Kent Conrad

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise to discuss the prescription drug bill and the Medicare reform package that is before us now. As a member of the Finance Committee, I was involved in the markup of this legislation. Let me begin by commending the chairman, Senator Grassley, and the ranking member, Senator Baucus, our former chairman, for the way in which they brought our committee together. That was not easy to do. It is an extraordinarily complex undertaking to have an expansion of Medicare of this magnitude and to do it in a way that will achieve real results. I thank the chairman and the ranking member for the way they brought us together, and for the tone they set in the committee. We were in markup from 9 in the morning until 9 o'clock at night--12 hours of togetherness that actually went very well. I think we all know why we are here. When Medicare was first drafted, the world was a very different place in terms of providing health care. As Senator Moynihan used to explain, at the time Medicare was drafted, the Merck Manual that contains all prescription drugs was a very thin volume. Now when we look at the Merck Manual, it is a very weighty tome. There is a dramatic change in the pattern and practice of medicine. Perhaps no better example is what happens with stomach illness. Twenty years ago, there was not much one could do for somebody who suffered from ulcers other than to have surgery. But now with prescription drugs that address the underlying causes, stomach surgery has been reduced by two-thirds. Yet, in Medicare there is no coverage for those prescription drugs. You can't have a modern Medicare without a prescription drug component. The problem is millions of Americans don't have any coverage. If we look at an outline of where we are, we see that 38 percent of those who are Medicare eligible have no drug coverage. Ten percent get their coverage through Medicaid, 15 percent through a Medicare HMO, 28 percent employer-sponsored coverage, 7 percent Medigap, and others, 2 percent. But nearly 40 percent have no coverage. That creates some very tough situations. And we can see there are real differences between where somebody lives, how old they are, and their income level, as to whether they are in that nearly 40 percent of Americans who have no coverage. We see for those over the age of 85, 45 percent have no coverage. For those who live in rural areas--and I represent a rural area, the State of North Dakota--50 percent have no coverage. Forty-four percent of those who have between $10,000 and $20,000 of income have no coverage. What we see is the situation is going to become more challenging and more difficult as out-of-pocket expenses for prescription drug expenditures jump dramatically. In 2000, those out-of-pocket expenditures averaged $644. By this year, it was up to $999--a 50- percent increase in just 3 years. And in the next 3 years, we anticipate another very large increase to $1,454 a year in prescription drug costs. The implications of that are outlined on this chart. This shows a study in eight States. It shows the percentage of seniors who reported forgoing needed medicines, and that is listed by chronic condition and prescription drug coverage. What it shows by the red bar is those without coverage, and it shows the percentage of seniors who did not fill prescriptions one or more times due to cost. For congestive heart failure, 25 percent of the people did not fill their prescriptions because they could not afford it; 31 percent of those who suffered from diabetes did not fill their prescriptions because they could not afford it; and 28 percent of those with hypertension did not fill their prescriptions because they could not afford it. If we go to the next element of the chart, the percentage of seniors who skipped doses in order to make it last longer: For congestive heart failure, 33 percent of those without coverage skipped doses; 30 percent of those with diabetes skipped doses because they could not afford it; and 31 percent of those with hypertension skipped doses because they could not afford it. Obviously, that reduces the quality of care and ultimately increases the cost. Why? Because those people are more likely to be hospitalized. And it is when a senior is hospitalized that the cost really escalates. I think it is in all our interest--both in terms of the quality of health care but also in terms of the cost of health care--that we get this right and we make the changes necessary to provide a prescription drug benefit in Medicare. Here, outlined on this chart, are the specific provisions of this legislation. These are estimates of the basic plan which will take effect in 2006. This excludes the low-income subsidies. We will talk about that in a moment. The premium will average about $35 a month; at least that is the projection at this point. The deductibles will be $275 a year. From $276 to $4,500 of prescription drug costs a year, 50 percent will be paid by Medicare, 50 percent by the senior citizen. Between $4,501 and $5,812 of prescription drug costs a year, there will be no assistance from Medicare. That is the so-called coverage gap, what some refer to as the ``doughnut.'' This is an area in which there is no assistance, no coverage. The reason for that is not enough money. For $5,813 and above in prescription drug costs, Medicare will provide 90 percent assistance, the senior citizen 10 percent. I think that is one of the most important parts of this bill. I would support this bill if there were no other provision than just this one. To provide 90 percent assistance to those who have catastrophic drug costs is going to make a meaningful difference. I was just with one of my staff members in North Dakota. Her mother had a rare form of cancer. At one point her drug costs were running $20,000 a month--$20,000 a month. Thankfully, she was insured. As we see, nearly 40 percent of seniors in the country are not. How many families could withstand a drug cost of $20,000 a month? For this particular family, their drug cost now has been reduced. She is past the acute phase, thankfully. Their drug costs are still running $2,500 a month. That is $30,000 a year. This provision will help people like that. It will keep people from bankruptcy. It will avoid people having to not have treatment. It will prevent crises in many families across the country. That is not the only part that I think merits support. As shown on this chart, these are the low-income provisions. I want to direct people's attention to this line. For those who are below 160 percent of poverty, they will get more assistance. So, for example, in that zero to $4,500 range of prescription drug costs, Medicare will pick up 90 percent of the cost for those low-income people. They will have to provide 10 percent of the cost. This, to me, is another strong reason to support this legislation. A third key element of this bill that I think merits support-- certainly for those who have rural areas--is the beginning of the leveling of the playing field between the rural areas and the more urban areas of the country. Just to give an example, in my home State, Mercy Hospital in Devils Lake, ND, gets exactly one-half as much in Medicare reimbursement to treat a heart ailment or to treat diabetes as Mercy Hospital in New York City--exactly one-half as much. Now, I would be the first to acknowledge there is somewhat of a difference in cost, but it isn't a 100-percent difference. When we go to buy technology for that hospital in Devils Lake, ND, we do not get a discount. When we try to recruit a doctor, he does not say to us: Well, you are a rural area, so I will take half as much money. That is not the way it works. So this incredible divergence, this disparity that exists in current law, needs to be addressed, and this bill will begin to address it. It does not close the gap, it does not eliminate the problem, but it does make meaningful progress. It permanently and fully closes the gap between urban and rural standardized payment levels. But unlike the legislation I introduced, it does not take effect until 2005. The legislation I introduced, along with 30 of my colleagues, would have taken effect in 2004. It also adopts all of the other provisions of the bill that I introduced along with Senator Thomas of Wyoming. It equalizes Medicare disproportionate share payments. Those are the ones that are used to cover the costs of treating the uninsured. It establishes a low-volume adjustment payment for small rural hospitals. It improves the wage index calculation which accounts for a hospital's labor costs. It ensures that rural hospitals are reimbursed fairly for outpatient services. It provides a whole series of improvements to critical access hospitals, including improved payments for ambulance services, increased flexibility in the bed limit, excluding critical access hospitals from the wage index calculation for other hospitals, which will improve payments to other larger facilities, has new incentives to ensure 24-hour access to emergency on-call providers, and has new measures to assure the critical access hospitals will receive timely Medicare reimbursement. It also authorizes a capital infrastructure loan program which will provide $5 million in loans for crumbling rural facilities. In addition, it provides a series of other provisions which a number of us have cosponsored and put before the body, including extending a 10-percent add-on payment for rural home health agencies, many of which are under pressure to close; a new 5-percent increase for rural ground ambulance services; a new 5-percent add-on for clinic and ER visits in rural hospitals; and a new automatic 10-percent bonus payment for physicians serving in rural areas. It has measures to address the geographic inequities in physician reimbursement, and an extension of improved payment for lab services in sole community hospitals. This does not close the gap between rural institutions and more urban institutions, but it does make meaningful progress in leveling the playing field, and that is critically important to rural hospitals. Let me say, in my own State we have 44 hospitals. At least eight of them are in danger of closing because of this enormous gap in Medicare reimbursement. Over 50 percent of their patients are Medicare eligible. If things don't change, these institutions are going to have to close. Those are positive aspects of the bill. Let me speak for a moment about what is in the bill that could and should be improved. The first that comes to my mind is the instability in the legislation. Seniors want certainty. They want to know what they are getting. But under this plan, seniors could be bounced back and forth between different plans depending on how many private drug-only plans enter an area. That is the first problem. If a senior is in a fallback plan and two private plans enter the area, they must leave the plan they are in; they have no choice in the matter. The second problem is that every time they switch between drug-only and fallback plans, their benefits could change. Let me illustrate that for my colleagues. Seniors, when forced to move between plans--and in 4 years, a senior could be forced into four different plans--every time, their premiums could change. The only thing that wouldn't change is the stop loss amount, or at least couldn't change. The deductibles could change. The coinsurance level could change. The coverage gap could change. The covered drugs could change. And the access to a local pharmacy at no extra charge could change. That is the kind of instability about which I am talking. Let me illustrate with this chart. I hope my colleagues are listening, or at least for those who are busy with other duties, perhaps their staffs are listening. It is very important to understand what could happen to a senior. In 2005, if there is only one private plan offered in their area, they could enroll either in that plan or in the fallback plan. Let's say this particular senior takes the fallback plan and enrolls in that for 2006. But then the next year, another private plan comes into the area. Then the senior would be compelled to drop out of the fallback plan even if they liked it and go into one of the private plans. Say they take private plan A for 2007. Then private plan A finds it is not effective for them financially to be in the plan, and they drop out. The next year, our senior citizen could be whipsawed into a third plan in 3 years. They could be over in private plan B. Then perhaps private plan B decides they can't afford to provide this coverage. They drop out, and our senior citizen, in the fourth year, is in their fourth plan. As I say, with different formularies--that is, different drugs--available to them, with different rules with respect to going to the local pharmacy to get their drugs, with different copays, with different premiums, with different deductibles, all of these changing-- if that isn't chaos, I don't know what is. This is an area we must address on the floor with amendments in order to remove some of this uncertainty for seniors moving ahead. For those of us who represent rural areas, the fact that only 2 percent of rural counties had two or more Medicare+Choice plans in August 2001 ought to tell us that our people are the most likely to be caught up in this whipsaw effect. Our people in rural areas are the most likely not to have two private drug-only plans available to them, or PPO plans or HMO plans. The reality is, they are not there now. In my State, there is virtually no coverage from those kinds of entities, almost none. Those who are suggesting that people are going to rush to this kind of business when the people who run the companies tell us very directly they are not going to--we ought to pay attention to that. We ought to listen to that. We ought to respond to it. I don't think it is going to do any of us any good to create a circumstance in which a senior we represent gets whipsawed back and forth between plans, changing premiums, changing deductibles, changing coinsurance, changing what drugs are covered and what are not. There is one thing I have learned in dealing with seniors, especially those who are ill: They need simplicity. They need an assurance of what is covered, what isn't covered, and how it works. We should not be subjecting them to a changed plan every single year. That is not a plan that meets the needs of seniors. I urge my colleagues to pay close attention to the debate when we begin to offer amendments to try to provide some greater certainty and stability to the plan. I also am concerned about disappointed expectations. As I travel my State, when there is a discussion of prescription drug coverage, I find most people think that means they are going to get something similar to what Federal employees receive, or they think they are going to get something similar to what people in the military receive, or they think they are going to get something similar to what big companies provide. That is not this plan. Let's understand what this plan is and what it is not. To provide the same coverage that we provide Federal employees would not cost the $400 billion in this plan. It would cost $800 billion. It would cost $800 billion in comparison to the $400 billion in this plan to provide the prescription drug benefit we provide Federal employees. To provide the same level of benefit to our Nation's seniors that we provide our members in the military would cost $1.2 trillion, three times as much as available in this plan. It is critically important that we not overpromise, that we not mislead people as to what they are getting and not getting. The fact is, there are some who I have heard say this is a 70 percent subsidy. I don't know where they get that number. That is exactly the kind of language and rhetoric that is going to lead to some very disappointed people. There is no 70 percent subsidy here. There may be for people who have extraordinarily high drug costs. I already indicated they get 90 percent of their bill paid for, over $5,800 in drug costs a year, but that is a very small percentage of the people. It is true that very low income people get a higher percentage paid for by Medicare. But overall, we should understand, of the $1.6 trillion of drug costs for our Nation's seniors, this legislation is going to cover 23 percent of that, not 70 percent, as I have heard stated during the debate. Twenty-three percent will be paid for by Medicare. If you look at this $400 billion legislation, $360 billion of the cost is for prescription drug payments--$360 billion. The total drug cost of our Nation's seniors is $1.6 trillion; $360 billion of $1.6 trillion is 23 percent, it is not 70 percent. So let's not be misleading people about how extensive this benefit is. That is not to say it is not a good bill because we are limited to $400 billion. This is about as good a bill as you can write for $400 billion. But I hope we don't mislead anyone as to what it really provides. One of the things we also need to think carefully about as we consider floor amendments is that 37 percent of retirees with employer drug coverage will lose it under the Finance Committee plan. Why? Because the Congressional Budget Office says when employers look at this plan, some substantial number of them will drop their old coverage--the coverage they are providing. That will affect 37 percent of retirees who currently have employer drug coverage. I think we need to take additional steps to provide incentives to those employers to keep on providing the drug coverage they provide. That is in our economic and financial interests, and it is in the interests of seniors to maintain stability in plans that they know and like. Mr. President, I hope this information is useful to our colleagues. As I say, as a member of the Finance Committee and as ranking member of the Budget Committee, I support this legislation. I voted for it. I think it merits the support of our colleagues. I hope it can pass with resounding support here in the Chamber. I hope it will ultimately become law. We ought to do this with our eyes wide open. We ought to understand exactly what it provides and what its weaknesses are. We ought to communicate that clearly to the American people. We ought not to overpromise or misrepresent. Disappointed expectations can swamp this boat. I am hopeful these remarks made clear what is provided and what is not and those places where we have an opportunity to improve this legislation. I think it is in all of our interests to commit our best efforts to do that over the coming days. I yield the floor. I suggest the absence of a quorum and ask unanimous consent that the time of the quorum call be charged equally to both sides.

Mr. CONRAD

Mr. CONRAD. Mr. President, today I wanted to honor the memory of a member of the congressional family whose life was tragically cut short last month. Albert James Davis, who was the Democratic chief economist at the House Ways and Means Committee, died on May 30. Mr. Davis had served the Congress with distinction since 1984, first as a senior economist with the Democratic staff of the House Budget Committee, then as chief economist for that committee, and finally as chief economist for the Ways and Means Committee. Although Mr. Davis never worked in the U.S. Senate, his death is a profound personal and professional loss for many Members and staff of the Senate. Mr. Davis was a highly respected and much loved member of the group of policy experts who work largely behind the scenes to provide Members of Congress with information about the policies they are considering. Many Senate staff--and many members of my Budget Committee staff--had worked with Mr. Davis, either directly in the House or through bicameral staff meetings and frequent phone conversations. And although few knew it, many Senators benefitted from Mr. Davis's knowledge and wisdom because of the frequent use made by Senate staff of insightful memos and analyses of important issues that Mr. Davis graciously shared with them. He was one of the leading experts in the country on issues involving taxes and entitlement programs. Just as important as his deep understanding of these complex issues was his ability to express his thoughts about them in a simple, straightforward way that others-- congressional staff, the press, and Members of Congress--could understand. And he could do it in a gracious and humorous way that did not betray any impatience with a listener who might be a little slow to grasp what was being explained. Mr. Davis was a committed Democrat, but he was more committed to honest and intelligent analyses of the issues. You could count on him to give you the straight scoop about any issue. He would not fudge the facts just to fit his personal policy preferences. When my staff gave me information from Al Davis, I knew I could rely on it. The combination of respect and affection that many members of the Senate family had for Al Davis is a testament to his intelligence, his ability, and his huge and warm heart. The Senate was considering the conference report on the reconciliation tax bill when it became known that Mr. Davis was not likely to recover. The sense of sorrow and loss felt by Senate staff on the floor that day was immense. For many of those staff, it was hard to imagine not being able to pick up the phone to ask Al about an issue. They understood the quality of reporting on tax and entitlement issues would be diminished because Al would not be around to explain a complicated issue in a way that the average reader or listener could understand. And they keenly felt the loss of a unique and wonderful person. Many people in the Senate family were touched by Al--benefitted from his knowledge and wisdom and were lucky enough to consider him a friend. He will be greatly missed.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise today, joined by my colleague Senator Dorgan, to introduce the Three Affiliated Tribes Health Facility Compensation Act. This legislation fulfills a longstanding Federal commitment to the Three Affiliated Tribes of Fort Berthold in my State of North Dakota. In 1949, the Three Affiliated Tribes lost 156,000 acres of land, one- quarter of its land base, for the construction of the Garrison Dam along the Missouri River. Three hundred twenty five families--eighty percent of the tribal membership--were forcibly relocated. Ninety-four percent of the agricultural lands of these farmers and ranchers was destroyed. The Indian Health Service's hospital at the community of Elbowoods was completely flooded. At the time, the Federal Government committed to replacing the hospital. On May 10, 1985, then Interior Secretary Donald P. Hodel signed a charter creating the Garrison Unit Joint Tribal Advisory Committee, which was charged with examining the effects of the construction of the Garrison Dam and Reservoir on the tribe and making recommendations on compensation. In its final report released on May 23, 1986, the committee found that the Three Affiliated Tribes were entitled to financial compensation as well as the replacement of lost infrastructure including its health facility. The committee specifically noted that the replacement of the health facility was an ``emergency need.'' In 1992, Congress acted on some of the committee's recommendations by passing the Three Affiliated Tribes and Standing Rock Sioux Tribe Equitable Compensation Act. However, at the time, due to budget limitations, Congress was not able to fulfill the commitments on infrastructure replacement. The Senate Committee on Indian Affairs in its report on the Act specifically noted that ``every effort should be made by the Administration and Congress to provide additional federal funding for these infrastructure priorities.'' More than 10 years later, many of the infrastructure priorities still have not been met. The legislative history on this matter is clear, a commitment was made to the tribe that must be kept. The bill I am introducing will authorize $20 million to construct for a health facility on the Fort Berthold Indian Reservation to fulfill this longstanding promise to the Three Affiliated Tribes.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise today, joined by my colleague Senator Dorgan, to introduce the Three Affiliated Tribes Health Facility Compensation Act. This legislation fulfills a longstanding Federal commitment to the Three Affiliated Tribes of Fort Berthold in my State of North Dakota. In 1949, the Three Affiliated Tribes lost 156,000 acres of land, one- quarter of its land base, for the construction of the Garrison Dam along the Missouri River. Three hundred twenty five families--eighty percent of the tribal membership--were forcibly relocated. Ninety-four percent of the agricultural lands of these farmers and ranchers was destroyed. The Indian Health Service's hospital at the community of Elbowoods was completely flooded. At the time, the Federal Government committed to replacing the hospital. On May 10, 1985, then Interior Secretary Donald P. Hodel signed a charter creating the Garrison Unit Joint Tribal Advisory Committee, which was charged with examining the effects of the construction of the Garrison Dam and Reservoir on the tribe and making recommendations on compensation. In its final report released on May 23, 1986, the committee found that the Three Affiliated Tribes were entitled to financial compensation as well as the replacement of lost infrastructure including its health facility. The committee specifically noted that the replacement of the health facility was an ``emergency need.'' In 1992, Congress acted on some of the committee's recommendations by passing the Three Affiliated Tribes and Standing Rock Sioux Tribe Equitable Compensation Act. However, at the time, due to budget limitations, Congress was not able to fulfill the commitments on infrastructure replacement. The Senate Committee on Indian Affairs in its report on the Act specifically noted that ``every effort should be made by the Administration and Congress to provide additional federal funding for these infrastructure priorities.'' More than 10 years later, many of the infrastructure priorities still have not been met. The legislative history on this matter is clear, a commitment was made to the tribe that must be kept. The bill I am introducing will authorize $20 million to construct for a health facility on the Fort Berthold Indian Reservation to fulfill this longstanding promise to the Three Affiliated Tribes.

Mr. CONRAD

Mr. CONRAD. Mr. President, I thank the Senator from Wisconsin. I especially commend him for his leadership on this issue. It has been over an extended period of time that he has tried to remind our colleagues repeatedly of the need for fiscal discipline. The Budget Enforcement Act of 1990 first established what we called pay-go. Pay-go has two separate enforcement mechanisms: a 60-vote point of order in the Senate, and sequestration. The majority extended the pay-go point of order but they included a huge loophole for all of the policies assumed in this year's budget resolution, including its tax cuts. So we have pay-go, but we are closing the barn door after the cows have all left. They did not extend sequestration, which expired on September 30 of last year. Therefore, we are currently operating without the key tools that have been used to help enforce budget discipline over a dozen years. Given the huge loophole that now exists in the pay-go point of order, we need pay-go sequestration all the more. Under sequestration, mandatory spending and tax legislation that reduced surpluses or increased deficits had to be fully offset with mandatory savings or revenue increases in order to avoid across-the- board cuts in mandatory spending at the end of a fiscal year. The threat of these cuts helped prevent the enactment of costly and fiscally irresponsible legislation that was not paid for, such as today's tax bill that just passed that is going to dramatically deepen the deficit and debt of this country. I support the amendment of the Senator from Wisconsin. I urge my colleagues to do so as well.

Mr. CONRAD

Mr. CONRAD. Will the Senator yield for question? Mr. President, may I have 30 seconds.

Mr. CONRAD. Mr. President, let me take on the spending argument because I have heard it over and over, and it is the biggest canard offered on this floor. We have heard before that on our side we offered $500 billion of amendments on the supplemental. We did not. They have taken 1-year amendments that were offered singly and accumulated them and made them 10-year amendments. We offered $32 billion of amendments separately. They were not offered as a package. Interestingly enough, what our Republican colleagues did is they went into conference committee--which they excluded us from--and they added $60 billion in spending. Who are the big spenders? Let's set the record straight. On the budget resolution, we did offer a series of amendments to do things such as fund the war, which wasn't in the budget, and to fund homeland security, which was inadequately funded in the budget. But we offset every one of those amendments. We paid for them, and the overall budget we offered was $1.2 trillion less in debt than the President's budget plan. Let's talk about who is serious about fiscal responsibility. Who offered the serious plans to reduce the growth of deficits and debt? I say to my friends, they told America 2 years ago they had a plan to pay off virtually all of the debt by 2008. Do you know what we see now? We have adopted their plan and, instead of paying off the debt, it is going to be $5.2 trillion of publicly held debt by 2008. The gross debt of the U.S. is going to double during this budget period--at the worst possible time, right before the baby boomers retire. The outcome is as clear as it can be; as clear as it can be. We have record deficits now. The President's budget increases spending by $600 billion above the baseline, cuts revenue by $1.6 trillion. There can only be one result: deeper and deeper deficits and debt, and at the worst possible time, right before the baby boomers retire.

Mr. CONRAD. Mr. President, facts are stubborn things, I say to the chairman of the Finance Committee. The budget we offered on our side did exactly what you were challenging us to do. We had $1.2 trillion less in deficits in our plan than the plan offered on your side. You said you want to cut back on the tax cuts, bring it to the bottom line. That is what we did. As a result, we would have had $1.2 trillion less in deficit if our plan had been adopted.

Mr. CONRAD. I thank the ranking member. Mr. President, this bill I call the policy of the three Ds. This is a policy of debt, deficits, and decline. This policy is reckless and irresponsible as fiscal policy. It will hurt, not help, economic growth and it is totally unfair. In terms of irresponsibility, nothing says it better than this chart. Two years ago, the President told us we would virtually pay off the debt of this country by 2008. Now instead we see, by adopting his policy, we will have a debt of over $5 trillion by 2008. That is just the beginning of the story because that is the publicly held debt. The gross debt of the United States is skyrocketing as well, from over $6 trillion at the end of this year to $12 trillion at the end of this budget period, and all of this occurs at the worst possible time. We are about to see a demographic time-bomb hit this country called the baby boom generation. This chart shows the Medicare and Social Security trust funds and the cost of the tax cuts. What it shows is that when the trust fund goes cash negative in the next decade as the baby boomers retire, at that very time the cost of these tax cuts explodes, driving us deep into deficits and debt at levels that are utterly unsustainable. The irony of this package is that it is looting the Social Security trust fund of virtually every dime over the next 10 years to pay for these tax cuts. Of the $2.7 trillion in surpluses in Social Security over the next decade, this policy takes $2.698 trillion to pay for tax cuts and other expenses--again, at the worst possible time. The news from the Treasury Department is that things are getting much worse. Already this year, revenue is running $100 billion below forecast. If that continues, we will have the lowest revenue as a percentage of gross domestic product since 1959. Two years ago, the President justified the tax cuts on the basis that revenue was high as a percentage of GDP. Now it is low, and yet his answer is the same. On this very day when our colleagues on the other side are pushing a tax plan that, without gimmicks, would cost $1 trillion, they are also advocating nearly a $1 trillion increase in the national debt--much higher than the last increase in the national debt of $450 billion. This is the biggest increase in the national debt in our history--all at the same time they are advocating a tax cut which they say will cost $350 billion but which we have already heard from colleagues in the Chamber is disguised in its true cost. It will cost up to $1 trillion if the gimmicks are eliminated. It is ineffective as stimulus because very little of this plan is effective this year. Only $55 billion is effective this year. That is about 16 percent of the advertised cost. It is only about 5 percent of the real cost if the gimmicks are eliminated. This plan is grossly unfair. Those who earn over $1 million get a $93,000 tax break this year on average. Those in the middle income range get $217. Our colleagues on the other side will say: The rich pay more in taxes, so they should get more of a tax break. They don't pay that much more. This is what the wealthiest among us pay in terms of all Federal taxes. They pay 23 percent. But under this plan, they get 38 percent of the benefit. It is a pretty good investment for them. And, unfortunately, unfair to the vast majority of Americans. Our colleagues say it is a growth plan, a jobs plan. No, it is not. This is not a jobs-and-growth plan. In fact, the people who have been hired by the White House and the CBO to do that kind of analysis tell us this plan is worse than doing nothing after 2004. You get a little bit of a bump in 2003 and 2004--just a little bit--one-half of 1 percent of GDP, which is about half as much as you would get with a well-designed stimulus package. But the outyear effect is negative because it is all borrowed money. Here are what the economists are telling us. Ten Nobel laureates: The tax cut proposed by President Bush is not the answer to our problems. It is not just 10 Nobel laureates. It is the Joint Committee on Taxation saying: The simulations indicate that eventually the effect of the increasing deficit will outweigh the positive effects of the tax policy. . . . Mr. President, this thing is so loaded with gimmicks that it is a now-you-see-it-now-you-don't tax policy. On dividends, it goes from 38.6 percent down to 15 percent. It stays there for 6 years and then jumps up to 35 percent. There is no consistency. The same on small business exemptions. That goes from $25,000 to $100,000 in 3 years and then back down to $25,000. It's the same thing on the 10 percent bracket. It wanders around and goes down to nothing in 2011, 2012, 2013--all to hide the true cost of this plan. Here is the child tax credit. It goes up to $1,000 for 2 years. Then it goes back to $700 for 4 years, then up to $800, then up to $1,000, and then back down to $500 for the last 3 years. Mr. President, this gives credibility a bad name. Marriage penalty. For 2 years, it is at $9,500 to eliminate the marriage penalty, and it drops down to $8,265, giving people a big tax increase in the third year. Then it goes back up to $9,500 in 2009 and in 2010, and then it plunges to $7,950. Even a mother could not love this child. This is a bad plan--bad for the economy, bad for the fiscal future of the country. It is going to weaken America, not strengthen it. I urge my colleagues to think twice. People are going to be held accountable for this vote. This is a scandal in the making. We are going to read that there are perverse results from this tax policy. I yield the floor.

Mr. CONRAD

Mr. CONRAD. Mr. President, I compliment our colleague from Florida on an outstanding statement. The Senator from Florida, who sits next to me on the Senate Finance Committee, has long been a voice of fiscal responsibility. His record is clear. I very much hope people across the country were listening to his excellent statement. I also want to take a moment to thank our ranking member on the Finance Committee, the Senator from Montana. Earlier this evening, he gave outstanding statement describing the problems with what is being proposed here. This is not a growth package. This is not a package that is going to lift the economy. In fact, the evidence is increasingly clear that, in the long term, this is going to hurt economic growth in this Nation. The ranking member also made clear the unfairness of this package. This is as unfair a package as I have seen in the 17 years I have served in the Senate. All of those who vote for this package are going to have a lot of explaining to do in the future because, as a former tax commissioner, I guarantee you are going to see one scandal after another as a result of the passage of this tax bill. This is going to provide lots of fodder for lots of writers, as they examine the consequences of this tax bill because it is going to produce, I predict on the floor of the Senate tonight, some of the most perverse tax outcomes we have ever seen as a result of legislation to pass the Congress. As Warren Buffett observed, in commenting on the President's proposed repeal of taxes on dividends, his receptionist was going to pay a rate of taxes 10 times what he pays. He is the second richest man in the United States, and his receptionist is going to pay taxes at a rate 10 times what he pays. Let me be clear. The measure we will vote on tomorrow morning is not quite the same measure as he was critiquing in his op-ed piece in the Washington Post. Instead of his paying one-tenth of what his receptionist pays, it may be down to one-eighth of what his receptionist pays. I tell you, this is a scandal, and it is going to explode, and it is going to explode right in the faces of those who vote for it. Here is the reality. We were told 2 years ago by the President that we could expect almost $6 trillion of surpluses--$5.6 trillion, to be absolutely precise--over the next decade. Now we know, instead of nearly $6 trillion of surpluses, if we enact the President's plan, we can look forward to $2 trillion of deficits. That is the hard reality confronting this Nation. This chart shows what is happening to budget deficits year by year. The President said, once we went into deficit, after he told us, you do not have to worry about that, that is not going to happen: My program with big tax cuts is going to lift the economy; it is going to produce more jobs, more economic growth; we are going to be able to pay off the debt; we are going to be able to protect Social Security, protect Medicare. Here are the results. The deficits are exploding. The deficit this year, on an operating basis, is going to be between $500 and $600 billion. It is going to be about $400 billion before you deal with Social Security. Under the President's plan, every penny of Social Security surplus money is going to be taken this year to pay for tax cuts and other expenses of the Government--every single dime. The President said the deficits will be small and short lived. Wrong again. These deficits are massive, and we see no end in sight. We have $550 billion of deficits on a $2.2 trillion budget? That is large by any calculation. We do not see deficits on an operating basis below $300 billion a year anytime for the next decade. The President told us 2 years ago, if we adopted his plan, we would be able to virtually eliminate the national debt. He said he would be able to retire all of the debt that was available to retire. He said by 2008 we would be down to $36 billion of publicly held debt. Now, after adopting his plan, we see that by 2008 we will not be down to $36 billion. Instead, the debt is going to be $5.2 trillion. That is the publicly held debt. That is just part of the story. The gross debt of the United States is even worse. The gross debt of the United States at the end of this year will be approximately $6.7 trillion. If we adopt the President's plan, at the end of this decade it is going to be $12 trillion. The deficits and debt are exploding. They are exploding at the worst possible time. Why is it the worst possible time? Here is the reason it is the worst possible time. This chart shows the Medicare trust funds, the Social Security trust funds, and the cost of the tax cut the President has proposed. The blue bar is the Medicare trust fund, the green bar is the Social Security trust fund, and the red bars are the tax cuts. You can see that right now the trust funds are throwing off big surpluses. In fact, just this year, Social Security will produce a surplus of $13 billion. But look at what happens later on in this decade and in the next decade when the baby boomers start to retire. Then the trust funds turn cash negative. At the very time they go cash negative, the cost of the tax cuts explodes, dragging us deep into deficit and debt in a way that is totally unsustainable--over $1 trillion a year in deficits. This isn't my projection. These are the President's own projections. This is page 43 of his analytical perspectives from the budget. Here is his long-term outlook on the deficit as a percentage of the gross domestic product. Economists like to use that measurement because it is an apples-to-apples comparison over time. It takes out the effect of inflation. This is the President's projection of where we are headed. If we adopt his tax plan and his spending plan, we never get out of deficits. These deficits that look relatively small compared to where we are headed according to the President are, in fact, record deficits. The deficit we are going to run this year is going to be the largest deficit ever in the history of America. The previous largest deficit we ran on a unified basis where all the money is put into the same pot and all the expenses come out of that pot--the largest deficit we ever had on the unified basis was $290 billion. On a unified basis this year, the deficit is going to be over $400 billion. That is here. As a percentage of gross domestic product, you can calculate it yourself-- $400 billion on a $1.5 trillion economy. That is about 3.6 percent or 3.7 percent of gross domestic product deficit. But look at where we are headed. Again, this is the President's assessment of where we are headed if we adopt his plan. Deficits as a percentage of gross domestic product of over 12 percent. Twelve percent on the economy of today would be a deficit of over $1.2 trillion this year. Who is going to loan us the money? America is going to become a deadbeat. Why has the dollar plunged 20 percent in value in just the last several months? Why are economists saying it is poised to plunge perhaps another 10 percent? What are the implications for foreigners who are buying dollar-denominated investments today when they see the dollar dropping like a rock? Do you think they want to hold American bonds? Do you think they want to hold American stocks when the value of the dollar is dropping like a rock? What happens to the American economy if they start to pull their money out of our stock market and out of our bond market? Do you want to see interest rates jump and see equity values plunge? Just have this dynamic continue, and it will rattle the eyeteeth of the markets in this country. The idea that this is going to increase markets--I am afraid it is going to be painful. This year alone, revenues are running $100 billion below forecasts-- forecasts made only 7 months ago. Yet it is running $100 billion below what was forecast. If that continues, we are going to have the lowest revenue as a percentage of our gross domestic product since 1959, the lowest revenue in 44 years. Remember when the President told us 2 years ago when revenue was the highest percentage of gross domestic product it has been in 40 years, he said we had to have a big tax cut to give the money back to the people. And we did. Now revenue is poised to be the lowest it has been in more than 40 years, and the President's answer is the same: Let's have another big tax cut. Give the money back to the people. He says it is the people's money. He is right about that. That is exactly whose money it is. It is the people's money. Do you know what else? It is the people's debt. It is the people's Social Security. It is the people's Medicare. And this President is running up the debt in an unprecedented way and at the worst possible time. He is running up the debt right before the baby boomers start to retire. If there is any question about his running up the debt, we are going to have it in our face tomorrow. We are going to have it before us tomorrow. He is asking not only for one of the biggest tax cuts ever, but he is asking for one of the biggest increases in debt ever. In fact, it is the biggest increase in debt in the history of our country. The last time he increased the debt, it was a $450 billion increase in June of 2002. But by April of 2003, the President is back asking Congress to increase the debt by $984 billion in one fell swoop--almost $1 trillion of added debt. This is an economic plan that is not working. It is failing. It is dangerous to the future of our country. The plan before us isn't going to work. How can I be so sure? I just said we have a $10.5 trillion economy, and this tax cut will provide $55 billion of lift in a $10.5 trillion economy. That is less than one-half of 1 percent of gross domestic product. If all of it translates into increased economic activity, the most it can affect is one-half of 1 percent of gross domestic product. This is a $350 billion package. At least it is advertised to be, despite the gimmicks it has. It is the most gimmick-laden package we have ever considered on the floor of the Senate. It costs $350 billion. Only 16 percent of it is effective this year to give stimulus to the economy. It is an upside-down plan. It provides too little lift now when we need it, and it costs too much in future years when we can't afford it. It is totally an upside-down plan. If you took out the gimmicks, all the sunsets, and the phase-ins, and the dodging around that is in this plan, it doesn't cost $350 billion. It costs $1 trillion. Those who are the most fervent advocates of this plan have no intention to sunset the various elements of this tax plan. If you do not sunset it, the true cost is $1 trillion. We go to the question of, Will this stimulate the economy? This is the answer of the people who were hired by the White House and hired by the Congressional Budget Office to answer that question. This is their answer, as shown on this chart. This black line is the President's policy. The green line is the base; that is, if you do nothing. What this shows is, you get that one-half of 1 percent increase in GDP in the early years, but after 2004 this plan is worse than doing nothing--worse than doing nothing in terms of economic growth. Why? Well, the people who do that analysis--and, again, they are hired by the White House; they are hired by the Congressional Budget Office to do this kind of analysis--this is what they say: Initially the plan would stimulate aggregate demand significantly by raising disposable income, boosting equity values, and reducing the cost of capital. However, the tax cut also reduces national saving directly while offering little new, permanent incentive for either private saving or labor supply. Therefore, unless it is paid for with a reduction in Federal outlays-- which it is not-- the plan will raise equilibrium real interest rates, ``crowd out'' private-sector investment, and eventually undermine potential GDP. That is what Macroeconomic Advisers say. They are not alone. This is from the Joint Committee on Taxation with a macroeconomic analysis of the House bill, which is the basis of the conference agreement we will have before us to vote on tomorrow: The simulations indicate that eventually the effects of the increasing deficit will outweigh the positive effects of the tax policy, and the buildup of private non-residential capital stock will likely decline. I do not know how many of our own experts we have to have tell us that we are going down the wrong path, but let's say you don't put any stock in the people we have hired to advise us. Let's say you don't trust the Joint Committee on Taxation. Let's say you don't trust Macroeconomic Advisers. How about 250 of the most prominent CEOs in America, the Council on Economic Development? They say current budget projections seriously understate the problem. While slow economic growth has caused much of the immediate deterioration in the deficit, the deficits in later years reflect our tax-and-spending choices. And the inevitable conclusion: deficits do matter. Those who are running around this town now telling us that deficits do not matter are the folks who, for years, made political careers in saying deficits did matter. Well, deficits do matter. Anybody who tells the American people they don't is shoveling smoke. The final point they made is the aging of our population compounds the problem. They could not be more right. Of course, they are not alone. Here are 10 Nobel laureates in economics, 10 people who have had the greatest achievement, the greatest recognition in economics. What do they say? The tax-cut plan proposed by President Bush is not the answer to our problems. Regardless of how one views the specifics of the plan, there is wide agreement that its purpose is permanent change in the tax structure, not the creation of jobs and growth in the near term. ``Not the creation of jobs and growth in the near term.'' They need to change the title of this bill from the ``Jobs and Growth Package'' to the ``Not Jobs and Growth Package'' because that is what it is because it explodes the deficits and debt. It is all financed with borrowed money. The dead weight of those deficits and debt will reduce economic growth, not improve it. The economists go on to say--again, 10 Nobel laureates-- Passing these tax cuts will worsen the long-term budget outlook, adding to the Nation's projected chronic deficits. It is not just them. This is the head of the Federal Reserve Board, Chairman Alan Greenspan, who endorsed the President's last round of tax cuts. Now he is saying we have to start paying attention to the growth of these deficits. He says: There is no question that as deficits go up, contrary to what some have said, it does affect long-term interest rates. It does have a negative impact on the economy, unless attended to. But he said more. He said the tax cuts that the President is proposing should be paid for. The President has no proposal to pay for these tax cuts. He is not offsetting them by reducing spending. In fact, he is increasing spending by over $600 billion above the baseline at the same time he is recommending $1.6 trillion of additional tax cuts, when we already have record deficits. My grandmother told me: If somebody tells you something is too good to be true, it probably is. When the President told us, 2 years ago, you could have it all, you could have a major defense buildup, you could have a massive tax cut, you could protect Social Security and Medicare fully, and in addition, you would be able to pay off the national debt, that sounded awfully good. But do you know what? It was not true. It was not close to being true. We have already seen that instead of paying off the debt by 2008, it is going to be over $5 trillion. We also know now, instead of protecting Social Security, the President's plan is going to take and loot virtually every penny of the Social Security surplus every year for the rest of the decade. This year, he is going to take every dime. Next year, he is going to take every dime; the next year, every dime; the next year, every dime. There are real consequences to the decision that is going to be made on this floor tomorrow. These are consequential decisions. Chairman Greenspan said: If, however, in the process of cutting taxes you get significant increases in deficits, which induce a rise in long- term interest rates, you will be significantly undercutting the benefits that would be achieved from the tax cuts. Again, it is not just Chairman Greenspan or 10 Nobel laureates or any of the others we have cited. Here are people at McKinsey & Co., one of the foremost consulting firms in the Nation, in fact, in the world. Mr. Koller and Ms. Foushee noted in a recent report that, as of last year, owners of 61 percent of all common stock were not subject to tax. They were not even subject to tax. Anybody who is listening: If you have a 401(k), you do not pay taxes on dividends. In fact, 61 percent, according to their analysis, of all common stock owners were not subject to tax. So markets are driven by investors who are not concerned with the tax treatment of dividends. Thus ``the proposed tax cut'' on dividends ``seems unlikely to have a significant or lasting effect on U.S. share prices.'' It is not just consultants from one of the most prominent consulting firms or 10 Nobel laureates or the Chairman of the Federal Reserve who are warning us about the danger of the direction we are taking. But here is Warren Buffett. I think he is the second most wealthy man in America. He calls this ``dividend voodoo.'' He calls dividend tax relief ``welfare for the rich.'' He said: When you listen to tax-cut rhetoric, remember that giving one class of taxpayer a ``break'' requires--now or down the line--that an equivalent burden be imposed on other parties. Now, obviously, that is true because we are in deficits. Remember, all of this money that is going out for a tax cut is being borrowed. In whose name is it being borrowed? It is being borrowed in all of our names. This is not out of surplus funds. This is out of borrowed funds. Every dime of this tax cut is being financed with borrowed money. When the President says it is the people's money, he is right. It is also the people's debt. That is how this is being financed. It is being financed by debt. Mr. Buffett goes on to say: Government can't deliver a free lunch to the country as a whole. It can, however, determine who pays for lunch. And last week the Senate handed the bill to the wrong party. Supporters of making dividends tax-free like to paint critics as promoters of class warfare. The fact is, however, that their proposal promotes class welfare. For my class. Mr. Buffett is referring to himself and other extraordinarily wealthy individuals. Where is a big chunk of the money coming from? Here it is. We are going to run, in Social Security, $2.7 trillion in surpluses over the next decade. Under the President's plan, $2.698 trillion is being taken to pay for these tax cuts and other expenses. This is the biggest raid on Social Security that has ever been conducted. It is being done right on the eve of the retirement of the baby boom generation. What a profound mistake. This plan is also deeply unfair. As Mr. Buffett said: His class is the biggest beneficiary. But he has that right. For those earning over $1 million a year, their tax cut for this year alone will be over $93,000. Let me say that again. If you are fortunate enough to be earning over $1 million a year in 2003, this package will give you on average a tax cut this year of over $93,000. If you are a middle-income person, if you are in the 20 percent of taxpayers who are right in the middle of the income distribution, your average benefit will be $217. Do you think that is fair? Our friends on the other side will say: Well, rich people pay more taxes. Indeed, they do. That is how our tax system works. But they don't pay that disproportionate a share of the taxes. No. No. They pay about 23 or 24 percent of the taxes. They are getting almost 40 percent of the benefit out of this plan. That is what is going on here. Don't let anybody tell you this is a fair plan, evenly distributed, based on what people pay in taxes, because it is not. It is not even close to being evenly distributed. It doesn't end there. This tax bill produces gimmick after gimmick after gimmick to hide its true cost. This is a ``now you see it, now you don't'' tax plan that comes and goes. Taxes are lower. Taxes are raised. Taxes are jumping all around because they have to hide the true cost of this plan. Here is how they propose fixing the standard deduction marriage penalty. The marriage penalty is eliminated when you get to a standard deduction for joint filers of $9,500. So for 2003 and 2004, they are at $9,500. Then in 2005, they drop it down to $8,265, representing a huge tax increase for those couples for 2005. Then they jump it up to $8,740 for 2006; $8,883 for 2007; then in 2009 and 2010, it goes back up to $9,500. Then look what happens in 2011, 2012, 2013. I mean this thing is embarrassingly bad. Then it goes down to the standard deduction to $7,950--meaning another big tax increase for people facing the marriage penalty. They don't just do it with the marriage penalty. Here is what they do with the child tax credit: it was $600 in 2002; they increase it to $1,000 in 2003 and 2004. Then they cut it to $700 for 4 years. Then they raise it to $800. Then in 2010 they raise it to $1,000. Then they cut it in 2011, 2012, and 2013 back down to $500. Does this make any sense to anybody watching or listening; this kind of tax policy? The ranking member calls this a yo-yo tax plan. It is at least a yo-yo. And it doesn't end with the marriage penalty or the child tax credit. Here is the 10-percent bracket. It shrinks for 2 years, then disappears altogether in 2011. Look at this plan. I don't know. It is not a pretty thing. From $12,000, it goes up to $14,000 for 2 years, then back down to $12,000 for 3 years, then it jumps for 3 years up to $14,000. Then it goes down to zero for 3 years. Who is kidding who about this plan? This thing is absurd on its face. Here is the small business expensing limit. From $25,000 in 2002, they increase it to $100,000 for 2003, 2004, 2005. Then they cut it back to $25,000 all the rest of the time. Top rate on dividends, same pattern, jumping all around: 38.6, then they cut it to 15 percent for 6 years. Then they jump it back up to 35 percent for 5 years. Our ranking member has called it a yo-yo tax plan. There is the yo- yo, up and down and all around. Economists say this is going to create such confusion, such chaos, such a lack of predictability in the tax system that in and of itself, the unpredictability will cost the economy substantially. The top rate on capital gains, same thing, jumping all around: 20 percent, then down to 15 percent for 6 years, then it is back up to 20 percent for 5 years. This is a tax policy that not even a mother would love, if this were a child. We can do better than this. This is a policy that is irresponsible fiscally. It is ineffective in terms of stimulus, and it is totally unfair. Those are the best things I can think to say about it. This is a tax policy that is going to plunge us right off the cliff into deficits and debt as far as the eye can see, and it is going to hurt this economy. I urge my colleagues to vote against the conference report. I thank the Chair and yield the floor.

Mr. CONRAD

Mr. CONRAD. Mr. President, last week the Senate and House passed tax measures. I want to take a moment to comment on those tax measures. My personal belief is that they are fundamentally flawed, that they are ineffective as stimulus, irresponsible as tax policy, and ultimately unfair. In terms of stimulus, the plan that passed the Senate last week will provide $45 billion of stimulus the first year; the House plan, $48 billion--that in an economy that is $10.5 trillion in size. Most economists say that small a measure will do virtually nothing to give a lift to the economy. The proposal by Senator Daschle, which provided $125 billion of stimulus, is the minimum size most economists say is necessary to give any serious lift to a $10.5 trillion economy. But the bigger flaw is in the long-term cost of the proposals advanced by our colleagues in both the Senate and the House. In the Senate, the 10-year cost of the plan is $350 billion; in the House, $550 billion. But that substantially understates the true cost of these measures. We can look at the Wall Street Journal, which did an analysis. They concluded: ``Caution: Tax Cuts Are Bigger Than They Appear In The Budget.'' That is because of this phony sunset that has been adopted in both the House and the Senate to substantially understate the cost. If the sunsets were not present, what we find is that the House bill, which is advertised to cost $550 billion, would actually cost $1.1 trillion. So when they say they have a tax measure that costs $550 billion, the true cost, without sunsets, is $1.1 trillion on the House side. In the Senate, they say they have a package that costs $350 billion. The true cost, without the sunset gimmick, is $660 billion. Some will say: Well, a sunset may be a valid thing. They may actually end that tax cut at the end of the time. Well, let's just look back 2 years ago. Two years ago, they passed tax measures filled with sunsets, and now what are they saying? Now they are saying: If you allow them to sunset, it will be a tax increase. So they are saying, oh, no, they can't be sunset, they have to be continued. You know, fool me once, shame on you. Fool me twice, shame on me. Look, how can any of us be fooled about what is to come? It is very clear what they are going to do. They are going to insist on eliminating these sunsets and the costs will explode. Well, what difference does that make? The difference it makes, of course, is that we are already in record deficit. With these additional tax cuts, and with the increased spending provided for in the President's budget, we are headed for deficits that are utterly unsustainable. Not only that, this policy of sunsetting means you have a come-and-go tax policy that is bewildering and will have an adverse effect on the economy. As the chart says: ``Sunset and Phase-in Gimmicks Produce Bad Tax Policy.'' Here is just one example. The marriage penalty comes and goes, and it comes again under the policy adopted in the Senate just last week. It is really quite stunning what they have done. For couples who incur a marriage penalty because of the standard deduction, that marriage penalty would be eliminated when the standard deduction equals $9,500 for the year 2003. Under the plan passed last week in the Senate--and using constant 2003 dollars--we will have $9,267 this year, $9,500 next year, and then it goes down to $8,265 the year after that. That will mean a tax increase on married couples. And then it goes up to $8,740, $8,883--all of these standard deduction amounts over the 4 years after 2004 are below the amount necessary to address the marriage penalty. It is really a giant hoax on the American people. But look what happens in 2011 and 2012 and 2013. Then it goes down to less than $8,000--a significant tax increase on married couples. This is consistent, unfortunately, throughout the package passed last week. It is true of the dividend tax measure. What a bizarre thing that is. It is phased in with a 50 percent exclusion the first year, then it goes up to 100 percent for a few years, and then it is eliminated. One prominent Republican analyst, an economist who has testified repeatedly before Congress, called it the most patently absurd tax policy offered ever. I don't know if it is the most absurd offered ever, but it is pretty farfetched. And he is not alone in that view. Here is what he said: Administration sources admit that dividends will likely decline relative to today under this plan between now and 2005. How can that be a harmless event given that increases in dividend payments are viewed to be so wonderful? Clearly, this proposal is one of the most patently absurd tax policies ever proposed. As I say, he is not alone in that analysis. Here are two economists who say the Senate GOP dividend tax plan will not help the economy: [Mr.] Timothy M. Koller and Susan Nolen Foushee, consultants at McKinsey & Co., noted in a recent report that as of last year owners of 61 percent of all common stock were not subject to tax, so markets are driven by investors who are not concerned with tax treatment of dividends. Thus, ``the proposed tax cut'' on dividends ``seems unlikely to have a significant or lasting effect on U.S. share prices,'' [they] said. That is from the Washington Post. What is even more bizarre is the President went around this country and told people this policy was to eliminate double taxation. His argument was that corporate profits are first taxed at the corporate level and then taxed again when they are paid out into dividends. So his initial proposal included a corporate accounting provision that guaranteed that taxes on profits were paid at the corporate level before those profits could be paid out to shareholders on a tax-free basis. Do you know what? Here in the Senate they took that provision out. So now you can have a circumstance where the money is not taxed either at the corporate level or when it is paid out as dividends. That is not a matter of eliminating double taxation, that is a matter of eliminating all taxation on corporate earnings. Now, if that isn't an utterly preposterous outcome, I don't know what is. That is what this Senate passed last week. I expect a lot of Members who voted for it did not even know that provision was taken out. I expect they did not know you are going to have a circumstance in which corporations do not pay taxes at the corporate level and then get to pay the dividends out completely tax free--well, at least for a few years until it is all restored and we face a massive tax increase on dividends that would do real damage to the economy of this country. As shown on this chart, here is a Republican tax analyst who ridicules the Senate GOP dividend tax plan: ``I can understand the political reasons why they put it in that way, but it's such an incredibly bad idea,'' said Norbert Michel, a tax policy analyst at the Heritage Foundation, a conservative research group in Washington. That is from the New York Times. I think Mr. Michel had it right. This next chart shows that economists say the Senate GOP dividend tax plan makes little sense: Many economists say a temporary reduction of the dividend tax makes little economic sense, blunting the goal of boosting companies' stock prices and leaving them more money to invest. ``Phasing something in but letting it go away doesn't have a very large economic impact,'' said Christopher Wiegand, economist for Citigroup Inc. This is according to the Associated Press. The evidence is mounting that what was passed here last week makes no earthly sense. It does not make economic sense. It makes no fiscal sense because the deficits of this country are already at a record level. This year some have said it would be a small deficit. Let the American people make the judgment if they think it is small. The deficit this year, on an operating basis, is going to be between $500 and $600 billion on a budget of $2.2 trillion. Some say that is a small deficit. What would they call a large deficit? A $500 to $600 billion deficit on an operating basis on a $12.2 trillion budget, and you know that is just the beginning. Once the President's plan is put in place, that increase is spent. That cuts revenue, and when we already have record deficits, you can only have one result; that is, deficits that multiply. It will also occur at the worst possible time because these deficits are coming at us right before the baby boomers retire. When I talk about a tax plan that makes no sense, it is not just people on our side of the aisle saying that. You have Republicans saying what was passed in the Senate makes no sense. Here is another lawmaker who says he considers the bill a bad idea. It is the Speaker of the House, Dennis Hastert, who described the plan as an ``all of a sudden you see it, and now you don't'' idea. He went on to say: If the dividend tax is 50 percent and then nothing, and all of a sudden it is back to 100 percent or whatever it is, my feeling is that it does not solve the problem. But he did not mention that his Chamber's bill also sunsets a half- dozen major provisions. Rarely have we seen tax bills so riddled with gimmicks and false assumptions. This is what the Joint Committee on Taxation found when they did a ``dynamic analysis'' of the bill passed in the House of Representatives. They concluded that the increased deficits that will be created will eventually outweigh the benefits of tax cuts. This is what a number of us have been saying repeatedly. These are not tax cuts offset by spending reductions; these are offsets paid for by borrowing money from the Social Security trust fund. In fact, virtually every penny of Social Security trust fund surpluses over the entire next decade are being taken to pay for these tax cuts. And people think that is a good idea. The President says this is the people's money. He is exactly right about that. This is the people's money. But do you know what? It is also the people's debt. It is also the people's Social Security. It is also the people's Medicare. All of those are the people's. The policy he has fashioned is taking Social Security trust fund surpluses from the people in order to pay for a tax cut; taking from a circumstance in which people are paying payroll taxes--by the way, 80 percent of American taxpayers pay more in payroll tax than they pay in income tax--it is going to take from their trust fund surpluses and use it to give an income tax cut that flows overwhelmingly to the wealthiest among us. You talk about Robin Hood in reverse, this is it. It is not good economic policy, it is not good tax policy, it is not good fiscal policy, and it is going to put us in a deeper and deeper hole. The Joint Committee on Taxation said this about the plan: This stimulus is reduced over time because the consumption, labor, and investment incentives are temporary, and because the positive business investment incentives arising from the tax policy are eventually likely to be outweighted by the reduction in national savings due to increased Federal Government deficits. That is exactly what is wrong with this plan. It is not the economic growth plan, it is a plan to borrow from the future and to take Social Security trust fund surpluses and give a big tax cut to those who are the wealthiest among us. This plan also flunks the fairness test. The plan benefits the wealthiest in a way that is truly stunning. Taxpayers with income over $1 million will get a benefit of $73,790 in this tax year alone. The typical taxpayers--those in the middle income in this country, the 20 percent of taxpayers who are in the middle of the income distribution-- will have an average benefit of $245. Let me conclude by saying I hope my colleagues will take a second look at what was passed. I think it is going to prove to be a serious mistake for our fiscal future. I thank the Chair and yield the floor.

Mr. CONRAD

Mr. CONRAD. Mr. President, pursuant to section 904 of the Congressional Budget Act of 1974, I move to waive the applicable section of the act for the purpose of the pending amendment and I ask for the yeas and nays.

Mr. CONRAD. Mr. President, I suggest the absence of a quorum.

Mr. CONRAD

Mr. CONRAD. Mr. President, this bill increases the child tax credit from $600 to $1,000 effective back at the beginning of this year. My amendment simply takes it back another year to the beginning of 2002. This is an efficient way of targeting money to those who are most likely to use it to give stimulus to the economy. I offset the additional cost by delaying part of the final reduction in the top marginal rate for a year and a half. This asks the top 1 percent, actually less than 1 percent of the taxpayers, to take part of their reduction somewhat later. It gives a benefit to 27 million American families by asking less than a million American families to wait for the final part of their additional tax reduction for a year and a half.

Mr. CONRAD

Mr. CONRAD. Mr. President, I wish my colleague a happy birthday. This is his birthday, and I hope it is a happy one for him. I hope what helps make it a happy birthday is this amendment passing. This is a good amendment. This is reversing a tax increase previously imposed on recipients of Social Security. That was part of a deficit reduction plan back in the 1990s that helped get us back on track. We did that. Now in the context of this bill, since there will clearly be tax reductions, we ought to do it in a way that is fair and balanced and that recognizes a tax increase previously imposed that could be reversed at this moment. My colleague mentioned what is happening to the Federal debt under the President's budget plan. This chart shows it in graphic form. The debt of the United States is absolutely skyrocketing. It is over $6 trillion now, and it will be over $12 trillion in 10 years if the President's plan is adopted, including the overall tax bill before the Senate. All of this is at the worst possible time. Right now, the trust funds of Social Security and Medicare are running surpluses. The blue bar is the Medicare trust fund; the green bar is the Social Security trust fund; the red bars are the tax cuts, both those enacted already and those proposed. You can see that when the trust funds that are now running big surpluses turn cash negative within the next decade, at that very time the cost of the tax cuts proposed by the President explode, driving us deep into deficit and deep into debt. That is right as the baby boom generation retires, right as we are least able to have deficits. You don't have to take my word for it or the word of the Congressional Budget Office; this is the President's own analysis of the long-term effects of his plan. Some have said these deficits are small. The deficits currently are at record levels. We are going to have the biggest deficit this year we have ever had in our history. That is right here. But look where we are headed, according to the President's own analysis. This is from his budget document. It shows deficits now are small compared to what they will be, even though they are at record levels now. These are the biggest deficits we have ever had, and they are tiny compared to what is to come if we adopt the President's plan, because the costs of the retirement of the baby boom generation explode at the very time the costs of the President's tax bill explode. Some on the other side are saying if you cut taxes you are going to get more revenue. Let's do a reality test. They said that 2 years ago. This was the range of possible outcomes, looking forward, that was given to us 2 years ago by the Congressional Budget Office. They adopted the midpoint of this range. That was what told them we were going to have nearly $6 trillion of surpluses over the next decade. Republicans said, Oh, wait a minute, that is too conservative. If you cut taxes, as we did 2 years ago, you will get much more revenue. They are making the same claim now: If we cut taxes again, we will get more revenue. Let's look back at history. Let's look at the record. What it shows us is here is what actually happened. This is what the projections were; this is the midpoint of those projections that said there would be nearly $6 trillion of surpluses. This red line is what has actually happened. We didn't get more revenue. We didn't get more surpluses. We got less revenue and no surpluses. Instead, we got deficits, massive deficits, record deficits. Now we get the same old song: Let's just do another big round of tax cuts; we will get more revenue. It didn't work last time. It didn't come close to working. In fact, we just got the latest numbers from the Treasury Department. Revenue this year is running $100 billion below the forecast made just 7 months ago. They said, based on the tax cuts of 2 years ago, we would get more revenue. We are not getting more revenue. In fact, if this trend continues this year, we will have the lowest revenue as a percentage of our gross domestic product since 1959. All those who claimed we were going to get more revenue were wrong. The President was wrong. Our Republican colleagues who told us we were going to get more revenue with the big tax cut enacted 2 years ago were wrong. They were not wrong just by a little bit; they were wrong by a lot. That is why some of the most distinguished economists in the country are telling us that this tax cut plan is not going to do the job. These are the names of the economists who signed this statement. Ten of them are Nobel laureates in economics, the most distinguished economists America has produced. This is what they say: The tax cut plan proposed by President Bush is not the answer to these problems--of weak economic growth. Regardless of how one views the specifics, there is wide agreement that its purpose is a permanent change in the tax structure and not the creation of jobs and growth in the near term. The permanent dividend tax cut, in particular, is not credible as a short-term stimulus. As tax reform, the dividend tax cut is misdirected in that it targets individuals rather than corporations, is overly complex, and could be, but is not, part of a revenue-neutral tax reform effort. Passing these tax cuts will worsen the long-term budget outlook, adding to the nation's projected chronic deficits. They conclude: To be effective, a stimulus plan should rely on immediate but temporary spending and tax measures to expand demand, and it should also rely on immediate but temporary incentives for investment. It is not just 10 Nobel laureates. This morning a distinguished Republican economist was quoted in the Washington Post reacting to a plan to phase-in and later sunset the President's dividend proposal. Here is what he wrote in a website editorial: Administration sources admit that dividends will likely decline relative to today under this plan between now and 2005. Dividends are going to decline. How can that be a harmless event, given that increases in dividend payments are viewed to be so wonderful? This Republican economist, distinguished Republican economist whom they have called to testify before committees of Congress repeatedly concluded: Clearly, this proposal is one of the most patently absurd tax policies ever proposed. This is from a Republican economist whom they have called repeatedly before committees to testify on economic proposals. It is not just 10 Nobel laureates. It is not just a distinguished Republican economist. It is even the people they have hired to do the analysis of their plan, Macroeconomic Advisers, hired by the White House, hired by the Congressional Budget Office to do macroeconomic forecasting. Do you know what they say? The President's plan will give you a little boost, less than half of 1 percent of additional GDP, until 2004. Then look: straight down. That is what this policy provides. It hurts economic growth. In fact, past 2004 it is worse than doing nothing. That is a great economic growth plan. That is a great jobs plan. It is worse than doing nothing, according to the people they have hired to give them advice on what the results will be. It is not just those Nobel laureates, it is not just a distinguished Republican economist, it is not even the firm the Congressional Budget Office and the White House have hired to do macroeconomic analysis. This is the chairman of the Federal Reserve: ``Greenspan Says Tax Cut Without Spending Reductions Could Be Damaging.'' He is saying: With a large deficit . . . you will be significantly undercutting the benefits that would be achieved from the tax cuts. The President of the United States is not proposing cutting spending. He is proposing increasing spending and he is proposing massive tax cuts when we already have record deficits. There can only be one result: massive deficits, massive debt, that will hurt economic growth, that will hurt the economic security of the country, and finally, on an amendment that involves Social Security, that will take virtually every penny of Social Security surplus over the next decade to pay for these tax cuts. What a profoundly mistaken policy.

Mr. CONRAD. Mr. President, I ask unanimous consent I be named as a cosponsor of the amendment of my colleague.

Mr. CONRAD

Mr. CONRAD. The amendment increases the child tax credit from $600 to $1,000 and makes it retroactive to the beginning of 2002 instead of 2003, as called for in the bill. To offset the cost, the amendment would delay the rate reduction for the 1 percent of taxpayers in the top income tax bracket from this year to 2005. I hope my colleagues will give it close consideration.

Mr. CONRAD. Mr. President, I ask unanimous consent that further reading of the amendment be dispensed with.

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

Mr. CONRAD. Mr. President, I ask unanimous consent to set aside the pending amendments.

Mr. CONRAD. I will conclude by saying the tax cut plan proposed by President Bush is not the answer to these problems of weak economic growth. I ask unanimous consent for an additional 30 seconds to call up my amendment.

Mr. CONRAD. I thank the manager of the bill, the ranking member of the Finance Committee. The Senator from South Carolina has just been talking about this scheme to give the President all that he wants on dividends, but to do it within the limits of the $350 billion tax bill that is before the Senate. A prominent Republican economist commented on this scheme today, calling it, ``The Dividend Fiasco.'' This scheme would exempt exempt one-third of dividends this year, two-thirds the next year, and all of them in the third year, and then sunset the whole proposal after that. Again, this is an economist whom Republicans have called before the Congress repeatedly to testify on their behalf. Here is what he says about that scheme: Think, for a moment, of the likely wacky effects of such a plan. If a firm pays you a dividend next year as opposed to this year, then you will save 33 percent on your taxes. With rates falling so sharply, it would be positively irresponsible for a firm to pay any dividends at all until the rates are at their lowest. Then, in 2005, the rate is zero for only one year. Thus, a firm will have an incentive to pay dividends that it might have planned to pay in 2006 in 2005 as well. So under the administration's proposal, dividends would go as close to zero as firms could manage for a few years, spike to their highest level in history, then drop sharply for some time. Administration sources admit that dividends will likely decline relative to today under this plan between now and 2005. How can that be a harmless event given that increases in dividend payments are viewed to be so wonderful? Clearly, this proposal is one of the most patently absurd tax policies ever proposed. That is from a prominent Republican economist. He has it exactly right. That is patently absurd. It is a hoax. It is an absolute hoax. The principle behind this bill is to limit the total tax cut to $350 billion. The reality of the proposal advocated by the Senator from South Carolina is that it would never be sunsetted, and the cost would turn out to be even more than the President's original proposal. While I was gone, my colleague from Arizona on the Finance Committee, and for whom I have a great deal of respect, suggested that corporate taxes are high compared to other nations. That is just not true. If you look at the effective tax burden--not the nominal tax burden, the effective tax burden--what companies really pay, the United States is a relatively low tax jurisdiction. Look at where the OECD places the United States in its international ranking of corporate income taxes as a percentage of GDP. This is where the United States ranks. We are way down the list, nowhere close to being high up on the list. Another thing I have heard repeatedly is that this plan is a jobs growth package. Let's do the math. If this is a jobs package, it is one of the most poorly designed in economic history. They say it is going to produce a million jobs. Actually, the models that have been done say from 230,000 to 900,000 jobs. Let's say it is a million jobs. It costs $350 billion. Let's divide 1 million jobs into $350 billion. Do you know what the cost of this program is per job? Three hundred fifty thousand dollars a job. Let's say that one more time. The cost of this program to create a job is $350,000. Now, that is patently absurd. What a ridiculous way to create jobs. The cost is $350,000. What are the jobs going to be--$50,000 jobs, if they were pretty good jobs. So it would cost $7 for every $1 you would produce in jobs? That makes no sense. My colleague said that consumer demand is not the problem in the economy. That is absolutely the problem. Consumer demand in the last 2 months has been 1.4 percent and 1.7 percent. That has been the growth. That is mighty tepid growth. That is right at the heart of what is wrong in this economy. My colleague from South Carolina said Senator Dorgan's amendment on the Social Security tax is an example of what is wrong here. No. It is an example of what is right here. The Senator from South Carolina said we had a chance on the budget resolution to do something about the previous increase in income subjected to Social Security tax. No, the budget resolution doesn't decide those things. It has nothing to do with that--nothing, zero. This is the place where you can do something about repealing a previous tax increase. The budget resolution doesn't change the tax code. This is the bill that determines the specifics. Our colleagues will have a chance tomorrow to indicate whether they are going to repeal the previous tax increase that involved Social Security recipients. One other thing I heard my colleague from Arizona say was that the dividend proposal would be such a tremendous benefit to the elderly. That's true, if you are wealthy. If you are an elderly person earning more than $500,000 a year, this plan gives you an average benefit of $24,000. If you are an elderly person earning less than $50,000 a year, your average benefit is just $90. If you are earning $50,000 or less, and you are elderly, you get $90. If you are earning over half a million dollars, this dividend tax cut gives you $24,000. I don't think that is equitable. I don't think it is fair. I don't think it does much to stimulate the economy. Let's remember the context within which we are making these decisions. The budget deficits have skyrocketed. All of this money, everything being proposed here, is with borrowed money. This is not being offset by spending reductions. This is all borrowed money. The Senator from South Carolina says that at times you need to do that to give a boost to the economy. I agree with that entirely. That is absolutely the right economics. But do you know what? The deficit this year on an operating basis is going to be between $500 and $600 billion. Should we do more? I believe we should. In fact, I think we should do more than what is in this plan, because this plan doesn't do much. This plan doesn't do much in the first year or the second year. This plan is very tepid in terms of what it does. In the first year, this plan gives $44 billion of stimulus in a $10.5 trillion economy. Frankly, that is not going to do much of anything. That is exactly what we see when you analyze this proposal in terms of what it is going to do to grow the gross domestic product. Senator Daschle's plan is the only plan that has much stimulus--$125 billion this year. Only $44 billion is in the plan before us. Here is an analysis of what the various plans would do in terms of stimulus. The President's plan, which is even more costly than the one before us, would increase GDP by less than half of 1 percent. The Democratic plan is significantly more, seven-tenths of 1 percent. In the second year, the Republican plan is half of 1 percent, and the Democratic plan nine-tenths of 1 percent. But what is most interesting is that the Republican plan, over the 10 years, is actually negative. It actually hurts economic growth. How can that be? Very simply, because it is going to explode deficits and debt. Here is what happens under the Republican plan: The debt of $6 trillion in 2002 will go to $9 trillion by 2008, and to $12 trillion by the end of this budget period. It explodes the deficits and debt. The Chairman of the Federal Reserve, Mr. Greenspan, has told us: With a large deficit, you will be significantly undercutting the benefits that would be achieved from the tax cuts. He also said: New academic evidence had strengthened his opinion that budget deficits led directly to higher interest rates, and that those higher interest rates choke off economic growth. It is not just Chairman Greenspan. Here are 10 Nobel laureates in economics.

Mr. CONRAD

Mr. CONRAD. I conclude by saying that if one is elderly and earns less than $50,000 a year, they will get a $90 tax reduction. If they are elderly and earn more than $500,000, they get a $24,000 tax reduction. That is not my idea of fair. That is not my idea of being effective for economic growth, and it is ultimately self-defeating because the plan is all financed by borrowed money.

Mr. CONRAD. I ask unanimous consent for an additional 30 seconds.

Mr. CONRAD. Mr. President, I conclude by saying not only is this plan ineffective in terms of giving lift to the economy and irresponsible in terms of the exploding deficits and debt, but it is also unfair. It is unfair because it overwhelmingly gives the greatest benefit to the wealthiest among us. The effect of this plan on people earning over $1 million in 2003 is this: They will get a $64,000 tax cut on average. That is for those earning incomes of over $1 million. Those who are in the middle of the wage distribution in our country will get a tax cut of $233. We heard earlier that this thing has tremendous benefits to the elderly. Well, it certainly does. It has tremendous benefits to those who are wealthy who are elderly. Elderly earning more than $500,000 a year would get a $24,000 tax break.