Kent Conrad

Mr. CONRAD

Mr. CONRAD. Mr. President, last week I was necessarily absent from the Senate to attend my daughter's graduation from college. As a result, I missed two votes Thursday and one Friday morning as I was returning to Washington. For the record, had I been present, I would have voted nay on the motion to table the Daschle amendment related to a Patients' Bills of Rights. I would have voted nay on the point of order raised with respect to the McCain amendment related to the so-called Section 527 loophole in our campaign finance laws. I would have voted aye on the Grassley amendment related to accounting practices at the Department of Defense. My vote would not have changed the outcome on any of these votes. Also for the record, I am extraordinarily proud of my daughter, Jessamyn, who graduated magna cum laude with highest honors from Harvard University last Thursday, June 8.

Mr. CONRAD

Mr. CONRAD. Mr. President, I am pleased today to join my good friends from Maine and Virginia, Ms. Collins and Mr. Robb, in introducing the Gray Market Cigarette Compliance Act of 2000. The growth in this gray market in cigarettes represents not only an economic threat, but a significant public health menace as well. This legislation will provide law enforcement with better and more effective tools to fight this dangerous intrusion into our marketplace. This bill concerns itself with cigarettes manufactured for overseas markets that nevertheless find their way into our domestic stream of commerce. Even if they have been manufactured in the United States, they are not required to comply with U.S. content disclosure and health labeling requirements. Thus, when they are brought back into the U.S. by gray market profiteers, they represent a serious public health concern. And because they are often sold at prices below those of products manufactured to comply with our tough cigarette marketing laws, they become more attractive and available to children. The gray market is unfair competition, plain and simple. Consumers often purchase gray market products thinking they are the same as the legitimate products manufactured for sale in the U.S. When gray marketers bring in cigarettes that are not manufactured in full compliance with U.S. law, they mislead unwitting consumers. Consumers are not the only ones affected. Gray marketers also harm the legitimate wholesalers and retailers who work hard and play by the rules by exploiting gray areas in the law in order to gain this unfair competitive advantage. It is important to stress as well the implications of the gray market in cigarettes for states under the tobacco Master Settlement Agreement (MSA). One of the major components of the MSA provides that payments to states are based on a formula that takes into account the annual volume of tobacco sold in each state. Gray market cigarettes are not counted under that volume adjustment formula. Therefore, to the extent that gray market sales displace sales of cigarettes that are counted in the volume adjustment, states could lose a portion of the amounts they would otherwise receive under the MSA. The Gray Market Cigarette Compliance Act will help consumers, retailers, wholesalers, and federal and state governments. It will strengthen the hand of law enforcement to combat the sale of gray market cigarettes and close loopholes that gray markets have been able to exploit. But most importantly, it will help keep cheap cigarettes out of the hands of children. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. CONRAD

Mr. CONRAD. Mr. President, I am pleased today to join my good friends from Maine and Virginia, Ms. Collins and Mr. Robb, in introducing the Gray Market Cigarette Compliance Act of 2000. The growth in this gray market in cigarettes represents not only an economic threat, but a significant public health menace as well. This legislation will provide law enforcement with better and more effective tools to fight this dangerous intrusion into our marketplace. This bill concerns itself with cigarettes manufactured for overseas markets that nevertheless find their way into our domestic stream of commerce. Even if they have been manufactured in the United States, they are not required to comply with U.S. content disclosure and health labeling requirements. Thus, when they are brought back into the U.S. by gray market profiteers, they represent a serious public health concern. And because they are often sold at prices below those of products manufactured to comply with our tough cigarette marketing laws, they become more attractive and available to children. The gray market is unfair competition, plain and simple. Consumers often purchase gray market products thinking they are the same as the legitimate products manufactured for sale in the U.S. When gray marketers bring in cigarettes that are not manufactured in full compliance with U.S. law, they mislead unwitting consumers. Consumers are not the only ones affected. Gray marketers also harm the legitimate wholesalers and retailers who work hard and play by the rules by exploiting gray areas in the law in order to gain this unfair competitive advantage. It is important to stress as well the implications of the gray market in cigarettes for states under the tobacco Master Settlement Agreement (MSA). One of the major components of the MSA provides that payments to states are based on a formula that takes into account the annual volume of tobacco sold in each state. Gray market cigarettes are not counted under that volume adjustment formula. Therefore, to the extent that gray market sales displace sales of cigarettes that are counted in the volume adjustment, states could lose a portion of the amounts they would otherwise receive under the MSA. The Gray Market Cigarette Compliance Act will help consumers, retailers, wholesalers, and federal and state governments. It will strengthen the hand of law enforcement to combat the sale of gray market cigarettes and close loopholes that gray markets have been able to exploit. But most importantly, it will help keep cheap cigarettes out of the hands of children. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. CONRAD

Mr. CONRAD. Mr. President, as a member of the conference on the disaster bill and the crop insurance bill, I am pleased to give strong support to the conference report. First, I thank the chairman of the Senate Agriculture Committee, Senator Lugar, for his leadership, his patience, and his very gracious treatment of all of our colleagues. All of us understand this particular bill was not Senator Lugar's first preference. Once again, he responded to the concerns of colleagues on the Senate Agriculture Committee and in the larger body and did so in a most gracious way. For that, I thank Senator Lugar. He has once again demonstrated the way we ought to do business in the Senate. He has certainly set a high standard. I also thank our ranking member, Senator Harkin, who has been indefatigable in advancing the cause of American agricultural producers. Senator Harkin has been a forceful advocate. Time after time, he has stood in the breach and insisted we do what is right by farmers and ranchers all across the country. I thank Senator Harkin for his exceptional leadership. We would not be here today without him. I also thank Senator Kerrey and Senator Roberts who were the primary sponsors of the legislation before us. Without their steadfastness right to the bitter end, we would not be here today. We faced a threat as late as last night when it was proposed we put the bankruptcy bill on this legislation. All of us know what that would have meant. That would have meant endless delay. That would have meant sinking into a bog of controversy that extends not only to the bankruptcy bill, but unrelated issues attached to it. Special thanks to those who stood firm and said, no, this needs to be a bill that deals with the critical problems facing farmers and ranchers in the United States. I also thank my close friend and colleague, Senator Grassley, who, as a member of the Budget Committee, worked with me to secure the $8.2 million in the budget that makes possible crop insurance reform. Finally, I recognize the work of the House committee chairman, Congressman Combest, for conducting what was a very fair and open conference committee. That is the way a conference committee should function. It was give and take, it was a debate, it was discussion, and at the end, it was a coming together around legislation that is, I think, outstanding. I again single out the House committee chairman, Congressman Combest, for his leadership. We have developed, I believe, the right bill at the right time with the required budget support. In one bill, we have managed to bring together emergency farm relief for the families who are faced with the lowest prices, in real terms, in 50 years and a reform of the crop insurance system to make it more affordable at every level. In addition to that, we are righting a wrong done to Durum farmers a year ago. This bill provides emergency relief in the form of 100- percent AMTA supplemental payments. For wheat farmers, that means instead of getting 64 cents a bushel, as they did last year in an AMTA payment, they will get 64 cents in addition to the regular AMTA payment, which this year will be 57 cents. So they will get an AMTA supplement--this is on wheat now--of 64 cents a bushel that is equivalent to last year's AMTA payment, married to the AMTA payment we will be getting this year. In addition, we have a crop insurance reform bill that is a dramatic improvement. When I go home and have meetings all across North Dakota, one of the most agricultural States in the Nation, what I am told, and told repeatedly, is that crop insurance is not working. It does not work because we do not have the right levels of support at the levels of coverage that farmers are buying, and they have a very serious problem if they have multiple years of disaster. Oddly enough, the way the formulas work, when farmers have multiple years of disaster, the base that calculates the support they receive is diminished--it is reduced, and it is reduced dramatically. The irony is, at the very time farmers need help the most, we have a formula that gives them the least help. It makes no sense. We have adjusted that in this legislation. I know there are those who are critical of using the AMTA payments as a basis for the economic disaster assistance. I understand that. AMTA payments are not countercyclical. That is, they are not designed to help those commodities that are the exact ones that are being hurt by this downturn. In addition, AMTA payments are not based on current production. AMTA payments, as a result, can go to producers and landowners who may no longer be producing the crop on which their payment is based or who are no longer growing a crop of any kind. Those are legitimate criticisms. Most of us recognize that. The question is, Do we make the perfect the enemy of the very good? I say to my colleagues, could we have done better? Yes, we could. We could have adopted a countercyclical program. But I say to my colleagues, at some point we have to make a decision: Are we going to delay support for producers who are in very deep economic trouble, faced with a circumstance in which USDA informs us, absent our action, farm income will drop $8 billion this year; or do we act? I urge my colleagues to join us in acting. Let's not delay. Let's not wait. Let's not make the perfect the enemy of the very good. The fact is, this package is going to make the difference for tens of thousands of farm families all across America between economic survival and economic death. That is the reality. That is what motivates the urgency of our action. I am very proud of the package that is before us. Many people labored hours and hours to produce this result. I salute not only the Members who worked hard and provided the leadership, but I thank the staffs on both sides who exhibited a dedication to public service because they did not work just 9 to 5. I know there are some people who think the Senate is kind of an easygoing place and people work leisurely hours. That is not the truth. The truth is people here work very hard. No one works harder than the staffs. The staffs in this circumstance have given us a perfect example of how to function to produce a result. They worked together harmoniously--well, not always harmoniously. Sometimes there was friction, sometimes there were real differences of opinion, but they kept at it, and they produced a result, and it is a result that is good for the country. They worked very long hours, many times late into the night, through the weekends repeatedly, to help achieve this result. I salute them today on both sides of the aisle because this was a bipartisan product. That happens, unfortunately, not as frequently as it should happen in this Chamber. I can tell you, this package is a product of coming together in a bipartisan effort. I salute all those who helped produce it. In addition to the disaster package we have, in addition to the crop insurance reform which is wide sweeping and incredibly important to America's farmers and ranchers, this bill also includes provisions that effectively resolve a lawsuit brought by an unfair action by USDA regarding the 1999 durum crop revenue coverage level in contracts that were offered in various parts of the country. This means that both parties to that lawsuit--farmers and USDA--have a reason to settle that lawsuit, with every policyholder who received a claim getting additional per-bushel assistance. More importantly, the bill language makes it clear that actions on the part of USDA that change the conditions of crop insurance policies retroactively are not acceptable for any commodity. Whatever were they thinking of, to put out a contract--however flawed that contract might be--to have farmers sign up to it, and then to withdraw it? These contracts are contracts. That means there is a two- way bargain. You cannot have a circumstance in which the Federal Government puts out a contract, gets people to sign up to it, and then changes its mind and withdraws it. That is not fair. That is not right. In this legislation, we have sent that clear signal. I close by suggesting to my colleagues that we now have a moment in time that we can act together in the best interests of the farmers and ranchers of America. I urge my colleagues to support this conference report. I again say how proud I am to have been a part of this conference that functioned the way a conference should in a bipartisan effort to produce a result that is good for America. I thank the Chair and yield the floor. Several Senators addressed the Chair.

Mr. CONRAD. I yield myself time off the leader's time.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise today to introduce the Farm Relief and Economic Development Act of 2000. We have farmers who are in the deepest trouble they have been in in 50 years: the lowest prices in 50 years, a series of natural disasters in many parts of the country, and an economic environment in which our major competitors are outgunning us 60 to 1 in agricultural export support, by 10 to 1 in internal support. The result is tens of thousands of farm families are faced with failure unless we respond. The Department of Agriculture has told us that farm income will drop $8 billion if we fail to act. As part of an overall response, today I am introducing legislation that I term the ``Farm Relief and Economic Development Act of 2000.'' There is no question in my mind that the best action Congress could take on farm policy would be to rewrite the farm bill. But that is unlikely to happen this year. There are parts of the Internal Revenue Code that create unnecessary problems for farmers that we can address. The essential elements of this bill are provisions to address farm and ranch risk management accounts. This proposal would allow farmers to make contributions to tax-deferred accounts, which would be known as farm and ranch risk management accounts. Those accounts would provide farmers with a valuable new tool for managing money in a way that best benefits each farmer's own operations. The second key element of this legislation is clarifying the self- employment tax that applies to farm lease income. A farm landlord should be treated no differently than small business operators and other commercial landlords when it comes to cash rent income. As a result of a 1996 Tax Court decision, the IRS has now expanded the reach of the self-employment tax to include all farm landlords, whether or not they are active participants in the farming activity. My proposal would restore the pre-1996 status quo, turning back this unilateral action by the IRS. My proposal also includes language to clarify the Conservation Reserve Program payments are not subject to the self-employment tax. Again, we have an interpretation by the Internal Revenue Service that we think is badly flawed and ought to be reversed. This legislation provides capital gains relief on the sale of farm residences and farmland. Farm families frequently cannot take full advantage of the $500,000 capital gains tax exemption that we provide nonfarm residents. That is because the IRS separates the value of a farmer's house from the contiguous land. The value of the home often turns out to be negligible because the IRS often judges homes located far out in the country to have very little value. In fact, it is often the case it has very little in the way of market value when it is detached from the land that surrounds that farmstead. My proposal would allow the exclusion of $500,000 that we currently allow homeowners to be applied to the sale of a farmer's home and up to 160 acres of surrounding farmland. The next element of my legislation is Aggie bonds. Finding ways to encourage people to start farming is not easy. Aggie bonds are helping by reducing the cost of credit and stimulating investment in agriculture. This proposal would exclude Aggie bonds from the State volume cap. It would not change the loan limit, nor would it affect any additional limitations or qualifications imposed by the 16 States which participate in the program. My proposal provides capital gains tax relief for farmers leaving farming. The farmer who decides to leave under enormous financial pressure today often finds the IRS waiting with its hand out. When property is sold at auction in order to satisfy debt, the farmers will often realize a very significant capital gain, even though they really have losses because the value of the property has gone up while the debt may have gone up even more dramatically. This proposal would provide a once-in-a-lifetime capital gains exclusion for farmers who decide or are pressured to leave agriculture. Next, this proposal addresses net operating losses of farmers. My proposal would lengthen the carryback period for net operating losses for farmers to 10 years. Because of the volatility in the income of farmers, we believe it makes sense to allow them a net operating loss over an extended period. Next, this proposal I am offering today deals with estate valuation. We have the special use valuation, in order to help farmers keep their farms intact. The definitions that trigger the recapture, unfortunately, are too rigid. If the farm can remain a going concern by renting some portion of it to other family members, I believe the family should be able to still enjoy the benefits of special use valuation. My proposal would provide that an heir could rent the family farm to family members for the purpose of farming without triggering the recapture provisions. Next, my proposal deals with farmer cooperatives. This proposal would provide cooperatives with the same declaratory relief procedures available to other tax-exempt entities when their tax-exempt status is denied. Finally, my proposal deals with income averaging for farmers and the alternative minimum tax. Because of interaction between the income averaging provisions of the code and the alternative minimum tax, some farmers who elect to take advantage of income averaging are finding themselves subject to alternative minimum tax. That was never intended. This outcome should be changed so farmers receive the full benefit of income averaging. This proposal would provide that a farmer who elects income averaging would not then face an increase in AMT liability. With that, Mr. President, I send the bill to the desk and ask for its referral. I hope colleagues will support this legislation.

Mr. CONRAD

Mr. CONRAD. Mr. President, I ask for time off our side off the resolution and ask to be notified when I have consumed 15 minutes.

Mr. CONRAD. Mr. President, this is one of the most important decisions we make every year: the question of the budget outline for the United States; what are our priorities; where is the money going to be spent; what are the revenue sources for the United States. The fundamental question is, Are we going to maintain fiscal discipline? Are we going to maintain a strategy that has produced the longest economic expansion in our country's history? This article appeared in the Washington Post in the business section announcing that the expansion was, at that time, the Nation's longest. This is back in February. Of course, the expansion has now been extended even further. But even then, we had created the longest economic expansion in our country's history. I say when ``we'' created; I am talking about all of us as Americans. Part of it is a result of Federal policy: the fiscal policy of the country, which is controlled by the Congress and the President of the United States, and the monetary policy, which is controlled by the Federal Reserve. The two work hand in glove to produce economic results for this country. Obviously, the underlying strength of America is the people of this country. Their hard work, their innovation, their creativity, their entrepreneurial spirit and drive makes this country the greatest economic power on the face of the globe. It is important to remember the economic strategy and the economic plan that brought us to where we are today. If we look back at the last three administrations and look at the question of the budget deficits that are so important to the fiscal policy of this country and the monetary policy, this is what one finds: The Reagan administration inherited a deficit of about $80 billion and promptly ran it up to over $200 billion and dramatically expanded the Nation's debt over the period of that administration. In fact, they more than tripled the national debt during this period. Then we had the Bush administration, which inherited a deficit of $153 billion and promptly ran it up to a $290 billion deficit. It actually was somewhat worse than that because this is counting the Social Security surplus. The true deficit, at least as I define it, was well over $300 billion. The Clinton administration came in, and in 1993, we passed a 5-year budget plan that was designed to reduce the deficit dramatically to take pressure off interest rates and to get this economy moving again. That plan passed without a single Republican vote in either the House or the Senate. These are the facts. That 5-year plan was put into place, and here are the results. They are clear; they are unambiguous. They show that each and every year that 5-year plan reduced the budget deficit, first, to $255 billion; then to $203 billion; then to $164 billion; then to $107 billion; then to $22 billion. By the end of the 5-year plan, we had done what was perhaps thought impossible when we started. We had balanced the Federal budget. Now we anticipate a $176 billion budget surplus in this year. This is a plan that worked. This shows the trend in receipts and outlays, the expenditures of the Federal Government that made this plan work. The blue line shows the spending of the Federal Government; the red line shows the receipts of the Federal Government. This is over a 20-year period. What it shows is obviously our spending was higher than receipts for an extended period in the eighties. That is why we were running massive budget deficits. When Democrats voted for a 5-year plan to get our fiscal house in order, spending came down each and every year in relationship to the size of our economy, revenue went up each and every year because, in part, we raised taxes on the wealthiest 1 percent in this country, and spending was cut. That is what allowed us to balance the budget, get our fiscal house in order, and kick off the longest economic expansion in our history. That is the record. Those are the facts. The question is, Are we going to put all this at risk and go back to the old, bad days of ``debt'' and ``deficits'' and ``decline,'' what I call the three Ds? I very much hope we do not return to those policies and those plans and that set of results: debt, deficits, and decline. That would be a profound mistake. Why would we ever turn our back on an economic strategy that has worked so well? Let's look at the results. Federal spending is now at its lowest level since 1966. We cut spending with that 5-year plan in 1993. Democrats cut spending because we did not have any help from the other side of the aisle--none. We cut spending because it was necessary to get our fiscal house in order. The results of reducing those deficits has been the virtuous cycle: Reduced deficits, reduced debt, and reduced interest rates that helps spur investment in the private sector, that helps spur private growth in the private sector, that led to the creation of over 20 million jobs, that gave us the lowest level of inflation since 1965. The virtuous cycle does not end there because it also gave us the lowest rate of unemployment in 42 years. These are the results of an economic plan that was put in place in 1993. It has also brought down the debt. What a remarkable circumstance. But we have actually started bringing down the publicly held debt. We are in a position to nearly pay it off by the year 2010. We are in a position to pay off the publicly held debt of this country by the year 2013, if we stay on course. Alan Greenspan, who is in charge of monetary policy--the Congress and the President are in charge of fiscal policy; the Federal Reserve is in charge of monetary policy--the head of monetary policy for our country says: Pay down the debt first. That is what he is urging us to do. He is not alone because virtually every economist of whatever ideological persuasion who has come before the Budget Committee and the Finance Committee, on which I sit, has told us: The highest priority ought to be to continue to pay down the debt, to put us in a position to deal with the baby-boom generation when it starts to retire and puts enormous demands on Medicare, on Social Security, on veterans programs; that the best way to prepare for the day when they retire is to build this economy, to grow this economy. And the best way to grow this economy is to lift the debt burden that is on this economy. That is what will hold down interest rates. That is what will keep the Government out of competition in private markets for scarce resources. That will allow additional resources to go into private investment. This plan, this strategy, has been working. Now, all of a sudden, our friends on the Republican side, who opposed putting in place that strategy that has worked so well, tell us: Ah, well, we were wrong then, but trust us, let's go back to that failed strategy we were pursuing before, and let's try it again. Why would we do that? It makes no earthly sense. What will happen if we take this risky approach they are proposing? I submit to you, in their plan they use all of the non-Social Security surplus--all of it--for a tax cut, a tax cut that goes to the wealthiest among us. Senator McCain said it well during the campaign. He questioned the Bush plan to take 60 percent of the benefits of their tax plan and to give it to the wealthiest 10 percent. Mr. Bush has said, over and over, in his campaign: What they don't know in Washington is, this is the people's money. He is right about that. It is the people's money. The question is, What should be done with the people's money? Should it be given to the wealthiest 10 percent--disproportionately given to the wealthiest 10 percent--or should our top priority be to use the people's money to pay down the people's debt? I submit to you, the highest priority ought to be to pay down the people's debt. But that is not the Republican priority. It is true they take all of the Social Security surplus and reserve it for Social Security. We do the same thing in our budget. That is the right thing to do. I applaud them for it. But on the non-Social Security surplus, they have quite a different approach. I think, objectively stated, the non-Social Security surplus is most likely to be about $170 billion over the next 5 years. The Republican plan has a $150 billion tax cut, a $25 billion reserve for tax cuts, and costs another $21 billion in interest. So they have $196 billion reserved for a tax cut that goes primarily to the wealthiest among us when we have only $171 billion available in a non-Social Security surplus. Where is the rest of the money going to come from? I think it is going to come right out of the Social Security trust fund. We are going to go back to the old, bad days of raiding the Social Security trust fund surplus. I hope not. I do not know how else it happens. Our priority on the Democratic side is to use the vast majority of the projected surpluses over the next 10 years for debt reduction. In fact, we use 82 percent of the projected surpluses for debt reduction. That is, every penny of the Social Security surplus for Social Security, since it is not used for that purpose immediately, goes to pay down the debt. The Republicans do the same thing. But, in addition, we take 36 percent of the non-Social Security surplus and use that for further paying down the debt. We also have a chunk of money for tax relief--not nearly as much as they do; we will stipulate to that. Their priority is a big tax cut to the wealthiest among us. Our priority is to pay down the debt. As I indicated, we take all of the Social Security surplus and use that to pay down debt. But, in addition, we take, of the non-Social Security surplus, 36 percent of it for debt reduction. We take 29 percent of it for tax cuts because we, too, believe tax relief is important. We would like to solve the marriage tax penalty. We would like to ease the estate tax burden. We would like to deal with some of the other inequities in the Tax Code. We also reserve 23 percent for high-priority domestic needs such as defense, education, agriculture, and, yes, a prescription drug benefit. We believe these are the priorities of the American people. Let me conclude by saying there are some on the Republican side who have argued over and over that the tax burden on the American people is the highest it has ever been. The tax revenues are high, but the tax burden, the tax rates, on individual taxpayers are not high. That is odd. How can the revenues be high but the tax rates on individuals not be high? The reason is, we have a booming economy that produces lots of revenue. That is part of the virtuous cycle we have created by getting our fiscal house in order. But if we look at the individual tax burden, what we find is, contrary to what our friends on the Republican side say so often and so repeatedly, the Federal tax level has fallen for most people in this country. Let me quote from the Washington Post of March 26 of this year: Studies Show Burden Now Less Than 10% For all but the wealthiest Americans, the federal income tax burden has shrunk to the lowest level in four decades, according to a series of studies by liberal and conservative tax experts. . . . What we see is that the tax burden on individual Americans has been reduced, and reduced dramatically. The article further states: The Congressional Budget Office estimates the middle fifth of American families, with an average income of $39,100, paid 5.4 percent in income tax in 1999, compared with 8.3 percent in 1981. The Treasury Department estimates a four-person family, with a median income of $54,900, paid 7.46 percent of that in income tax, the lowest since 1965. The article continues: The Conservative Tax Foundation figures that the median two-earner family, making $68,000, paid 8.8 percent in 1998, about the same as 1955. This is a question of priorities. We ought to reject this budget and pass the alternative.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise today to introduce the Farm Relief and Economic Development Act of 2000. We have farmers who are in the deepest trouble they have been in in 50 years: the lowest prices in 50 years, a series of natural disasters in many parts of the country, and an economic environment in which our major competitors are outgunning us 60 to 1 in agricultural export support, by 10 to 1 in internal support. The result is tens of thousands of farm families are faced with failure unless we respond. The Department of Agriculture has told us that farm income will drop $8 billion if we fail to act. As part of an overall response, today I am introducing legislation that I term the ``Farm Relief and Economic Development Act of 2000.'' There is no question in my mind that the best action Congress could take on farm policy would be to rewrite the farm bill. But that is unlikely to happen this year. There are parts of the Internal Revenue Code that create unnecessary problems for farmers that we can address. The essential elements of this bill are provisions to address farm and ranch risk management accounts. This proposal would allow farmers to make contributions to tax-deferred accounts, which would be known as farm and ranch risk management accounts. Those accounts would provide farmers with a valuable new tool for managing money in a way that best benefits each farmer's own operations. The second key element of this legislation is clarifying the self- employment tax that applies to farm lease income. A farm landlord should be treated no differently than small business operators and other commercial landlords when it comes to cash rent income. As a result of a 1996 Tax Court decision, the IRS has now expanded the reach of the self-employment tax to include all farm landlords, whether or not they are active participants in the farming activity. My proposal would restore the pre-1996 status quo, turning back this unilateral action by the IRS. My proposal also includes language to clarify the Conservation Reserve Program payments are not subject to the self-employment tax. Again, we have an interpretation by the Internal Revenue Service that we think is badly flawed and ought to be reversed. This legislation provides capital gains relief on the sale of farm residences and farmland. Farm families frequently cannot take full advantage of the $500,000 capital gains tax exemption that we provide nonfarm residents. That is because the IRS separates the value of a farmer's house from the contiguous land. The value of the home often turns out to be negligible because the IRS often judges homes located far out in the country to have very little value. In fact, it is often the case it has very little in the way of market value when it is detached from the land that surrounds that farmstead. My proposal would allow the exclusion of $500,000 that we currently allow homeowners to be applied to the sale of a farmer's home and up to 160 acres of surrounding farmland. The next element of my legislation is Aggie bonds. Finding ways to encourage people to start farming is not easy. Aggie bonds are helping by reducing the cost of credit and stimulating investment in agriculture. This proposal would exclude Aggie bonds from the State volume cap. It would not change the loan limit, nor would it affect any additional limitations or qualifications imposed by the 16 States which participate in the program. My proposal provides capital gains tax relief for farmers leaving farming. The farmer who decides to leave under enormous financial pressure today often finds the IRS waiting with its hand out. When property is sold at auction in order to satisfy debt, the farmers will often realize a very significant capital gain, even though they really have losses because the value of the property has gone up while the debt may have gone up even more dramatically. This proposal would provide a once-in-a-lifetime capital gains exclusion for farmers who decide or are pressured to leave agriculture. Next, this proposal addresses net operating losses of farmers. My proposal would lengthen the carryback period for net operating losses for farmers to 10 years. Because of the volatility in the income of farmers, we believe it makes sense to allow them a net operating loss over an extended period. Next, this proposal I am offering today deals with estate valuation. We have the special use valuation, in order to help farmers keep their farms intact. The definitions that trigger the recapture, unfortunately, are too rigid. If the farm can remain a going concern by renting some portion of it to other family members, I believe the family should be able to still enjoy the benefits of special use valuation. My proposal would provide that an heir could rent the family farm to family members for the purpose of farming without triggering the recapture provisions. Next, my proposal deals with farmer cooperatives. This proposal would provide cooperatives with the same declaratory relief procedures available to other tax-exempt entities when their tax-exempt status is denied. Finally, my proposal deals with income averaging for farmers and the alternative minimum tax. Because of interaction between the income averaging provisions of the code and the alternative minimum tax, some farmers who elect to take advantage of income averaging are finding themselves subject to alternative minimum tax. That was never intended. This outcome should be changed so farmers receive the full benefit of income averaging. This proposal would provide that a farmer who elects income averaging would not then face an increase in AMT liability. With that, Mr. President, I send the bill to the desk and ask for its referral. I hope colleagues will support this legislation.

Mr. CONRAD

Mr. CONRAD. Mr. President, as I listened to my colleague, I thought some things said required a response. As we look back at how we achieved balance in our budget and how we turned massive deficits into massive surpluses, let me explain how it was done. This chart covers 1980 through 1999. The blue line is the outlays or expenditures of the Federal Government; the red line is the revenue line. We had massive deficits when we were following the Republican economic prescription for the country, which was trickle- down economics, because the outlays far exceeded revenues. The result was massive deficits and massive growth of the debt. In 1993, we got a new administration and a new economic plan. We passed a proposal without a single vote from the other side that reduced spending as a percentage of our national economy and raised revenue. That is how we balanced the budget. That is how we stopped the raid on Social Security. That is how we stopped the economic decline the country was experiencing under their plan, under their proposal. In fact, at the time we passed the new budget plan in 1993, which was a 5-year plan reducing the deficits each and every year as we brought spending down, we brought revenues up until the two lines crossed and we moved into surplus. Our friends on the other side of the aisle said it was a huge mistake. They said it would increase the deficit. They said it would increase unemployment. They said it would increase inflation. They were wrong on every count. They were not just a little bit wrong, they were completely wrong. Now they come with a new economic prescription to go back to the bad old days--back to debt, back to deficits, back to decline. Are we going to take that path? Haven't we learned anything about what works? Haven't we learned the best course is one of fiscal discipline? Haven't we learned the best course is to stay on this plan that has turned massive deficits into massive surpluses, that has led to the longest economic expansion in our country, that has led to the lowest unemployment in more than 30 years, the lowest inflation in more than 30 years? Are we going to jeopardize this with a risky tax scheme that our friends on the other side propose? My friend from Iowa says we have the highest tax rates ever. No, we don't have the highest taxes ever. This chart shows the revenue line, and indeed it came up; that is absolutely correct. It was that combination of reduced spending and increased revenue that led to this result. However, that does not translate into higher tax rates on the American people. A key reason we have higher revenues is because we got the economy moving again. This extraordinary economic expansion--again, the longest economic expansion in our history--has generated more revenue. That is what helped balance the budget, coupled with reduced spending. The question of what has happened to individual taxes is quite a different story. This was a story on the front page of the Washington Post: ``Federal Tax Level Falls for Most. Studies Show Burden Now Less Than 10 Percent.'' The story tells the truth. For all but the wealthiest Americans, the Federal income tax burden has shrunk to the lowest level in four decades. We don't have the highest taxes on individual American taxpayers that we have ever had, as the Senator from Iowa asserted. That is just not the case. For all but the wealthiest Americans, the Federal income tax burden has shrunk to the lowest level in four decades. That is the truth according to a series of studies by both liberal and conservative tax experts. Each of the studies shows the bottom line is the same. Most Americans this year will have to fork over less than 10 percent of their income to the Federal Government. The Congressional Budget Office estimates the middle fifth of American families with an average income of $39,000 paid 5.4 percent income tax in 1999, compared with 8.3 percent in 1981. Their taxes have gone down. That is the middle-income people in America. The Treasury Department estimates that a four-person family, with a median income of $54,900, paid 7.46 percent of that in income tax, the lowest since 1965. And the median two-earner family making $68,000 paid 8.8 percent in 1998, about the same as 1955. If we are going to have a debate, let's have a debate on facts and not make up things. The fundamental problem with the legislation offered by our colleagues: They have more of a tax cut than there is non-Social Security surplus available for a tax cut. It is a question of priorities. What do we want to do with the surpluses available? Remember, these are projected surpluses. We can take the money and use it all for a tax cut that disproportionately goes to the wealthiest. That is what the Republicans want to do. Our side believes we ought to reserve every penny of the Social Security surplus for Social Security. Republicans agree with that. On the non-Social Security surplus, the Republicans want to use it all for a tax cut that disproportionately goes to the wealthiest; 60 percent goes to the wealthiest 10 percent. Our side thinks the highest priority should be further paying down of the debt because that is what every economist has said is in the highest interests of this country. This is what will most assure our economic future. Second, we believe we ought to provide for tax relief; 29 percent of the non-Social Security surplus under our proposal goes for tax relief. Part of that goes to address the marriage tax penalty. However, we are addressing those who suffer the marriage tax penalty. Our friends on the other side want to give a big tax cut to folks who do not have the marriage tax penalty. In fact, for people receiving the marriage bonus--they pay lower taxes as a result of being married than if they were filing individually--they want to give them a tax cut, too. When they say we are limited to 10 amendments on our side, the underlying legislation deals with many more issues than just the marriage tax penalty. They want to restrict our right to offer alternatives. That is not fair. That is not the way the Senate was designed to operate. Not surprisingly, we don't intend to go along with that. That is not the way the Senate is designed to work. We offered legislation in the Senate Finance Committee to give people a choice. They file as married couples; they file as individuals; file the way that helps the most, that gives families the least tax liability. That is what Democrats are proposing. We do it in a way to not use all of the non-Social Security surplus for a tax cut that goes predominantly to the wealthiest. Instead, we put the highest priority on reducing the debt; the second highest priority on tax relief; the third highest priority on using money for high priority domestic needs such as defense, education, and agriculture, which are in very deep trouble.

Mr. CONRAD

Mr. CONRAD. Pursuant to section 904 of the Congressional Budget Act, I move to waive the applicable sections of the Budget Act for consideration of the pending amendment, and I ask for the yeas and nays.

Mr. CONRAD. Mr. President, I send an amendment to the desk and ask for its immediate consideration.

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

Mr. CONRAD. Mr. President, this amendment is designed to safeguard both Social Security and Medicare. We have, on a bipartisan basis, achieved consensus now that we should not spend the Social Security surplus for other programs. That is an enormous advancement. That is a commitment to fiscal responsibility. We ought to take the next step now and protect Medicare as well. That is what this lockbox amendment does. It protects every penny of Social Security for Social Security in each and every year, and it commits one-third of the non-Social Security surplus to Medicare. So we are taking care of our two major programs that are most at risk, Social Security and Medicare. I hope my colleagues will support this lockbox amendment so we can leave this Congress with a full commitment to Social Security and Medicare.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise to pay tribute to Michael Dobmeier and to recognize him as a member of a distinguished group of North Dakotans who have demonstrated extraordinary leadership in their military careers and civilian life. Michael was recently elected National Commander of the million-member Disabled American Veterans, a group with a historic tradition of advocating responsible legislation to assist disabled veterans, their families and survivors. Speaking of the DAV recently Michael said, ``I soon discovered the critical role the DAV serves in the lives of disabled veterans and their families in my community and communities nationwide.'' I wholeheartedly agree with this statement and attest to the fact that Michael has exemplified through his many significant achievements the great importance of the Disabled American Veterans. Michael Dobmeier is a native of Grand Forks, North Dakota. After graduating from high-school, he enlisted in the navy in 1969. Following boot camp in San Diego, he trained as an engine man in Great Lakes, Illinois, attended Submarine School in New London, Connecticut, and, later Diver's School in San Diego. While serving off the coast of Washington in April 1972 aboard the U.S.S. Trigger, Michael was severely burned when an engine crankcase oil heater exploded. It sprayed him with flaming oil and caused him 2nd and 3rd degree burns over more than 30% of his body. Following this accident, Michael received a military discharge and joined the Grand Forks' Disabled American Veterans Chapter 2. Since then, he has held almost every local, state, and national leadership position in the organization and has held all chapter and department leadership positions. At the 1994 DAV National Convention, Michael was chosen to serve on the National Executive and Finance Committee, was elected 4th and 3rd Junior Vice Commander consecutively at the 1995 and 1996 DAV National Conventions, and at the 1997 National Convention was elected 1st Junior Vice Commander. In 1998, Michael was elected Senior Vice Commander at the National Convention in Las Vegas, Nevada. He was also the president of the North Dakota Veterans Home Foundation and was chosen the 1985 DAV Outstanding Member of the Department of North Dakota. Michael Dobmeier resides in Grand Forks with his wife Sandra Jo and their two children. As owner and President of Dobmeier, Inc., an independent insurance company, Michael has also found success in the business world. I am proud to honor Michael Dobmeier as a person who has served his country with distinction and accepted the challenges and risks associated with this service. As Michael recently stated, ``taking risks means moving forward while others are waiting for better times, while others are waiting for proven results, and while others are waiting for applause for their past performance. The greatest risk of all, however, is to take no risks . . . make no changes.'' We thank Mr. Dobmeier today for taking those risks. The world is truly a better place because of him.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise today to pay tribute to Michael Dobmeier and to recognize him as a member of a distinguished group of North Dakotans who have demonstrated extraordinary leadership in their military careers and civilian life. Michael was recently elected National Commander of the million-member Disabled American Veterans, a group with a historic tradition of advocating responsible legislation to assist disabled veterans, their families and survivors. Speaking of the DAV recently Michael said, ``I soon discovered the critical role the DAV serves in the lives of disabled veterans and their families in my community and communities nationwide.'' I wholeheartedly agree with this statement and attest to the fact that Michael has exemplified through his many significant achievements the great importance of the Disabled American Veterans. Michael Dobmeier is a native of Grand Forks, North Dakota. After graduating from high-school, he enlisted in the navy in 1969. Following boot camp in San Diego, he trained as an engine man in Great Lakes, IL, attended Submarine School in New London, CT, and, later, Diver's School in San Diego. While serving off the coast of Washington in April 1972 aboard the USS Trigger, Michael was severely burned when an engine crankcase oil heater exploded. It sprayed him with flaming oil and caused him 2nd and 3rd degree burns over more than 30 percent of his body. Following this accident, Michael received a military discharge and joined the Grand Forks' Disabled American Veterans Chapter 2. Since then, he has held almost every local, state, and national leadership position in the organization and has held all chapter and department leadership positions. At the 1994 DAV National Convention, Michael was chosen to serve on the National Executive and Finance Committee, was elected 4th and 3rd Junior Vice Commander consecutively at the 1995 and 1996 DAV National Conventions, and at the 1997 National Convention was elected 1st Junior Vice Commander. In 1998, Michael was elected Senior Vice Commander at the National Convention in Las Vegas, NV. He was also the president of the North Dakota Veterans Home Foundation and was chosen the 1985 DAV Outstanding Member of the Department of North Dakota. Michael Dobmeier resides in Grand Forks with his wife Sandra Jo and their two children. As owner and President of Dobmeier, Inc., an independent insurance company, Michael has also found success in the business world. I am proud to honor Michael Dobmeier as a person who has served his country with distinction and accepted the challenges and risks associated with this service. As Michael recently stated, ``Taking risks means moving forward while others are waiting for better times, while others are waiting for proven results, and while others are waiting for applause for their past performance. The greatest risk of all, however, is to take no risks * * * make no changes.'' We thank Mr. Dobmeier today for taking those risks. The world is truly a better place because of him.

Mr. CONRAD

Mr. CONRAD. Mr. President, first let me thank my colleagues. We are glad to split the remaining time. I think the point has been made and hopefully clearly made. I am offering a second-degree amendment to the amendment of the Senator from Colorado. Let me just speak, if I may for a moment, about the amendment of the Senator from Colorado because there is something in his amendment that also should concern my colleagues. Right at the beginning of the amendment of the Senator from Colorado, he defines a balanced budget as one that includes all budgeted outlays and budgeted revenues. He says, ``budgeted outlays shall not exceed budget revenues.'' That sounds like a balanced budget but, unfortunately, under the legal terms to which we have to hold, that is a definition of a balanced budget that includes the Social Security surpluses. We have all pledged here not to do this. We have all pledged not to use Social Security surpluses to balance the budget. Now the Senator from Colorado comes in here and defines a balanced budget as one that uses Social Security revenues to balance. That is precisely----

Mr. CONRAD. I thought we had 12 minutes on our side.

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

Mr. CONRAD. Mr. President, I say to my colleague from Colorado, I read his amendment. His amendment defines a balanced budget as one that includes all receipts and all outlays. That includes the Social Security surplus funds as a definition of a balanced budget. That, in my judgment, is not a balanced budget. It is exactly the mistake we made around here for 30 years. Defining a balanced budget as one that includes Social Security surpluses is to set up the circumstance in which we could go back to the bad old days of raiding and looting Social Security for operating expenses, and that is something we have all pledged not to do. Maybe the intention of the Senator from Colorado is to protect Social Security, but when he defines a balanced budget in the amendment he has offered as one that raids Social Security surpluses to accomplish balance, he has turned back the clock to the bad old days. That is a mistake. That should not happen. We should not vote for it. Instead, I say to my colleagues, we should vote for the second-degree amendment I have offered that says let's put debt reduction as the first priority of this Government; that says we are going to reserve every penny of the Social Security surplus for Social Security; and that says of the non-Social Security surplus, instead of making a tax reduction, a tax-cut scheme virtually the only priority of the non- Social Security surplus, we ought to adopt a plan that says, no, we ought to make the top priority of the non-Social Security surplus debt reduction. That is the proposal before the Senate: to cut in half the proposed tax cut and dedicate the money to debt reduction. That is what the economists have told us should be the highest priority for these funds. I believe that is the case. I reserve the remainder of my time.

Mr. CONRAD. Mr. President, I send an amendment to the desk and ask for its immediate consideration.

Mr. CONRAD. No, I will not. That is precisely what we should not do. That is going back to the bad old days around here of using Social Security money to balance the budget. That is going back to the bad old days of raiding Social Security, of looting Social Security to make it look as if we have balanced the budget. Why ever would we want to go back to that approach? We have just spent years convincing our colleagues and the American people that we should not count Social Security surpluses to balance the operating budget of the United States. Now we have an amendment from a colleague that suggests we ought to go back to the bad old days and we ought to raid Social Security to balance the budget. I hope we will not go in that direction. I hope we will continue on the path of reserving every penny of Social Security for Social Security. Let's not, please, colleagues, go back to defining a balanced budget as one that raids the Social Security surpluses in order to achieve balance. That would be a profound mistake. Instead, I hope we take the second-degree amendment I have offered that says let's make the top priority debt reduction, let's take every penny of the Social Security surplus and dedicate it to Social Security, and let's take the biggest chunk of the non-Social Security surplus and use it to pay down debt. That is the best game plan for maintaining economic prosperity in the country, for extending this remarkable period of economic expansion, for broadening and deepening economic opportunity in this country. Mr. President, I reserve the remainder of my time.

Mr. CONRAD. Absolutely. That would reduce interest costs over time. Of course, we are burning up a lot of money in the Federal budget in interest costs. The other thing I think is often missed in this whole question of debt reduction, Lloyd Bentsen when he was Secretary of the Treasury came to a meeting of the Finance Committee and said the best bang for the buck, the biggest bang for the buck is to take measures that reduce debt, that reduce deficits, that as a result take pressure off of interest rates. For every 1 percent we save on interest rates, we lift a $128 billion debt burden off this economy, every year--every year. That is bigger than any tax cut anybody has come up with, in terms of relief to our economy, by lifting the debt burden on this economy. The proof is in the pudding. What happened in 1993, when we cut spending and, yes, raised income taxes on the wealthiest 1 percent so we could reduce the deficits, balance the budget, and get us on a course that could be sustained financially? We triggered reduced interest rates, increased rates of savings, societal savings that made more money available for productive investment that kicked off the longest economic expansion in our history. That is what is working. We ought to continue that course. We ought to stay the effort, continue the effort to pay down this debt, relieve the debt burden on the economy, take Government out of competition for scarce resources so the private sector has more money to invest, so we are better able to grow the economy, so we have a bigger economy when the bills of the baby boom generation start to come due. That is what every economist has told the Finance Committee. It is what they have told the Budget Committee. We have the Chairman of the Federal Reserve telling us that is the wisest course. Let's do it. Let's take some of this tax cut, half of it, and use it to reduce the debt. That is the wisest course. We know there are things that need to be done on tax relief. I mentioned the marriage tax penalty. We ought to eliminate the marriage tax penalty. We ought to eliminate that. We have enough money in our proposed tax cuts to take care of that problem and also to address other serious needs in the tax arena. But when I talk to my constituents, they say to me: Senator, pay down the debt. That is really the crying need in this economy. We know; we have seen the reports in the Washington Post, that individuals' taxes have gone down. That is the finding of the Congressional Budget Office. That is the finding of the Tax Foundation, that taxes on individuals have gone down because we have expanded the earned-income tax credit; we provide the $500 tax credit for children. As a result, we have provided tax relief, very meaningful tax relief. That is one reason people are not clamoring for the additional tax relief. What they are clamoring for is a continuation of the economic strategy that has made us the wonder of the world. It has created the longest economic expansion in our history. Whatever we do, we should not put that economic expansion at risk. And the best way to foster a continuation of this economic expansion is to continue the strategy of paying down debt. Might I inquire how much time I have remaining?

Mr. CONRAD. I am happy to yield to the Senator.

Mr. CONRAD. Mr. President, the amendment I am offering is simple. It reduces the proposed $150 billion tax cut in the Republican plan. It cuts it in half and dedicates the savings to debt reduction. The U.S. economy is stronger than it has ever been. We have now had the longest economic expansion in our history. The question before the Senate is: What is the best strategy for keeping this extraordinary economic expansion underway? That is the question before the Senate. Virtually every economist who came before the Budget Committee, virtually every economist who came before the Finance Committee on which I also serve, has said the highest priority ought to be the further paying down of the national debt. That is what my amendment addresses. I believe rather than some ambitious, new spending scheme or some ambitious, new tax scheme that our priority ought to be paying down the national debt. Why? Because that is what has triggered this enormous economic expansion, getting our fiscal policy in order. In 1993, we had a $290 billion deficit, a deficit as far as the eye could see. We were running up the national debt. In fact, we quadrupled the national debt in about a 10-year timeframe. That would put this economy in the tank. In 1993, when we passed a plan to bring down the deficit, a 5-year plan that brought down the deficit each and every year, that put us on a course to lower interest rates and of higher rates of economic growth, to get the crowding-out factor removed from the marketplace so the Federal Government wasn't in competition with the private sector for scarce resources. The result has been reduced interest rates. The result has been more money available for productive investment in this economy. The result has been the lowest unemployment in 30 years, the lowest rates of inflation in more than 30 years, and the longest economic expansion in our history. Those are the facts. The critical component, according to every economist that has come before us, is to continue that strategy, continue to pay down the debt, lift this debt burden off of the economy, pay off this publicly held debt by the year 2013 or before so that we have as big an economy as we can possibly grow before the baby boomers start to retire. That is the wisest course. It is not just the opinion of the Senator from North Dakota; that is also the opinion of the Chairman of the Federal Reserve, who says: Pay down the debt first. The best use of the surplus is to reduce red ink. Chairman Greenspan said on debt reduction: Saving the surpluses, if politically feasible, is, in my judgment, the most important fiscal measure we can take at this time to foster continued improvements in productivity. Listen to Mr. Greenspan on this question: . . . there are limited fiscal resources in this country and until we have strong evidence that there is a major structural increase in the surplus, that trying to commit it to various different programs or even tax cuts, I think, is unwise. The alternative budget we are offering on our side dedicates 82 percent of the projected surpluses to debt reduction. This is what we are proposing over 10 years; 82 percent of all of the surpluses dedicated to paying down the debt. We leave 14 percent for tax cuts and other high priority domestic needs such as prescription drug benefits. The vast majority of what we are proposing in our substitute is to pay down the debt. This includes every penny of the Social Security surplus, and it includes the biggest percentage of the non-Social Security surplus for paying down the debt. I know this is a conservative approach and some are surprised we are advocating it, but this is our position. We believe it is the best strategy for the economy. We believe it is the best strategy for the country, and it is the strategy we are strongly supporting. Our friends on the other side of the aisle primarily advocate tax cuts. Virtually all of the non-Social Security surplus in the plan on the other side of the aisle goes for tax cuts. Our alternative is to say, yes, there is room for tax cuts, but it ought not to be the first priority out of the non-Social Security surplus. The first priority ought to be further debt reduction. We dedicate 36 percent of the non- Social Security surplus in addition to 100 percent of the Social Security surplus. In addition, we advocate 36 percent of the non-Social Security surplus to debt reduction, the biggest percentage. The next biggest percentage is for tax cuts. Yes, tax cuts are called for with this prosperity. Yes, we ought to address the marriage penalty; we ought to solve it. Yes, we ought to deal with some of the other things in the Tax Code that are unfair. For example, I believe 39 years of depreciation for leasehold improvements makes no sense when the economic life of those improvements is 10 to 15 years. We ought to change that, too. We ought to change the estate tax. The current unified credit is out of date. We ought to update that. We ought to dramatically increase what we are doing in terms of relief for people with an estate tax problem. The top priority ought to be debt reduction. That is what we have made the top priority in our proposal. Mr. President, 36 percent of the non-Social Security surplus is for debt reduction; 29 percent for tax cuts; 23 percent for prescription drugs and other initiatives, and, of course, 11 percent for interest costs.