Kent Conrad

Mr. CONRAD

Mr. CONRAD. I appreciate that. My argument still holds because the way pay-go works, because the existing tax cuts are sunset under current law, to extend them, costs money. It has to come from somewhere. Pay-go says you have to pay for it. That is what we are seeking to do. The amendment of the Senator would gut that attempt. What we are saying is to extend the current tax cuts, you have to pay for it. If you want new mandatory spending, you have to pay for it. Let me indicate very quickly, under the current GOP pay-go rule, the Republican pay-go rule, it exempts all tax cuts and mandatory increases that are assumed in any budget resolution, no matter how much they increase the deficits. Our pay-go rule says all mandatory spending and tax cuts that increase deficits must be paid for or require 60 votes. That is a budget discipline that worked very well in the 1990s and we need to restore it. One of the reasons we have this, when we had strong pay-go in effect, here is what happened to the deficits. Each and every year they were reduced until we actually went into surplus and even, for 2 years, we stopped using Social Security money to pay bills around here. Then the weakened pay-go rule went into effect right here and look what happened: Right back in the deficit ditch big time, record deficits, record increases in debt. That is what we are trying to avoid with these points of order, to make it more difficult around here to spend money on new mandatory programs, to have more tax cuts, new tax cuts. The amendment of the Senator would gut it. Senator Gregg said this, in 2002: As a practical matter you can get 60 votes on the floor of the Senate fairly quickly for most things that make sense. Senator Gregg was absolutely right back in 2002. But he had other things to say as well. Back in 2002 he said this: The second budget discipline, which is pay-go, essentially says if you are going to add a new entitlement program or you are going to cut taxes during a period, especially of deficits, you must offset that event so that it becomes a budget-neutral event that also lapses. He went on to say this: If we do not do this, if we do not put back in place caps and pay-go mechanisms, we will have no budget discipline in this Congress and, as a result, we will dramatically aggravate the deficit which, of course, impacts a lot of important issues but especially impacts Social Security. Senator Gregg was absolutely right about that. That is why I think adopting the amendment of the Senator from Alabama would be a serious mistake. Does the Senator from Michigan request time to respond?

Mr. CONRAD. Madam President, I would like to respond, and then I will be happy to yield to the leader. The Senator has used one of the most entertaining presentations I have seen in a long time. I want to give special praise to his staff for his wonderful new charts. I assume that the creative genius behind these charts was the Senator himself.

Mr. CONRAD. Maybe we need to spend the whole day tomorrow.

Mr. CONRAD. Madam President, I ask unanimous consent that no other amendments be in order today; that on Wednesday, when the Senate resumes the budget resolution, there be 42 hours remaining equally divided; that on Wednesday, the first amendment be offered by a Republican Senator, and the intention is that be Senator Ensign, and that the next amendment be one offered by the majority leader or his designee; further, that no rollcall votes occur prior to 5 p.m. Wednesday and that the first vote in the sequence be the amendment offered by the majority leader or his designee.

Mr. CONRAD. It is entirely appropriate to say to our colleagues, to put them on notice, that we intend to have a series of votes after 5 o'clock, not limited to these. The other amendments we are going to try to get through as quickly and as fairly as we can tomorrow so that we reduce what is left over for vote-arama.

Mr. CONRAD. Mr. President, let me begin, if I may, by thanking the ranking member, Senator Gregg, for the way in which he has conducted the work of the committee on the minority side and the fairness with which he has conducted it when he was in the majority. I wish to say to him that we will endeavor to approach this in the same way with him. There will not be surprises. We will try to organize this in a way that gives each side a fair opportunity to make their points and to offer their amendments. I wish to again thank Senator Gregg for his courtesy and professionalism throughout both the times when he has been in the majority and the times he has been in the minority. Mr. President, the budget resolution that has now passed the committee has these key elements: It restores fiscal responsibility by balancing the budget by 2012, it reduces spending as a share of gross domestic product, it reduces debt as a share of gross domestic product after 2009, and it adopts new disciplines, spending caps, and restores a strong pay-go rule. At the same time, it meets the Nation's priorities by rejecting the President's cuts in key areas and provides increases for children's health care, for education, and for our Nation's veterans. It also seeks to keep taxes low by protecting middle-class taxpayers with 2 years of alternative minimum tax relief, the old millionaire's tax that has rapidly become a middle-class tax trap. It also includes a deficit-neutral reserve fund for new tax relief and extensions of expiring tax provisions. Our goal is to be fiscally responsible but to do it in a way that keeps tax rates low and addresses some of the other things we have seen that have been brought before the committee, things that are serious problems. We find abusive tax situations that have grown up around the country. We see the use of tax havens. We also see the tax gap growing geometrically--the difference between what is owed and what is paid-- and that is not fair to the vast majority of American taxpayers who pay what they owe. So we try to keep taxes low, and we include no assumption of a tax increase. We also try to prepare for the long term by including a comparative effectiveness fund to address rising health care costs, looking at those procedures and those disciplines and those technologies that work to hold down health care costs in one part of the country and to adopt them in other parts of the country. We also adopt a new budget point of order against long-term deficit increases. The budget resolution that came out of the committee and which we bring to the floor today starts with a $249 billion deficit and reduces it each and every year. In fact, we almost balance in 2011 under this proposal. We do achieve balance in 2012 with $132 billion to the plus side. One might say this is a surplus. I always hesitate to use that term because the only reason it is in surplus is because of Social Security. Nonetheless, in terms of the way deficits are calculated and reported by the press, there is a $132 billion positive balance in 2012. One of the most important things we have to stop is the growth of the debt. All the economists tell us the most important thing we have to do is to reverse the debt growing faster than the size of the economy. I am proud to report this budget does so. This shows the debt, gross debt of the United States, as a share of gross domestic product. You can see that after 2009, each and every year we are bringing down the debt in relationship to the size of our economy. That is, by all accounts, the single most important thing we can do in terms of returning fiscal responsibility. In terms of a spending comparison, the green line is the spending in the budget resolution, the red line is the President's spending. You can see there is a very close fit. We do spend more money than is in the President's budget, but when you put it on a comparison basis and you look at 5 years in which the United States will be spending just over $15 trillion, the difference between our spending and the President's is almost indecipherable. As a share of gross domestic product, our spending is going down. In 2008, we will be at 20.5 percent of GDP. Each and every year, spending as a share of GDP will be going down, so that by 2012 we have spending at 18.8 percent of gross domestic product. The budget resolution has lower spending as a percentage of gross domestic product than the average during the period of Republican control. From 2003 to 2007, the average spending in Republican budget resolutions was 20.1 percent. Under our 5-year budget plan, the average will be 19.7 percent, four-tenths of 1 percentage point below what the Republican spending was in the years in which they controlled. On the question of defense spending and war spending, we have matched the President dollar for dollar. The President has total defense spending, and we are spending $2.9 trillion during this period. We match that amount. We have the same amount for defense and the same amount for the war. But there are other areas in which we do better. Perhaps the signature proposal of this budget is to fully fund children's health care, to say to every child in America: You are valued, and we want you to have health insurance. We believe this is substantively right, that this is a good investment. Our children are the least expensive to cover, and you have the biggest payoff because you have an entire lifetime of return if you are able to safeguard a child's health. So we have made a major commitment--up to $50 billion over the 5 years--to provide the opportunity to provide America's children with health coverage. The President only had $2 billion for this purpose. He couldn't even cover those who have existing coverage. If there is one thing that unites our caucus, it is a vision of being able to extend health care coverage to every child in America. Our budget resolution will help make that prospect a reality--if it is adopted. This is from the Akron Beacon Journal in Ohio. Earlier this month, they wrote: The State Child Health Insurance Program arguably is the best thing going for children in families with annual incomes too high to be eligible for Medicaid but not high enough for them to afford private health insurance . . . Statehouses across the country consider the SCHIP a winner. . . . At issue is President Bush's budget plan changing aspects of the funding and direction of the program, forcing States to scale back or scratch up more funds to keep their programs at current levels. Why scramble something that is working well? We have asked that question. Why is the President turning his back, in his budget, on millions of American children? Why is the President saying we won't even provide coverage to those who already have it? Why isn't coverage being extended to the millions of young people in this country who have no health care coverage at all? Another major area of priority in this budget is for education. The President provides in his budget, for just the fiscal year 2008--and I wish to emphasize that the previous numbers I have talked about were 5- year numbers. I am now talking about just the year 2008. The President's budget for education is $56.2 billion. We are proposing $62.3 billion. Why? Because we believe education is an absolute priority. Education is our future. Education is what allows us to maintain a competitive edge in this world. Education is what gives children in America the chance to make the most of their God-given talent. This is a year in which we reauthorize the Higher Education Act. This is a year in which we reauthorize No Child Left Behind. This is the year in which we have to put the funds up to keep the promises that have been previously made and, unfortunately, all too often were broken. Our funding level meets those needs in education and gives an opportunity to improve things such as the Perkins loan program, things such as title I, No Child Left Behind, and the other education programs that are critical to America's role and position in the world. A third area of priority after children's health care and education is our Nation's veterans. We have all read the stories about what has gone on at Walter Reed. I do not think there is a Member on either side of the aisle who was not outraged to see what was happening to veterans. I think we all know there are problems in our VA system as well. We have increased the President's proposal for veterans health care from the $39.6 billion he provided to $43.1 billion. I am especially proud of this because we have matched the independent budget in every area but one. In fact, we have either matched the independent budget, which is the budget put together by our veterans organizations themselves--this is what they have told us is necessary, and we have either matched them or exceeded them in every category but one. The only category in which we didn't match or exceed them was in an area in which the Veterans' Committee tells us they couldn't spend the money in 2008 if we gave it to them. In medical care, the independent budget called for $36.3 billion. We have provided $36.9 billion. I might add, that is at the recommendation of the Veterans' Committee. The independent budget called for $1.3 billion for information technology. We have provided $1.6 billion--again at the recommendation of the Veterans' Committee--because they have analyzed the information technology systems in the VA and determined there would be a significant advantage by this additional expenditure. As you know, the VA system is now developing a world-class system, one that provides information in real time on each patient's condition. This makes a profound difference in the medical treatment to our Nation's veterans. On medical and prosthetic research, the independent budget called for $480 million. We have provided $481 million. On operating expenses, the independent budget called for $2.23 billion. We have matched that amount. On construction--this is the only area in which we did not match the independent budget. They called for $2.14 billion. We provided $960 million, the amount the Veterans' Committee tells us could actually be efficiently spent this year. If we were to provide them more money, the Veterans' Committee tells us that money could not be effectively or efficiently deployed. I don't think any of us want to waste money or to spend money that cannot be efficiently or effectively employed. Other priorities in the budget resolution include restoring the cuts to the COPS Program. The President proposed cutting the COPS Program, which puts police on the street, by 94 percent. What sense does it make to eliminate police on the street at a time when crime is rising, at a time when we face a continuing terrorist threat? It makes no sense to this Senator, and I don't think it makes sense to most Senators. I held a hearing on this in Fargo, ND. I had the police chief there and I had the sheriff of Cass County there. They told me how important this has been to my State. Over 250 police officers have been added to the streets of North Dakota because of the COPS Program. We should not be cutting it, as the President proposed, by 94 percent. So we have restored that cut. On heating assistance, the President cuts the Low-Income Home Energy Assistance Program by almost 20 percent. We have restored that cut. Community Development, CDBG--I think we all know how important community development block grant funds are to this Nation's mayors. If there is one thing we have heard loud and clear, it is that the President's cut there makes no sense. Finally, with respect to transportation and Amtrak, we have funded this at $1.78 billion that the committee requested. The President had a deep cut there, threatening transportation service not only in the Northeast corridor but all across the country, including my own State. With respect to revenues in the resolution, I wanted to emphasize the following points: The budget resolution protects middle-class taxpayers with 2 years of alternative minimum tax relief, and that is fully offset, it is paid for. What is the alternative minimum tax? Remember, years ago they found out that some very wealthy people were paying no taxes. It was a handful of people--as I recall, in the hundreds--very-high-income people who were paying no taxes. So they put in place something called the alternative minimum tax. It is an alternative tax structure to try to make certain that very wealthy individuals, high-income individuals, pay something in terms of taxes. Unfortunately, it was not appropriately adjusted for inflation. The result is more and more people are being caught up in it. Last year, some 3.5 million people were affected by the alternative minimum tax. If we fail to act, there will be over 20 million people caught up in the alternative minimum tax this year. We have prevented that from occurring, and we have prevented it from occurring again the next year. We also provide a deficit-neutral reserve fund for tax relief, including extension of expiring provisions, a deficit-neutral reserve fund that says you can extend current tax cuts if you pay for them. Next, we provide for new measures to close the tax gap, shut tax shelters, and address the burgeoning growth of offshore tax havens. I will have more to say about those in just a minute. We also called for fundamental tax simplification and reform. We had tax reform a number of years ago. Since that time, we just keep adding complexity, we just keep adding regulations, and we just keep adding new and more provisions that make the Tax Code more and more complex. I am a former tax commissioner. I used to be the elected tax commissioner of my own State. I couldn't do my own taxes today. I happen to have a very good accounting firm back in my hometown of Bismarck, ND, prepare my taxes. Unfortunately, I think that is true of most of us. That should not be. Certainly, the vast majority of people should be able to do their own taxes. It should be far more simple than we have allowed it to become, so we think it is important to call for tax simplification reform. We also have no assumption--I wish to emphasize this--no assumption of a tax increase. We do not believe a tax increase is necessary to achieve the revenue levels we have outlined in this resolution. Let me show why we believe that is the case. The red line is the President's revenue line. The green line is our revenue line. There is a 3-percent difference. In other words, on the same scoring basis, same projections by the Congressional Budget Office, who are the ones who evaluate these things, our revenue line would produce 3 percent more revenue over the 5 years than the President's plan. Our plan would produce some $15 trillion of revenue over the 5 years; the President's, 3 percent less. Seeing it another way, here is what the President called for in his initial budget. In his beneficial budget proposal, the President said his plan would raise $14.8 trillion over the 5 years. Our plan, as I have indicated, raises $15 trillion. That is a difference of 1.2 percent. So our budget contains revenue over and above what the President proposed of 1.2 percent. I know my colleague will jump up and say: But that is OMB scoring, the Office of Management and Budget scoring for the President, and you are using CBO scoring. That is true. But what is also true is the President controls the Office of Management and Budget. That is his office. It is his office that said he was going to raise $14.8 trillion over the 5 years. I am constrained to use Congressional Budget Office scoring. The Congressional Budget Office said our proposal would raise $15 trillion. So that is a difference of 1.2 percent. We think that can be achieved by going after the tax gap, by going after these tax havens, by going after these egregious tax abuses I will get into in a minute. AMT relief. I indicated that over 3 million people were affected in 2006. In 2007, there will be over 20 million--in fact, it is 23.2 million. In 2008 it would be 25.7 million if we failed to act. This budget resolution will prevent that explosion of people being subject to the alternative minimum tax, the middle-class tax trap. This is what the head of the General Accounting Office said, General Walker said in August of 2006: If we are looking into the future and face the facts, we will see that our problem is not just on the spending side and entitlements, it is also on the revenue side. General Walker is telling the truth. Here is what happens if we extend all of the President's tax cuts without paying for them. If we extend all of the President's tax cuts without paying for them, debt as a share of the economy will reach over 200 percent. Debt as measured by the gross domestic product of the economy will reach over 200 percent in coming years. The red part of this bar is the additional debt if tax cuts are extended without offsets, without paying for them. The green part of this bar is what happens to the debt if tax cuts expire or are offset, are paid for. That is an important fact to keep in mind. We simply cannot extend all of the tax cuts without paying for them, without pushing this country right over the cliff into massive debt. I want to talk a minute about the tax gap because I have indicated we believe we could get this additional revenue--remember our revenue is 1.2 percent more than what the President said his budget would raise. How do we get it? Well, one of the first places we ought to look is the tax gap. The tax gap is the difference between what is owed and what is paid. The Internal Revenue Service tells us for 2001 the tax gap was $345 billion for that 1 year alone. That is based on an estimate of the tax gap back in 2001. Surely the tax gap has grown significantly since that time. I believe this was a conservative estimate to begin with in terms of what the tax gap was in 2001, $345 billion for that year alone. Again, this is the amount of money that is owed under the current Tax Code but not paid. If we could eliminate this tax gap, we would eliminate the budget deficit. The budget deficit would be gone. All of us know we cannot collect it all. All of us know we cannot collect it all. But over this 5-year period, the tax gap is probably in the range of $2 to $2\1/2\ trillion. If we just collected 15 percent of it--15 percent--that would be over $300 billion. That alone would come close to meeting the revenue needs under our budget resolution. But we don't just look to the tax gap, even though that is important, and even though the National Taxpayer Advocate finds the tax gap is adding more than $2,000 to the average household's tax bill in this country. This is what the Taxpayer Advocate said this year: Compliant taxpayers pay a great deal of money each year to subsidize noncompliance by others. Each household was effectively assessed an average tax of about $2,680 to subsidize noncompliance in 2001. That is not a burden we should expect our Nation's taxpayers to bear. What an outrage. What an outrage. The vast majority of us who pay what we owe are getting stuck with the bill from those who do not. Those individuals, those corporations that do not pay what they legitimately owe under the current Tax Code, an amount back in 2001 that was $345 billion in 1 year alone, that has now grown substantially--I am certain--since then. Some are saying, well, we cannot collect most of it. Why not? I used to be a tax commissioner. We went after it aggressively, and we collected tens of millions of dollars on that tax gap in the little State of North Dakota. We can do it. If we could do it there, we certainly can do it here in the Nation's Capital. If we can go after big corporations in North Dakota, from the capital in Bismark, ND, with the power of the Federal Government, we can go after these companies and these individuals who are abusing and avoiding what they legitimately owe. I don't buy that we can't. I don't buy it. It is not just the tax gap, the difference between what is owed and what is paid, it is also the explosion of tax havens. This is a building in the Cayman Islands, a five-story building that is the home to 12,748 companies. Let me repeat that. This modest building in the Cayman Islands, a five-story building, is the legal home of 12,748 companies. They say they are doing business out of that building. Really? They are doing business out of that building? They are not doing business out of that building. They are doing monkey business out of that building. What they are doing is avoiding taxes in the United States and other jurisdictions. That is what they are doing. When I was tax commissioner, I went after a company doing business in North Dakota. I found them engaged in one of these tax dodges in one of those tax haven countries. They wound up sending us big chunks of money because they were hiding their profits in these tax haven countries. We should go after them. We went on the Internet to find out what we could find there. We punched in ``offshore tax planning.'' Offshore tax planning, that is the euphemism used by these tax haven countries. You know how many hits you will get on the Internet? You will get 1,260,000 hits on the Internet, 1,260,000. What do they talk about? They talk about offshore tax planning, basic techniques of international tax planning. International tax planning. What they are really talking about, what you find when you go to the individual Web pages--because tax planning, that is the euphemism. What they are really engaged in is tax avoidance, tax evasion. That is what is really going on. Here is my favorite: Live tax free and worldwide on a luxury yacht. Moving offshore and living tax free just got easier. You bet it got easier. You transfer your money to one of these offshore tax haven accounts, and they say very clearly: Do not worry about paying taxes any time in the future. We will shield you from it because we do not have taxes that apply to earnings in these offshore accounts, and we will not report back to your home country that you have stuck your money here and are earning big chunks of change on it and owe taxes on it. We will help you shield that from your Government. It says in one of these: Your money belongs to you, and that means it belongs offshore. That means it belongs offshore because you put it offshore, and it will be tax free. That is not fair to all of the rest of us who pay the taxes we owe. This is from USA Today, a story from September of last year: ``Offshore Tax Havens Aggressively Targeting U.S. Taxpayers.'' This is the quote from the UofMoney.com: ``I am going to show you how to protect your money and all you own so nobody, not even the Government, can get at it,'' says University of Money dot-com. Well it does not end there. This is, again, from USA Today, that same story, ``Offshore Tax Havens Aggressively Targeting U.S. Taxpayers.'' ``Once your assets have been transferred to the offshore entity they are safe,'' says website Carib-offshore.com. ``You cannot be taxed on them.'' Now, what could be more clear? This is a giant tax dodge. It is growing. It is a cancer on the vast majority of people and companies that pay what they owe. How big is this? Well, this is from the State Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations. That is a committee of ours. That is a committee of the Congress of the United States from February of this year: Experts have estimated that the total loss to the Treasury from offshore tax evasion alone--this is not the tax gap, this is tax evasion--approaches $100 billion a year, including $40 to $70 billion from individuals, another $30 billion from corporations engaging in offshore tax evasion. Abusive tax shelters add tens of billions of dollars more. If we got a chunk of this money and a chunk of the tax gap money, the two of those, if we got 15 percent of those, we would meet the revenue requirement in the budget resolution before the body. Now, some will say, well, that is impossible to do. I do not believe it. I do not believe that is impossible to do. I was a tax commissioner. I know what can be done if we put the effort into it, if we put the resources into it. We can make enormous progress. Will we ever get it all? No. Obviously, no. We are not going to get it all. But can we get some fraction of it? Goodness knows, this country, if it puts its mind to it, can make significant progress. One hundred billion dollars a year in these offshore tax havens--this is according to the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations. They say tens of billions more in abusive tax shelters. What kind of tax shelters are they talking about? Here is the kind of tax shelter they are talking about. Here is the Dortmund, Germany, subway system. What has that got to do with U.S. taxes? Well, as it turns out, it has got a lot to do with U.S. taxes because wealthy U.S. investors bought the Dortmund subway system from Dortmund, Germany. They went out and bought it. You know what they did? They depreciated it on their books for U.S. tax purposes to lower their U.S. taxes, then they leased it back to Dortmund, Germany, to continue to run their own subway system. Now, that is a ripoff, I think. What are we doing? We are allowing people to depreciate and reduce their U.S. taxes by buying the Dortmund subway system over in Germany, a system that was paid for by German taxpayers, and then to lease it back to Dortmund, Germany, to run. Are we really going to let this kind of thing go on? It does not stop there. Here is the city hall in Gelsenkirchen. Wealthy investors in the United States bought that, too, depreciated that on their books in the United States for tax purposes, then leased it back to Gelsenkirchen for their city hall. Shame on us for allowing this kind of thing to go on. It does not end here. Here is a European sewer system. This is my favorite rate of all. European sewer system, wealthy investors in the United States bought it and depreciated that on their books to reduce their U.S. taxes and leased the sewer system back to the European city that built it in the first place. Come on. Come on. How are we allowing this to go on? And we cannot get 1 percent more revenue than the President does in his budget? I don't believe it. Close down this tax gap, tax havens, these offshore tax havens. Go after these kinds of scams. It does not end there. Closing loopholes and abusive tax shelters are not tax increases. Some are going to come out here and say, well, you have got more revenue, it is a tax increase. Is it a tax increase to close these loopholes, to close these abusive tax shelters? I do not think so. I am not alone in that. The former chairman, Republican chairman of the Senate Finance Committee, said this last year: Just in the period of time since 2001, our committee has raised $200 billion in revenues by shutting down tax shelters, by closing inversions and other abusive tax schemes. Now, in the year 2004 alone, the Finance Committee fully offset a $137 billion tax bill at no expense to the American taxpayers--$137 billion in 1 year. Hallelujah. If we do that each of the 5 years of our budget, we would more than meet the revenue called for with no tax increase. The budget resolution also addresses some of our long-term fiscal challenges. We provide $15 billion in Medicare savings. We have program integrity initiatives to crack down on waste, fraud, and abuse. I will talk more about that in a minute. We have new mandatory spending and tax cuts that must be paid for under pay-go. We have a long-term deficit increase point of order. We save Social Security first with an amendment that was adopted in committee. We have a health information technology reserve fund the RAND Corporation says could save hundreds of billions of dollars a year if implemented, and we have a comparative effectiveness reserve fund to look at those changes we could make in health care to dramatically improve the cost effectiveness of our system. We all know what is driving our budget challenges. Right at the heart of it is health care. Rising health care costs are driving Medicare cost growth. If we look to the years ahead, the red part of this chart is what health costs are doing to raise the cost of Medicare. The green is the effect of demographics. The green is the change of the numbers of people in the baby boom generation. The red is the increase in projected health cost. That is where we have to focus like a laser. That is what this budget resolution does. We have this comparative effectiveness reserve fund that will jump-start an effort to bring down health care costs. It provides a new initiative to provide research on effectiveness of different treatments, medical devices, and of drugs so we can identify those things that work where we make an investment and it is paying off. The Secretary of Health and Human Services, Secretary Leavitt, said this in February of this year in testimony he provided: It's evident that there is substantial fraud going on in the Medicare program and we need to be able to have the resources to root it out, to prosecute it, to make certain that it stops. . . . [I]t's a desperate need, we have to have more resources for enforcement. This budget resolution gives the Secretary the resources he has asked for to go after fraud in Medicare and Medicaid. This chart shows what he is talking about. Because this is part of an ongoing investigation, I can't reveal on the Senate floor where this site is. It is an office building. All these areas blotted out in white are businesses in a building with front operations, scam operations. They are operations that are billing Medicare on average about $1.5 million a year, but they are not providing any services. This is the kind of thing that is going on all across the country. Unfortunately, there are certain parts of the country where it is more prevalent. The Secretary told the committee there are hundreds of these operations in one State alone, billing Medicare typically $1.5 million a year. He would go to the doors of each of these operations in the middle of a workday, and nothing is going on. Nobody is there. Yet they are billing, billing, billing, billing Medicare for fraudulent devices. This is the kind of scam we have to shut down. In this budget resolution, we provide important budget enforcement tools as well: discretionary caps for 2007 and 2008; we restore a strong pay-go rule. Pay-go simply says if you want new tax cuts, you have to pay for them. If you want new mandatory spending, you have to pay for it. We also have a point of order against long-term deficit increases, and we allow reconciliation for deficit reduction only. Reconciliation is a big word, a fancy word for special procedures around here that go outside the normal way business is done. It is a fast-track procedure. The only reason it was provided for is to reduce deficits. In recent years it has been hijacked and used to increase deficits. That stands the whole process on its head. We now return reconciliation for the purpose it was intended, to be used to reduce deficits only. That is a brief summation. Maybe not so brief. I took my colleague's breath away with that ``brief'' reference. That is a relatively brief summation of what is in this budget resolution. I yield the floor.

Mr. CONRAD. I thank the Senator from Texas very much. Senator Cornyn is another member of the Budget Committee whom I always look forward to working with and hearing his views; sometimes we agree, sometimes we do not. But with Senator Cornyn, it is always done in a collegial and professional manner, and I appreciate the attitude he brings to the committee. I have three questions I wish to ask Senator Cornyn with respect to this amendment. First, would it be the Senator's intent, in any way, that this amendment would preclude a corporation or an individual from paying more if we were to close down certain offshore tax havens?

Mr. CONRAD. Mr. President, I repeat the unanimous consent request.

Mr. CONRAD. Mr. President, I ask unanimous consent that during further consideration of the concurrent budget resolution today, the first 3 hours be for debate only, the time equally divided and controlled by the chairman and the ranking minority member of the Budget Committee, and that at the end of that time, the majority leader then be recognized.

Mr. CONRAD. The second question would be with respect to the tax gap. Obviously, we have some who are not paying what they legitimately owe under the current Code. I assume it would be the Senator's position that his amendment would not preclude us from collecting more revenue from companies or individuals who are not now paying what they legitimately owe under the current law.

Mr. CONRAD. I will yield.

Mr. CONRAD. Madam President, I will tell my colleague that I have a picture of a foreign sewer system that was handled in precisely that way. U.S. investors bought a foreign sewer system and depreciated that on their books in the United States for the purpose of reducing their taxes in the United States, and then they leased it back to the foreign government that built it in the first place. Look, here is the building in the Cayman Islands, home to the 12,748 companies. Here is the work of another committee of the Congress that points out we are losing $100 billion a year in that kind of scam. Our country is losing $100 billion a year. Our friends on the other side of the aisle will say, oh, there is nothing we can do about it. Sure, there is something we can do about it, if we have the brains, the heart, and the courage. That is Wizard of Oz.

Mr. CONRAD. That is correct, Mr. President.

Mr. CONRAD. Madam President, look, this isn't that hard. The President said in his budget he was going to raise $14.8 trillion. In my budget, I say $15 trillion. That is a 1.2 percent difference. I don't believe for a minute that we can't raise that difference by going after these abusive tax shelters, these offshore tax havens, this looming tax gap. The tax gap alone is going to be well over $2 trillion over these 5 years--$2 trillion. It seems to me it is very clear. I used to be a tax commissioner. I have audited the books--Senator Dorgan and I are perhaps the only ones here who have audited the books and records of companies operating on an international basis. I went to my legislature and told them I would produce this kind of additional revenue if they would increase my budget. They did, and I did. I know this can be done. This isn't an imagining to me. I have done it. Senator Dorgan has done it. We have actually checked the books and records of companies. We have found extraordinary sums of money for the little State of North Dakota. My goodness, if it can be done for North Dakota, it can certainly be done for the United States.

Mr. CONRAD. How is this one?

Mr. CONRAD. I understand, 10-year numbers. But we are talking about 5-year numbers of $439 billion. Let me say, if they can do that, these extraordinary numbers, and we combine not only tax gap with tax havens and with abusive tax shelters, I believe we could easily get that $439 billion. Again, the President said his budget would produce $14.8 trillion in revenue. We are saying $15 trillion. That is a 1.2-percent difference. Finally, this is from the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations: Experts have estimated that the total loss to the Treasury from offshore tax evasion alone approaches $100 billion per year. I rest my case.

Mr. CONRAD. Madam President, the Senator from Iowa is much too modest. I have much greater confidence in his abilities and the abilities of the other members of the Finance Committee--a committee, by the way, on which I serve--to do far better. Look, we are talking about a tax gap over this period alone of $2 trillion. Fifteen percent of that would be $300 billion. I don't know if we can get that amount, but I would say to the Senator, when we put it all together, when we put together the tax gap, tax havens, tax scams, abusive tax shelters, there is a ton of money there. Just in this offshore area alone, another committee of Congress, the Investigations Subcommittee, says $100 billion a year is being lost. There is a lot of money here, without any tax increase to anybody, just collecting--let me just give one other example--this is very interesting--on compliance. If we were able to increase our compliance from 86 percent to 89 percent, we would raise the total amount of revenue that is in the budget I have proposed. Again, the President said his budget would raise $14.8 trillion. Here is what he said. He said his budget would raise $14.8 trillion. My budget raises $15 trillion. That is a 1.2-percent difference. Civilization is not going to end if we do a better job of collecting the revenue that is due. Civilization is not going to end if we successfully go after these abusive tax shelters. We can do this. We need a lot more confidence in ourselves. We need to be a little optimistic. You know what. America can do this. We can do this.

Mr. CONRAD. Madam President, when they make this Wizard of Oz reference, I do remember words from the Wizard of Oz: brains, courage, and heart. That is what we need here. I believe we have the brains in this country to go after a tax gap that is well over $400 billion a year now. That is $2 trillion over 5 years, and it should return substantial money to the Treasury of the United States. I believe we can go after these tax havens that another committee of Congress has said are running a revenue loss to this country of $100 billion a year. I believe we can shut down these abusive tax shelters that have the spectacle of wealthy investors in this country buying European sewer systems and depreciating them on their books so they hold down their U.S. taxes and then lease them back to these foreign enemies. Come on. We can't capture 15 percent--15 percent--of the tax gap and the tax haven abuses and the tax shelter scams? We can't do that? Well, if we can't, they ought to get a new bunch in here. They ought to get a bunch of new Members of the Senate and the Congress of the United States. If we can't increase the compliance rate from 86 to 89 percent, they ought to get some new Senators in here. They ought to get some new Congressmen in here to get the job done, because that is a job the American people deserve to have accomplished.

Mr. CONRAD. Final question goes to this more nuanced question of basically tax scams, circumstances such as the one I have described earlier today in which U.S. companies and investors are buying foreign assets--for example, sewer systems or public facilities such as commuter rail or other foreign assets--depreciating them on the books here for tax purposes, and then engaging in lease back of those assets to the communities that paid for them in the first place. Would it be correct to assume there is nothing in this amendment that would preclude us from shutting down those abusive tax shelters?

Mr. CONRAD. If I can give her an additional minute because we are now down to 9 minutes, and they have got 43 minutes.

Mr. CONRAD. Madam President, first of all, I have previously commended publicly the former chairman of the Finance Committee for the work he has done in this area, and I wish to commend him again because I consider him an ally in this effort and somebody who has been serious about going after tax havens and somebody who has been serious about going after abusive tax shelters. In fact, I have even quoted him, and let me quote him again. Here is what he said last year at this time on the Senate floor: Just in the period of time since 2001, our committee has raised around $200 billion in new revenues by shutting down tax shelters, by closing inversions, and other abusive tax schemes. I believe that is the case. Continuing: Now, just in the year 2004 alone, the Finance Committee fully offset a $137 billion tax bill at no expense to the American taxpayers.

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

Mr. CONRAD. Let me say I have enjoyed this. It has tremendous entertainment value. There is not a whole lot of factual value but a lot of entertainment value. Let me say this. The hard reality is regarding the Senator's chart comparing apples and oranges. The problem with that chart is it is not to scale. It is not to scale. If you do a scale of what the President called for in revenue and what I have called for in revenue, here is what it is to scale. The President said his budget would produce $14.8 trillion of revenue; mine, $15 trillion. That is a difference of 1.2 percent. I don't think civilization is going to cease to exist because we get 1 percent more revenue than the President called for. How do we say we should get it? We say we should go out and close down the tax gap. That is over $300 billion a year--a year--going after the tax havens, these outrageous scams that are going on that another committee of Congress says is costing $100 billion a year. Then these other egregious tax loopholes where companies and wealthy individuals are buying sewer systems from Europe and using them to reduce their taxes in the United States and then leasing them back to the Europeans. Now, on this whole question of tax increases, the Senator, to his credit, was square with people about this because when he says I have a $900 billion tax increase, the fact is, the President, in a similar analysis, has a $484 billion tax increase because the President has $328 billion of AMT increase, $104 billion of tax extenders, and $52 billion in this health tax proposal. So the difference between us--both have revenue increases. Both do. The difference in revenue is $439 billion. As I have indicated, the President called for $14.8 trillion in his budget, and we have $15 trillion in mine, a difference of 1 percent. The Senator also talked about debt, and he talked about our wall of debt. He didn't mention anything about the President's wall of debt, and he left that out because the President's budget--by the way, our colleague here on the other side has no budget. The only budget from the other side is the President's budget, and the President's budget has $250 billion more debt than our proposal. So when my colleague criticizes our proposal on building debt, you didn't hear him mention a word about the proposal from the President. The only budget we have from the other side has $250 billion more debt than in our proposal. Here is the wall of debt, not only looking forward but looking to the previous years that their side has built up. The reason, for example, that we still have Social Security funds being used is because our friends on the other side have dug a mighty deep hole. We are on a ladder scrambling to get out, but we are still stuck in a hole they dug, and here is the hole they dug. When they came in, at the end of the President's first year, there was $5.8 trillion in debt. At the end of this year, there is going to be $9 trillion in debt. This is the hole they dug. They controlled the Senate and the House and the White House, yet they put us in this deep chasm of debt. Under the President's proposal, as I have indicated, they would add even more debt--even more debt--taking us to over $12 trillion by 2012. One of the results of this, because increasingly this debt is being financed from abroad, is that it took 42 Presidents 224 years to run up $1 trillion of our debt held abroad. This President has more than doubled that amount in 6 years. One President, in 6 years, has more than doubled foreign holdings of our debt, a debt which took 42 Presidents 224 years to run up. On the question of Social Security and who is taking Social Security money, the President's budget is the only budget from their side of the aisle, because our colleagues have no budget. They have presented no budget. They have presented no alternative. The only alternative budget we have from their side is the President's budget. So if we want to talk about Social Security money, their budget uses $1.16 trillion of Social Security money, which is $130 million more than does ours. So I would ask my colleagues: Where is your budget? Where is your budget? You think we should use less. Where is your budget? The only budget you have is the budget of the President, and it uses more Social Security money, it runs up more debt, and also has massive, or at least large, capped increases associated with it. So I am a little concerned that the other side hasn't produced any budget other than the President's budget. When our colleague talks about this big spending increase, there is no big spending increase. It is indecipherable, the difference. It is indecipherable, the difference. On a $15 trillion base, yes, we spend $150 billion more over 5 years. Where does it go? Where does it go? It goes to education, it goes to children's health, and it goes to our Nation's veterans and their health care. It has been a failure of the other side of the aisle to take care of our Nation's veterans' health care. It has created the scandal that is now here in this town, the Walter Reed scandal. It was a failure on their watch. It was a failure to care for our veterans. We are not going to accept that. We are not going to allow it. So, yes, it requires more money; and, yes, it requires more money for education; and, yes, it requires more money if we are going to provide health insurance for the children of this country. The Senator also said that under the President's watch, the tax cuts have been very progressive. No, they have not. They have not been progressive. The top 1 percent have income of more than $418,000 a year. They have gotten 71 percent of the benefits of the tax cuts passed by this administration. That is progressive? This is how confused our colleagues have become on the other side, that they think it is progressive when those earning over $400,000 a year get 71 percent of the benefit. Here is what the average tax cut for a millionaire is in 2006. Those earning over $1 million a year, under their tax plan, got a $118,000 tax cut, on average. They received a $118,000 tax cut, and those earning less than $100,000 got $692. They say that is more progressive? I mean, that is true denial. That is true denial. Those earning over $1 million a year got an average of $118,000 in tax cuts under their plan, and those earning less than $100,000 got $692, and they say that is more progressive. That stands logic and truth on its head. The drop in the tax rate is the largest for the high-income taxpayers. Those who are in the top 1 percent got a drop of 3\1/2\ percentage points in their rates. Those in the bottom 20 percent got three-tenths of 1 percent. That is progressive? I don't think so. That is not the definition of ``progressive'' I learned in school. Now, he talked about job creation under the Bush administration and he talked about 4.9 million jobs being created. Yes, that is true. In the first 73 months, 4.9 million jobs were created. Let me compare that to the Clinton administration. In the first 73 months of the Clinton administration, 18 million jobs were created. That is over three times as many. The Senator also held up a chart talking about job creation. Let me make this point. We have gone back to the nine recoveries since World War II, nine major recoveries, and compared this one to those. Here is what we find. This recovery is running 6.7 million private sector jobs short of the average of all of the other recoveries since World War II. This is a success? I don't think so. It is not just on jobs, it is also on business investment. In business investment, this recovery compared to the nine previous recoveries since World War II, business investment is lagging in this recovery by 68 percent. What about the median household income under this administration? It has declined. From 2000 to 2005, real median income in constant dollars declined by almost $1,300. Maybe that is why people are working more and earning less. Maybe that is why in the latest Newsweek poll two- thirds of the American people say the economy is not doing well. Two- thirds of the American people say the economy is not doing well. If we look at the question of recoveries, the Senator held up another chart talking about how well recoveries have done and revenues have done in this recovery. Well, again, if we compare it to previous recoveries, in this recovery we are running $127 billion short of the average of the nine previous recoveries since World War II. Something is very wrong. On the Senator's revenue chart, he didn't show you the first 4 years of this administration. He only showed you the most recent years. Why didn't he show you all the years? Why did he just show you some of the years? Well, I think here is the reason. It gives a very different conclusion than the one he drew. When you show all the years, what you see is we have not gotten back to the revenue base we had back in 2000 until 2006. It has taken us 6 years to get back to the revenue base we had back in 2000. He didn't want to show you that. He doesn't want to show you that, after the big tax cuts in 2001, the revenue base went down. It went down again the next year and stayed down the next year and the next year. Only in 2006 did we get back to the revenue base we had 6 years ago. Maybe that is the reason the debt has exploded under their watch. The deficits grew dramatically under their watch. Increasingly, we are in hock to foreign governments and foreign entities and foreign investors, and our budget says we have to stop it. We have to balance the budget and, yes, we have to look to the longer term. My own belief is, and I think virtually everyone in this town knows this, the only way we are going to deal with the nagging long-term fiscal shortfalls is with bipartisan agreement, one between Republicans and Democrats, one in which both of us come to the table and compromise. That is what Senator Gregg and I have proposed, a working group, eight Democrats, eight Republicans, with the responsibility to come up with a plan to deal with these long-term fiscal imbalances. My own belief is that is the only way that will happen. I thank the Chair, and I yield the floor.

Mr. CONRAD

Mr. CONRAD. Mr. President, as an alumnus of the George Washington University, GW, I wish to take a few minutes to pay tribute to president Stephen Joel Trachtenberg, who is retiring in July after 19 years of dedicated service to GW. President Trachtenberg became the 15th president of GW on August 1, 1988. A native of Brooklyn, NY, President Trachtenberg came to GW from the University of Hartford, CT, where he had been president for 11 years. Before assuming the presidency of Hartford, he served for 8 years at Boston University as vice president for academic services and academic dean of the College of Liberal Arts. Previously, he was a special assistant for 2 years to the U.S. Education Commissioner, Department of Health, Education and Welfare. He was also an attorney with the U.S. Atomic Energy Commission and a legislative aide to former Indiana Congressman John Brademas. President Trachtenberg has shown a strong commitment to public, civic, and personal service. He worked tirelessly to honor and enhance the relationship between the University and the District of Columbia, supporting and mentoring students, and leading and advocating for reinvention, change and civic engagement. In 1989, President Trachtenberg created the 21st Century DC Scholars Program--now the Stephen Joel Trachtenberg Scholars--which has granted almost 100 full scholarships to students from the DC Public Schools to attend GW. Under his leadership, GW's Multicultural Student Services Center has become a strong center for cultural awareness and celebrations, student development, and diversity training. His dedication to civic service is reflected throughout the University, its faculty, and its students. GW has experienced great changes and improvements under President Trachtenberg's leadership. During his tenure, the university has seen the number of undergraduate applications triple. Financial aid to students, research funding, and campus infrastructure investment have also significantly increased. President Trachtenberg has received numerous accolades from across the Nation and abroad for his service, vision, intellect, wit and compassion. His passion and demonstrated commitment to GW and its students, the city of Washington, DC, and the pursuit of lifelong learning are to be commended. I congratulate him on his record of service and outstanding leadership.

Mr. CONRAD

Mr. CONRAD. Mr. President, I would like to comment today on the Stolen Valor Act of 2005 that was signed into law by President Bush on December 20, 2006. I am extremely proud of authoring the Senate version of this legislation that ultimately became law. The new law that has resulted from the Stolen Valor Act strengthens and expands the protections for our Armed Forces military service awards and decorations. Since the Stolen Valor Act was signed into law, there have been reports of concerns raised by medal collectors, historians, museums, family members that inherit medals, and persons legitimately possessing, shipping, or selling military service awards and decorations. I would like to make it clear for the Record that the intent and effect of my legislation and the resulting law is only to provide the tools law enforcement need to prosecute those fraudulently using military service awards they did not earn through service to our Armed Forces. It does not in any way restrict legitimate possession, use, shipment, or display of these awards and decorations. Before the law was enacted, my legislation was reviewed by the Senate Judiciary Committee, the House Judiciary Committee, the Department of Justice, and the Congressional Research Service's American Law Division. All concluded that the Stolen Valor legislation does not negatively impact those legitimately in possession of military service awards and decorations. Although the new law modifies title 18 USC, section 704, it does not impact the legitimate purchase, sale, or possession of medals. The key part of this passage is the phrase, ``except when authorized under regulations made pursuant to law.'' That exception refers to 32 Code of Federal Regulations (CFR), section 507. I believe the concerns raised by collectors and dealers of military medals and memorabilia may stem from lack of familiarity with the CFR and its relationship to statutory law. The CFR is the regulation that implements and administers statutory provisions, in this case, the provisions of 18 USC section 704 as amended by the Stolen Valor Act. The CFR specifically states in section 507.12(b), ``Mere possession by a person of any of the articles prescribed in Sec. 507.8 of this part is authorized provided that such possession is not used to defraud or misrepresent the identification or status of the individuals concerned.'' According to numerous legal experts consulted on the drafting of the Stolen Valor legislation, ``mere possession'' would include family members who inherit medals, museums, collectors, approved medals dealers, historians, and other persons in possession or selling medals that do not use them for fraudulent purposes. In addition, CFR Sec. 507.8(a) indicates, ``the articles listed in paragraphs (a) (1) through (10) of this section are authorized for manufacture and sale when made in accordance with approved specifications, purchase descriptions or drawings.'' The articles listed as authorized for manufacture and sale in Sec. 507.8(a) include decorations, service medals, ribbons, lapel buttons, and badges with the exception of the Medal of Honor. The CFR allows for the sale of all U.S. medals, except the Medal of Honor, and insignia, provided that an official government manufacturer has made them and that the Institute of Heraldry, IOH, approved those pieces. Thus, the Stolen Valor Act does not in any way stop collectors or dealers from selling or collecting officially made medals and insignia, whether they were made yesterday or 50 years ago. In closing, I again want to assure those legitimately in possession of selling, displaying, or shipping military service awards that the Stolen Valor Act is only directed at those who fraudulently use military service awards and decorations. I have been to Walter Reed Hospital, Bethesda Naval Hospital, and have awarded numerous awards and decorations to soldiers and veterans. These brave men and women have given so much to ensure our freedoms. I strongly believe protecting the meaning and valor of military service awards is a very important way we can continue to honor their service and sacrifice. I ask unanimous consent that a memo from the American Law Division at Congressional Research Service supporting this analysis be printed in the Record at the conclusion of my remarks.