Kent Conrad

Mr. CONRAD

Mr. CONRAD. I thank the Chair. We have important matters left to resolve. How are tobacco farmers going to be treated? What are we going to do about the question of attorneys' fees. Obviously, none of us wants to see attorneys unjustly enriched by these tobacco settlements. In the underlying bill, the McCain bill, which came out of the Commerce Committee on a 19-1 vote, they provided for arbitration. Many of us think that is the best way to resolve this matter--to have parties get together and resolve, on an arbitration basis, differences over attorneys' fees so attorneys are not unjustly enriched by these settlements. Mr. President, most important is that I think we ought to stay on this bill until it is finished. We have spent 3 weeks of the Senate's time so far on this legislation. Let's finish the course. Let's get this bill resolved. I think that makes sense. I think it would be an enormous leadership failure if this Senate didn't take final action on this legislation. Some are saying the House isn't going to have a bill. Well, none of us can tell that until we act. We have taken a lead on this question in the U.S. Senate; we ought to complete our action and then let the House decide what it does. Let them be accountable for their action--or their failure to act. Mr. President, I hope we will stay on this bill until we finish this bill. That ought to be our message. The reason is very important. We have delay, and this delay is costing people's lives. As I indicated, we are in a circumstance in which, since the industry entered into a settlement with the attorneys general nearly 1 year ago, 1 million kids have taken up the habit. Fully a third of them are going to die prematurely--over 300,000 young people. Let me just close by saying the tobacco companies tell you in their paid advertising--they describe this bill in unfavorable terms. Let's remember their background. They have misrepresented this issue repeatedly. I thank the Chair. Mr. DORGAN addressed the Chair.

Mr. CONRAD. Mr. President, I ask unanimous consent for 2 additional minutes.

Mr. CONRAD. How much time is left on our side?

Mr. CONRAD. Mr. President, we started debate on this bill weeks and weeks ago here on the floor of the Senate. We started action on this bill months ago in the Commerce Committee. I think we may have forgotten that we started real action nearly a year ago. It was on June 20 of last year that there was an agreement announced between the attorneys general and the tobacco industry. That was the basis that led Congress to act. We are talking 1 year. On June 20 of 1997, the attorneys general entered into an agreement with the tobacco industry. Here we are, June 16 of 1998, and we still haven't acted. Now some are saying we shouldn't act. The majority leader said over the weekend that he thought this bill was dead. Well, he has said that about every week. About every week there is an announcement by the majority leader, the bill is dead. He said that when it was still in the Commerce Committee, yet it came out of the Commerce Committee on a 19-1 vote. Mr. President, I remind my colleagues that this has been going on for a year because that has special importance. We are talking about 3,000 young people who take up the habit every day--3,000. Over a year, that is over a million kids who have taken up the habit of smoking and the use of tobacco products. And we know that one-third of them will die prematurely as a result. That is, over 300,000 children are going to die prematurely because they have taken up the habit in the one year since the settlement between the attorneys general of the various States and the tobacco industry. They entered into an agreement to fundamentally transform policy toward tobacco in this country. And now the question is, Is Congress going to act, or are we going to have an enormous leadership failure here in the U.S. Senate? That is the question. I don't think anybody wants to have that kind of failure on their hands. The fact is, it is very interesting that when people have a chance to vote, things are much different than when they are just talking with the newspapers. We have seen that over and over and over. In the Budget Committee, in the Finance Committee, when people had a chance to vote, they did vote, and the outcome was often much different than what was predicted. Let's look at the bill before us. We are talking about seeing the price increase $1.10 a pack over the next 5 years. Why is that important? Well, every single expert that has come and testified, every element of the public health community has said that a significant price increase is important in order to reduce youth smoking. That is not the only part of reducing youth smoking, but it is an important part. Second, we voted on look-back provisions. Look-back provisions are the penalties to be imposed on the industry for the failure to reduce youth smoking in line with the goals provided for in the legislation. We made a significant change here on the floor of the Senate. Before, most of the fee was going to be charged to the industry on an industry- wide basis. Some of us didn't think that made much sense, because what happens when you do that is you put the good in with the bad. Those companies that have accomplished the goal pay the industry penalty just as those companies who have failed to reach the goal. What sense does that make? That is not fair. Instead, we think most of the fee ought to be placed on the companies which are the ones that failed to meet the goal. They are the ones that ought to be held accountable, the ones that ought to pay, and so that change was made here on the floor. Third, we dealt with the question of liability. Out of the Commerce Committee, just as in the proposed settlement, there was special protection for this industry--protection never given any other industry in our history. The vast majority of us on the floor of the Senate said, no, that is not right; we should not be giving special protection to this industry. That is not appropriate. So that was changed. There have been other significant changes on the floor of the Senate. A third of the revenue will now go for tax relief. Some of it is designed to relieve the marriage penalty. In addition, there will be other tax relief as well. So about a third of the revenue now goes for tax relief. Many of us thought it was appropriate to have some of the money go toward tax relief in this package, and now fully a third of it does. In addition, there are provisions to deal with illegal drugs. That is a matter that is now included in the legislation. Not only are we dealing with tobacco, tobacco products, but also illegal drugs. There are very strong provisions which have now been included in this legislation that relate to that. There is also the question of FDA authority. FDA has been given the authority to regulate this drug as they regulate other drugs in our society. We still have several matters left to resolve. One is the whole question of agriculture, how tobacco farmers will be treated.

Mr. CONRAD

Mr. CONRAD. Mr. President, I thank my colleague, Senator McCain, for his remarks and putting some of this argument back in perspective. I want to address briefly the amendment of the Senator from Washington, Senator Gorton. I know there are other colleagues waiting to speak on this question. Mr. President, I understand the strong feeling that we want to limit lawyers' fees. I don't think there is a Member of this body that isn't concerned about seeing lawyers get windfall results for themselves as a result of this litigation. We have in the McCain legislation, the bill that came out of the Commerce Committee on a 19-to-1 vote, a strong bipartisan vote, a means of addressing that problem. What is in the bill is a provision for arbitration panels to determine what are the appropriate legal fees. I think probably that is the best answer, as imperfect as it is. The problem with the our taking action is, What action do you take? I think Senator Gorton has probably the best chance of prevailing. But it has problems. I think his is probably the most thoughtful provision before us. But I say to my colleague from Washington, I think there are real problems with what he has proposed. Under Senator Gorton's proposal, fees would be limited to $4,000 an hour for actions filed before 12-31 of 1994. The problem is that may be way too much. It is even conceivable in certain circumstances that it is too little, but I think it is more likely that it is too much. He also provides $2,000 an hour for actions filed between 12-31 1994 and 4-1 1997. I tell you, my own view is that may well be too much. It is hard to say because it is an arbitrary cap. That is the problem with what the Senator from Washington is offering. In many cases, it may be way too much. He says it establishes a cap, not a floor. But I think we all understand what happens in these cases. Very often what is intended is a cap which then becomes a floor. What we may find out is that people being compensated at $4,000 an hour do not deserve a fraction of that. Or we may find that we have attorneys who file actions between 12-31 1994 and 4-1 1997 who are capped at $2,000 an hour. That may be far in excess of what they should receive. He also provides for $1,000 an hour for actions filed between 4-1 1979, and 6-15 of 1998; $1,000 an hour. Again, because this is arbitrary, it can wind up being too much in one case when it goes down to $500 for actions filed after 6-15 of 1998. Those would be new cases. That may be appropriate for those who have just gone out and made a copy of the previous actions filed by others, but if it is a new action, taking on the tobacco industry on a new theory where a law firm has to put up substantial resources of its own to bring an action, $500 may not be enough. The point is we don't know. Sitting here in this Chamber, how do we make a decision about what is an appropriate legal fee for literally thousands of cases across this country. I don't think it is possible for us to make this judgment. That is why some of us believe an arbitration panel is the appropriate resolution. Let's leave it up to the parties at issue. They each name somebody on their behalf, and those two name a third, and they reach a conclusion on what the appropriate fees are in a particular case. But to have us sit in Washington and try to decide what a contract ought to be in the State of Minnesota is really pretty far-fetched. We often say we are engaged in too much micromanagement from here in Washington. In fact, our friends on the other side of the aisle say that frequently, and frequently they are right. If there was ever a case of micromanagement, this is it. We are deciding what legal fees should be in the State of Washington, the State of Minnesota, the State of North Dakota. I don't think so. I tell you what an appropriate legal fee in North Dakota is and what an appropriate legal fee in New York is are probably not the same. For us just to put in an arbitrary amount that applies across the country is meddling at a level that I think is counterproductive. Now, we have heard, gee, some of these cases that are settled are going to lead to a windfall for the attorneys at issue. I tell you, I am very concerned about that. That is why I have supported arbitration, because where there is a difference between those who hired the lawyers and those who have been hired, there ought to be a way of resolving it so lawyers do not enjoy windfall returns. We have heard a lot of discussion about Florida. There has been the suggestion that law firms down there are going to get $2 billion. I tell you, that is outrageous, absolutely outrageous --$2 billion for a case in Florida. But I am not the only one who thinks it is outrageous. The State court in Florida thinks it is outrageous. In fact, they have said it is unconscionable in the State of Florida, and they have not approved it. So why are we substituting our judgment for the judgment of courts in the individual States and the judgment of the attorneys general in the various States who are the ones who have hired lawyers on a contingency basis? Because that is why we have the problem. We have the problem because individual attorneys general did not, by themselves, have the resources to go take on the tobacco industry. They did not have the resources to do that. We all understand, before this series of cases, the tobacco industry had never lost a case and they had the best legal talent in the country. By the way, as I understand it, the proposal of the Senator from Washington only applies to plaintiffs' attorneys. It does not apply to the tobacco industry's attorneys. So you have kind of an uneven fight here: The tobacco industry has no limitation, and the plaintiffs' lawyers, those who sue on behalf of the victims, are capped. And the caps that apply under the amendment of the Senator from Washington may be way too much. In fact, I think in virtually every case $4,000 an hour is way too much; $2,000 an hour for a different set of classes based on the time that they were filed may be way too much; $500 an hour for new cases may be too little if the law firm has to put up substantial resources of its own in order to bring the action and successfully take on the multibillion-dollar tobacco industry, especially given the tobacco industry's rate of success. Mr. President, in the task force that I headed for our side, the conclusion we came to as the appropriate resolution is not to have us try to determine appropriate legal fees. The Senate of the United States is not equipped, frankly, to reach into the facts, the different fact patterns of hundreds of different cases, even thousands of different cases across this country, and determine what are the appropriate legal fees. I think that is a profound mistake, and it sets a precedent. Are we going to start to determine the legal fees in cases that involve the automobile industry? Are we going to start to get involved in what the legal fees should be in the medical industry? Boy, I tell you, I do not think that is a road we want to go down, because I do not think this body is equipped to determine the legal fees. I think we may make very serious mistakes, and I can easily see under the amendment offered by the Senator from Washington that we could wind up with a scheme in which lawyers were compensated far more than they should be. Now, if we look at what has happened around the country, I think we will see that, in fact, the individual States are responding to these challenges. We are seeing in State after State that they are not accepting these outrageous contingency agreements that were entered into. They are not accepting 25 percent contingency agreements. In State after State they have changed what was proposed. In Minnesota, outside counsel agreed to accept 7.5 percent instead of the 25 percent fee as called for in the original contract. In Mississippi, both the State and their counsel have agreed to submit a decision on fees and expenses to an arbitration panel. In both Texas and Florida, where there is a dispute over fees, the attorneys' fees and expenses will be decided either through agreement, arbitration, or court order. In each case, mechanisms are now in place to determine the amount of the attorneys' fees. In Texas, a State court ruled that a 15 percent contingency fee called for in the contract between the State attorney general and the attorneys was reasonable but refused to award a specific dollar amount. In that State, the Governor has now petitioned the court to reconsider its decision and has asked for an evidentiary hearing. The decision is not expected until later this year. In Florida, as I indicated, the State court rejected as unconscionable the fee request of the attorneys. Well, good for the court in Florida; they should have rejected it as unconscionable. But that is where the decision ought to be made. It should not be made here in this Chamber where we are not privy to the facts in each of these cases and not in the position to determine what are the appropriate legal fees. Let me say further that the Gorton amendment would interfere in private contracts. That is a very serious matter. Where a State attorney general has entered into an agreement with an outside law firm, I think it is highly questionable for the Senate to reach behind that contract and say we know better, we know what the appropriate legal fees should be, and we divide it on this arbitrary basis as is called for in the Gorton amendment. I do not think I have ever heard our colleagues on the other side of the aisle call for interference in private contracts. I do not think that is a precedent that stands much scrutiny. I am going to have more to say about this amendment as we go forward. I would say that Senator Gorton, I think, has done the most serious job of trying to address this vexing question, to try to prevent windfalls to attorneys, but I am afraid it fails at least the test that I would apply for something that can meet the very different standards one sees all across the country in the literally thousands of different cases where legal fees apply. I yield the floor.

Mr. CONRAD

Mr. CONRAD. In the Senator's previous amendment, didn't the Senator have a cap of $1,000 an hour?

Mr. CONRAD. How can this Senator justify supporting an amendment now that goes to $4,000 an hour?

Mr. CONRAD. Could I ask the Senator a further question?

Mr. CONRAD. Is it not the case in the Texas matter that there has not been a dollar paid and there is no final resolution of that matter, that that matter is on appeal, and the Governor has interceded in that case?

Mr. CONRAD. One final question I ask of the Senator. Isn't the Senator concerned, as I am, that the $4,000-per-hour fee cap that is supposed to be a cap, supposed to be a ceiling, could well turn into a floor, and the fact is that we will see unconscionable attorneys' fees under this amendment? The Senator viewed $1,000 an hour as a limit and now this has $4,000 an hour as a limit. Isn't it possible that we will see absolutely unconscionable attorneys' fees out of an amendment like this?

Mr. CONRAD. No; the Senator would not agree with that, because this is the exact criterion that is included in the bill with respect to reforming the arbitration panel decisions--the exact same criterion. I know what is going to happen. The courts out there are going to see that the U.S. Senate says that it is appropriate to bill $4,000 an hour if your action was filed before 12-31-94. That is what is intended--is the ceiling is going to become a floor. And we are going to see case after case where the attorneys are unjustly enriched at $4,000 an hour. That is exactly what is wrong with this kind of an amendment. It is arbitrary, it is capricious, it sets a limit that allows for unjust enrichment, and it will have the stamp of endorsement of the U.S. Senate. That is a profound mistake. We shouldn't be in the business of deciding what the legal fees are in any case. That is not our business. That is overreach. That is the kind of micromanagement that people on the other side of the aisle have warned us against. It is the kind of thing that people resent, because they know we can't possibly know the factual matter in each and every case that is before a court in every jurisdiction in this country. For us to substitute our judgment for State judges' determinations of what are the appropriate legal fees in a case is a profound mistake. We shouldn't do it. I go on to point out in the amendment that the Senator from Washington just changed his amendment. The change he made is very interesting. He just sent a modification to the desk that says, upon petition by any interested party, the attorneys' fees shall be determined by the last court in which the action was pending. Those words don't seem to really mean much. But do you know, they mean a lot. They mean a lot. What they mean is that in the four cases that have already been resolved where the tobacco industry has agreed to pay the attorneys, that now they would be able to come in the back door and challenge the fees that they already agreed to. That is what this language could do. This little modification was just sent so quietly to the desk and received no explanation. ``Any interested party.'' That means Philip Morris might challenge the attorneys' fees of the attorneys that brought the case against Philip Morris. That is a pretty good deal. That is exactly the kind of thing we shouldn't be doing. That is not the kind of thing we should be allowing. That isn't the kind of thing that should be permitted here on the floor of the U.S. Senate. Let me say to my colleagues who are well intended on the other side, to put in a stamp of approval by the U.S. Senate that $4,000 an hour is an appropriate legal fee is just a profound mistake. We embarrass this Chamber, we embarrass this Congress, by putting our stamp of approval and say $4,000 an hour is OK. I don't believe the Senator from Alabama believes $4,000--I mean, I think it is preposterous, and yet we are about to vote seriously on an amendment that says $4,000 an hour is OK. I don't think it is OK. I don't think it should be approved. Mr. DURBIN addressed the Chair.

Mr. CONRAD. Mr. President, I thank the Senator from Illinois for his really superb presentation. He makes many important points about what this amendment is about. I just want to direct my final remarks to those who may think, as I do, that some lawyers are in line for unjust enrichment. I tell you it makes my blood boil to hear lawyers in Texas may get $2 billion. That is outrageous. That is unconscionable. I do not believe it is going to happen. That matter is on appeal. In Florida, when the lawyers there submitted bills like that, the court said it was unconscionable and told them to forget it. That is what every State court ought to do when presented with unconscionable claims by lawyers in these cases. I have to say to my colleagues who are thinking about voting for this amendment, you are going to have to be able to go back home and justify the Senate of the United States saying $4,000 an hour is OK. I do not believe it is. I do not believe you can justify going back home and saying, yes, I voted for an amendment that would provide $4,000 an hour for any case filed before 12-31 of 1994. I do not think people in my State would think the Senate ought to say, well, $4,000 an hour is OK for every case filed before 12-31 of 1994. Boy, I tell you, the best lawyers in my State bill about $150 an hour. And now we would be saying, well, in a tobacco case, if you just happened to file before this magical date of 12-31-94, you get $4,000 an hour. And the Senate has said that is OK. Boy, I tell you, I think that would be a profound mistake. Let me just say the Senator from Illinois is also correct; there are circumstances where some of the limits are not enough. The $500 an hour which is provided for in this amendment for cases filed after 6-15 of 1998 may be too little. If we discover, going through the documents, that there is some new legal theory to take on the tobacco industry but we say to firms across America you are limited to $500 an hour when you do not have any idea whether you are going to win or not and you may have to put millions of dollars into making the case and then the Senate, in its wisdom, says you are limited to $500 an hour, that is probably too little. What law firm is going to take the case? And then, as the Senator from Illinois has pointed out, interestingly enough, this amendment applies to one set of lawyers, the lawyers for the people who are hurt by these products. The lawyers for the families of somebody who has contracted cancer or has lung disease or has heart disease, they are limited but the tobacco industry lawyers are not. And the bizarre thing is the limits that are put on here may well be far too much. I really cannot see justifying $4,000 an hour. I don't know how that gets justified. And $2,000 an hour if you filed between 12-31- 94 and 4-1-97; $1,000 an hour for actions filed before 4-1-97 and 6-15- 98, those are pretty fancy numbers where I come from. So I just think this amendment is a mistake and ought to be rejected by our colleagues. I thank the Chair and yield the floor.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise today to express my support for the amendment of the Senator from Rhode Island, Mr. Reed. The amendment of the Senator from Rhode Island is an important amendment. Senator Reed has been a very important member of the task force that I chaired on the Democratic side on the tobacco issue. He has been a superb contributor to the work of the task force. In fact, he traveled to North Dakota to participate in a hearing on the tobacco issue with me. I went to Rhode Island, and we held a very informative hearing at Brown University in his State. No one has played a more constructive role than the Senator from Rhode Island, Mr. Reed. He is absolutely dedicated to the cause of trying to craft responsible national tobacco policy. As part of that effort, Senator Reed has brought to us an amendment. I believe it is an important amendment. It says very simply that the tobacco companies will be denied tax deductibility for advertising if, and only if, a tobacco manufacturer violates the Food and Drug Administration's advertising restrictions. I am a cosponsor of this amendment. I believe it is an amendment that ought to pass 100 to nothing. There is absolutely no reason why every Member of this Chamber should not support the Reed amendment. We all know that the tobacco industry has a history of marketing to children. After we received through the various trials the documents that were previously secret and beyond our observation, we now know beyond question that this industry has targeted children, sometimes as young as 12 years old. We have seen document after document from the industry itself that demonstrate the truth of those statements. The advertising restrictions included in the FDA rule are not extraordinary. These restrictions are constitutional. They are carefully targeted to prevent the tobacco industry from advertising to kids. In every State of the Union it is illegal to sell tobacco products to children under the age of 18--in every State in this Nation. It is illegal to market to kids under the age of 18. In every State of the Nation, the tobacco industry should be stopped from advertising to children under the age of 18. These advertising restrictions are sensible and reasonable, and again, fully constitutional. In fact, the tobacco industry found them reasonable enough to agree to them in the proposed settlement which they reached with the State attorneys general. The tobacco industry actually agreed to some restrictions that went beyond those provided for in the FDA rules. The FDA determined that in order to reduce youth smoking, the following restrictions to advertising should be enforced: No. 1, no outdoor advertising within 1,000 feet of a public school or playground. We know that outdoor advertising has an impact. Billboards placed close to places where kids spend a great deal of time can be very influential. The tobacco industry is aware of the power of the billboard. According to the industry's own marketing materials: Outdoors is right up there, day and night, lurking, waiting for another ambush. Those are the tobacco industry's own words. The FDA rules also limit advertising in publications with a significant youth readership to a black-on-white, text-only format. They also limit advertising in an audio format to words with no music or sound effects. They also limit advertising in a video format to static, black-on-white text. They also prohibit the marketing, licensing, distribution or sale of all nontobacco promotional items such as T-shirts and caps. These restrictions do pass constitutional muster. They were designed to pass constitutional muster. These restrictions are aimed at ads that target kids. They do not attempt to ban legitimate commercial speech. Mr. President, that is why they pass constitutional muster. Senator Reed's amendment is intended to penalize the tobacco manufacturer if it fails to limit its advertising and marketing to those who are legally able to buy the product. We know from the thousands and thousands of internal industry documents that the tobacco companies purposely and aggressively sought a youth market share. There can be no question about it. How many times have we heard on the floor the words ``youth replacement smoker''? Because the industry has to find someplace to get those to fill the shoes of the 425,000 smokers who die every year from tobacco-related illness. Where do they recruit them? They recruit them from our youth. Maybe we could put up those charts that speak to these questions. These are not my words. These are not the words of the public health advocates of this bill. These are the words of the industry itself. They have said to us they don't market to children. But in a 1978 memo from a Lorillard executive, they said, ``The base of our business are high school students.'' ``The base of our business are high school student.'' What could be more clear? Again, they have said they don't market to children, but if we look at their own documents, in this case a 1976 R.J. Reynolds research department forecast: Evidence is now available to indicate that the 14 to 18 year old age group is an increasing segment of the smoking population. RJR must soon establish a successful new brand in this market if our position in the industry is to be maintained over the long term. These are not my words. These are the industry's own documents, Again, the claim that they don't market to children and another document from the industry, a 1975 memo from a Philip Morris researcher: Marlboro's phenomenal growth rate in the past has been attributable in large part to our high market penetration among young smokers . . . 15 to 19 years old . . . [it goes on to say] my own data . . . shows even higher Marlboro market penetration among 15 to 17 year olds. Can there be any question that they targeted kids? Can there be any serious question when their own documents reveal that is precisely what they have done? Finally from a Brown & Williamson document. The studies reported on youngsters' motivation for starting, their brand preferences, et cetera, as well as the starting behavior of children as young as 5 years old . . . the studies examined . . . young smokers' attitudes towards addiction, and contained multiple references to how very young smokers at first believe they cannot become addicted, only to later discover, to their regret, that they are. These are the industry's documents and they reveal that they have targeted kids. This industry has spent more than $5 billion a year on advertising and marketing each year. The industry says this effort is aimed at getting adult smokers to switch. But their own documents reveal that these ads are also aimed at building youth market share. They repeatedly talk about the need to build the youth market, and they know that smokers are very loyal to the first brand they smoke. Few adults switch brands as a result of tobacco advertising. The reality is that the toys and the slogans and the marketing and the ads are targeted at kids. The campaign by the tobacco industry against our youth must stop. This amendment, the amendment of the Senator from Rhode Island, Senator Reed, I think, would help. It would be another tool in the tool box to help us achieve the goals of protecting public health and reducing youth smoking. Mr. President, I call on our colleagues to support the Reed amendment when we have a chance to vote on it next week. I thank the Chair and yield the floor. Mr. President, I suggest the absence of a quorum.

Mr. CONRAD

Mr. CONRAD. Mr. President, I associate myself with the remarks of the Senator from Washington. The reality is, the Senator from Texas has said in this bill it provides for $92,000 an hour to counsel. That is not true. You cannot find that on any page of this legislation. It is just not accurate. It is a fiction. It is made up out of whole cloth. The fact is, what is provided for is, where there is a disagreement between the parties, that an arbitration panel determine what are the appropriate fees based on a set of criteria that includes the level of effort that needed to be expended, the quality of the legal counsel's work, the amount of the investment that they have made. Frankly, $1,000 an hour is too much if somebody just went and copied the case from somewhere else and then filed it. But it is much too little in the case of those who invested millions of dollars in court preparation of their own resources without knowing whether they would be victorious or not. In that case, it is much too little. So the problem we have with this amendment is it is one-size-fits- all. That is why we adopted an arbitration approach that would allow those who have a difference to have it worked out so there would be adequate compensation, but so there would not be the kind of ripoff that is, indeed, potential without what is provided for in the underlying McCain bill. Several Senators addressed the Chair.

Mr. CONRAD

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

Mr. CONRAD. Mr. President, while we are waiting, I thought I would just go through what I call the top 10 tobacco ``tall tales'' that we have heard from the tobacco industry during this debate. Tall tale No. 1 was that tobacco has no ill-health effects. Remember that? They came up to the Capitol, and they put up their hands, and they swore under oath that these products did not cause ill-health effects. But then we got the documents. We got them because of court action. We got access to the documents, and we found out, in the industry's own words, what the truth is. Here is the truth on that claim that tobacco has no ill-health effects: Boy! Wouldn't it be wonderful if our company was first to produce a cancer-free cigarette. What we could do to the competition. This is from a mid-1950s Hill & Knowlton memo quoting an unnamed tobacco company research director. That is tall tale No. 1. Tall tale No. 2 is, again, tobacco has no ill-health effects. Again, we have an industry document that reveals the falsity of that claim. This is from a 1978 Brown & Williamson document that says: ``Very few customers are aware of the effects of nicotine, i.e., its addictive nature and that nicotine is a poison.'' Again, that is not from the public health community. That is from the tobacco industry's own documents. Tall tale No. 3: Nicotine is not addictive. The truth, from a 1972 research planning memo by RJR Tobacco: ``Happily for the tobacco industry, nicotine is both habituating and unique in its variety of physiological actions.'' This industry, I tell you, these guys come up here, they don't come with a lot of credibility because they have told a lot of tall tales. Tall tale No. 4, again, the claim that nicotine is not addictive. This is from a 1992 memo from the director of portfolio management for Philip Morris' domestic tobacco business: ``Different people smoke cigarettes for different reasons. But, the primary reason is to deliver nicotine into their bodies . . . similar organic chemicals include nicotine, quinine, cocaine, atropine and morphine.'' Now, again, this is the industry--their documents--revealing what they know and what they think of their own products. They say it is not addictive and yet they say it is the same as cocaine, the same as morphine, the same as atropine. Tall tale No. 5: The tobacco companies did not manipulate nicotine levels. The truth, again, from an industry document, a 1991 RJR report: ``We are basically in the nicotine business . . . effective control of nicotine in our products should equate to a significant product performance and cost advantage.'' Tall tale No. 6: Tobacco companies did not manipulate nicotine levels. This is from a 1984 British-American Tobacco memo: ``Irrespective of the ethics involved,''--that is an interesting statement-- ``Irrespective of the ethics involved, we should develop alternative designs which will allow the smoker to obtain significant enhanced deliveries [of nicotine] should he so wish.'' They have been manipulating nicotine levels for a long time. Tall tale No. 7: Tobacco companies don't market to children. This is from a 1978 memo from a Lorillard Tobacco executive: ``The base of our business are high school students.'' They didn't market to kids? They didn't target kids? Here you have a major tobacco company executive saying the major business is high school kids, the same kids tobacco companies don't market to--children. This is from a 1976 RJR research department forecast: ``Evidence is now available to indicate that the 14- to 18-year-old age group is an increasing segment of the smoking population. RJR must soon establish a successful new brand in this market if our position in the industry is to be maintained over the long term.'' Well, I don't know how it can be more clear. Tall tale No. 9: Tobacco companies don't market to children. This is from a 1975 report from a Philip Morris researcher: ``Marlboro's phenomenal growth rate in the past has been attributable in large part to our high market penetration among young smokers . . . 15 to 19 years old . . . my own data . . . shows an even higher Marlboro market penetration among 15-17-year-olds.'' You wonder what they thought when they went home at night. Tall tale number 10, again, the claim tobacco companies don't market to children. This is from ``apparently problematic research,'' a Brown & Williamson document: ``The studies reported on youngsters' motivation for starting, their brand preferences, as well as the starting behavior of children as young as 5 years old . . . the studies examined . . . young smokers' attitudes toward addiction and contain multiple references to how very young smokers at first believe they cannot become addicted, only to later discover, to their regret, that they are.'' That kind of sums it up. That is the issue before the Senate. Are we here to protect kids or are we here to protect the bottom line of the tobacco industry? The Wall Street analysts that came before my task force indicated that, indeed, if this legislation were passed, it would reduce the profits of the industry, but not dramatically. In fact, the industry would still enjoy very, very high profit levels. Remember, this industry has a profit margin that is three times the profit margin of most companies that are in packaged good industries in America. They have a profit margin of 30 percent. Other package goods average a profit margin of 10 percent. They would still enjoy dramatic profits, even if we passed this legislation according to the analysis of the people who should know best, the Wall Street analysts that report on this industry. I yield the floor.

Mr. CONRAD. Mr. President, I thank my colleague from North Dakota for his strong advocacy, because this is an important issue. It is an issue that is going to affect the lives of the American people for years to come. We all know the statistics--over 400,000 people a year die in this country from tobacco-related illness. As we have held hearings all across the country, we have heard from the people affected by those deaths very moving testimony. I still remember very clearly in Newark, NJ, hearing from a coach, Pierce Frauenheim, a big, tough, strong guy who is a football coach and assistant principal. When he testified, you could barely hear him talk. He described how after a lifetime of smoking he was diagnosed with cancer of the larynx, and he described to us the terror that he felt when the doctor told him that his life was threatened and that the only hope for him was a laryngectomy in which his larynx would be taken out. He went through that procedure, and thank God it did save his life. But he is left now as somebody who can barely talk. You can barely hear him. He told us of how much he hoped his message would influence others and that perhaps by his experience and his suffering others could avoid the fate that he had experienced. How often we heard that story. Most recently, when the task force met we heard from a former Winston man. He would go around to parties and events, representing Winston. Now he has lung cancer. He described to us what it is like to be under a death threat. And we heard from a woman who was a model for Lucky Strike, who has also had a laryngectomy, and also had other forms of cancer. She was required by the terms of her contract to smoke. She took up the habit as a very young woman and now describes the pain and suffering she has experienced. So many of these witnesses have actually broken down and cried at our hearings, moved by the emotion of what they have experienced. I wish my colleagues could have been there through every hour of what we heard, because I don't think there is a Member of this Chamber who could have remained unmoved. But we know the history of this industry. We had a representative of the industry come and see me and tell me we are unfairly vilifying this industry. I said to him, frankly, this industry has done a great job of vilifying itself. They came before Congress. They said under oath their products didn't cause these diseases. They said their products were not addictive. They said they had not targeted kids. They said they had not manipulated nicotine levels to foster addiction. We now know each and every one of those statements was false. We do not know it by somebody else's words, we know it by the industry's own words, because we have now seen the documents. I have read hundreds of pages of these documents that reveal how this industry testified falsely, knowing full well what they were saying was untrue. I was kind of struck by this cartoon by Herblock that was just in the Washington Post on May 27. The headline is, ``Have I Ever Lied To You?'' It is a picture of the tobacco companies. This man in the fancy suit has a button on saying ``tobacco companies.'' He is a representative of the tobacco companies. Here is a person who is reading a tobacco industry ad and watching a tobacco message on taxes on television, all with the headline, ``Have I Ever Lied To You?'' We know the tobacco industry has lied to us. They have done it repeatedly. I regret to say they are doing it in this debate. I would like to focus now on the question that is before us, the amendment of the Senator from Texas, because during the budget debate the Republicans on the Budget Committee repeatedly said: The tobacco funds should go to Medicare and should not be used as a piggy bank for unrelated spending or tax priorities. That was the position they took in the Budget Committee. The Senator from Texas serves on the Budget Committee. Now he is sponsoring an amendment that uses the money substantially in a way that is at variance from what he said in the Budget Committee. He said, and I quote: The fundamental issue is going to be that we want to dedicate the tobacco settlement to saving Medicare, and the minority wants to spend the money on a myriad of programs, many of which have absolutely nothing to do with the tobacco settlement. That is what the Senator from Texas said in the Budget Committee. He said all of the money ought to go to Medicare. Now we look at his amendment--not a dime of the money goes to Medicare. My, what a change a few months has made. We in the Budget Committee debated this issue for an entire day, and over and over and over the Senator from Texas said: All of the money ought to go to save Medicare. Now he offered an amendment on the floor of the U.S. Senate and guess what? There is not one penny for Medicare. What happened? We were supposed to be using this money, he said in the Budget Committee, to save Medicare. Now all of a sudden Medicare gets nothing. Under the bill I introduced, Medicare got a chunk. We also gave a substantial chunk to the States because they are the ones that brought the suits that are before us. We also used the money for health research and for public health care campaigns--countertobacco advertising, smoking cessation, smoking prevention. Under the amendment of the Senator from Texas, not only is there no money left for Medicare, which he said all the money should go to just a few months ago, but you know what? There is no money left for public health programs--none--zero. This is a bill that is supposed to be protecting the public health. There is no money left for public health and there is no money for Medicare, which just a few months ago he said was the absolute priority. This chart shows the effect of the Gramm amendment which really does turn the tobacco bill into a piggy bank for unrelated matters that our colleagues on the other side of the aisle were decrying during the Budget Committee deliberations. Look what has happened here: 35 percent of the money, if we agree to the Gramm amendment, goes for an unrelated tax cut. We have the Coverdell amendment that takes 13 percent of the money, so now half the money is for matters that are unrelated to tobacco legislation--half the money. There is no money for Medicare. Research will get 13 percent of the money. Veterans will get 4 percent. Farmers will get 9.8 percent. The States, boy, they are going to be in for a big surprise. The States were going to get 40 percent of the money. They are the ones who brought the lawsuits. They were given 40 percent of the money because that is the amount of the money they got in the settlement with the tobacco industry. If we adopt the Gramm amendment, they are going to get 24 percent of the money. Tobacco control and public health gets zero. Medicare gets zero, which they argued in the Budget Committee hour after hour ought to get all the money and now gets no money. And public health gets no money-- nothing for smoking cessation, nothing for smoking prevention, nothing for countertobacco advertising. I thought this was a public health bill. I thought that is what this was about. Our friends on the other side said it was a bill to help save Medicare. That is when we were in the Budget Committee. Now they come up with nothing for Medicare, not a penny. What a difference a few months makes. The Gramm amendment, in conjunction with the Coverdell amendment, will spend tobacco money on programs that have nothing to do with the tobacco settlement. Frankly, I am in favor of using some of the funds for drug control. I am in favor of using some of the money to address the marriage penalty. But the way they have done it, there is nothing left for Medicare and there is nothing left for public health. I just don't think that makes sense. I don't think that can stand the light of day. I don't think that can stand scrutiny. I think our colleagues are going to have some explaining to do if these amendments are adopted. Every single public health expert has testified that if we are going to be serious about protecting the public health and reducing youth smoking, then we have to have a program that is comprehensive in nature, and part of that has to be smoking prevention programs, smoking cessation programs to help those who are addicted get off the products, and we also need countertobacco advertising to warn people of the dangers of using these products, to warn them of the cancer risks, to warn them of the risks to their heart, the risks of heart disease, the risks of emphysema and the other diseases which cost so many people in our country their lives. I can remember very well a young woman who came and testified at our hearing, again, in New Jersey, a young woman named Gina Seagrave. She told about her mother who took up smoking at a young age and died at a very young age from a smoking-related illness. This young woman broke down and cried. She described to us the devastating effect this had on her whole family, because losing their mother really hurt the entire family. It hurt it very badly. She described what they had been through since their mother had passed away. In every town and in every State I have gone to, to listen to witnesses, they have described to us the trauma that they have experienced because of the addiction and disease caused by the use of these products. I grew up in a household where my grandparents raised me. My grandfather was a smoker. It probably shortened his life. I think of all those families we have heard from who told us of what it meant to have a father taken, a mother lost, a brother who died because of the addiction and disease caused by these products. This is the only legal product in America, when used as intended by the manufacturer, that addicts and kills its customers. Those are pretty harsh words, but it is the truth, and it is the reason we have a challenge and an opportunity. The challenge is to overcome the power of this industry that wants nothing done. The opportunity is for us to act and to make a difference in the lives of the people we represent. The Senator from Texas talks a lot about this being a huge tax on low-income Americans. He doesn't tell the other side of the story. The other side of the story is that there is a huge tax already being placed on low-income Americans, and it is because of the use of these products. There is a massive shift that is going on in this country because of the costs of this industry. Mr. President, $130 billion a year is the consensus calculation on what this industry costs Americans--$60 billion in health care costs, $60 billion in lost productivity, $10 billion in other costs. Nobody gets hurt worse by those facts than low-income Americans. Low-income workers' payroll taxes are paying about $18 billion a year in Medicare costs. Our friends on the other side talked about that incessantly in the Budget Committee, that it is costing Medicare $18 billion a year and that all of the money ought to go to protect Medicare. That was their argument in the Budget Committee. Now they come out here on the floor and offer an amendment that gives zero for Medicare. How do they justify that? What caused this dramatic transformation? What caused this incredible change from being the defenders of Medicare to now not caring about Medicare at all? I don't know what happened. It is amazing what occurs in this body, the inconsistency. One month, Medicare is the priority; in fact, it is the only priority. The next month, it matters not at all. What a difference a few months makes. The fact is, smoking is a huge tax on low-income Americans. The average pack-a-day smoker will spend $25,000 on cigarettes over his or her lifetime. The average pack-a-day smoker is being affected in many ways. Not only are they paying $25,000 for cigarettes, but they are paying $20,000 in medical costs over their lifetime--$25,000 for the cigarettes, $20,000 for medical costs. That is $45,000 tobacco use is costing the average pack-a-day smoker. We talk about a heavy economic impact on low-income folks; that is the heavy impact. It dwarfs anything that is being done here to counteract it. Mr. President, the biggest tax cut we could give low-income Americans is to reduce that cost. The McCain bill will cut smoking by about one- third. That will produce a savings of $1.6 trillion over the next 25 years. That is the smart way of helping low-income Americans. When we look at the Gramm proposal with respect to the so-called marriage penalty, we see that he is not really just addressing the marriage penalty. In fact, a lot of folks are benefited in the Tax Code by being married. Maybe we can put that next chart up that shows what I am talking about. This is something we know with great certainty, because we can study married couples and we can see who would benefit by filing as single individuals, who gets helped and who gets hurt by filing as a married couple. What we find is, for adjusted gross incomes of under $20,000, the significant majority of people get a bonus by filing as a married couple. We see a very small group--those are in red--who are actually penalized. A little over 10 percent of couples with combined income under $20,000 have a penalty by being married. The significant majority of people, almost two-thirds, receive a bonus by filing as a married couple, those who have adjusted gross incomes of under $20,000. If we go to AGIs--adjusted gross incomes--of $20,000 to $50,000, over 50 percent benefit. They pay less filing as a married couple than they would pay filing separately. About 40 percent have a marriage penalty. From adjusted gross incomes of $50,000 to $100,000, more of those, as a percentage, are penalized. About 50 percent have a marriage penalty; about 40 percent have a marriage bonus. That is also true of those with adjusted gross incomes of over $100,000. About 50 percent have a penalty; about 40 percent have a bonus. Given this information, it is relatively easy to put together a remedy that delivers the relief directly to those who actually have a marriage penalty. That is what the Democratic proposal does. Unfortunately, this is not the approach of the Senator from Texas. He has opted instead to take a scattershot approach that benefits equally those who are helped and those who are hurt. The result is, those who are hurt get less help than they really deserve. That is why the Democratic alternative is superior for those who really have a marriage penalty. I believe that this is unfair. We ought to give those who actually experience the marriage penalty the help they really need to overcome it. It does not make sense to me to give the help to those who are benefited by being married in the same way that you help those who are being hurt. The result is, you do not give enough to those who are being hurt. That is not fair. I just do not know what sense it makes. The Senator from Texas has told us on the floor that the average family would save about $1,400 in taxes under his proposal. Let us look at an example. A couple earning $25,000 is in the 15 percent tax bracket. Under the Gramm proposal, this couple would get a $3,300 above-the-line deduction, but only when fully phased in. In actual tax savings, this couple would realize 15 percent of that deduction, or $495. That is a far cry from the $1,400 advertised on the floor of the Senate. A couple earning $50,000, in the 28 percent bracket, would get a savings of $924--again, a far cry from the $1,400 advertised here on the Senate floor. Bear in mind that those calculations are based on the $3,300 deduction being fully phased in. The $25,000 couple waiting to realize its $495 savings is going to have to wait until the year 2008, because that is when it is fully phased in. What they will get next year, under the Gramm plan, is not the $1,400 that has been advertised, but $125. That is what they are going to get next year, not $1,400; they are going to get $125. For the year 2002, that savings goes up to almost $150. Well, that is a whole lot less than $1,400. By 2007, the savings is up to $297. So millions of families, who think of themselves as average hard- working people, are going to be wondering where their $1,400 of savings are. The fact is, they are not going to see it, because it has been overstated here on the floor of the Senate what the savings actually will be. I am hard pressed to decide what is the worst feature of the amendment of the Senator from Texas: The reckless reductions it will require in public health programs or the downright stinginess of the remedy it purports to deliver to couples who actually incur a marriage penalty. If we are going to do something about the marriage penalty, we ought to focus the benefit on those who are being hurt. That would be dealing with the marriage penalty. But to spread it around to people who are helped and hurt by the marriage penalty denies those who are actually penalized from getting the help they deserve. Mr. President, I think what we have before us is an important choice. The Democratic alternative focuses its relief on those taxpayers who are actually being penalized. By contrast, the proposal offered by the Senator from Texas dilutes that relief to provide for couples paying a marriage penalty as well as those who are actually receiving a marriage bonus. You hear a lot of talk about the marriage penalty. We do not hear much talk about the marriage bonus. But the fact is, at many income levels many more are being benefited by the marriage bonus than are being affected by the marriage penalty. Because the Democratic alternative is targeted to low- and moderate-income couples, we can make their relief much greater. I think that makes sense for those who are actually experiencing a marriage penalty. In addition, we can save money to use to promote the public health. After all, that is what this bill is supposed to be about. I must say, I have viewed with some concern the developments on the floor over the last week, because now we have an amendment before us that, amazingly enough in a public health bill, provides no money for public health. And after the arguments of our friends on the other side of the aisle that were so strenuous in the Budget Committee--they said we had to take every dime of this money and use it for Medicare--now we are about to vote for an amendment that does not give one dime to Medicare. What a transformation. They have gone from 100 percent of the money going to protect Medicare to none of the money going for Medicare. While they are at it, there is not going to be a dime of money to protect public health, either, in a public health bill. Let us defeat the Gramm amendment and stay on course with a public health bill that addresses the real concerns and the real challenges facing the American people. I thank the Chair and yield the floor.

Mr. CONRAD

Mr. CONRAD. Mr. President, on behalf of the Democratic leader, I would like to close by sending this cloture motion to the desk.

Mr. CONRAD. I thank my colleague from Georgia for his indulgence and his patience. I yield the floor.

Mr. CONRAD. Mr. President, I am going to speak on a number of subjects this morning. I am going to talk about a Web site contest that I sponsored in North Dakota on this question of tobacco. I am going to talk about the marriage penalty debate that we have ongoing. Then I am going to file a cloture motion on behalf of the leader. First of all, I want to say to my colleague from Georgia that there are some of us who agree that dealing with drugs as part of this legislation makes some sense. We hope we are able to work together and see if we can't find a formula that works so it can be included here. We know there are others who do not think it is appropriate to include it here, and we respect their views. But some of us do believe it is appropriate to deal with the question of other drugs in this bill. Hopefully, we can find a way to be successful at the end of the day. There is no question that it is a serious problem, just as tobacco is a serious problem that imposes enormous health and financial costs on society. Illegal drug use is also creating enormous difficulties. When we are in Washington, my wife and I live eight blocks from the Capitol. From the steps of the Capitol, we can look right down the street that leads to the house we live in here in Washington. In 1991, my wife was abducted at gunpoint by a crack addict. I tell you, I will never forget the trauma it caused our family. It is an epidemic in many parts of our country. I am proud to say it is not an epidemic in North Dakota, but even there we have a problem. I think all of us who are serious about improving the lives of people we represent want to address this problem in this bill if we possibly can. So I thank the Senator from Georgia for the effort he has made. Mr. President, I sponsored a Web site contest for kids from my State on the question of tobacco use. I asked them to create electronic pages, or electronic posters, to help spread the word that tobacco use causes problems. We just had an outpouring of kids from around the State who entered the contest. One of the winners was Justin Grueneich of Ellendale, ND. His Web site said, ``Smoke Is No Joke.'' He is right. His Web site was packed with statistics and information. One of the things that impressed us was, we found there was more information there than we have heard on the Senate floor. He actually found facts that we haven't heard in the debate on the Senate floor. So Justin did a superb job. Another person who did excellent work was Anne Erickson, a senior at Cavalier High School. She was very creative. Her graphic design was great, and her messages were right on target. She wrote, ``To smoke or not to smoke, there is no question.'' She also posted that in addition to being unhealthy, smoking was also unattractive. As we know, the tobacco industry has tried to present smoking as cool and attractive and sophisticated. She wasn't buying it. So thank you, Anne, for seeing through those advertising gimmicks by the industry. Six fifth graders from Dakota School in Minot joined forces and created a Web site they called ``The Healthiest Web Site in North Dakota.'' Congratulations to Cierra Bails, Christina Leyrer, Mikey Perron, Jr., Nicole Rogers, Jessica Sarty, and Nicki Taylor for their excellent work. These fifth graders designed a colorful and informative Web page that included links to North Dakota facts and laws on tobacco. They did really a great job in reminding kids that buying tobacco is illegal and it is unhealthy. Now, younger students also entered the contest and published electronic posters on the Internet. I brought some of them here to the floor to share with my colleagues today. These are from third graders at North Hill Elementary School in Minot, ND. These are very young children, some as young as 7 years old. This one was done by Annie Kirchofner. It has a very simple message. Fruit is healthy, yes to grapes and apples, no to cigarettes. That is Annie Kirchofner. Devin Blowers doesn't think that smoking is cool. He says, ``Smoking is bad for you. Be cool. Don't smoke.'' And then he has down here this alligator figure. I guess this is his alternative to Joe Camel, and he has sunglasses on the top of his head here and he says ``Yuk'' to tobacco. That is pretty good for 7- and 8-year-old kids. They certainly have the message. Courtney Sluke, another third grader, produced this poster: ``Do not smoke.'' She is saying to her friend, ``Hey, you should not smoke.'' Again, a third grade student from Minot, ND. The next was Nicole Belgarde. She had a very interesting message. She says, ``Don't always take the advice off T.V.'' That is a pretty good message. She realizes. Here is the television and it is sending the message that ``Smoking is cool.'' And a fellow youngster is picking up that message saying ``Smoking is cool'' and she is countering it saying, ``No, smoking is not cool.'' Alex Deck gets right to the point. He says, ``Smoking is bad.'' He has the universal symbol here, the crossing out of the cigarette, and he has this little figure who is chanting ``Smoking is bad.'' Bryan Moe, he also was able to get right to the heart of it. He says, ``Don't smoke cause you might die.'' He put the victim right in his deathbed. He was on top of this. And he has X's for his eyes. Pretty tough message. If you smoke, you die. That poor victim is right on his deathbed. The first place winner--the first place winner is Amanda Roise. She shows that price does matter. I really like very much what she did. Now, remember, these are 7- or 8-year-old children who designed these. And these are electronic posters. It is just amazing; these kids posted them on the Internet after we had a call statewide: Send us your ideas. And really we got a tremendous response from all around the State. Her theme is, ``Don't waste your money on cigarettes.'' And here they have a price of $2.95 and a customer saying, ``I don't have enough.'' And here is a sign ``Don't do drug.'' She ran out of room so she put the ``S'' down here. ``Don't do drugs.'' And it is a store, obviously, and one of my favorites is she has excellent coloring, wonderful coloring. These are Cheerios boxes, and I like to eat my Cheerios every morning, so I thought this was especially good. Amanda Roise, the first place winner in our contest for electronic posters. Congratulations to all of the winners and all of the contestants. We are going to be having fun with this when we go back home presenting the awards to not only these very young children but older ones as well who participated in this web site contest. Gee, we have had so much fun with this. I can tell you, we had a number of distinguished judges make the determinations, and my thanks to them as well. Mr. President, I wanted to direct my main remarks this morning to the question of the marriage penalty because that has become an important part of the debate here as to what alternative we ought to pursue in addressing the marriage penalty. I thought it might be helpful to discuss for a moment what the marriage penalty is, who is really being hurt by it, and what we could do to address it in some rational way. Let's put up the first chart that shows the question of who really is facing the marriage penalty. This is according to the Congressional Budget Office, and it shows that 51 percent of noncorporate filers in this country are singles. So, of course, they don't face the marriage penalty. Of all the noncorporate filers, 51 percent are single people. They don't have a problem with the marriage penalty. And 3.5 percent are joint returns that are unaffected by the so-called marriage penalty, so we don't need to focus on them. Then when you look at the rest, what you find is that 24.5 percent, in fact, face the marriage penalty; that is, they pay more taxes because they are married than if they were filing separately. Interestingly enough, 21 percent get a bonus by being married; that is, they pay less by being married than they would pay if they filed separately as single individuals. I want to indicate that the Democratic alternative to the Gramm amendment focuses its relief on those taxpayers who are actually being penalized. That seems to make sense. Unfortunately, Senator Gramm's offering deals not only with those who are actually being penalized but he also gives relief to those who are getting a bonus. I am not quite sure what logic there is to that, but that is, in fact, what the amendment of the Senator from Texas would do, and as a result there are insufficient resources to help those who are really hurt by the marriage penalty. What sense that makes escapes this Senator. What we have done is instead of diluting the relief that would go to couples paying a marriage penalty, we focus on those who are paying the marriage penalty. It seems to me that tax fairness would require that married couples with equal incomes ought to be taxed equally. That seems to be a basic kind of concept, one that makes common sense. The Democratic alternative recognizes, as did the Congress in 1981 when it enacted the Kemp-Roth tax cuts, that to eliminate or reduce the marriage penalty, it is necessary to draw a distinction between one- earner and two-earner couples. As in 1981, the most efficient way to provide relief to couples who are incurring a marriage penalty is to allow a percentage of the earned income of the spouse with the lower earnings to be, in effect, free from income tax. Because the alternative offered by the Democrats is targeted on low- and moderate- income couples, we can make this two-earner deduction more generous than the one that was enacted in 1981. At that time, they provided the 10-percent deduction. Our alternative, when fully phased in, will provide a 20-percent deduction from the lower earner's income. This represents a much more potent assault on the marriage penalty than either the 1981 provision or the proposal offered by the Senator from Texas. Let me direct my attention for a moment to the proposal of the Senator from Texas. His proposal is a one-size-fits-all approach that scatters the modest relief that it provides to all joint filers, whether they actually incur a marriage penalty or not. He gives it to those who have a bonus from being married instead of focusing on those who actually are penalized by being married. As a result, he gives much less help to those who actually are paying a penalty. Again, the logic of his approach I do not think holds up under scrutiny. In fairness, there is marriage penalty relief in the Gramm proposal, but there is also a considerable tax cut for people who are already getting a marriage bonus. I just do not think that makes sense. The Senator from Texas would spend about half of the revenue he is all too willing to take away from health research and public health efforts in order to spend the money on tax relief for people who already enjoy an advantage under the system and, in the process, shortchanges the couples who are actually being penalized. The next chart demonstrates the weakness of the Gramm approach in comparison to what we are offering. This looks at the alternative that we are proposing on the Democratic side to cut the marriage tax penalty more than the Gramm proposal does for most families. This would be in 2002, when fully phased in. The first example is for a couple earning $35,000 a year, split, with one member of the couple getting $20,000 a year of income and the other, $15,000 a year of income. The Gramm amendment would provide a tax deduction of $1,650. Our proposal would provide a deduction of $3,000--far more generous, because it makes much more sense, in order to provide actual relief to those who are being penalized by the marriage penalty. The second alternative is a couple earning $50,000, evenly split between the two. Again, the Gramm amendment, the one-size-fits-all approach, gives a deduction of $1,650. That doesn't really make much sense because, again, he is conferring benefits not only on those who are being penalized by the marriage penalty but he is conferring benefits on those who are already getting a bonus, those who are being given favorable treatment. He treats them all alike. Those who are helped, those who are hurt--he treats them all alike. We say you ought to focus the resources you have on those who are hurt, so we say a $5,000 tax deduction for that couple who has $50,000 a year of income, evenly split between the two. By the way, this is precisely the situation in which the largest marriage penalties occur, yet Senator Gramm treats them the same way as the others. And, in addition, he is giving that same benefit to couples who are actually advantaged by being married because of their tax circumstances under the current Tax Code. Again, the Gramm approach just does not stand up under much scrutiny. I think if we analyze what has happened here, the fact is that we know who the taxpayers are who face a marriage penalty and we know that some penalties are harsher than others. Why should we opt for an approach that treats everybody the same, especially when it is substantially more expensive than a tailored approach that responds to the marriage penalty in a proportional way on a couple-by-couple basis? Senator Gramm calls our approach a figleaf. I think moderate-income families who are struggling on two incomes would welcome our figleaf when they compare it with the pine needle the Senator from Texas would provide. The fact is, ours is far more generous to those who are actually experiencing a marriage penalty. If we are going to call it marriage penalty relief, we ought to target it to those who are actually facing a marriage penalty. I think it is also important to say that when the Senator from Texas asserts that this bill which is moving through Congress is regressive and imposes a harsh penalty on those who are at the lowest end of the income continuum in this country, that there is another side to the story that he is not telling. The fact is, smoking is a huge tax on low-income Americans. An average pack-a-day smoker will spend more than $25,000 on cigarettes over his lifetime. An average pack-a-day smoker will have an additional $20,000 in medical costs over his or her lifetime. And the average low-income American, both smokers and nonsmokers, will pay his or her share of the $4.7 trillion in costs that smoking will impose on society over the next 25 years. That is something that has been left out completely by the discussion of the Senator from Texas. He talks a lot about tax increases, but he does not mention the hidden tax that is being imposed on members of this society every year: $130 billion that this industry is imposing in costs on society--$60 billion in health costs, $60 billion in lost productivity, and $10 billion in other costs. The fact is, low-income workers' payroll taxes are paying for about $18 billion a year in Medicare costs; low-income workers' income taxes are paying for about $12 billion a year in Medicaid costs. Those are hidden taxes that low-income people are paying each and every year because of the costs being imposed by the tobacco industry in this society. The fact is, low-income workers are also paying higher health insurance costs and getting lower wages as a result of the costs to our health care system of smoking. Again, let me stress the bottom line: $4.7 trillion in costs being imposed on this society over the next 25 years. The biggest tax cut that we could give low-income Americans is to reduce that cost. The McCain bill will cut smoking by about a third. That would produce savings of about $1.6 trillion for this society from the $4.7 trillion price tag imposed on us by the tobacco industry. That is the smart way of helping low-income Americans. Obviously, when we couple that with the proposal of the Democrats to focus on the marriage penalty, not to be giving the same treatment to those whether they are hurt or helped by the current tax system, we have a potent combination. Mr. President, I ask unanimous consent to have printed in the Record an analysis by the Congressional Budget Office describing what causes the marriage penalty and what causes the marriage bonus, so people might see how it comes about, the situations in which people are adversely affected by the marriage penalty, and how others benefit by being married and actually pay less taxes than they would pay if they were filing as singles.

Mr. CONRAD

Mr. CONRAD. Mr. President, I commend our colleague, the Senator from South Dakota, Senator Johnson, for drawing the attention of this body to the extraordinary tragedy in South Dakota. I think all of us were stunned to see those photos of this town, the town of Spencer, which was just wiped out. It really is stunning to see the complete devastation of that small town. I remember seeing the press reports and seeing the pictures and being reminded of the devastation we suffered in North Dakota last year with the 500-year flood, on top of the worst winter in history, the most powerful winter storm in 50 years, and in the middle of all that, the fires that destroyed much of downtown Grand Forks, ND. Our hearts go out to the people of South Dakota. Our hearts go out to the people who have suffered this extraordinary tragedy, to those who lost their lives, to those whose lives have been disrupted forever. And I think it is important for them to know that those in this body on both sides of the aisle will reach out and will help. We certainly saw that in our tragedy, and we will never forget the assistance of our colleagues. We want our friends in the South Dakota delegation to know that we are prepared to help and to reach out and to be of assistance, just as they were of help to us in our disaster. So we want to say to our colleague, Senator Johnson, when you are back home talking to the people who have suffered, they can count on this Federal Government to reach out and be there to help in their time of need, just as they were there to help others when they were afflicted. I also want to say to Senator Daschle, the other Senator from South Dakota, obviously, those of us in the Dakotas have a special bond. We will do everything we can to help as you go through this difficult process of rebuilding.

Mr. CONRAD

Mr. CONRAD. I have been in the Senate 12 years. I must say I don't recall a time when the majority leader said to the minority, ``We will not only decide what amendments are offered on our side, but we'll decide what amendments are offered on your side.'' Is this something the Senator from South Dakota has seen before?

Mr. CONRAD. Will the Senator yield for a question?

Mr. CONRAD. I ask the Senator from South Dakota, isn't it the case that the amendment of the Senator from Texas, Senator Gramm, doesn't just deal with the marriage penalty and give benefits to people who are hurt by the marriage penalty, his amendment goes way beyond that? It actually gives benefits to people who benefit by being married; isn't that the case?

Mr. CONRAD. Isn't it the case that the amendment that we would like to offer on our side would actually target those affected by the marriage penalty? So if the rhetoric from the other side is, if you want to deal which those hurt by the marriage penalty, we are prepared to do that. The amendment on the other side goes way beyond those hurt by the marriage penalty and actually gives benefits to people who are benefited by marriage in the Tax Code. So wouldn't it be the case that what we are prepared to offer will address directly the marriage penalty, and why then is the majority leader resistant to the very fair notion that if he says he endorses again going back and forth between Republicans and Democrats, that he would allow the Democrats to decide which amendment is offered on their side? Isn't that a fair result?