T. Gorton

Mr. GORTON

Mr. GORTON. Mr. President, I am pleased to join Senator Hatch today in introducing the Software Export Equality Act. In 1971, Congress created foreign service corporations [FSC] in order to encourage U.S. exports and increase U.S. competitiveness in the international marketplace. Under current law, FSC legislation gives U.S. manufacturers a tax incentive for exports of domestically produced goods. Today, virtually every U.S. product manufactured for export abroad qualifies for FSC benefits. Yet current tax laws continue to discriminate against one of the America's fastest growing exports: software. Due to the IRS's narrow interpretation of FSC rules, the software industry is precluded from qualifying for any FSC benefits despite the fact that approximately 85 percent of products sold by U.S. software companies are developed in the United States and it currently ranks seventh in U.S. industry exports. This bill will clarify that computer software qualifies as export property and is eligible for FSC benefits. Continuing to deny the benefits of FSC rules to the software industry is not only unfair, it poses a serious impediment to the competitiveness of U.S. manufactured software. Software is one of the America's fastest growing industries, with revenues of more than $200 billion and a growth rate of 13 percent per year on average. As the world leader in software development, the United States is home to more than 8,000 software companies that provide, directly and indirectly, millions of high-paying, high-skilled American jobs in many States. Software is a vital and growing part of many State economies, including my own State of Washington. In Washington State, the software industry accounted for $3.5 billion worth, and 12 percent, of Washington State exports and employed over 22,509 people in 1995. Microsoft, the State's largest software producer, alone supported 1.5 percent of the State's economy in 1995. But these impressive numbers do not even take into account the significant impact the numerous small and middle-sized software companies that make up the majority in Washington State have on the State's economy. The worldwide market for software is exploding and global competition is quickly on the rise. In this increasingly competitive world economy, incentives to encourage firms to develop and export from the United States are more important than ever to job creation and economic stability. This bill provides a simpe way to ensure the U.S. software industry remains the world leader in software manufacturing and American software jobs are protected. I encourage my colleagues to join me in support of this very important legislation and urge its quick passage in the Senate.

Mr. GORTON

Mr. GORTON. Mr. President, is the Senate under any time rules?

Mr. GORTON. I ask unanimous consent I might be permitted to speak for up to 10 minutes.

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

Mr. GORTON

Mr. GORTON. Mr. President, the long and often thoughtful debate over the balanced budget amendment is now drawing to a close. It is also apparently drawing to a regrettable unsuccessful end unless a sudden flash of enlightenment takes over the minds and hearts of one or more of the opponents to this amendment. Nevertheless, I believe it appropriate for every Member of this body to state his or her reasons for support or for opposition to the amendment. While I have done so in part, at least in the past, I should like to share with my colleagues some of my thoughts on the subject. Mr. President, from my perspective, perhaps the single most important reason for voting in favor of this constitutional amendment, for including a requirement making it considerably more difficult to spend money that we do not have, is a moral or ethical one. Mr. President, we living today, representing the people of our States today, simply do not have the right to spend money to undertake obligations which we collectively are unwilling to pay for, thereby consuming whatever goods or services Government provides to us today and sending the bills to our children and to our grandchildren. Mr. President, that is simply the wrong thing to do. We should not engage in that practice at all, and it is a simple disgrace that we have now engaged in it in each and every year for almost three decades. Now, I am aware of, and I subscribe to, the positive economic impacts of balancing our budget. It is clear to me, as it is to most, that it will mean lower interest rates which, in turn, make it easier for young people--for all of our people--to purchase a home, an automobile, a college or university education. At the same time, a balanced budget provides more economic growth and, thus, greater opportunities, again, for all of us, but particularly for generations just moving into the work force. These are important arguments. These are goals that we all ought to see. But I believe that the balanced budget amendment would be imperative even if we were not able to prove in our own minds the economic benefits of the amendment. For the reasons that I have just stated, it is wrong for us to spend the debt and to send the bills to those who are not represented here, who, Mr. President, in most cases, have not yet been born. In this long and leisurely and thoughtful debate, we have been given dozens of reasons not to pass the amendment. Dozens of scarecrows have been raised: We can't respond to a military emergency that does not involve a declaration of war. We can't respond to a physical disaster. We can't build our infrastructure. Social Security, or some other program, may be hurt by a balanced budget constitutional amendment. Mr. President, first, as someone interested in the history of our country, I am reminded by the recitation of these objections to nothing so much as the case against adopting the Constitution in the first place in 1787 and 1788. These arguments stem, just as did those arguments more than two centuries ago, from a fear of the unknown. But, Mr. President, those fears must be weighed against the actual, tangible history of the last half century. And that actual, tangible history shows us that, regrettably, we do not, without some constitutional constraints, balance our budget. In fact, in my mind, each one of those threats is more likely to become reality if we don't balance the budget than if we do. A balanced budget will provide a far stronger economy for the support of Social Security, a far stronger framework for the building of our infrastructure, and a far stronger structure within which we can provide for the education for our young people than does the present system, which threatens all of these things by the accumulated burden of the debt, added to each year by the amount of its annual deficit. So the very threats that are causing Members to vote against this constitutional amendment are more likely to come true if they are successful than if they are not. Mr. President, this may well be the most important single vote that we cast during the course of this Congress. It is our duty, whether the constitutional amendment passes or not, to produce for the people of this country, for our colleagues, a budget which is balanced in fact. And it is clearly possible--though history gives very little cause for optimism--that we may do so in the absence of this amendment. At least this debate has led to lip service on the part of the President of the United States and almost every Member of this Congress to the proposition that we should do so. But to see to it that not only we do so, but that our successors do so, that we break the mold of the history of the last decades, the passage of this amendment is absolutely essential. I am pleased that all of my colleagues on this side of the aisle plan to vote in favor of the constitutional amendment. I hope that a sudden flash of enlightenment on the other side of the aisle will help us to get the necessary 67 votes. Mr. REID addressed the Chair.

Mr. GORTON

Mr. GORTON. Mr. President, I am proud today to honor the retirement of the Navy's A-6E Intruder. Attack Squadron 196 at Whidbey Naval Air Station in my home State and Attack Squadron 75 in Virginia Beach will stand down the final two Intruder squadrons in simultaneous ceremonies today. As the backbone of carrier attack aviation for the past 36 years, the A-6E Intruder stood ready to face the enemy in any weather, day or night. The A-6 put teeth in the term ``carrier forward presence.'' It saw combat in Vietnam, Lebanon, Libya, in the waters of the Arabian Gulf and over the shores of Kuwait and Iraq. It delivered iron bombs, laser guided bombs, and every air-to-ground missile available in the Navy inventory for the past three decades. The A-6E Intruder was the hardest working plane on the flight deck. The pilots and bombardier/navigators who flew the Intruder had great affection and respect for the aircraft and its ability to withstand heavy enemy fire. They too should be honored for their courage and dedication to this great nation. They will truly miss the A-6. We also honor the thousands of Intruder maintainers, both past and present, who kept the A-6E flying day and night, at sea and ashore. The excellent record of the Intruder is a testament to the hard work of these men and women. Finally, let us remember the Intruder crews who never returned. In service to our Nation, they paid the ultimate price flying this machine that they loved. We must never forget them. From this day on, the United States Navy must continue to carry on the spirit of Intruder attack. On a personal basis, my son-in-law, Joe Nortz, was an A-6 bombardier/ navigator during most of his 20-year Navy career. He is attending the stand down ceremony at NAS Whidbey as a great admirer of a great aircraft.

Mr. GORTON

Mr. GORTON. Mr. President, I am pleased to have joined my colleagues in supporting final passage of H.R. 668, an urgently needed measure to reimpose the aviation excise taxes through the end of fiscal year 1997, and give the Internal Revenue Service authority to transfer previously collected aviation excise taxes into the Airport and Airway Trust Fund. Reinstatement of these excise taxes for fiscal year 1997 are essential to the continued operation of our Federal aviation system. The Airport and Airway Trust Fund into which these taxes are deposited, is funded by a 10-percent passenger ticket tax; a 6.25-percent cargo waybill tax; a $6.00 per person international departure tax; and certain general aviation fuel taxes. In 1997, this trust fund is expected to provide 62 percent of the Federal Aviation Administration's [FAA] fiscal year 1997 budget. More specifically, the trust fund is expected to provide $5.3 billion of the FAA's $8.6 billion total fiscal year 1997 budget. Of this $5.3 billion, $3.6 billion will provide 100 percent of the resources necessary to fund the FAA's capital programs, while $1.7 billion will provide 34 percent of the fiscal year 1997 budget for FAA operations. When the authority to collect the aviation excise taxes lapsed on December 31, 1996, officials from both the General Accounting Office [GAO] and the FAA initially predicted that the $4.35 billion in uncommitted balances in the fund at that time would be available to fund the FAA's capital programs through June 30, 1997. If Congress did not reinstate the taxes by July 1, 1997, they predicted, the Office of Management and Budget [OMB] would have to reduce the FAA's capital accounts, which are totally funded out of the trust fund--including both the facilities and equipment [F&E] account and Airport Improvement Program, to account for the $1 billion shortfall between the trust fund's fiscal year 1997 expected contribution of $5.3 and the actual contribution of $4.35. According to the FAA, this reduction in the facilities and equipment account could force the FAA to issue stop work orders on all major F&E contracts, which include upgrades of the current air traffic control system throughout the country. The Airport Improvement Program would suffer an even greater impact. Under the original projections, if the aviation taxes were not reinstated, funding for the airport improvement would have to be reduced by as much as $300 million in fiscal year 1997. Existing funding agreements under the AIP would be maintained, but no new, discretionary funding would be provided for high priority safety and security projects, capacity projects, and important noise mitigation programs. From a Washington State perspective, fiscal year 1997 funding for noise mitigation is particularly important. Seattle-Tacoma International Airport has been a national leader in noise mitigation programs and was the first to implement a local housing insulation program to reduce the impact on houses near the airport. The current program, which is partially funded through the AIP's discretionary noise mitigation grants, is scheduled to run through the year 2003. Under the FAA and GAO's original projections, it was clear that reinstating the taxes as quickly as possible was the appropriate action for Congress to take to ensure that the U.S. aviation system continues to be the best system in the world. The need to do this became even more urgent in mid-January, however, when the Treasury Department announced that because of an accounting error, the Airport and Airway Trust Fund could be insolvent as early as March or April. Let me explain the events, as I understand them, which led to accounting error made at by the Treasury Department. Each airline deposits the ticket taxes it collects to the IRS every 2 weeks. Under the look-back provisions of the IRS safe harbor rule, however, an airline can base the amount of that payment on the amount of excise taxes it collected in a 2-week period from the second preceding quarter before the current quarter. In other words, in making a 2-week tax payment in the third quarter of the year, an airline can deposit the amount it collected in a 2-week period during the first quarter of that year. If the taxes it deposits are less than what the airline actually took in during the third quarter, the airline can make up that underpayment when it files its quarterly return. The quarterly return date is approximately 2 months after the close of the quarter. The 10-percent ticket tax was in place during the fourth quarter of 1996. The airlines semimonthly tax payments for that quarter, however, were based on the second quarter of 1996, during which time no excise taxes were collected. The airlines, in essence, did not remit any excise taxes during the fourth quarter of 1996, even though they were collecting these taxes from passengers at that time. The airlines had to make up for these tax underpayments by the time they file their fourth quarter returns, which are due today. Without this legislation, however, these taxes would not be deposited into the aviation trust fund, since the general-fund-to-trust-fund transfer authority expired along with the aviation excise taxes on December 31, 1996. It appears that the Treasury Department did not account for the complex accounting procedures, and assumed that the trust fund would be credited with $1.5 billion more than it could have been, unless Congress reinstated the authority for the IRS to transfer the fourth quarter excise taxes to the trust fund. Last night, the Senate passed the bill that will avert the imminent insolvency of the trust fund and ensure that our aviation system remains the best and safest in the world. The temporary reinstatement of the excise taxes, however, does not necessarily mean that the taxes should be extended indefinitely. Last year, Congress created the National Civil Aviation Review Commission [NCARC] to study new mechanisms to fund the FAA after an indepedent audit of FAA needs. The report on the independent audit of the FAA's projected needs was released today, February 28, and now the NCARC can do its work and report back to Congress in early October 1997. While I would have preferred to maintain the aviation taxes through the end of the year to ensure that there was not another lapse while Congress thoroughly considers the NCARC recommendations, procedural and time contraints made it impossible to do this.

Mr. GORTON

Mr. GORTON. And then in several years, in a few years when the Social Security trust fund is paying out more money than it is taking in, Congress would be able to pretend that the budget was balanced when, in fact, we were running a huge deficit in the Social Security trust fund. And, in fact, the Social Security trust fund could go absolutely bankrupt, could it not, and yet under that proposal the budget would still be balanced?

Mr. GORTON. In summary, then, I ask my friend from New Mexico, that is just one of the reasons that this proposed change in the balanced budget constitutional amendment is a risky gimmick, and the risk is to Social Security and its beneficiaries themselves; is that not correct?

Mr. GORTON. That $5 trillion figure, you did not pull that out of thin air, did you? That is what the indicators show we would have?

Mr. GORTON. I thank my colleague.

Mr. GORTON. And is it not also true that whether this constitutional amendment passed or not, there would be no impact on the actual total spending of the Government of the United States or the total receipts of the United States; we would simply pretend that the largest single spending and social program were not a part of a budget or of balancing the budget?

Mr. GORTON. And was that not opposed by all of the people who opposed the constitutional amendment with the single exception of the then Senator from Oregon and vetoed by the President of the United States?

Mr. GORTON. And did we not take them up on that proposal and did we not, in fact, pass through the Congress of the United States a budget that would have been balanced by the year specified in the constitutional amendment and would have postponed for an extended period of time the insolvency of the Medicare hospital insurance trust fund?

Mr. GORTON. Is it not also true that all of those, almost all of those who opposed the balanced budget constitutional amendment 2 years ago told us all that was required to balance the budget was courage and dedication on the part of the Congress itself? Is that not pretty much the message that we constantly get from them?

Mr. GORTON. So is it the net result of the defeat of the constitutional amendment 2 years ago that we are simply 2 years closer to the insolvency of the Social Security trust fund and the Medicare hospital insurance trust fund?

Mr. GORTON. Now, perhaps my friend from New Mexico, who is the chairman of the Budget Committee, and who has totally immersed himself in these problems, has a better memory than I have, but does the Senator from New Mexico remember any proposal after the defeat of the constitutional amendment last time by those who opposed it that would buttress or build up the Social Security trust fund, any changes in eligibility, any increases in the payroll tax or not? I remember no attempts in this last 2 years to do anything about this imminent or future insolvency of the Social Security trust fund. Does my friend from New Mexico?

Mr. GORTON. And we heard all of the same alarms from those who ultimately opposed the balanced budget amendment about the future of Social Security at that point?

Mr. GORTON. Am I not correct in remembering that we went through exactly this same debate 2 years ago at the time at which the balanced budget constitutional amendment ultimately was defeated by one vote in the Chamber of the Senate?

Mr. GORTON. Will the Senator from New Mexico yield to another more general question?

Mr. GORTON. Will the Senator from New Mexico yield for a question?

Mr. GORTON. Is that not exactly one of the forms of risky gimmicks that the Senator spoke of should we adopt this amendment?

Mr. GORTON

Mr. GORTON. Mr. President, it is with sorrow that I recognize the passing of a good man and a fine citizen, Mr. John D. McAlister, who died yesterday. John worked at Tree Top in Yakima, WA, where he served as director of government affairs. In this capacity he became a great friend of the Washington State congressional delegation and a magnificent voice for the agricultural industry. John's activities were not only confined to his work--he also served the Yakima community as a member of many agricultural industry organizations and of the Goverment Affairs Council of the Association of Washington Businesses, where he sat on the board of directors. I am honored to have known John McAlister, and am grateful for his service to Washington State agriculture and to his community in Yakima. John is survived by his wife, Patricia, to whom I extend my condolences.

Mr. GORTON

Mr. GORTON. Mr. President, last Thursday, I joined my colleague from Arizona, the new Chairman of the Senate Commerce Committee--Senator McCain, the ranking member of the full committee, Senator Hollings, and the ranking member of the Aviation Subcommittee, Senator Ford, in sponsoring the Airport and Airway Trust Fund Taxes Short Term Reinstatement Act. This legislation will extend the existing system of aviation excise taxes through September 29, 1997, and give the Internal Revenue Service authority to transfer previously collected aviation excise taxes into the airport and airway trust fund. The airport and airway trust fund is funded by a 10-percent passenger ticket tax; a 6.25-percent cargo waybill tax; a $6 per person international departure tax; and certain general aviation fuel taxes. In 1997, this fund is expected to provide 62 percent of the Federal Aviation Administration's [FAA] fiscal year 1997 budget. More specifically, the trust fund is expected to provide $5.3 billion of the FAA's $8.6 billion total fiscal year 1997 budget. Of this $5.3 billion, $3.6 billion will provide 100 percent of the resources necessary to fund the FAA's capital programs, while $1.7 billion will provide 34 percent of the fiscal year 1997 budget for FAA operations. But this fund, so critical to the operation and improvements of our aviation system, is no longer being funded. When the authority to collect the aviation excise taxes lapsed on December 31, 1996, officials from both the General Accounting Office [GAO] and the FAA predicted that the $4.35 billion in uncommitted balances in the fund at that time would be available to fund the FAA's capital programs through June 30, 1997. By July 1, 1997, however, they predicted that the trust fund would become insolvent. Accordingly, if Congress did not reinstate the taxes, it was predicted that the Office of Management and Budget [OMB] would have to reduce the FAA's capital accounts, which are totally funded out of the trust fund --including both the facilities and equipment [F&E] account and Airport Improvement Program, to account for the $1 billion shortfall between the trust fund's fiscal year 1997 expected contribution of $5.3 billion and the actual contribution of $4.35 billion. According to the FAA, this reduction in the facilities and equipment account could force the FAA to issue stop work orders on all major F&E contracts, which include upgrades of the current air traffic control system throughout the country. The Airport Improvement Program would suffer an even greater impact. Under the original projections, if the aviation taxes were not reinstated, funding for the Airport Improvement Program would have to be reduced by as much as $300 million in fiscal year 1997. Existing funding agreements under the AIP would be maintained, but no new, discretionary funding would be provided for high-priority safety and security projects, capacity projects, and important noise mitigation programs. Quite simply, this is unacceptable. If delays in the implementation of safety and security initiatives, as well as construction of capacity enhancement projects, are caused by lack of funds, then we in Congress will be responsible for weakening the safest aviation system in the world. From a Washington State perspective, fiscal year 1997 funding for noise mitigation is particularly important. Seattle-Tacoma International Airport has been a national leader in noise mitigation programs and was the first to implement a local housing insulation program to reduce the impact on houses near the airport. The current program, which is partially funded through the AIP's discretionary noise mitigation grants, is scheduled to run through the year 2003. Under these original projections, it was clear that reinstating the taxes as quickly as possible was the appropriate action for Congress to take to ensure that the U.S. aviation system continues to be the best system in the world. Last Wednesday afternoon, however, this situation became more dire when the Treasury Department announced that because of an accounting error, the airport and airway trust fund could be insolvent as early as March or April. Let me explain the events, as I understand them, which led to accounting Error made at by the Treasury Department. Each airline deposits the ticket taxes it collects to the IRS every 2 weeks. Under the look-back provisions of the IRS safe harbor rule, however, an airline can base the amount of that payment on the amount of excise taxes it collected in a 2-week period from the second preceding quarter before the current quarter. In other words, in making a 2-week tax payment in the third quarter of the year, an airline can deposit the amount it collected in a 2-week period during the first quarter of that year. If the taxes it deposits are less than what the airline actually took in during the third quarter, the airline can make up that underpayment when it files its quarterly return. The quarterly return date is approximately 2 months after the close of the quarter. The 10 percent ticket tax was in place during the fourth quarter of 1996. The airlines' semimonthly tax payments for that quarter, however, were based on the second quarter of 1996, during which time no excise taxes were collected. The airlines, in essence, did not remit any excise taxes during the fourth quarter of 1996, even though they were collecting these taxes from passengers at that time. The airlines will have to make up for these tax underpayments by the time they file their fourth quarter returns, which are due on February 28, 1997. These taxes, however, will not be deposited into the aviation trust fund, since the general-fund-to-trust-fund transfer authority expired along with the aviation excise taxes on December 31, 1996. It appears that the Treasury Department did not account for the complex accounting procedures, and assumed that the trust fund would be credited with $1.5 billion more than it can be unless Congress reinstates the authority for the IRS to transfer the fourth quarter excise taxes to the trust fund. The FAA now expects to run out of money for its capital programs, and possibly its operations, much sooner than originally anticipated. Mr. President, with Wednesday's Treasury Department announcement that the trust fund could be insolvent by March, I believe it is clear that the Senate's first and overriding priority must be to immediately reinstate the excise tax and transfer authority. While our system continues to be the safest aviation system in the world, Congress owes it to the American people to consider this legislation as quickly as possible to ensure aviation safety, security, and capital investment are not jeopardized in any manner.

Mr. GORTON

Mr. GORTON. Mr. President, on January 1, 1997, the aviation system in the United States received a serious blow when the aviation excise taxes lapsed. Together, these taxes--the 10-percent passenger ticket tax; the 6.25-percent cargo waybill tax; the $6.00 per person international departure tax; and certain general aviation fuel taxes-- account for more than 90 percent of the revenues in the airport and airway trust fund, which funds the Federal Aviation Administration and its programs. Without the collection of these revenues, the uncommitted balance of the airport and airway trust fund is quickly being depleted. In fact, it is running dry at a rate of $175 per second --more than $15 million every day. Yesterday, officials at the Department of the Treasury announced that if no action is taken to reimpose these taxes, the trust fund could be insolvent as early as March. For this reason, I am pleased to join my colleagues, Senators McCain, Hollings, and Ford, in sponsoring the Airport and Airway Trust Fund Taxes Short Term Reinstatement Act. This legislation will extend the existing system of aviation excise taxes through September 29, 1997, and give Internal Revenue Service authority to transfer previously collected aviation excise taxes into the airport and airway trust fund. The numerous aviation tragedies in 1996 have, I believe, lowered the public's confidence in the safety of the U.S. aviation system. While our system continues to be the safest aviation system in the world, Congress owes it to the American people to consider this legislation as quickly as possible to ensure aviation safety, security, and capital investment are not jeopardized in any manner.