Kent Conrad

Mr. CONRAD

Mr. CONRAD. For precisely the same reason that the Senator has given for his including extending the middle-class tax cuts when he last wrote a budget resolution in 2006. It would have covered the years 2007, 2008, 2009, 2010, 2011. The Senator included the extension of those middle-class tax cuts, just as I have done, because it was a 5- year budget resolution, and then the Senator's side did not execute, just as we did not last year, because there was no necessity to do it because those tax provisions do not expire until 2010. This is a case of the pot calling the kettle black. You extended the middle-class tax cuts in your 2006 resolution and then did not execute because there was no need to do so because those tax cuts don't expire until 2010. That is precisely what we have done.

Mr. CONRAD. Mr. President, we have no such tax increase assumption in our budget. Here are the facts. It is true we have $400 billion more in revenue over the 5 years than the President has in his budget. That is a difference of 2.6 percent. We believe that revenue can be attained without a tax increase. How? The pool of money I am talking about is the tax gap, the difference between what is owed and what is paid. The vast majority of us pay what we owe, but we have a group of people who don't. No. 2, offshore tax havens. The Permanent Subcommittee on Investigations has told us we are losing $100 billion a year to offshore tax havens. I have shown many times on the floor the Ugland House in the Cayman Islands, a little five-story building that claims to be the home to 12,600 companies. How can that be, that a five-story building in the Cayman Islands can be the operational home to 12,600 businesses? They are not engaged in business out of that building. They are engaged in monkey business. That monkey business is costing us a lot of money. Now we have new evidence from the Boston Globe of another building in the Cayman Islands, this time a four-story building. In that building, they are also engaged in massive tax fraud. How? The company that is hiring the contractors for the United States in Iraq, KBR, is using that operation in the Cayman Islands to avoid paying their Medicare and Social Security taxes in the amounts of hundreds of millions of dollars for one company. The New York Times has just reported in Liechtenstein that they have uncovered massive tax fraud. I would say to the American people, before we ask for a tax increase from anyone, we ought to go after these tax scams. What is the amount over 5 years? The estimates are at least $2.7 trillion. If we get 15 percent of that--not 50 percent, 15 percent of the abuse in tax havens, the abuse of tax shelters, the tax gap, 15 percent of it--we can balance this budget with no tax increase. Yes, additional revenue, revenue acquired by going after people who are cheating. Senator Dorgan and I are perhaps the only two Members who have actually audited the books and records of major corporations, because we used to be the tax commissioners for our State. I have looked at the books and records. I have audited the books and records. I found tens of millions of dollars from my little State of North Dakota. One of the things I learned when I did it and actually examined the books and records is how much fraud is going on. This is fraud not just from my conclusion or Senator Dorgan's conclusion, this is what has happened as a result of investigations by our own Permanent Subcommittee on Investigations that have uncovered massive fraud, massive cheating. We ought to go after it.

Mr. CONRAD. Will the Senator yield?

Mr. CONRAD. Mr. President, I know the Senator insists on his point of view on this, but I have to say there is another point of view which I have articulated and have articulated repeatedly. There simply is not an assumption that there is a tax increase embedded in this budget. In fact, what is included, after the Baucus amendment is adopted, is significant additional tax reduction: tax reduction for middle-class families, tax reduction for estates, tax reduction for those who would otherwise be subjected to the alternative minimum tax--some 20 million families. So that is the fact. If you go to the record of what this Congress has done so far, after the Senator gave his same speech last year, almost verbatim, saying we are going to increase taxes by $1 trillion, which is his favorite number--I tell you, I do not think it would matter what document we brought to this floor, the Senator would say there is a trillion dollar tax increase because that is what he said last year. Let's go back and check the record. What happened? Since last year, this Congress, controlled by Democrats, has reduced taxes on a net basis by $186 billion. It is not a statement. It is not a speech. It is a fact. This Democratic Congress--after all the warnings last year: We are going to increase taxes $1 trillion--has reduced taxes, in 1 year, by $186 billion. Now, the Senator says: The CBO does not score tax gap provisions. Well, let's be clear. The CBO does not score tax provisions. That is the job of the Joint Committee on Taxation. That is not the job of the Congressional Budget Office. All of us who serve on the Finance Committee know that is the case. CBO does not score tax provisions. That is the responsibility of the Joint Committee on Taxation. The Senator has asserted we have a $400 billion tax increase. No, we do not. We have $400 billion more in revenue over 5 years than the President has. That is a difference of 2.6 percent. As I have asserted repeatedly, I believe additional revenue could be obtained by going after the tax gap, by going after these tax havens, by going after abusive tax shelters--a pool of money over this 5 years that is some $2.7 trillion--$2.7 trillion. And that is probably a conservative estimate. So we would only have to get $1 in every $7 in that pool to balance this budget, with no tax increase on anyone. I believe the first thing that ought to be done is to go after those abusive tax havens, those abusive tax shelters, and that tax gap, where the vast majority of us pay what we owe, but some number of us do not. One other thing: The Senator referenced his budget. The fact is, he has no budget. They have no budget. If our budget is so egregious, why haven't they offered a substitute budget? They have not. They have not offered a budget. They did not offer a budget in the committee. They do not have a budget on the floor. They do have the President's budget, and we have compared, repeatedly, our budget to the President's budget because it is the only alternative that is out there. They have chosen not to offer an alternative. That is their right. The majority has the responsibility to offer a budget, but the minority, if they feel it is grievous, can offer a substitute, and they have not. I thank the Chair and yield the floor.

Mr. CONRAD. Mr. President, I ask unanimous consent that, unless stated otherwise, the time comes off the resolution.

Mr. CONRAD. Mr. President, I ask unanimous consent that the Joint Committee on Economics be recognized at 5 o'clock for 1 hour for their Humphrey-Hawkins testimony--5:15 I am now told--that the Joint Economic Committee be recognized for 1 hour at 5:15. That would involve both the chairman of the committee and the ranking member of the committee for that 1 hour.

Mr. CONRAD. Mr. President, the Senator held up a chart about the growth of the debt. The exact same chart applies to the President's budget--precisely the same. In fact, his is worse in terms of additional debt burden put on the American people by the President's budget compared to ours. The Senator also raised the point, as did the ranking member earlier, of why we have not addressed in this 5-year budget resolution the long- term entitlement challenges that we face as a nation, the shortfall between what we are spending and what we are raising, and the entitlement obligations this country has made but has not funded. Let me say I have never believed that the long-term entitlement challenges that are 10, 15, 20-year problems are going to be resolved in a 5-year budget resolution. That is why I joined with the ranking member of the committee on something where we do agree, which is an approach to address these long-term imbalances by creating a working group of 16 Members--8 Democrats, 8 Republicans--given the responsibility to come up with a plan to deal with our long-term challenges, and only if 12 of the 16 could agree would legislation advance. If they could agree, 12 of the 16, then we would have a circumstance in which there would be a vote in both Houses of Congress. Not only would it involve Congress, it would also involve the administration, because if we are going to address these long-term challenges, it has to be done with all of the players at the table. This is something Senator Gregg and I are advancing. I believe it is very important. I believe it is the only way we are going to deal with these long-term challenges. I don't believe it is ever going to happen in a 5-year budget resolution. No. 1, it is too short term. No. 2, it is typically carried just by one party. That is the way budgets are around here. These longer term challenges can only be addressed by both sides coming together and grappling with it in a joint way. I yield the floor.

Mr. CONRAD. Mr. President, this is an area where there is agreement between the ranking member and myself. This is a statement Senator Gregg made in the Senate Budget Committee about the proposal he and I have made to deal with these long-term challenges. This is a quote from Senator Gregg, and one I agree with: We have come to the conclusion that everybody who puts policy on the table first ends up getting it shot at by the different interest groups, and that putting policy on the table simply doesn't work in our institution; that the only way to do this is-- Talking about the long-term gap between spending and revenue and the commitment on entitlements-- the only way to do this is to create a procedure which is viewed as absolutely fair, absolutely bipartisan and that that decision by that task force will then be voted up and down by the Congress. The task force we are talking about which Senator Gregg and I have proposed would address the long-term fiscal imbalance, would include a panel of lawmakers and administration officials, 16 in number, with everything on the table, with fast-track consideration. That means Congress ultimately would have to vote, and that would require a bipartisan outcome because it would require a supermajority. The ranking member referenced what the President has called for. Let me put up what the President has called for in his budget. He has called for savings from Medicare and Medicaid of $536 billion over the 10 years of his budget proposal, but at the same time he calls for $2.4 trillion of additional tax cuts, most of which goes to the wealthiest among us. Those are priorities we don't share. I don't think the answer is to cut Medicare over $500 billion, Medicare and Medicaid, at the same time cutting taxes $2.4 trillion disproportionately on the wealthiest among us. Who would be affected by these Medicare reductions? I will tell my colleagues one group that would be affected: the rural hospitals I serve as a representative from the State of North Dakota in the Senate. Rural hospitals already on average have negative margins. That means they are losing money. Why? Because they get one- half of the reimbursement rate of more urban hospitals to treat the very same illnesses. In other words, if you have a heart attack, you go to an urban hospital, that hospital gets twice as much under Medicare to treat you as a rural hospital. Unfortunately, there are no rural discounts available to those rural hospitals. When they go to buy technology, they don't get a rural discount. When they go to attract a doctor, they don't get a rural discount. In fact, it costs more to attract doctors to rural areas than to urban areas. That is proven by the MediPAC studies. The proposal by the President would cut these hospitals. Can I tell you what that would mean in my State? Hospitals would shut down. We have more than 40 hospitals in my State. My State is a very large State, although sparsely populated. At least eight hospitals in my State would fail under these provisions. So, no, we don't support that. I certainly don't support it. I don't think most Democrats think this is the priority--cut Medicare, cut Medicaid, and at the same time you are cutting taxes on the wealthiest among us. I think many of the wealthy would say that should not be the priority. Warren Buffet points out that he pays a lower effective tax rate than the woman who is his secretary and than the woman who is his housekeeper. Why? Because most of his income comes from dividends and capital gains that are taxed at a 15-percent rate and his housekeeper is paying at a higher effective rate than that. How can that be fair? I don't think it is. So even Warren Buffet doesn't think it is fair. He has pointed this out on repeated occasions. He questioned, How can you have an equitable tax system in which he, the richest man in the world, is taxed at a lower rate than his own housekeeper and his own secretary? Mr. President, we talk about debt. Here is what happens if all of the President's tax cuts are extended without being paid for. The debt takes off like a scalded cat, the debt that is already out of control, already burgeoning, already burdensome to future generations. If you extend all these tax cuts without paying for any of it, what happens? The debt grows inexorably, and in a way that fundamentally threatens the economic security of this country. Mr. President, I hope very much that as we continue this debate we will focus not just on the 5 years of this budget resolution but also that we remind ourselves and the American people of the very daunting challenges we face long term. This is one place where I am in complete agreement with the Senator from New Hampshire, the ranking member of the committee. I yield the floor.

Mr. CONRAD. Will the Senator yield on that point?

Mr. CONRAD. I asked that same question myself. Why do we not put in the $35 billion figure? And the answer was: It is up to $50 billion so it would accommodate the $35 billion compromise, but it also was with the understanding that a year later, maybe that would need to be $36 or $37 billion, to have the same force and effect. I would say to the Senator, there was no intention here to leave an impression that we were not eager to continue the bipartisan effort. I wish to salute the Senator. He made an enormous effort, as did Senator Baucus, Senator Rockefeller, and Senator Hatch. They spent many hours putting together a bipartisan agreement on SCHIP. We certainly don't want to in any way leave the impression that we don't want to pursue that again.

Mr. CONRAD. If the Senator will continue to yield, that is why the language in the resolution says up to 50. Again, I say to my colleagues, I have every intention to pursue again the effort that you and the chairman of the committee pursued so vigorously last year.

Mr. CONRAD. Madam President, will the Senator yield?

Mr. CONRAD. Mr. President, I thank, once again, the Senator from Kentucky for his courtesy. At this point, I wish to offer a unanimous-consent request that we have worked on both sides that would be this: From 5:20 p.m. to 6:20 p.m. will be the time for the Joint Economic Committee; the first 5 minutes of that time--is that sufficient for the Senator?

Mr. CONRAD. The first 5 minutes will go to Senator Webb, then come back to, for the next 30 minutes, Senator Brownback, then come back to this side for the final 25 minutes of JEC time; then at 6:20 p.m., to go to Senator Dorgan from 6:20 p.m. to 6:35 p.m.; to Senator Hatch from 6:35 p.m. to 6:50 p.m.; to Senator Conrad or his designee from 6:50 p.m. to 7 p.m.; to Senator Coburn or Senator Gregg's designee from 7 p.m. to 7:15 p.m.; and to Senator Brown from 7:15 p.m. to 7:30 p.m.

Mr. CONRAD. The Senator makes a good point; if we can adjust all those times to 10 minutes later.

Mr. CONRAD. Mr. President, that means we now go to Senator Webb for 5 minutes.

Mr. CONRAD

Mr. CONRAD. Mr. President, I would like to be informed when I have used 45 minutes.

Mr. CONRAD. Mr. President, we come to the floor with a budget resolution that came out of the committee last week. I think it is important to set the stage in recognition of the fiscal condition of the country as we present this budget. We have seen a dramatic deterioration in the budget situation under this President. As we all know, he inherited a budget that was in surplus; in fact, a budget that was estimated to have a future of surpluses so large that the head of the Federal Reserve said we were in danger of paying off the Federal debt. That is a danger I would like to have. The President then took us on a fiscal course that has produced four of the five largest deficits in our history. In fact, it may turn out to be five of the largest deficits in our history, depending on how events unfold this year. We can see in the previous years we were having budget surpluses, and then the President took us into deficit and deepened those deficits until we reached a record deficit in 2004 of $413 billion. Now we see those levels being challenged in this year and perhaps next as well. The result of these massive deficits is this President has built a wall of debt that is unprecedented. When President Bush came into office in 2000, the debt at the end of his first year--we do not hold him responsible for his first year because he is working on the budget he inherited--the debt stood at $5.8 trillion. At the end of last year, the debt had reached over $9 trillion. And by the end of 2009, which will be for the 8 years for which he is responsible, we will see the debt will have risen to over $10 trillion. This President will almost have doubled the debt of the United States in just 8 years. Not only will he have almost doubled the debt of the country, the gross debt, all of the money we owe, but he will also have more than doubled what we owe to foreign nations. It took 42 Presidents, all the Presidents pictured here, 224 years to run up a $1 trillion of U.S. debt held abroad. This President has more than doubled that amount-- much more than doubled that amount--in just 7 years. The result of that is we now owe Japan almost $600 billion. We owe China almost $500 billion. We owe the United Kingdom over $150 billion. We owe the oil exporters almost $140 billion, and so it goes. That is a warning sign to all of us about the fiscal condition of our country. The long-term projections are sobering as well. Partly as a result of this tremendous buildup of debt, the value of the dollar has shrunk rather dramatically. This chart shows the dollar against the Euro. It has gone down 40 percent since 2002. Anybody who has traveled has seen that in what they buy abroad. We see it in the prices of goods that are being imported. We also see it in terms of the kinds of reactions we are getting in the marketplace to further American indebtedness. We are hearing warnings from people who are saying: United States, you have to get your fiscal house in order. You cannot keep running up these massive debts and deficits. We see that during this period of the Bush administration that economic growth has lagged previous recoveries. We have gone back and looked at all of the major recoveries since World War II. There have been nine previous recoveries. At the same point in the business cycle, the economy had typically grown at an average pace of 3.4 percent a year during those previous recoveries. Look at what is happening here. In this recovery, the average GDP growth is only 2.5 percent, well short of what we have seen at the same point in previous economic cycles. Now we have a new element to consider, and that is a housing slump with new home building falling dramatically. We have seen this pattern which comes to us from the Census Bureau, U.S. Department of Commerce. This is monthly data through January 2008. These are housing starts in millions of units, and we can see that housing starts have plunged, and plunged dramatically. We also have word that inventories of unsold homes are growing, and growing dramatically; that foreclosures are running at a very alarming rate. And all of this signals trouble in the economy. There are other indicators as well. If we look at business investment in this economic period versus what we have seen in the nine previous recoveries since World War II, that growth of business investment is lagging in this business cycle by 52 percent. That should tell us there is something amiss in the economic policy of this administration. Something is not working. Certainly by comparison with previous business cycles, the nine significant business cycles since World War II, this one is showing much more weakness than the previous nine. That is also true in job creation. If we look at the nine previous business cycles--that is the dotted red line on this chart, and this business cycle is the black line--we are now 9.6 million private sector jobs short of the typical business cycle, going all the way back to World War II. There are a lot of alarm bells that are ringing, warning signs to which we need to pay attention and need to respond to in a budget. We have seen real median household income decline by almost $1,000 under President Bush, from $49,163 in 2000 to just over $48,000 in 2006, the last year for which we have complete statistics. Mr. President, these numbers cry out for a response. And the first way that we respond is in a budget because the budget sets the policy priorities for the coming year. And we have attempted to do that in this budget by emphasizing strengthening the economy and creating jobs by doing the following: investing in energy, education, and infrastructure. Those are the top three priorities to help strengthen the economy. Invest in energy. Why? To reduce our dependence on foreign oil. We are now spending $1 billion a day buying foreign oil. How much better off would our country be, how much stronger would the economy be if we were generating our own energy rather than importing it from around the world? So part of this budget is designed to reduce our dependence on foreign energy and to strengthen our education and our job training because if we are not the best educated and best trained, we are not going to command the strongest economy for very long. Also, to build our infrastructure. We all remember the incredible sight of the 35-W bridge collapsing last year. I think we all recognize that our airports, our rail lines, our highways and bridges need serious investment if we are going to be competitive globally. We also need to expand health coverage for our children, provide tax cuts for the middle class, and restore fiscal responsibility by balancing the budget in 4 years and maintaining balance in the fifth. Mr. President, we also want to make America safer by supporting the troops, by providing for veterans health care, by protecting the homeland, and rejecting the President's cuts in law enforcement. For example, he eliminates the COPS Program. He cuts first responders' grants by 78 percent. We don't think that makes sense, and we reject those cuts in this budget. Mr. President, we now anticipate that economic growth is going to slow sharply in this year. We can see it all around us--more job layoffs announced today, dramatic slowing of the economy. Economists today are saying they believe our country is already in recession. Of course, we will not know for several months, but it has all the appearance of a reduction in economic growth. The Congressional Budget Office is forecasting for this year an economic growth of only 1.6 percent, down from the 2.5 percent pace over the course of 2007 and 2.6 percent in 2006. And, by the way, these were already weak economic growth numbers. 2006 was weak, 2007 was weak, and CBO is expecting even weaker growth in 2008. So in this budget resolution we provide for a second stimulus package. We have already had one stimulus package to try to increase aggregate demand in the economy, to give a lift. We believe it is prudent to provide the room in the budget for a second stimulus package, some $35 billion of standby authority, so if this economy does continue to shed jobs and to weaken that we are prepared to respond and prepared to respond in these ways: Housing relief. We have legislation on the floor now to provide relief for what is happening in the housing market. That package is a $16 billion or $17 billion package that could be accommodated in this $35 billion of standby stimulus relief. Also, we may need to extend unemployment insurance and provide for additional funding for food stamps or perhaps State fiscal relief. We know 21 of the States are increasingly in difficult financial straits, so we may need to extend some relief to them. This budget also provides room for additional funding for low-income heating assistance and the WIC Program, the women, infant, and children's feeding program, and/or infrastructure spending in 2008. When we did the last stimulus program, we asked the agencies of the Government if they had construction projects that were ready to go-- where the engineering has been done, the design has been done, the land acquisition is finished--and all they need is money to begin construction and to begin hiring people. And they told us, yes, they do have projects like that. So we have provided for taking up some of those projects as part of the stimulus package. Why? Because we know in road building, highway construction, and bridge construction that for every $1 billion, there are about 45,000 jobs created. And, Mr. President, we think it is very important that standby authority be ready to go if indeed this economy weakens further. We also provide for tax relief in this budget resolution: the alternative minimum tax. If something is not done, it will affect 20 million more American families this year--the alternative minimum tax. So we provide an additional year's relief from that levy. We also provide the energy tax incentives necessary to reduce our dependence on foreign oil, education tax incentives to make college more affordable for American families, and we provide the stimulus package, where I previously described some of the provisions, and they help the housing industry. Our tax provisions would fit in that $35 billion package; for example, extending net operating loss provisions to home building companies so they aren't buffeted by further write- downs of their assets at the worst possible time. And, of course, the important tax extenders, those permanent provisions that are about to expire that provide for the research and development credit, the wind energy credit, and the like, those are provided for in this budget resolution as well. The first amendment that will be offered to this budget will be to extend the middle-class tax provisions previously enacted. Those provisions are about to expire, and we want to extend them. Those are the marriage penalty relief, the child tax credit, and the 10-percent bracket. There is room in this budget to extend them all and still balance the budget in 4 years. There is also room in this budget for estate tax reform along the lines of what we advocated last year. As you know, we faced this unusual situation where the exemption per person, the $3.5 million next year but the year after, in 2010, there will be no estate tax. In 2011, the estate tax comes back with only $1 million per person exemptions. So we provide the continuation of the $3.5 million exemption per person and have that indexed for inflation. Mr. President, there is not an American family who doesn't know what is happening to gas prices. I was just talking to my staff this morning about what they are experiencing. One of my staff--who was caught up in a horrendous traffic jam yesterday coming from Baltimore and took 2\1/ 2\ hours to get here--filled up, and it cost $3.18 a gallon. I filled up the other day, and it was over $3.20 a gallon. There are some projections now that gas is going to go to $4 a gallon. Look what is happening just since 2001 when gas was less than $1.50. It has more than doubled in just those 7 years, and we see it continuing to jump. I am told oil prices today are also rising on world markets. There was some speculation that oil might reach $108 a barrel today on the world market. So to address this continuing problem of energy dependence, we are proposing in this budget to invest in energy, to create green jobs, to reduce our dependence on foreign energy, to strengthen our economy, and to help with high home heating costs. We have to do that a package of energy tax incentives of over $13 billion, $3.5 billion over the President's budget in discretionary funding for energy, and an energy reserve fund for investing in clean energy and the environment. We all know there are global climate change initiatives coming before Congress. If any of those are adopted, we are going to need a reserve fund like this to prepare for it. Education is also a great challenge to us. We see from the National Science Foundation a chart that compares what is happening to bachelor's degrees in engineering in the thousands in China versus what is happening here. You can see we are pretty well flat, with about 75,000 engineers a year being produced. But look what has happened in China. China is now up to a rate of producing more than 350,000 engineers a year. That should serve as another alarm to us because we know engineering is critical to economic growth. And if you are producing many more engineers, you are laying the foundation for stronger economic growth in the years ahead. I chose that as just one example. We know there are many others where we face global competition for doing the best job of educating our young people. So this budget resolution invests in education. It does it to generate economic growth and jobs, to prepare the workforce to compete in the global economy, and to make college more affordable and to improve student achievement. We seek to do that by providing some $13 billion in education tax cuts, some $5.7 billion in funding over the President's budget in discretionary money for the Department of Education and Head Start, and a $2 billion education reserve fund for school construction and higher education reauthorization. But it doesn't end with energy and education, Mr. President. It also extends to the challenges in infrastructure. We all remember this very striking picture from last year when the bridge on 35-W collapsed between Minneapolis and St. Paul. That is a bridge I traveled over many times when my wife was in medical school at the University of Minnesota, and I think all of us, our hearts went out to those people. Imagine the horror of driving home from work and having the bridge fall out from under you. We know there were lives lost and people injured. That should not happen. That should not happen anywhere in America. It shouldn't happen anywhere in the world. Mr. President, we know there are deficiencies in the infrastructure funding for highways, for bridges, for airports, and for rail, and all of those are going to have to be strengthened and improved. This budget begins the process. It begins the process by creating a reserve fund to allow for major infrastructure legislation. We have had a group of the country's business leaders come to us and tell us they have a plan they think could generate a multiplier effect in terms of matching public sector investment with private sector investment to build infrastructure in this country. We have created a reserve fund to allow for the adoption of such legislation if the committees of jurisdiction proceed, and if they pay for it, if they provide offsets for it. We also provide $3.9 billion more than the President for key discretionary transportation accounts in 2009, and we provide another $6.5 billion to fully fund highways, fully fund transit, increase funding for airport improvement, and fund ready-to-go infrastructure projects. Those are projects that are ready to be built; they only lack the money. We also fix the highway trust fund shortfall that exists. I think that is roughly $1.4 billion that needs to be dealt with. We not only have challenges and opportunities in education and energy and infrastructure, but we also have them in health care. We can see the number of uninsured children in our country has jumped by 700,000 just in the year 2006. We went from 8.7 million uninsured children to 9.4 million. So this budget seeks to make wise and careful investment there to improve health care, to expand coverage, to increase health research, and to promote food and drug safety. We do that by again providing for a reserve fund that will allow the $35 billion children's health insurance compromise that was adopted last year but vetoed by the President to once again proceed this year. We also provided $4.4 billion over the President's budget in discretionary funding for health and a reserve fund to address the cut in Medicare physician payments and make other improvements to Medicare. We know the doctors of the country are scheduled for a very sharp cut in Medicare payments. I think that is rejected here virtually universally. But we have to do something about it. We provided a reserve fund to address that, so later this year Congress will be able to act. The budget resolution also provides $3.2 billion above the President's for our veterans. We know that veterans funding in the President's budget is $44.9 billion. We have provided $48.2 billion in funding for our veterans. This is focused on veteran health care, primarily in terms of veterans because we all recognize that is an area in which we simply must do better if we are going to keep the commitment that was made to our veterans. In terms of war funding and defense funding, we match the President's request. He has asked for $2.9 trillion over the next 5 years, and we matched that amount in this budget--$2.9 trillion. The budget also provides $2.3 billion more than the President's budget for law enforcement and first responders. This is an area which I find utterly inexplicable in the President's budget. President Bush sent this Congress a budget that eliminates the COPS Program-- eliminated it. He did not just cut it, he eliminated it. The COPS Program has put 100,000 police officers on the streets in this country, put over 250 police officers on the street in my State of North Dakota. Why the President would eliminate the COPS Program eludes me. He has also proposed cutting the first responder grants; that is for emergency medical personnel, that is for our firefighters and our other first responders. He has proposed cutting these grants 78 percent. We have rejected those cuts in this budget at a cost of $2.3 billion. While we have restored funding in certain key priority areas and made targeted investments in reducing our energy dependence and promoting education and in building our infrastructure, we have also sought to be fiscally responsible by balancing the budget by the fourth year and maintaining balance in the fifth. Those are the numbers that are in the budget resolution, but this is before we extend the middle-class tax cuts. When we extend the middle- class tax cuts, these numbers will drop dramatically, but we will still be in surplus, we will still be balancing by 2012, by the fourth year, and be maintaining balance in the fifth. But we do think it is critically important to extend the middle-class tax cuts and to reform the estate tax, which previous legislation has left in a chaotic state, I think would be a fair way to say it. We also, under this budget resolution, bring down the debt as a share of gross domestic product each and every year. Again, this is before the amendment to extend the middle-class tax cuts, but you will see the same pattern after we extend the middle-class tax cuts--the debt as a share of GDP going down each and every year of the 5 years--because we think that is critically important for the long-term economic health of the country. This is a comparison of spending under the resolution and the President's budget. The red line is the President's spending line, the green line is ours. You can see there is very little difference. That is a difference of 2.1 percent in overall spending over the 5 years. So we do have some additional spending to meet these priorities in education and energy and infrastructure and reducing the cuts the President proposed for law enforcement, weatherization, and other priorities. Spending as a share of GDP under the resolution goes down each and every year, from 20.8 percent of GDP in 2009 to 19 percent of GDP in 2013, applying the spending discipline that I think is necessary, that I think most of us would say is necessary if we are going to address these problems of deficit and debt. The first thing we have to do is bring down the deficit, and this budget seeks to do that. We also, for this year, for 2009--this shows the overall spending difference for this year. I have showed the spending comparison for 5 years showing that we are spending 2.2 percent more, but I think it is also important to look at 2009, the first year of this 5-year budget, on overall spending. We are spending 1 percent more than the President--1 percent more. Some say: Well, you should not spend more than the President did. But the problem is, he had cuts that I do not think are broadly embraced by the American people. I do not think they think we should eliminate the COPS Program. I do not think they think we should eliminate weatherization. I do not think they believe we should cut the grants to first responders, our emergency personnel, by 78 percent. I do not think the American people think we should fail to invest in reducing our dependence on foreign energy. I do not think that is what the American people want. I do not think they believe we should continue to dramatically underfund infrastructure, which leads to bridges collapsing in our country. So we have spent more than the President--in total for 2009, 1 percent more. That 1 percent will go to those high- priority areas of energy, education, and infrastructure. On the revenue side, this is the comparison when the middle-class tax cuts are extended. We will have 2.6 percent more revenue than in the President's budget--2.6 percent more revenue than in the President's budget. Now, this shows that difference in revenue. The President's budget has $15.2 trillion over the 5 years, and our budget is $15.6 trillion-- a 2.6-percent difference. Because we have more revenue, of course, we have the ability to fund in those high-priority areas but still balance the budget in the fourth year and maintain balance in the fifth. According to the Congressional Budget Office, the President's budget does balance in the fourth year but then promptly falls back out of balance in the fifth year. Our budget not only balances by the fourth year but stays in balance in the fifth. Now, this is where we get into the question of, Well, how do you come up with 2.6 percent more revenue than the President has? I believe you can come up with the 2.6-percent more revenue than the President has by looking at three areas: the tax gap--that is the difference between what is owed and what is paid. The Internal Revenue Service tells us that for 2001 the tax gap was over $300 billion; that is, the vast majority of us pay what we owe, but some do not. Before we ask for a tax increase from anyone, I think we ought to go to those who are not paying what they owe. Now, I think that is the first thing we ought to do before we ask for a tax increase from anyone. But it is not just the tax gap, it is also those offshore tax havens that are proliferating and costing us a lot of money. There is a report from the Permanent Subcommittee on Investigations from February of last year. This is what they said: Experts have estimated that the total loss to the Treasury from offshore tax evasion alone approaches $100 billion per year, including $40 to $70 billion from individuals and another $30 billion from corporations engaging in offshore tax evasion. Abusive tax shelters add tens of billions of dollars more. Shame on us for allowing this kind of abuse to occur. Let me say, there have been some in this Chamber who have made a serious effort to close this kind of scam down, and I would be the first to recognize the ranking member of the Finance Committee, Senator Grassley of Iowa, who has been very serious about going after not only abusive tax shelters but offshore tax havens. Here is an example of what is going on. There is a little five-story building in the Cayman Islands called Ugland House, a nice little building; 12,748 companies call it home. Mr. President, 12,748 companies say they are doing business out of this little five-story building. Can you imagine having 12,000 companies conducting business out of that little building? Of course they are not conducting business; the only business they are conducting is monkey business because what they are doing is cheating all of the rest of us who pay our taxes. They are engaged in very ambitious tax scams and tax schemes to avoid paying what they owe in this country. Here is a picture of a building that was in the Boston Globe. Let's put up the Boston Globe story. This was a building that is also in the Cayman Islands where shell companies allowed KBR to avoid Medicare and Social Security deductions. This story says: Kellogg, Brown and Root, the nation's top Iraq war contractor, and until last year a subsidiary of Halliburton, has avoided paying hundreds of millions of dollars in Medicare and Social Security taxes by hiring workers through shell companies based in this tropical tax haven. So what they were doing is hiring people paid for by American taxpayers, hiring them for contracts, and they were running them through these shell operations down in the Cayman Islands, and by doing that they were avoiding paying their Medicare and Social Security taxes to this country and saved hundreds of millions of dollars, according to this story in the Boston Globe from March 6 of this year. This is just days ago that this story appeared. They point out: More than 21,000 people working for KBR in Iraq, including 10,000 Americans, are listed as employees of two companies that exist in a computer file on the fourth floor of a building on a palm-studded boulevard here in the Caribbean. Neither company has an office or phone number in the Cayman Islands. They do not even have a phone number. They do not even have a real office. What they have is a scam. This is the kind of scam we ought to shut down. Here is the building, a very nice building. On the fourth floor of this building, apparently 21,000 people are supposedly employed, at least for the purpose of records. Now, it does not stop there. This is a story from late last month in the New York Times: U.S. among countries investigating tax evasion. This is in Liechtenstein. I have never been to Liechtenstein. I am sure it is a lovely place. But the Internal Revenue Service says: It was beginning enforcement action against more than 100 U.S. taxpayers on suspicion of evading taxes through investments in Liechtenstein. They have the Deputy Director of the Center for Tax Policy and Administration at the OECD saying Liechtenstein is the tip of the iceberg. Indeed, it is. This kind of scam is going on down in the Cayman Islands, going on in Liechtenstein, going on in other tax haven places, but it is also happening with abusive tax shelters. Last year, I showed pictures of European sewer systems. People might ask: What does a European sewer system have to do with revenue in the United States? It turns out it has a lot to do with it because it turns out U.S. companies are buying European sewer systems. Later on in this debate I will show a picture of one of those. It may not be the most welcome picture on the Senate floor, of a European sewer system, but, nonetheless, this is part of an incredible scam that is going on in which U.S. companies buy European sewer systems, write them off on their books in the United States for tax purposes, and lease them back to the European cities that built them in the first place. That should not be allowed. That is not fair to the rest of us who pay what we owe. Last year, when we went after some of these scams, the President threatened a veto. He said that would be a tax increase. I guess it would be a tax increase on those who are getting away without paying what they fairly owe, but I don't consider it a tax increase to make people pay what they already owe. I don't consider it a tax increase to shut down a tax scam. I don't consider it a tax increase to shut down these abusive tax shelters. We tried to codify economic substance, prohibiting transactions with no economic rationale, done solely to evade taxes. We tried to shut down schemes to lease foreign subway and sewer systems and depreciate assets. We tried to end deferral of offshore compensation by hedge fund managers trying to evade current taxation. We tried to expand broker reporting. We tried to tax people who use expatriation to evade taxes. Over and over the President said: No, I will have to veto because that would be a tax increase. I think the President has it entirely wrong. Those are not tax increases. Those are just making those folks pay what the rest of us are already paying. In this budget we provide a number of enforcement mechanisms to try to help restore some fiscal discipline. We have discretionary caps for 2008 and 2009. We maintain a strong pay-go rule. We have a point of order against long-term deficit increases. We allow reconciliation for deficit reduction only, and we have a point of order against mandatory spending on an appropriations bill. These are important enforcement mechanisms that ought to be part of any budget resolution. They are part of ours. I hope they are adopted by my colleagues. Finally, this budget resolution has provisions addressing long-term challenges. More daunting than any of our short-term problems is where this is all headed. We can't pay our bills now; that is, before the baby boomers retire. What is going to happen then? What is going to happen to the commitments that have been made in Social Security and Medicare? What is going to happen with this tremendous imbalance between spending and revenue? We have offered these three elements as part of an approach, understanding that the larger plan to deal with our fiscal problems is going to have to come in some sort of special process, a process that Senator Gregg and I have offered our colleagues to create a task force with 16 Members--eight Democrats, eight Republicans--and ask them to come back with a plan as to how to deal with long-term imbalances. In this resolution, we have comparative effectiveness reserve fund and cap adjustment to deal with health care. One of the things we know is that lots of different health modalities are being used across the country to address illness. Some of them work and some don't. We have to know which ones work. Second, we have program integrity initiatives to crack down on waste, fraud, and abuse in Social Security and Medicare. In fact, I received a letter from the Secretary of Health, Secretary Leavitt, thanking us for the program integrity funds that we have included so that he can continue his important investigations to shut down these Medicare fraud operations that he found in Florida and other parts of the country last year and that he is continuing to crackdown on. He found a circumstance in which you go to these strip malls, and half of the offices in the strip malls are front organizations collecting Medicare payments. You go to the door and nobody is there during the day, during work time. They are just billing mills. They are sending out Medicare bills. Goodness knows if any service is actually being extended or not. But these are scams that are operating that need to be shut down. We also have a point of order against long-term deficit increases which is important to any strategy to contain burgeoning deficits and debt. Before yielding the floor, I want to ask our colleagues for their cooperation. This is going to be an especially challenging budget. The numbers are very close on the two sides. We have two Presidential candidates on this side. They have a Presidential candidate on the other side. We know they may not be here for all of the deliberations. That means we are going to have to coordinate and cooperate. We also have a Member on our side who is ill. That means we will have a special challenge getting the budget done this year, but we must do it. We must get it done. I will be asking for all of our colleagues' cooperation as we proceed. I yield the floor.

Mr. CONRAD. Mr. President, first of all, I wish to say, while I disagree with some of the observations of the Senator from Iowa, I have enormous respect for him. He has earned that respect by the way he conducts himself as a Senator. While we have policy disagreements, I have absolutely no disagreement or question about his motive because he has proved to me repeatedly that he is trying to do the very best for this country, as am I. I want to go back to some basic facts. We heard the Senator talk about a 9-percent increase in spending that is in this budget. I don't know how they came up with that calculation, but there is no 9 percent increase in spending in this budget. If you look at the spending that is in this resolution over 5 years and compare it to the President's budget, it is 2.1 percent more. That is total spending. That is over 5 years. If we look at just the next year, 2009, the Bush budget calls for $3.04 trillion of spending. We call for $3.08 trillion. That is a difference of 1 percent. That is total spending. I think what the Senator's staff has done is to look at one small part of Federal spending, just nondefense domestic discretionary spending, which is about one-sixth or one-seventh of the budget. But if we look at total spending, there is a 1-percent difference total spending for 2009. OK? The difference between our President's budget and our budget is 1 percent--1 percent. That is a fact. On the comparison of revenues, the President's revenue line we see is the red line, ours is the green line. What is the difference? The difference is over 5 years, the President calls for $15.2 trillion of revenue; we call for $15.4 trillion. That is a difference of 2.6 percent. I believe this revenue can be achieved without any tax increase. I believe that. Why do I believe that? Because of the three things I mentioned before. The tax gap--the Senator put up a chart that shows what the tax gap was in 2001. The net tax gap in 2001 was $290 billion. The Senator correctly says very little has been done in the last year to do anything about it. In fact, very little has been done over the last 10 years to do anything about it. My belief is the tax gap has done nothing but grow from 2001. So it is not $290 billion a year anymore. I believe over 5 years the tax gap is probably in the range of $2 trillion. I say this as a former tax administrator of my State, a former chairman of the Multistate Tax Commission. I believe the tax gap over 5 years is likely to be $2 trillion. But it doesn't stop there. I put up what the Permanent Subcommittee on Investigations says is the loss to the tax havens. They say $100 billion a year without any growth over 5 years, that would be $500 billion. So with the tax gap and the tax havens, that is $2.5 trillion over 5 years. Then abusive tax shelters over the 5 years, I believe, based on the Permanent Subcommittee on Investigations' work, is another $200 billion. That is a total of $2.7 trillion of leakage over 5 years in the revenue system--$2.7 trillion. If we got 15 percent of it, 1-5--15 percent of it, $1 in every $7 in the tax gap, the tax havens, the abusive tax shelters, $1 in every $7--we can't do that? If we can't do that, then the Revenue Commissioner ought to be replaced and all the rest of us ought to be replaced if we have designed a tax system that has that much leakage in it, in which the vast majority of us pay what we owe but we are letting a bunch of scoundrels escape? Shame on us. That is exactly what our own Permanent Subcommittee on Investigations has told us. All this talk about, well, we are going to have a trillion dollars of tax increases--let's look at the record. Let's go to the record. What has this Congress, controlled by Democrats, done? It has cut taxes $194 billion so far, with $7 billion of revenue raisers and loophole closers enacted for that period. I say to my colleagues, these are just the facts. What is most of this? Most of this is the stimulus package we just passed. Most of it was bipartisan. The reference was to Democratic control of the House and the Senate, $194 billion of tax cuts and $7 billion of revenue raisers. That has been the record of this Democratic Congress: $194 billion of tax cuts and $7 billion of revenue raisers. That is not a projection, that is not sitting around conjuring up how we can make the other side look as bad as we can make it, that is a fact of what has been done. The other side talks about the miracle of the tax cuts producing more revenue. We don't need to look at a projection there either. Let's just look at the record. In 2000, the tax base of the United States was $2.03 trillion. Now, adjusted for inflation, it is $2.05 trillion. The revenue base of the country has basically been static for 8 years. The spending, most of it controlled by our colleagues on the other side because they were in charge until last year, has gone up 50 percent. Again, we don't have to look at some projection or some guess or some economists' estimates. Let's just look at what happened on the record: revenue flat, spending up substantially when our colleagues controlled everything, the House, the Senate, the White House. What happened to the debt? The debt exploded. This is not a projection, this is not guessing ahead, this is what is happening. And my friends across the aisle controlled everything--they controlled the Senate, they controlled the House, they controlled the White House--and here is their record. The debt exploded, not some projection, not some guesstimate of the future. That is what has happened. The revenue was flat, the spending went up dramatically, went up about 50 percent, and the debt exploded as a result. That is not a projection, that is not a claim, that is a fact. I yield the floor.

Mr. CONRAD. Mr. President, Senator Akaka is here. He would like to speak on the budget. I will give him time off the resolution. How much time does the Senator wish?

Mr. CONRAD. I provide 5 minutes off the resolution to the Senator from Hawaii, Mr. Akaka.

Mr. CONRAD. Mr. President, I thank the Senator from Hawaii for his kind remarks. I also thank him for the enormous contribution he made to the work of the Budget Committee, especially with respect to funding for veterans affairs, and specifically veterans health care. One of the things I am most proud about in this budget is we are showing a $3.2 billion increase over what the President requested for veterans health care because I think the vast majority of us recognize the extraordinary ongoing need for improvements to veterans health care. Our veterans have made an enormous commitment to this country, and we must keep our commitment to them. Last year, as the Chair will recall, the budget contained the largest increase for veterans health care in our history. This year we have another significant increase that largely parallels the budget proposed by the veterans organizations themselves in recognition of the extraordinary need that exists. I yield the floor.

Mr. CONRAD. Madam President, Senator Menendez, who is a very valuable member of the Budget Committee, as is the occupant of the Chair, is here and is available for his opening remarks. How much time would the Senator desire?

Mr. CONRAD. I yield such time as the Senator may consume. Again, I thank the Senator from New Jersey, who is truly an outstanding member of the Budget Committee. He has made an incredibly valuable contribution there, and I very much appreciate the leadership he has brought to the committee.

Mr. CONRAD

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