community, and his Nation--all reasons we should pay tribute to George on his birthday and every day. Today, three of George's six children are also in the candy business. Even though he has long passed the normal retirement age in our Nation, he stills comes to work every day to make candy and interact with the public he loves dearly. As George puts it, it's not about the money, but the people he serves. Again, it is my pleasure to honor George on his 85th birthday and wish him continued health and happiness.

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. Mr. President, today I am introducing legislation to correct an injustice in the Internal Revenue Code that is negatively affecting our troops. I recently received an e-mail from an active-duty Airman who expressed his dismay that he has been told the law requires him to withdraw the money he had contributed to an IRA previously in the year. Here is what he told me: I am an active-duty member of the military who has been deployed so much that I have not paid taxes for more than a year now. I also had been contributing to a Roth-IRA. I've been told by tax professionals that I will have to withdraw my contributions because I do not show a taxable income. I've been deployed and put in harm's way many times last year and I am not allowed legally to contribute to an IRA like any other average American. This is an injustice to the soldiers that work so hard under hard conditions. There are thousands of soldiers that are going to be told to take their IRA contributions out since they have been deployed twelve months. This is a slap in the face for those soldiers who have put themselves in danger. This injustice results from an unintended, but undeniably unjust, interaction between combat pay and IRA rules. Under IRA contribution rules, you can only contribute to a tax-favored retirement account if you have taxable income for the year. Military personnel deployed for a full calendar year or more, however, may have no taxable income because their earnings while serving in a combat zone are excluded from taxation. These troops are therefore prohibited by law from contributing income to an IRA because, technically, they have not earned taxable income. This is indeed an injustice. This is no way to treat the men and women who have been deployed to combat zones in Iraq and Afghanistan for long periods of time. Rather than discouraging our troops from saving for retirement, we should take steps to ensure that they have the same access to tax-favored retirement savings programs as the rest of us. I ask my colleagues to join me in correcting this injustice. The bill I am introducing today simply amends the Internal Revenue Code to allow our dedicated military service men and women to contribute to lRAs, regardless of their deployment status. My bill presents an opportunity for the United States Senate to support retirement savings and our brave military personnel. This is a win-win for all involved. I hope my colleagues will join me in correcting this injustice and send this bill to the President for his quick signature.

Mr. CONRAD

Mr. CONRAD. Mr. President, today I am introducing legislation to correct an injustice in the Internal Revenue Code that is negatively affecting our troops. I recently received an e-mail from an active-duty Airman who expressed his dismay that he has been told the law requires him to withdraw the money he had contributed to an IRA previously in the year. Here is what he told me: I am an active-duty member of the military who has been deployed so much that I have not paid taxes for more than a year now. I also had been contributing to a Roth-IRA. I've been told by tax professionals that I will have to withdraw my contributions because I do not show a taxable income. I've been deployed and put in harm's way many times last year and I am not allowed legally to contribute to an IRA like any other average American. This is an injustice to the soldiers that work so hard under hard conditions. There are thousands of soldiers that are going to be told to take their IRA contributions out since they have been deployed twelve months. This is a slap in the face for those soldiers who have put themselves in danger. This injustice results from an unintended, but undeniably unjust, interaction between combat pay and IRA rules. Under IRA contribution rules, you can only contribute to a tax-favored retirement account if you have taxable income for the year. Military personnel deployed for a full calendar year or more, however, may have no taxable income because their earnings while serving in a combat zone are excluded from taxation. These troops are therefore prohibited by law from contributing income to an IRA because, technically, they have not earned taxable income. This is indeed an injustice. This is no way to treat the men and women who have been deployed to combat zones in Iraq and Afghanistan for long periods of time. Rather than discouraging our troops from saving for retirement, we should take steps to ensure that they have the same access to tax-favored retirement savings programs as the rest of us. I ask my colleagues to join me in correcting this injustice. The bill I am introducing today simply amends the Internal Revenue Code to allow our dedicated military service men and women to contribute to lRAs, regardless of their deployment status. My bill presents an opportunity for the United States Senate to support retirement savings and our brave military personnel. This is a win-win for all involved. I hope my colleagues will join me in correcting this injustice and send this bill to the President for his quick signature.