Kent Conrad

Mr. CONRAD

Mr. CONRAD. I actually read David Stockman's book, and he makes very clear that this was a policy they hoped somehow would all add up, and it did not. It was a miserable failure that dug a very deep hole for this country. Mr. President, the facts are very clear. This is the record. Nobody can dispute these numbers. This is what happened.

Mr. CONRAD

Mr. CONRAD. I thank Senator Chafee and Senator Breaux for this time. Mr. President, what can be more clear? We are headed for a cliff. Everyone who has examined this question tells us we are headed for a circumstance in which if we do not change course, we will either face an 82-percent tax rate in this country or a one-third cut in all benefits. That is where we are headed. Make no mistake. There are many things that must be done in order to prevent that calamity from occurring. We must generate savings out of the various entitlement programs. We must cut other spending. All of those things must be done. Mr. President, with respect to the CPI that was criticized on the floor last night, the technical correction in the Consumer Price Index that our group has advocated on a bipartisan basis, this is a question of a mistake--a mistake. The Consumer Price Index is being used to adjust for cost-of-living increases, not just with respect to entitlement programs but also with respect to the revenue base of this country. The economists have come to us and said, overwhelmingly, ``You are overcorrecting by using the Consumer Price Index. It is not a cost-of- living index.'' Even the people who draw it up at the Bureau of Labor Statistics will tell you it is not a cost-of-living index. Yet, that is what we are using it for. The economists tell us, because we are doing that, we are making a mistake. They say the mistake is between 0.7 and 2 percent a year, with the most likely overstatement being 1 percent. What does that mean? Over 10 years, that means we are spending $600 billion by mistake--by mistake. If we cannot correct a mistake around here to address preventing the calamity that is going to occur, what can we do? If this body and the other body and the President of the United States cannot correct mistakes to prevent a fiscal calamity, what can we do? Mr. President, I think the question has to be, if not now, when? If not us, who? If we cannot correct a mistake to prevent a financial calamity, then we fail in our responsibility.

Mr. CONRAD

Mr. CONRAD. I do not presume to know how they voted. But I assume, since it was a recommendation from President Reagan, they may have supported their President in that recommendation.

Mr. CONRAD. I thank the Chair. I understand the Senator from Nebraska has a question.

Mr. CONRAD. The Senator from Nebraska asks a very good question. I was thinking next of offering an amendment that would repeal all taxes. Let us repeal them all. Of course, I do not have to pay for such a proposal in the context of a sense-of-the-Senate resolution--just as some have not paid for their proposals. I must say, for sheer hypocrisy, the presentations I have heard this morning go beyond almost anything I have heard in a long time. I guess it is an indication that we are close to an election. On the one hand, our colleagues on the other side say they want to reduce the deficit and balance the budget. Yet they also propose reductions in income to the Federal Government without a replacement, which is the height of hypocrisy, and it is precisely what got this country into trouble in the 1980's. I would like to demonstrate this point with some charts. We can see what has happened with the deficit when our friends across the aisle were in charge.

Mr. CONRAD. I will be happy to yield.

Mr. CONRAD. I think that is correct, that that was part of the 1983 act, which imposed a tax on Social Security of retirees.

Mr. CONRAD. Two other witnesses on that day offered no estimate as to the overstatement. The evidence is clear and abundant. The Consumer Price Index overstates the cost of living. If that is true, and I believe it is, then we know that if it is a 1 percent overstatement, it is costing this country $600 billion over the next 10 years. We are on a course now we know cannot be sustained. Why would we not correct a mistake if we know it is occurring? It was earlier stated that correcting the CPI will not improve the solvency of the Social Security trust fund. That is not accurate. We have a memo from Mr. Ballantyne, the chief actuary, in which he says: The actuarial balance over the next 75 years as a percentage of taxable earnings is out of balance by a negative 2.17 percent. Just this change, a modest correction of one-half of 1 percent, will improve that actuarial balance by a factor of one-third. It does one-third of what we need to do if we are to secure the future solvency of the Social Security trust fund. Mr. President, I yield the floor and again commend my colleagues for what I think has been an outstanding effort. Mr. CHAFEE addressed the Chair.

Mr. CONRAD. Mr. President, I thank the Senator from Louisiana. I, too, want to join our group in thanking Senator Chafee and Senator Breaux for an outstanding effort to have the two sides, Republicans and Democrats, join together in an attempt to bring our fiscal house into order. Mr. President, I have been in the Senate now 9 years. As I look back, I have never been more proud to be part of a group than I am proud to be part of this one because I think for 5 months--maybe 6 months now-- we have worked together in good faith to do something important for our country. I just say that this is the way I think the Senate ought to operate. There were no raised voices. There were no press conferences. There was no political posturing. There were honest disagreements. There were serious debates. At the end of the day, we resolved matters, we reached agreement, we bridged differences, and we came to a conclusion. That conclusion is a plan that is before us now; a 7-year plan to bring unified balance to our budget. I stress unified balance to our budget and doing it in a way that is, I believe, a fair and responsible compromise between two sides that have some distances on many issues. Mr. President, again I want to salute Senator Chafee and Senator Breaux. They provided outstanding leadership in keeping this group together. But I also wanted to commend publicly each and every member of this group because they were willing to put partisan differences aside in order to accomplish a larger result. I commend the statement that was earlier made by my colleague from California, Senator Feinstein. I thought it was an outstanding statement of why this group hung together and why this group felt it was important to reach a result. I thank her not only for her outstanding statement here on the floor this evening but for the excellent work that she did in participating in the efforts of this 22- member group. I thank Senator Feinstein. I also want to thank the Senator in the chair, Senator Bennett, who I have come to appreciate greatly for the kind of background that he has as evidenced by the story he told tonight, an excellent story that applies to what was happening in the real world in business to what is happening to our country, because there is no question that we are headed for a cliff. Our colleague from Colorado this afternoon described it well. We are headed for a cliff in this country. There is absolutely no question about it. There is nobody in this Chamber who can stand up and dispute the fact that we are headed for a circumstance in which future generations either face a lifetime net tax rate of over 80 percent or a one-third cut in benefits. Maybe we are off by a couple of percentage points here or there. Maybe the entitlements commission, maybe the generational accounting effort are off by a few percentage points, but the unmistakable conclusion that any rational person can arrive at is that we are on a course that cannot be sustained. It must be changed. And the sooner we do it, the better off we are. I see my colleague from Washington, Senator Gorton, on the floor. He made a significant contribution to this group as well, willing to debate and discuss these differences and to resolve them in a way that did not satisfy either side completely. There is no question the Presiding Officer, Senator Bennett, would have preferred more Medicare reform--very clear to this Senator. The Senator from Utah was ready to go further in cuts in many of these categories. I think that is true of the Senator from Washington as well. On the other hand, I would have preferred no tax cut until we balance the budget--my own preference. But that was not the consensus of the group. Those in this group believed that achieving a result was more important than any one of us getting exactly what we wanted. That is exactly the example that needs to be set for this body and for the other one, because if we are going to act like grownups, we are not going to get precisely what we want. But for the good of the country, we desperately need to achieve the result of moving toward balance and getting our fiscal house in order. I feel very, very strongly about the need for us to come together to achieve this result. We all know where we are headed. We are headed for a calamity. I think very often about what I am going to say to my daughter, who is 18 years old, 10 years from now, 20 years from now when she asks me: ``Dad, what were you doing there in the Senate? You were on the Budget Committee. You were on the Finance Committee. Our country is in deep trouble now and all of this must have been known when you were there. Why didn't you act?'' Mr. President, all of us are going to face those questions at some time in the future if we continue to fail to act, because it is abundantly clear where we are headed. I am going to speak just momentarily on the question of the CPI. I know there are people who feel very strongly in opposition to that proposal. I feel very strongly in support of it because I think it is clear that measures like a technical correction in the CPI are absolutely essential if we are going to get our fiscal house in order. If we are going to preserve Social Security, if we are going to preserve an economic system in this country that is strong and competitive, we have no choice. We are headed for a circumstance in which Social Security is exhausted of funds in the year 2030. The first year in which expenditures exceed total income will be 2020. The first year in which expenditures exceed tax income will come in 2013. These are not my numbers. These are not the numbers of the centrist coalition. These are the numbers of Harry Ballantyne, the chief actuary for the Social Security system. He says we are headed for the cliff. It was said earlier in the Chamber that there have been no hearings on the question of CPI. That is not the case. We have had three hearings in the Senate Finance Committee--March 13 of 1995, April 6, and June 6 of 1995--three hearings on this question. And it is very interesting to recount what happened in those hearings. We had witness after witness who told us the CPI, the Consumer Price Index, is overstating the cost of living. Let me just put in perspective what that means. A 1 percent overstatement, a mistake by 1 percent, will cost this country $600 billion over 10 years--not $600 million, $600 billion. That is a mistake, a mistake that is going to cost this country $600 billion. Can we not correct a mistake in this Chamber? Now, let us look at the evidence. What did the experts who came and testified before the Senate Finance Committee tell us? And I might add, a bipartisan group--a bipartisan group. Chairman Greenspan, head of the Federal Reserve, came in in the first hearing, and he said the overstatement is from 0.5 to 1.5; Dr. Robert Gordon, Northwestern University, Department of Economics, minimum overstatement, 1.7 percent; Director June O'Neill of the Congressional Budget Office, 0.2 to 0.8. At the April 6 hearing, Dale Jorgenson, Harvard University, chairman of economics, overstatement of the CPI, 1 percent; Dr. Erwin Diewert, University of British Columbia, Department of Economics, acknowledged expert in the field, overstatement, 1.3 to 1.7 percent; Dr. Ariel Pakes, Yale University, Department of Economics, overstatement of 0.8 percent. June 6 hearing, Dr. Michael Boskin, senior fellow, Hoover Institute, Stanford University, overstatement of the CPI, of the cost of living, at least 1 percentage point, maybe 2; Dr. Ellen Dulberger, director, strategy and economic analysis for IBM, CPI overstatement is greater than others have stated and likely to grow; Dr. Zvi Griliches, Harvard University, Department of Economics, overstatement is 0.4 to 1.6 percent. I would ask my colleague for one additional minute.

Mr. CONRAD. Mr. President, let me just say, this is one of those things that is very easy to come out here and demagogue. It is precisely what is wrong in this country--not just wrong on their side of the aisle; we have plenty of it on our side of the aisle, too. It is exactly why this country is in trouble. Because the easiest thing in the world to support are policies that increase the deficit and add to the debt. That is exactly what has been going on here since 1980. This chart shows what has happened to the deficit since 1980--this is expressed in dollar terms. In 1980, the deficit that President Reagan inherited was about $70 billion. But look what happened during the Reagan years. The deficit absolutely exploded. It went up to over $200 billion a year, finally hitting over $220 billion in 1986. The unified Federal budget deficit then came down as measured in dollar terms, and stabilized throughout the rest of President Reagan's term. Then we got a new President, President Bush, and the deficit took off again. There was a dramatic increase. The deficit went up to $290 billion in 1992, the year before Bill Clinton became President of the United States. Since Bill Clinton has been President, these deficits have come down each and every year. The deficit in dollar terms has been cut in half since 1992. Why did this happen? It happened because some of us had the courage to vote for a package in 1993 that, yes, raised taxes, primarily on the wealthiest 1 percent in this country. It also cut spending. The combination, an increase in taxes primarily aimed at those who are the wealthiest among us, coupled with cuts in spending, cut the deficit in half. Bill Clinton deserves credit for that. Our friends on the other side of the aisle, when that 1993 deficit reduction bill passed, said it would crater the economy. They said it would add to unemployment. They said it would put us in a recession. They were wrong. They were wrong on every count. It reduced the deficit. As I have indicated, it cut the deficit in half. But not only did it reduce the deficit, it reduced interest rates, it sparked an economic recovery that has created over 8.5 million new jobs. Beyond that, we have had the highest level of business investment in 30 years. We have had strong economic growth. The result has been a resurgent American economy. This country is now rated the most competitive nation in the world. One of the key reasons is because we reduced the deficit in 1993. Now, some on the other side of the aisle, seeking political advantage, want to go to the heart of things that contributed to that package of deficit reduction. What a profound mistake that would be. We should not allow deficits to start going back up, year after year, and to put the country back behind the 8-ball of debt. Debt, deficits and decline, Mr. President. Those are the three ``D's'' of those in the 1980's who put this country on a diet of endless deficits and debt. What a profound mistake it would be to go on that course once again. I want to make clear, the Senator from Missouri has proposed an offset for his tax reductions. I do not put him in the same category of others who do not. I disagree with the spending cuts the Senator from Missouri has proposed, but at least he has had the honesty to stand up and say how he would pay for his amendment. I commend him for having the forthrightness to say how he would pay for those tax cuts. That is the way we ought to do business here. Then we can have an honest debate about whether those spending cuts are wise or not. But I must say, I have no respect for people who stand on this floor and propose reducing revenue and do not say how they are going to pay for it. That is precisely what got us in this spot we are in today. The first chart I used today showed unified Federal budget deficits in dollar terms, and the record of our two previous Presidents. This next chart shows it in a little different way. This next chart shows, as a percentage of our gross domestic product, what has happened to the deficits. In other words, these are the deficits in relationship to the size of our economy. Again, one can see the pattern. Under President Reagan, the deficit soared from about 3 percent of our gross domestic product to over 6 percent. The deficit as a percent of GDP then came back down as deficit reduction measures were put in place, to still over 3 percent. Then President Bush came into office and once again deficits soared as a percentage of the gross domestic product or as a percentage of the size of our economy. Then Bill Clinton took over in 1992, and the deficits have come down sharply as measured against the size of the gross domestic product--a very good start. It does not finish the job. We have much more that needs to be done for deficit reduction. Some say deficit reduction is not so important. Some say we now have the lowest deficits in the industrialized world, that we have made great progress. We are OK. Mr. President, nothing could be further from the truth. We have made significant progress. We have cut the deficit in half. We have cut the deficit, compared to the size of the economy, in half. We have the lowest deficits of any of the industrialized countries. The problem, Mr. President--and I would say the occupant of the Chair knows this well as a distinguished member of the Budget Committee--the problem is, we have the baby-boom generation coming, and we have a demographic time bomb that we have to face. Mr. President, this next chart shows where we are headed, in terms of our national debt. Very often people are confused at the difference between the deficit and the debt. The Federal budget deficit is the yearly amount that we spend over and above what we take in in revenue. The deficit is the annual difference between what we take in and what we spend. The deficit has been coming down. The debt is the cumulative total of all of our deficits. Obviously, as long as we continue to run deficits, the debt will continue to mount. This chart shows what will happen to the gross Federal debt with no action, with no further deficit reduction. Mr. President, it shows that when Ronald Reagan took over as President, the debt was less than $1 trillion in this country, about $900 billion. Look what has happened since that time. The debt has gone up and up and up and up. Mr. President, that is a course that is unsustainable. It is especially unsustainable when one recognizes that we have the baby boom generation coming along. Medicare is currently among the fastest growing of any program in the Federal budget in terms of its cost. When baby boomers start to retire, the number of people who are eligible for programs like Medicare and Social Security will double from 24 million to 48 million. Then, Mr. President, we will truly be in a circumstance in which we will face a budget calamity. That budget calamity has been outlined for us very clearly. If we fail to act, future generations will face either an 82 percent lifetime net tax rate or a one-third cut in all benefits. Mr. President, I ask those who are listening, those who may be senior citizens who are hearing that their taxes may be cut, I ask them to think, what does it mean to your grandchildren if we do not get our fiscal house in order? If future generations in this country face an 82-percent lifetime net tax rate--yes, I am not misspeaking; an 82- percent tax rate, or a one-third cut in all benefits--because that is where we are headed if we do nothing. Mr. President, let me put it another way. Last year the Entitlements Commission, on a bipartisan basis, told us that by the year 2012, if we fail to change course, every penny of the Federal budget will go for just entitlements and interest on the debt. There will be no money for any of the other things that people say they need in this country, whether it is parks, education, or law enforcement. There will be no money for any of that. All of it will go for just entitlements and interest on the debt by the year 2012. Mr. President, that is why we must take action. I have shown the chart that shows what has happened to the growth of the debt in dollar terms. It is skyrocketing. There is a little different picture that emerges when one looks at debt as a percentage of our gross domestic product. In other words, roughly speaking, debt in relationship to the size of our economy. There, too, one can see the trend line. It has been extremely unfavorable. We had a national debt, as a percentage of our gross domestic product, it was just over 30 percent in 1980. Look what has happened. The debt, measured against the size of our economy, measured against the gross domestic product, has been rising, rising, rising. This is a course that is unsustainable. It is now, as we meet here in 1996, up to 70 percent. I say to my colleagues, we faced a much higher debt in relationship to our gross domestic product after World War II. At that time, debt to GDP was over 120 percent. Under every President and under every Congress from after World War II until 1980, the debt measured against the size of our economy, measured against the gross domestic product, declined-- declined, went down. Look what happened after the Reagan administration, after we heard this same swan song that you can cut revenue and you will get more income and it will all add up. Hooey. Absolute hooey. It was a disaster. It added to the deficits, it added to the debt, and it created economic decline in this country because interest rates were forced up, made this country less competitive, and hurt every sector of our economy. Let us not repeat that mistake. That would be a profound error for the economy of this country. Mr. President, the good news is since the Clinton administration and Congress passed the 1993 deficit reduction bill, the debt as a percentage of GDP has leveled off. It has quit soaring and it has leveled off. Now, Mr. President, what we need to do is start the debt as a percentage of GDP going down, to put it in decline. That is our responsibility. That is our challenge. The best way to do that, Mr. President, is to adopt a budget plan that cuts spending because further deficit reduction, at least in my judgment, should be based on reducing spending, not on further tax increases. In fact, I have been part of a group, a bipartisan group, 22 Senators, who will present an alternative plan this evening that not only cuts spending but also has a modest tax cut as well. Mr. President, we should not and we cannot have an overall plan that increases the deficit year after year or that fails to move us toward balance. That would be a profound mistake. Let me just show how profound a mistake it is to give up on this deficit battle. I understand, it is not particularly popular to cut spending, nor is it particularly popular to oppose further tax cuts that are not paid for. Mr. President, it is critical that we have the courage to do so. The future of our children is at stake. Mr. President, this chart shows our children's economic position in the year 2025 under two different scenarios. These are not my projections. These are the estimates of the General Accounting Office. This is a study they did a year or two ago. They concluded that if we take no action, by the year 2025 our children's economic position will be at about $28,000 a year. If, instead, we have a balanced budget by 2002, our children's economic position in the year 2025 will be improved to over $37,000. That is a dramatic difference in the economic futures of our children. The question is, do we have the will to stay on the deficit reduction course that we have been pursuing for the last 3 years? Do we have the courage to continue to reduce spending? Do we have the courage to maintain the revenue base so these deficits continue to go down and so the debt in relationship to the size of the economy starts to go down, so that interest rates are lower, so that more money is invested in this country, so that we can have greater economic growth? You cannot have investment without savings. The best way to improve savings in this country is to stop the ``dissavings'' by the Federal Government. The deficits represent dissavings. The deficit represents reducing the pool of money that is available in our society for investment. It is that investment that will fuel future economic growth. Mr. President, another way of looking at what the future holds is our children's debt in 2025. Again, in the no-action scenario versus a balanced unified budget by the year 2002, Mr. President, you can see very clearly under the no-action scenario, our children's debt in 2025 will be over $60,000 for every person in this country. Mr. President, the alternative, if we balance the budget by the year 2002--and that is unified balance rather than true balance, but unified balance by 2002-- our children will have a debt of $4,800 instead of $60,000. That is why we have to be deadly serious about the job of deficit reduction. Mr. President, this chart presents where we are headed in a different way. It shows very clearly that current trends are not sustainable. This chart shows the total revenues of the United States. Again, this is measured as a percentage of the gross domestic product, Federal outlays as a percentage of the gross domestic product. The green line shows revenue, current revenue, projected until the year 2030. Revenue runs right below 20 percent of our gross domestic product. That is historically what Federal revenue has been. This chart shows discretionary spending as the blue bar. It shows net interest as a yellow bar. It shows entitlement spending as a red bar. Look at what this chart shows. This is 1970. Discretionary spending was by far the largest. Entitlements were relatively small in comparison. By 1980, discretionary spending was about the same size as entitlement spending. But entitlement spending was growing rapidly. In 1990, the deficit is worse. Discretionary spending is now smaller than entitlement spending. The yellow portion shows interest growing dramatically. In the year 2000, you can see the trend--entitlements, again, now much larger than discretionary spending. In 2010, 2020, the same pattern until we reach 2030. By that time all revenue of the Federal Government will be eaten up by entitlement spending. Mr. President, this is not a course that is sustainable. I indicated that, later today, a bipartisan group of us--22 Senators, 11 Democrats and 11 Republicans--are going to present what we call the centrist budget. It is a compromise between things that Republicans have advocated and policies that Democrats have advocated. It is an attempt to break through the gridlock, to actually achieve an agreement so that we can get this country on a course of deficit reduction that is sustainable and that will lead to unified balance in the year 2003. It is a 7-year plan of deficit reduction, but one that does not only reduce the deficits in the next 7 years, but creates a platform that will encourage deficit reduction beyond that point, and that will secure deficit reduction beyond that point because of entitlement reforms that are critically important to our economic future. Mr. President, this chart shows what happens under the Republican plan that is before us, which is the blue line. The green line is the President's budget plan. This lighter colored line, is the centrist plan. The red line shows what happens if we fail to take action. It is the so-called baseline. You can see that deficits will rise inexorably if we fail to take action. Under any of the other three plans, we will see steady downward progress with respect to the deficit. Mr. President, I hope my colleagues will give serious consideration to the centrist plan when we present it later today. I wanted to outline the differences on the 7-year plans between what the Republicans have before us, what the President has advocated, and what the centrist coalition has agreed to. Mr. President, this part of the chart compares the plan on a 7-year basis. It looks at the major categories of spending and compares the centrist plan, the Clinton plan, and the Republican plan. On discretionary spending, the centrist plan proposes savings of $268 billion over the next 7 years. The Clinton plan, which is a 6-year plan, but if you extend the policy for 7 years, would have $312 billion of savings out of discretionary spending. The Republican 7-year plan would have $393 billion of savings out of discretionary spending. Our group, the bipartisan group, concluded that both the Clinton plan and the Republican plan are unrealistic in their discretionary savings. They are heavily backloaded in both cases --both the Republican plan and the President's plan. Frankly, we believe future Congresses are unlikely to hold to the path that they have outlined. That is precisely what has been wrong around here. We adopt plans that do not have any realistic prospect of coming true. Mr. President, on Medicare, which has been such a hot-button issue in this Chamber and across the country, the centrist plan saves $154 billion over 7 years. The President's plan--and, again, he has a 6-year plan, but if you extend the policy 7 years, he has about $156 billion over 7 years. The Republican plan, $228 billion in savings out of Medicare over 7 years. Many of us would conclude that the Republican plan goes too far. Those savings are going to require reductions from what current law provides in a way that will be very difficult, especially for rural hospitals in the State that I represent. On Medicaid, the centrist plan, $62 billion over 7 years; President Clinton's plan, $81 billion over that period of time; and the Republican plan before us, $106 billion. Again, this is assuming you take their 6-year policy and extend it to 7. Welfare, EITC, centrist plan, $58 billion savings over 7 years; Clinton plan, $52 billion; and the Republican plan, if you take the 6 years of policy and extend it, $87 billion. A major difference between the centrist plan and the other plans before us is that we have made a technical correction to the Consumer Price Index of one-half of 1 percent. I just say, if there are those who are serious about entitlement reform, if there are those who are serious that we are on a course that is not sustainable. If there are those who are serious that we face a situation that will lead to either an 82-percent lifetime tax rate for future generations or a one-third cut in all benefits, because entitlement spending is running out of control, a technical correction of one-half of 1 percent in the Consumer Price Index is something that will help secure the economic future for not only senior citizens, but for the American economy as well. Mr. President, economist after economist have told us that the Consumer Price Index overstates the cost of living. Of course, we use the Consumer Price Index to alter Social Security payments, to index the tax system, because we want to make adjustments for increases in the cost of living. The problem is that the best evidence we have is that the Consumer Price Index is overstating increases in the cost of living. There is a mistake, and that mistake is very, very costly. A 1 percent change in the Consumer Price Index, if it is overstating the cost of living by 1 percent, that is over $600 billion over 10 years. Mr. President, we had a group of economists--a bipartisan group-- review this question for the Senate Finance Committee. They came back and told us that the Consumer Price Index overstates the cost of living by from 0.7 percent to 2 percent. Mr. President, our bipartisan group decided that we would make a 0.5 percent technical correction in the Consumer Price Index in order to more accurately reflect the cost of living. Mr. President, this will save $125 billion over 7 years. Neither of the other plans have this feature. I believe this is one of the most important parts of the centrist coalition plan. It is a significant long-term entitlement reform that will help to get us off the unsustainable fiscal course we are on. I say to my colleagues, if we cannot make this kind of technical correction, which has been supported by Alan Greenspan--he said the overstatement of the cost of living by the Consumer Price Index is most likely 1 percent, and Alice Rivlin in her book of deficit reduction options that she put out indicated the overstatement may be from 0.4 percent to 1.5 percent. As I stated previously, a bipartisan group of economists, led by Michael Boskin, former chairman of the Economic Advisers under President Bush, recommended the overstatement is from 0.7 percent to as much as 2 percent. Our group has said that we ought to at least make a change of 0.5 percent and save $125 billion. On the question of tax cuts, we do have a tax cut in the centrist plan. Not all of us thought it was the better part of wisdom. Mr. President, the view prevailed in our group that there ought to be a tax reduction. I personally believe that we ought to balance the unified budget first. I mean, I have been here 9 years. I have heard over and over the swan song that we have a plan that is going to reduce the deficit, and over and over the deficit has gone up. It has not gone down. Only after the 1993 plan that we on this side supported, did we actually see the deficit go down both in dollar terms and measured in terms of our gross domestic product. Mr. President, over and over before that we were told there were plans that were going to reduce the deficit. They did not. They failed. My own judgment is we that ought to prove that we are balancing the budget and getting the job done before there is a tax reduction. But that was not the view of the centrist group. The consensus was there ought to be a tax reduction. So in our group there is a net tax reduction of $105 billion over 7 years. That compares to the Republican plan of $151 billion over 7 years and President Clinton's plan, which is roughly a wash over a 7- year period, if you extend the first 6 years' policy. Mr. President, we will have a lot more to say about the centrist plan later tonight. I feel deeply that the greatest challenge facing this body and facing this country is to stay on the path of deficit reduction. Let us not be distracted by those who say that we cannot cut anything. That is not right. And let us not be distracted by those who say we can cut taxes and we will get more revenue. We heard that swan song before. All it led to was escalating deficits, escalating debt, and a decline in the strength of this country. I hope deeply that we have the courage to stay on the course of deficit reduction. The only group that on a bipartisan basis has been able to reach agreement is this centrist coalition of 22 Senators--11 Democrats and 11 Republicans. All we have gotten around this town in the last year has been partisanship and gridlock. I suppose, if you were looking at where we are and where we are headed, you would say the greatest likelihood is that, with the course that we will stay on in an election year, that there is a low probability that we will be able to get together and do something even as important as putting together a plan that will allow us to achieve significant deficit reduction over the next 7 years. I hope very much that the conventional wisdom is wrong. I hope very much that somehow out of the partisanship of an election year, we will find the ability and the will to work together to do something which would be great for our country, which is to reduce the deficit, keep us on a path moving toward balance so that we can reduce interest rates, so that we can see this economic revival continue and strengthen, and so that we can look at our children and say honestly that we are helping to secure their economic futures. Mr. President, nothing could be more clear than that deficit reduction has helped strengthen this economy. That is a course we ought to stay on. That is a commitment that we ought to make to each other, that somehow we find a way to bridge the differences and reach agreement, agreement on a plan to at least give us a unified balance by the year 2003. We can do that. The model is before us. We have a group of Senators who on a bipartisan basis have done it. Mr. President, let us complete the job. I thank the Chair. I yield the floor. Mr. ASHCROFT addressed the Chair.

Mr. CONRAD

Mr. CONRAD. Mr. President, I would just like to say to my colleague from Wyoming, I am disturbed by backloading, too, but the reality is the Republican plan has 64 percent of its savings in the last 2 years. So this is a case of the pot calling the kettle black. Both of them have 82 percent of their savings in the last 3 years. They are both backloaded. So to come and criticize the President's plan when your own plan does exactly the same thing is a little misleading. Let me just say----

Mr. CONRAD. I thank the Senator from Nebraska. This is one of those debates, as I listen to it, that I think causes people who are watching from outside the beltway to just shake their heads, because they have to wonder what is this all about? I must say, unless you are a green eyeshade type and spend all of your time poring over the subaccounts of the Federal Government, it is a little confusing. I think one of the things that perhaps has been lost in this discussion is that if we are looking at a comparison between the various budgets on domestic discretionary spending--and that is, after all, the pool of money from which veterans benefits are drawn and all of the other discretionary spending elements of the Federal budget--the reality is, the Republican budget over 6 years cuts $296 billion, the President's budget, $229 billion, so the cuts in discretionary spending in the Republican budget are substantially greater than the cuts in the President's budget. The issue has been raised, what are the subtotals? When you distribute those reductions, when you distribute them among all the functions in domestic discretionary spending, how do veterans come out? I think one of the things that has been lost in this debate is that these functional totals are not binding. They are not binding. That is the way the budget process works. There is no requirement that the committees of jurisdiction abide by that functional subtotal. I ask my colleague from Nebraska, is that not the case? As the ranking member on the Senate Budget Committee, is it not the case that these functional subtotals are not binding?

Mr. CONRAD. So, we get lost here in the details, but the overarching truth is the Republican budget, over 6 years, cuts $296 billion out of domestic discretionary spending. The pool of money for domestic discretionary spending is reduced by $296 billion. The President's budget reduces it by $229 billion over 6 years. I point out the centrist budget, which a bipartisan group of Senators, Republicans and Democrats, have agreed to, is $179 billion over 6 years. Frankly, I would say both the Republican budget and the President's budget have unrealistic reductions in domestic discretionary spending. They are unlikely to ever occur. One of the reasons is, in both of those budgets, that the overall pool of money available for domestic discretionary spending is so sharply reduced that future Congresses are unlikely to adhere to the spending path outlined in either one of those budgets. The fact is, the bipartisan group, which has tried to put together a budget alternative that would really have some prospects of actually holding course, holding to the course set for a 7-year period, has lower domestic discretionary savings than either of the other budgets. It is also true the President has less in the way of domestic discretionary savings than the Republican budget has. So if people are really concerned about veterans or any other subcategory of the budget, and they are comparing the President's budget and the Republican budget, the President's budget is more adequate, has less reductions over a 6-year period, or a 7-year period, than does the Republican budget. So if you are concerned about veterans or if you are concerned about education or you are concerned about all of the other elements that are part of domestic discretionary spending, the President's budget is superior to the Republican budget. The fact is, these functional subtotals that are the concern of the amendment of the Senator from Missouri are not binding. Those are the rules we work on around here. Those totals are not binding. Somehow I think we are missing the point. We have bogged down in the details in an attempt to score partisan political points. Unfortunately, that is what is happening around here more and more. We have not gotten into what is the heart of the debate and the discussion, what is the heart of the matter. The heart of the matter is, all of us need to move toward a balanced budget. We need to do that because we are on a course that cannot be sustained. The Entitlements Commission told us last year if we stay on the current course, we are going to have an 82 percent tax rate in this country, or a one-third cut in all benefits. That is the harsh reality of what we confront. And all of these budgets--all of them--are reducing domestic discretionary spending, they are reducing every other element of the Federal budget from what current law provides in an attempt to move towards fiscal responsibility. Mr. President, I will just say in conclusion, I hope my colleagues will remember, the reality is, the President's budget has less reductions in domestic discretionary spending than does the Republican budget. That is just a fact. And the second fact that is important to remember is these functional subtotals that are the subject of debate here are not binding in any event. I thank my colleague.

Mr. CONRAD. Will the Senator yield?

Mr. CONRAD. One minute.

Mr. CONRAD. I thank the Senator from Nebraska. I simply say to my colleague on the other side with respect to the Senator's amendment, you can close a tax loophole and not raise taxes on any Americans. As a member of the Finance Committee, I have been trying for some time to deal with the question of the fact that 73 percent of the foreign corporations doing business in the United States do not pay a penny of taxes here. The question is, how can that be? How do they avoid paying taxes in the United States when they are obviously doing very well here? Mr. President, the reason is, we have a scheme called transfer pricing in the international tax system that allows corporations to put their taxes or their profits where there are no taxes. Foreign corporations who are in here competing with American corporations have been taking advantage of this loophole in a very significant way to avoid paying any taxes here. That is not only unfair to U.S. taxpayers, that is unfair to U.S. companies who are expected to compete with the foreign enterprise that escapes and avoids tax responsibility, that an American-based corporation cannot escape and avoid. I say that my colleague from Nebraska has come up with a very reasonable way to take care of the needs of our veterans by closing a tax loophole. Now, some of our friends on the other side have never seen a tax loophole they do not like. They have never seen a tax loophole they do not endorse. There is absolutely no reason to allow foreign corporations to do business in this country and not pay any taxes here. It is not fair, not only to U.S. taxpayers, it is not fair to American corporations with whom they compete. I yield the floor.

Mr. CONRAD. I think if we were going to be direct with each other, we would acknowledge both plans are backloaded.

Mr. CONRAD

Mr. CONRAD. Will the Senator yield?

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

Mr. CONRAD

Mr. CONRAD. Mr. President, the Senator from Montana, in his presentation, said that he would like the Senator from North Dakota to vote for a balanced budget plan. I do not know where the Senator from Montana has been. Not only have I voted for a balanced budget plan, I have presented three in the U.S. Senate in the last year. I presented the fair share balanced budget plan last year; got 39 votes. It was the most ambitious deficit reduction plan that has been presented by anybody in either House--got 39 votes in the U.S. Senate. No. 2, I cosponsored with Senator Simon last year the commonsense balanced budget plan. We got 19 votes in the U.S. Senate for that plan. That plan was the second most ambitious deficit reduction plan that anybody has presented in the U.S. Congress. Third, I have been involved in the centrist coalition, which will have a substitute to the Republican plan that we will offer this week, which is a 7-year balanced budget plan that 22 of us have put together--11 Democrats and 11 Republicans. Not only have I voted for balanced budget plans, I have helped author them, or in some cases authored them in their entirety. I just want to set the record straight. I thank my colleague from North Dakota for this opportunity to respond.

Mr. CONRAD

Mr. CONRAD. Mr. President, I rise today to discuss the effort to roll back the 4.3-cent-per-gallon gasoline tax that was part of the 1993 deficit reduction package. I seriously question the wisdom of repealing the 4.3-cent-per-gallon gasoline tax at this time. I think it is important to remember how we got this 4.3-cent-per- gallon gasoline tax. We got this as a result of the 1993 deficit reduction package. It was a time when there was an understanding that there was great urgency to reduce the budget deficit in this country. At that time, when President Clinton came into office, the budget deficit for the previous year had been $290 billion. Since that time, after we passed the 1993 budget plan, the deficit has been reduced to $145 billion this year. In other words, the deficit was cut in half. It was cut in half because some of us voted for a package to cut spending and, yes, to raise taxes, primarily on the wealthiest among us, in order to get our fiscal house in order. Now we have a proposal before us to reduce the gasoline tax by 4.3 cents. Most people think it is a political move. Most people think it is politically popular. But sometimes what is politically popular, at least for the moment, does not stand much scrutiny. I believe that is the case with this proposal. I just had 40 members of the rural electric cooperatives from my State in my office, and I asked them, ``What should we do? How would you vote if you were here representing North Dakota?'' By 38 to 2 they said, ``Keep the gasoline tax and if there is a proposal to offset the revenue lost by repealing the gas tax, take those funds and reduce the deficit. That should be the priority in this country.'' I think those folks from North Dakota have it exactly right. The top priority ought to be to continue to reduce the deficit. Yes, it is true we have cut it in half since 1993, but the job is not done, and we ought to complete that job. We ought to get it done. Some are saying that this 4-cent-a-gallon gasoline tax is the reason gas prices have gone up. That defies common sense and it defies logic. Clearly, a 4-cent gasoline tax put into effect in 1993 has nothing to do with rising gas prices experienced in the spring of 1996. In fact, when that tax went into effect in October 1993, gas prices went down. They did not go up, they went down. The recent rise in gas prices has been caused by a number of factors totally unrelated to gasoline taxes: an unusually cold and longer than average winter that drove up demand for home heating fuel; refinery breakdowns across the country; more low-mileage sport utility vehicles that are on the road that increase the demand for fuel; the speed limit has been increased, again increasing the demand for fuel; and oil companies are holding lower than average inventories, moving to just- in-time inventory management in order to save money. But even with all of that occurring, driving up the price of gasoline in the spring, the price of gasoline is now showing signs of coming down. In my home State of North Dakota, the price for a gallon of regular unleaded gasoline in Fargo, ND, the biggest city in my State, is now about $1.25, down about 4 cents in the past 2 weeks. It is not just in North Dakota that we have seen gas prices come down. As this news story from the Los Angeles Times indicates--the story ran last week--a major headline: ``Gas Prices Show Signs of Decline as Production Surges.'' Los Angeles, CA, we all know, has been the hardest hit by increases in gasoline prices. Average cost at the pump falls half a cent, and state officials predict more reductions. . . . After lagging, refineries again operating at close to normal output. Mr. President, that is what has happened. Gas prices are starting to come down because of market forces. Additionally, the price of gasoline in the United States is very low in comparison to other industrialized countries. Saturday's Washington Post included a column comparing gas prices in other countries. I thought it was an excellent graphic that compared what folks are paying in other countries versus what we are paying. It is $4.66 a gallon in the Netherlands; $4.49 a gallon in France; $4.39 in Italy; $3.68 in Britain; $1.30 in the United States. We have the lowest gas prices of any industrialized country in the world. Now we are talking about taking off 4 cents instead of applying it to deficit reduction, deficit reduction that over 7 years amounts to $30 billion? I really do not understand why we dig the hole deeper before we start filling it in. The people that I represent believe the highest priority is to eliminate these deficits so we can start to see this economy grow. Mr. President, there is also a question of whether this repeal would ever benefit consumers. The whole theory has been if you take off the 4-cent gasoline tax, that is going to benefit consumers. The Washington Post last week had a headline that says: ``Experts Say Gas Tax Cut Wouldn't Reach the Pumps. Oil Industry Called Unlikely To Pass on Savings to Consumers.'' Mr. President, these are not my views. These are not views of other Members of the Congress or other Members of the U.S. Senate. These are the views of oil industry experts. I go to one energy expert, Mr. Verleger, who is quoted in the story as saying: The Republican-sponsored solution to the current fuels problem . . . is nothing more and nothing less than a refiners' benefit bill. He makes the point these reductions in the gas tax will not be passed on to consumers, but the real beneficiaries will be the folks that refine the gasoline. Those are the folks that will get the benefit of any repeal of the 4-cent gas tax. The president of the conservative Cato Institute, a former member of President Reagan's Council of Economic Advisors, said: I don't think there is anything the Republicans can credibly do to guarantee that the tax reduction gets passed through to the consumer. Mr. President, I think he is right. We have not only had the testimony of those energy experts, but we have heard from the oil industry itself. The CEO of ARCO, Mike Bowlin, said last week: There are other market forces that clearly will overwhelm that relatively small decrease in the price of gasoline. . . . People's expectations will be that the minute the tax is removed, they want to see gas prices go down 4.3 cents, and that won't happen. Mr. President, what could be more clear? I think these three experts have said it about as clearly as it can be stated. There is no way that this reduction in the gas price can be assured to be passed on to consumers. But what we can be assured of--what we can be assured of--is this is going to blow a $30 billion hole in the plans to reduce the budget deficit in this country. I believe deficit reduction is more important than taking off the 4- cent-per-gallon gasoline tax that we have no assurance will be passed through to consumers anyway. I understand the majority leader has provided offsets to pay for the gas tax repeal, at least for the next several months. Mr. President, I would like to offer an amendment that would take his offsets and, instead of repealing the gas tax, apply it to reducing the budget deficit that is still $145 billion this year. That is what we ought to do if we are, instead of playing politics, serious about managing the fiscal affairs of this country. If we are really serious about helping families, I think we ought to look at the benefit of reducing the deficit in comparison to the benefit of repealing this 4-cent gasoline tax. This chart shows the benefit to a typical family of balancing the budget versus what a typical family would gain from repealing the 4- cent-a-gallon gasoline tax, and that is assuming every penny got passed on to consumers. We already know, from what I have already presented, that that gas tax repeal is unlikely to get passed on to consumers. But let us just look at what happens, what the benefits are of balancing the budget to the average family versus what the gas tax repeal would do. Balancing the budget, balancing the unified budget, would reduce the home mortgage for a typical family in the United States by $917 a year. That is because interest rates would be reduced; a car loan savings would be $97 a year; student loan savings $56 a year; in comparison to what the gas tax would mean to a family, $42 a year. Mr. President, it seems to me very clear that the priority ought to be in further reduction of the deficit rather than in a repeal of the gas tax, which is unlikely to ever be passed through to consumers. The benefit to consumers, the benefit to families, lies in further deficit reduction. I thank the Chair and yield the floor.

Mr. CONRAD

Mr. CONRAD. Mr. President, this morning I was privileged to honor North Dakota's recipients of the 1996 Prudential Spirit of Community Award, Kendal Alexander, a student attending the Erik Ramstad Middle School in Minot, and Jessica Schmidt, from Minot High School Magic City Campus. Kendall and Jessica are among 104 honorees representing each State, the District of Columbia, and Puerto Rico that were selected to receive the Prudential Spirit of Community Award in recognition of their exemplary contributions to community service. The Spirit of Community Initiative was organized last year by the Prudential Insurance Company of America, in partnership with the National Association of School Principals to encourage community involvement by young people, and to recognize community service contributions of America's youth. In the first year of the program, more than 7,000 young people working in various community service programs across the country were considered for the Prudential honors. One hundred four finalists were selected to receive the Prudential Spirit of Community recognition, an award including a silver medallion and a $1,000 cash award. Mr. President, at a time when so much attention in the press is focused on the problems of youth, I think it important to highlight the contributions of young people like Kendal and Jessica who are working to improve their communities, and to provide services to individuals in need. Kendal was honored for his work with a local food bank, highway improvement, to develop safe activities for children during Halloween and to assist senior citizens in nursing homes. Jessica, as president of the Minot High School Key Club, organized programs for nursing home residents, and a senior's prom for senior citizens in the Minot community. Kendal and Jessica deserve our sincere appreciation for their efforts to improve our communities. We can be proud that they are so committed to helping others, and that they represent our future. I also want to commend the Prudential Insurance Co. and the National Association of School Principals for establishing this outstanding program, and particularly, for encouraging young people to become involved in their communities.

Mr. CONRAD

Mr. CONRAD. Mr. President, in recent weeks we have mourned the passage of two great Americans, former Senator and Secretary of State Edmund Muskie, and Secretary of Commerce Ronald Brown. However, little note was given to the passage of another man whose contribution to America's history and future may rival those of the better known men mentioned above. I refer to Judge Ronald Davies, who died in Fargo, ND, April 18. Appointed to the Federal bench in 1955 by President Eisenhower, Judge Davies served the Federal judicial district of North Dakota for 35 years. But his career will be remembered most by a decision he handed down nearly four decades ago. In September 1957, Judge Davies was called to Arkansas to make a difficult ruling--one that has changed America forever. Mr. President, on September 7, 1957, Judge Ronald Davies of North Dakota ordered the immediate integration of the Little Rock, AR school system. What followed that ruling was, and is, history. Many angry white residents of Little Rock, incited by anti-integrationists such as Gov. Orville Faubus, opposed the order and kept their children home from school. They vowed to keep African-American children out of the all- white high school--by violent force, if necessary. President Eisenhower responded by ordering Federal troops to Arkansas to keep order and escort the nine young African-American students to Little Rock's Central High School. That decision, Mr. President, by a North Dakota judge in an Arkansas courtroom, began a new era of race relations in America. No longer were separate but equal schools--which were always separate but seldom equal--good enough in America. All citizens were entitled to equal treatment under the law, and that included an equal opportunity in public education. Today, Mr. President, race relations in this country are far from ideal. However, few of us can imagine a return to the legalized segregation that existed before Judge Davies made his ruling in 1957. Judge Davies was buried Monday, April 22, in Fargo. North Dakota lost a man of courage and conviction. America lost a piece of its history. To the 5 children and 20 grandchildren he leaves behind, I send my deepest condolences, and our country sends her thanks.

Mr. CONRAD

Mr. CONRAD. Mr. President, my amendment is the same amendment that was added last week by unanimous consent to S. 1028, the health insurance reform bill. Although I am hopeful the House of Representatives will agree to retain the amendment during its conference with the Senate, that is not a certainty. The program this amendment extends is very important to my State and several others with large rural populations. But time is running out and this extension must be signed into law into the next few months. So I am offering the amendment today to S. 1664. This amendment would extend what has become known by some as the Conrad State 20 Program. In 1994, I added a provision to the visa extension bill that allows state health departments or their equivalents to participate in the process of obtaining J-1 visa waivers. This process allows a foreign medical graduate [FMG who has secured employment in the United States to waive the J-1 visa program's 2-year residency requirement. As a condition of the J-1 visa, FMGs must return to their home countries for at least 2 years after their visas expire before being eligible to return. However, if the home countries do not object, FMGs can follow a waiver process that allows them to remain and work here in a designated health professional shortage area or medically underserved area. Before my legislation became law, that process exclusively involved finding an ``interested Federal agency'' to recommend to the United States Information Agency [USIA] that waiving the 2-year requirement was in the public interest. The law now allows each State health department or its equivalent to make this recommendation to the USIA for up to 20 waivers per year. This law was necessary for several reasons. Despite an abundance of physicians in some areas of the country, other areas, especially rural and inner city areas, have had an exceedingly hard time recruiting American doctors. Many health facilities have had no other choice but turn to FMGs to fill their primary care needs. Unfortunately, obtaining J-1 visa waiver for qualified FMGs through the Federal program is a long and bureaucratic process that not only requires the participation of the interested Federal agency but also requires approval from both the USIA and the Immigration and Naturalization Service. Finding a Federal agency to cooperate is difficult enough, considering that the Department of Health and Human Services does not participate. States who are not members of the Appalachian Regional Commission, which is eligible to approve its own waivers, have had to enlist any agency that is willing to take on these additional duties. These agencies, such as the Department of Agriculture or the Department of Housing and Urban Development, often have little or no expertise in health care issues. Once an agency does agree to participate, the word spreads quickly and soon that agency can be flooded with thousands of waiver applications from across the country. Because States can clearly determine their own health needs far better than an agency in Washington, DC, my legislation now allows States to go directly to the USIA to request a waiver. It also is relieving some of the burden that participating Federal agencies have incurred in processing waiver applications. The Conrad State 20 Program is still very new, and not every State has yet elected to use it. But the program is beginning to work exactly as I had hoped. At least 21 States have reported using it to obtain waivers. More States are expected to participate in the coming months. Unfortunately, the Conrad State 20 Program is scheduled to sunset on June 1, 1996, unless Congress approves an extension. The amendment I am offering would extend the program for 6 more years. This is not a permanent extension. The amendment would sunset the program on June 1, 2002. My amendment also puts new restrictions and conditions on FMGs who use the Federal program. As a condition of using the Conrad State 20 Program to acquire a waiver. FMGs must contract to work for their original employer for at least 3 years. Otherwise, their waiver will be revoked and they will be subject to deportation. My amendment would apply the same 3-year contractual obligation for those who obtain a waiver through the Federal program. We all know that State empowerment has been a major issue of the 104th Congress. The Conrad State 20 Program is one way of giving States more control over their health care needs. States that are using the program want to keep it operating for a few more years. They understand that this program does not take away jobs from American doctors, but instead is one more valuable tool to help serve the health care needs of rural and inner city citizens. The Senate passed my original legislation with strong bipartisan support. I am hopeful the Senate will agree that creating the Conrad State 20 Program was very worthwhile, and will agree to accept this modest, 6-year extension.

Mr. CONRAD

Mr. CONRAD. We are particularly concerned that the conference agreement does not explicitly mention that Devils Lake, ND, is eligible to receive disaster and hazard mitigation assistance from the Economic Development Administration, as was the case in the Senate-passed version of the bill.