Bob Graham

Mr. GRAHAM

Mr. GRAHAM. Mr. President, on rollcall No. 50, I voted ``aye.'' It was my intention to vote ``no.'' Therefore, I ask unanimous consent that I be permitted to change my vote since it would in no way change the outcome of the vote.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I am going to use this time at this late hour, not to talk about the subject that has been before the Senate most of the day but, rather, to an issue that I think is dominating the attention of the American people even more than the question of campaign finance reform, and that is what is happening in their wallets, what is happening to their economic well-being. We went through a long Presidential campaign in the year 2000. During that campaign there was considerable discussion about tax policy, fiscal policy, the direction of the economy. Each of the candidates tended to mark out their own position. Then Governor Bush basically said, beginning before the Iowa caucuses in January of 2000, that taxes were too high; that the surplus was generating more money than the Federal Government could intelligently utilize, and therefore a significant amount of that surplus should be returned to the taxpayers. He laid out a specific plan to return $1.6 trillion of an estimated $5.6 trillion surplus; about a $2.6 trillion surplus minus the Social Security and Medicare trust fund. The Democratic candidate, Vice President Gore, said we should have a tax policy targeted to achieve a set of specific economic and social purposes. They ranged from education to encourage more people to send their children to college, to continue their own personal education in a changing economy, to energy conservation: How could we use the Tax Code to encourage a set of incentives for conservation? I suggest that just as the long campaign of 2000 finally ground itself to an end, those arguments have, similarly, ground themselves to an end. What we have come to realize is that the issue no more is how to return an unending gusher of surpluses or how to target in a very clinical, almost surgical sense, tax relief in order to achieve specific economic and social purposes; rather, the question before us now is, What should the National Government be doing in a time of unexpected economic slowdown? We even had, in the period of the transition, the Vice President- elect state the ``R'' word. He began to use the suggestion that we might be in or close to a recession. If that is true, and if we are clearly--as we are--in a slowdown, and if in fact we are moving to an even more serious economic situation, it is largely because consumers have suddenly lost confidence in their own future and in our Nation's economic future, and they have stopped spending. Since two-thirds of the Nation's economic output is predicated on the ability of consumers to spend and consume that output, that starts a process of a downward cycle. Spending slows on a grand scale. The economy slows. Layoffs begin. Pay cuts materialize. The cycle intensifies. The disease that may have started out largely in our heads is now in our bank accounts. Colleagues, we are in the throes of that illness today. Just a few statistics over the past couple of months: Layoffs totaling 275,000 jobs have been announced, and they have been announced from some of the businesses that we regard as the mainstays of America's consumer economy, such as last week's announcement of Procter & Gamble. This bad news has led to a 35-point plunge in the consumer confidence index from an all-time high of 142.5 just as recently as September of 1995. I think the good news in this dreary circumstance is that we do not have to stand on the sidelines as spectators and let the hand of the market control our destiny. We have the ability to take some steps that would soften the impact of a declining economy that might be able to even buy an economic insurance policy to protect us against an unnecessarily long or deep economic decline. Part of that ability is being exercised by the Federal Reserve Board as it has started the process of ratcheting down the interest rate increases which it ratcheted up over the preceding couple of years. We also have the opportunity to play a role not as a spectator but as a participant through our control of fiscal policy. In the past, Democrats would have said the fiscal policy that we want to follow is one to accelerate spending: Let's spend more money as a means of generating greater economic activity. Today, some of us who are the descendents of the Presiding Officer's noble son, Thomas Jefferson, believe that the step we need to take to stimulate the economy is to put additional dollars in the pockets of American families so that they can make the decision as to where to spend, and those decisions and the increased confidence they have will cause additional dollars to go into their pockets, and we will begin to attack this psychology of despair which has become such a significant reason for the decline in consumer demand. I believe that stimulative tax cuts in this year of 2001 and in the year 2002 are what are required of Members of the Congress to play our role as active participants in avoiding an unnecessarily severe economic downturn. I believe there are some characteristics those tax cuts should have. I believe that is where the debate is today. As recently as a month ago, if you had said I believe we ought to use the resources that are available through our surplus for an economic stimulus in tax cuts, you could not have commanded a majority on the Republican side because there would have been objection as to the direction in which you were suggesting the tax cuts flow. And you would not have gotten a majority on the Democratic side because they would have said tax cuts are too large in terms of our overall allocation of the surplus, and maybe a question as to whether tax cuts could make any difference as a stimulative matter at all. I believe that argument has now been decided, that the American people want us to--and the American people have concluded correctly, in my opinion, that it will be in their economic best interest if we provide an immediate significant tax stimulus. The American people understand what some of the characteristics of that tax stimulus must be. That tax stimulus must be large enough to make a difference. We might argue at the edges as to what the numbers would be, but my suggestion, based on the advice of a range of prominent economists, is that we need to be able to inject into the economy during calendar year 2001 at least $60 billion in tax cuts; and, if we can do so, we can anticipate that the gross national domestic product will grow by one-half to three-quarters of a percentage point greater than it would have grown had we not taken that action. Senator Corzine, who joins us now, and I have developed a formula that we believe meets the criteria of an effective economic stimulus. That formula came from an idea in President Bush's tax proposal; that is, that we create a new 10-percent tax bracket; that that tax bracket cover taxable income for single Americans up to the first $9,500 of their taxable income; and that for joint filers, for married couples, it would be up to $19,000 of taxable income; the first $19,000 would be taxed at the 10-percent rate; and that all of those would be effective as quickly as Congress could pass it but made retroactive to January 1, 2001. That simple, easily enacted withholding rate change would result in single Americans this year--calendar year 2001--receiving a $475 tax cut if they had taxable income of $19,000 or more. For married couples, it would result in a $950 tax cut for the year 2001. Our proposal would continue this as a permanent change in the law, so those same reductions would be applicable in each future year. This plan is not deceptively simple; it is truly simple. That is why it would work. Taxpayers will see it. They will understand it. They will feel comfortable that this is not a one-time ``manna'' from Heaven; that it represents a permanent change in their tax relationship. They would feel comfortable as early as this summer in beginning to incorporate that into their economic expectations. While this tax relief is broad based--every American taxpayer, single or married, who pays Federal income tax would be a beneficiary of this plan--it would provide the largest portion of the relief to middle- income families. That is not a statement based on class warfare or a statement based on fairness; it is a statement based on sheer economic reality. There is a correlation between the tendency of people to spend and the amount of their income. The lower the income, the greater propensity there is that the new additional dollar that would come by reducing tax rates would actually move quickly into the bloodstream of the American economy. So we are, for that reason, since our goal is to stimulate the demand side of the economy, suggesting this single rate change as the most effective means of getting that immediate surge of action in our economic bloodstream. It is large enough to make a difference but it is not so large as to crowd out other important budget priorities. While it is a substantial share of this year's budget surplus-- approximately $2 out of every $3 of the non-Social Security, non- Medicare surplus in 2001 would be committed for this purpose--its claim on future surpluses is much smaller. If I could contrast this with other proposals that are before the Congress and before the American people: The President has a total tax plan of $1.6 trillion. That compares over 10 years with approximately $693 billion that would be the cost of the 10-percent plan Senator Corzine and I are advocating. But there are other differences beyond just the sheer scale of the tax measure. The President's plan would be largely backloaded. Most of the tax benefits would come in the last 4 or 5 years of the 10-year cycle. In fact, in the year 2001, when I believe the stimulus is most needed, the tax cut in the President's plan is only $183 million. That contrasts with the $60 billion Senator Corzine and I believe is the appropriate level of stimulus for this economy. Another plan that is before the Congress and has already passed the House of Representatives is the Ways and Means proposal: The first phase of the President's tax plan, which is limited to changes in marginal rates of the income Tax Code for personal filers. In my judgment, this, too, falls far short of what is needed because it would only provide $11 billion of so-called stimulus in 2001. Eleven billion dollars is better than $183 million, but neither of them are adequate to the task of providing the stimulus that our economy needs. And these packages do not target those taxpayers who are the most likely to use this money, to spend this money in the ways that would best advance our economy. Three-quarters of all taxpayers do not pay beyond the 15-percent bracket as it is currently calculated. That means that three-quarters of all taxpayers have total taxable income of less than $45,000, which is the top of the 15-percent rate. Yet nearly 60 percent of the total cost of both the President's plan and the House Ways and Means's plan is devoted to persons who earn more than $45,000 in taxable income. Again, this is not an issue of class warfare. It is an issue that those higher income folks are less likely than the middle- and lower- income Americans to spend that money and, therefore, create the stimulus in the economy. As I have said, Senator Corzine and I have been very impressed with the President's excellent idea of creating this new 10-percent bracket. We think that deserves to be the centerpiece, the focus, of an economic insurance policy that we can enact soon. What would this mean for a middle-class American family? With the kind of cut we provide, they could almost buy a new Dell computer. They could buy a new RCA 36-inch stereo color TV. They could buy a week's vacation in Florida. We all agree that America's hard-working families deserve that computer, that color TV, and especially that Florida vacation. We all agree that America's workers need job security. Now let's agree on a tax cut that can stimulate the economy and make that job security happen for all Americans this year. I am afraid that we are about to move from the chapter in which the debate was over: Should we have an economic stimulus, a chapter that I think has ended--we now have broad agreement that should be the title of whatever tax relief we provide first in the year 2001--and we are now about to go into a debate on which is the most perfect way to get to that objective. That then fall prey to exactly the comments that the Chairman of the Federal Reserve Board, Mr. Alan Greenspan, made in February to the Senate Budget Committee when he said he was skeptical about an economic stimulus tax plan, not because it did not have the economic potential but he did not believe that the Congress had the capacity to enact it quickly enough to make a difference; that the history of these efforts to use the Tax Code to stimulate the economy has been that a good idea was birthed but it was never nurtured quickly enough to be fully available while the problems still existed. To me, it is critical we have a plan that is simple and direct enough, that is sufficiently shorn of controversy that it can be enacted, ideally by the first of July, so that it could begin to affect paychecks in August of this year. We need to be bold and aggressive and recognize that this is our time to step out of the boxes above the arena down to the floor and become an active participant in assisting American families in dealing with this serious problem of a declining economy and the effect that it is having on the quality of their lives and on their psychological sense of the future for their families and our Nation. We have the opportunity to do so. We should grasp that opportunity now. Thank you, Mr. President.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I rise today on behalf of Senators Chafee, McCain, Feinstein, Jeffords, Wellstone, Murray, Kennedy, Collins, Specter, Schumer, Clinton, and myself to introduce the Immigrant Children's Health Improvement Act of 2001. This bill will give States the option to provide Medicaid and CHIP coverage to immigrant children and pregnant women who arrived legally in this country after August 22, 1996. That is the date Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act-- commonly known as welfare reform. The goal of that legislation was to encourage self-sufficiency in adults. But it also affected children, including immigrants, citizens, and those not yet born. The legislation cut off government-supported health care for all legal immigrants, regardless of their ages or circumstances. Census data released last week offered good news on the number of uninsured people in America. The data shows that the number of Americans without health insurance fell from 44.3 million to 42.6 million in 1999. This is the first decline since 1987. But the news is not good for everyone who works hard in this country, who plays by the rules, who tries to build a better life for themselves and their families. What was not in the headlines is the fact that the proportion of immigrant children who are uninsured remains extremely high. A new report by the Urban Institute shows that in the last year, nearly half of low-income immigrant children in America had no health- insurance coverage. In my State of Florida, that ratio is nearly three to one. This is just one of many reports that show that in our zeal to discourage dependency in adults, we unintentionally punished children. A study by the Center on Budget and Policy Priorities finds that the percentage of low-income immigrant children in publicly-funded coverage--which was low even before welfare reform--has fallen substantially. Florida is home to more than half a million uninsured children, many of whom are in this country legally or are citizens whose immigrant parents are ineligible for coverage and so think their children are similarly barred. Under this bill, States have the option of taking steps to change that by eliminating the arbitrary designation of August 22, 1996, as a cutoff date for allowing children to get health care. Giving States the option of providing this coverage to legal immigrant children and pregnant women would cover more than 200,000 people a year. States have asked for this option. Many are already trying to provide coverage but can't make up the holes in their budget. In their 2001 Winter Policy Report, the National Governors' Association endorsed this commonsense policy proposal. The National Council of State Legislators has also endorsed this bill. More than 200 respected public-interest groups including Catholic Charities, the National Council of La Raza, the National Association of Public Hospitals, the National Immigration Law Center, the Children's Defense Fund, and the American Academy of Pediatrics have all joined together in support of the bill. Beginning today and for months to come, these organizations will be holding events to rally behind this and other legislation that supports the goal of providing healthy solutions for hard-working American families. Under this umbrella, Senators Kennedy and Jeffords will be introducing legislation to restore food stamps to legal immigrants and Representatives Levin and Morella will be introducing a bill to protect immigrant women from domestic violence. Passage of the Immigrant Children's Health Improvement Act is an important step in revisiting the welfare reform legislation. What we now realize, years after passing that landmark law, is that legal immigrant children are, as much as citizen children, the next generation of Americans. Providing Medicaid and CHIP to legal immigrant children is critical in order to guarantee that generation can be healthy and productive members of their adopted country. We call upon Congress and the President to act this year and pass this important bill.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I rise today on behalf of Senators Chafee, McCain, Feinstein, Jeffords, Wellstone, Murray, Kennedy, Collins, Specter, Schumer, Clinton, and myself to introduce the Immigrant Children's Health Improvement Act of 2001. This bill will give States the option to provide Medicaid and CHIP coverage to immigrant children and pregnant women who arrived legally in this country after August 22, 1996. That is the date Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act-- commonly known as welfare reform. The goal of that legislation was to encourage self-sufficiency in adults. But it also affected children, including immigrants, citizens, and those not yet born. The legislation cut off government-supported health care for all legal immigrants, regardless of their ages or circumstances. Census data released last week offered good news on the number of uninsured people in America. The data shows that the number of Americans without health insurance fell from 44.3 million to 42.6 million in 1999. This is the first decline since 1987. But the news is not good for everyone who works hard in this country, who plays by the rules, who tries to build a better life for themselves and their families. What was not in the headlines is the fact that the proportion of immigrant children who are uninsured remains extremely high. A new report by the Urban Institute shows that in the last year, nearly half of low-income immigrant children in America had no health- insurance coverage. In my State of Florida, that ratio is nearly three to one. This is just one of many reports that show that in our zeal to discourage dependency in adults, we unintentionally punished children. A study by the Center on Budget and Policy Priorities finds that the percentage of low-income immigrant children in publicly-funded coverage--which was low even before welfare reform--has fallen substantially. Florida is home to more than half a million uninsured children, many of whom are in this country legally or are citizens whose immigrant parents are ineligible for coverage and so think their children are similarly barred. Under this bill, States have the option of taking steps to change that by eliminating the arbitrary designation of August 22, 1996, as a cutoff date for allowing children to get health care. Giving States the option of providing this coverage to legal immigrant children and pregnant women would cover more than 200,000 people a year. States have asked for this option. Many are already trying to provide coverage but can't make up the holes in their budget. In their 2001 Winter Policy Report, the National Governors' Association endorsed this commonsense policy proposal. The National Council of State Legislators has also endorsed this bill. More than 200 respected public-interest groups including Catholic Charities, the National Council of La Raza, the National Association of Public Hospitals, the National Immigration Law Center, the Children's Defense Fund, and the American Academy of Pediatrics have all joined together in support of the bill. Beginning today and for months to come, these organizations will be holding events to rally behind this and other legislation that supports the goal of providing healthy solutions for hard-working American families. Under this umbrella, Senators Kennedy and Jeffords will be introducing legislation to restore food stamps to legal immigrants and Representatives Levin and Morella will be introducing a bill to protect immigrant women from domestic violence. Passage of the Immigrant Children's Health Improvement Act is an important step in revisiting the welfare reform legislation. What we now realize, years after passing that landmark law, is that legal immigrant children are, as much as citizen children, the next generation of Americans. Providing Medicaid and CHIP to legal immigrant children is critical in order to guarantee that generation can be healthy and productive members of their adopted country. We call upon Congress and the President to act this year and pass this important bill.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, for 133 years, since Congress established a Federal personal bankruptcy law, there has been a recognition that the law is a balance of the interests of the National Government in uniformity and the interests of the States in terms of local values and circumstances. Federal law presently allows States, for instance, to establish how much of their residents' property can be protected or exempt from seizure during bankruptcy. This delicate relationship tests our fundamental commitment to the concept of federalism. Everybody is for federalism. Everyone favors more local control, placing decisions closest to those who are involved, until it begins to affect a specific interest of their own. Then they become what I refer to as ``situational federalists.'' If the situation does not result in a conclusion that is to your liking, you decide that federalism becomes a lesser value. We are being tested today on, do we believe, as this Congress has for 133 years, that personal bankruptcy should be a balance of the interests of uniformity at the national level, but recognize the legitimate interests of the States and their citizens in protecting certain important values. Since most of the creditor-debtor relationships tend to be within a single State, this is an issue in which States have had to make the same kinds of hard choices that we have been dealing with in consideration of this bill: How to set the proper balance between the person who has indebted himself and who is now unable to meet their responsibilities against the person who has extended that credit. Many States, including my own, have placed such an importance on protecting the value of the residence in which an individual lives that they have enshrined that in their State constitution. I have the following commentaries on the amendment before us as it relates to that Federal-State balance. The amendment makes no allowance for the wide variance in property values from State to State. There are places in America where if you live in a home valued at $125,000, it is a veritable mansion. There are other places in America where a home valued at $125,000 meets minimum adequacy standards. This bill provides only one standard to cover the wide range of circumstances. The standard itself, even by national standards, is inadequate. The national average value of existing single family homes in the United States of America is $176,000, $51,000 higher than the proposed cap on the amount that can be exempt from foreclosure in bankruptcy. This amendment would threaten home ownership for millions of American families. States also have given special recognition to individual classes of persons as it relates to the exemption. For instance, some States have recognized a different standard for seniors or disabled citizens and providing additional homestead protection when they experience a serious illness or other financial crisis. We know, for instance, that seniors tend to have a higher proportion of their net worth in the equity of their home, typically because they have been living in the home for an extended period of time and have paid down the mortgage. The circumstance of older Americans will become more pronounced in the immediate future because within two decades 54 million Americans will be 65 years of age or older. An estimated two-thirds of these seniors will own their own homes free and clear. This amendment makes no allowance for real estate inflation. In the last few years, parts of America have been experiencing a real estate inflation on residential housing above 10 percent per year. Fewer and fewer States will be able to protect home and farm ownership in the same way they do now as real estate purchasing power of the $125,000 limit contained in this amendment is eroded by inflation. As the Senator from Texas has already stated, this bill does not ignore, is not unmindful of this balance between the National Government's interest in uniformity and the State's interest in the particular circumstances of its citizens. This bill contains compromised language on the homestead issue which was adopted during debate on the bill last year and has already been approved once by the Senate. As an example, in this bill before the Senate, without the amendment that has been proposed, the homestead exemption would be capped at $100,000, with an inflation adjustment provision for any property purchased within 2 years of filing for bankruptcy. So the case that is frequently cited as the reason to require this amendment, the person who rushes into a State such as mine which has an exemption of the residential property from bankruptcy in the last moments before they declare, will not be the case. If you have not owned that home for 2 years before declaring bankruptcy, your exemption is limited to $100,000 adjusted for inflation. There is a further requirement before a debtor can use the homestead exemption in a particular State that he or she must have been a resident of that State for more than 2 years--again, an appropriate recognition of the national desire for uniformity. Additionally, these and other provisions of the bill and of existing law grant any bankruptcy judge in the country the power to disallow the use of the homestead or any other exemption if it is being used improperly to shield assets. So this legislation contains effective barriers to inappropriate use of the homestead exemption while recognizing the 130-year theory of Federal relationship within the personal bankruptcy law between national uniformity and State values. This amendment tests our commitment to the fundamental principle of federalism. The States and the Federal Government share in the responsibility for developing and applying our bankruptcy code. In my judgment, this amendment distorts that relationship. The provisions that are already in the bill honor federalism.

Mr. GRAHAM. Ten minutes.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, today I introduce a bill along with my colleagues Senators DeWine, Hagel, Breaux, McCain, Dodd, Thompson, Biden, and Ben Nelson to introduce the ``Andean Trade Preference Expansion Acts,'' a bill that would provide additional trade benefits to the countries of Bolivia, Colombia, Ecuador, and Peru. The Andean Trade Preference Act, commonly known as ATPA, was passed in 1991. That legislation is set to expire. If we are serious about halting the flow of drugs into this country, we must not let this happen. If we are committed to stabilizing the situation in Colombia, we must act this year, to both extend and expand those trade benefits. The office of the United States Trade Representative recently published a report assessing the operation of the Andean trade agreement so far. The report concluded that this agreement is strengthening the legitimate economies of countries in the region and is an important component of our efforts to contain the spread of illicit activities. Export diversification in beneficiary countries is increasing, net coca cultivation has declined slightly. Although there is still progress to be made, these countries are working constructively with the United States on issues of concern including working conditions and intellectual property protection. Despite this success, renewal of ATPA in its current form is not our goal. The landscape has changed since 1991. Perhaps the most significant alteration was last year's passage of the ``Trade and Development Act of 2000,'' which provided significant new trade benefits to countries of the Caribbean Basin Initiative. As a result of enhanced trade benefits to these countries, the Andean region stands to lose a substantial number of apparel industry jobs--up to 100,000 jobs in Colombia alone. At least 10 U.S.-based companies that purchase apparel from Colombian garment manufacturers have already indicated their near-term intentions to shift production to Caribbean countries due to the significant cost savings associated with the new trade benefits afforded the region. Some of these U.S. companies have utilized Colombia as a manufacturing base for more than 10 years, providing desperately needed legitimate employment to the Colombian economy. The immediate reaction of these companies to enhanced Caribbean trade benefits creates a dilemma. Clearly, it does not make sense for Congress to provide foreign aid on the one hand, and implement trade legislation that puts tens of thousands of people out of work on the other. This bill will address that critical, unintended contradiction by harmonizing the trade benefits of the Caribbean and Andean nations. Specifically, our bill would extend duty-free, quota-free treatment to apparel articles assembled, cut or knit in Andean beneficiary nations using yarns and fabric wholly formed in the United States, and provide benefits to non-apparel items that were previously excluded from the Andean trade preferences package. These new benefits will create parity with the Caribbean Basin Initiative nations as well as expand an important source of economic and employment growth for the U.S. textile and apparel industry. The United States is at now a critical juncture with its neighbors in the Andean region. Last year, the United States government responded generously to Colombia's needs by providing a supplemental appropriations package of more than $1.6 billion dollars to help the country in its time of crisis. These funds were in addition to over $4.0 billion being spent by Colombia itself. Fundamental to Plan Colombia, and to the government's ability to succeed in its efforts to safeguard the country, will be efforts to encourage economic growth and provide jobs to the Colombian people. Today in Colombia more than one million people are displaced, the unemployment rate is nearly 20 percent and Colombia is experiencing the worst recession in 70 years. Without new economic opportunities, more and more Colombians will turn to illicit activities to support their families or seek to join the growing numbers of people who are leaving the country to find a better, safer future for their families. This ``trade plus aid'' approach to stabilizing the Andean region has been widely embraced. In its March 2000 report. ``First Steps Toward a Constructive U.S. Policy in Colombia,'' a Task Force I co-chair with General Brent Scowcroft recommended the extension of the ATPA, to include the same benefits as those contained under the Caribbean Basin Initiative. Although this bill provides benefits to all ATPA beneficiaries, it is particularly critical to Colombia, which in 1998 exported 59 percent of all textiles and apparel from the Andean region to the U.S., two-thirds of which were assembled and/or cut from U.S. yarns and fabric. Colombian President Pastrana recognizes this. In his visit to Washington last week he stressed that access to U.S. markets was among the top priorities. On a more comprehensive scale, passage of this legislation is critical to ensure that all nations in the Western Hemisphere can maintain their long-term competitiveness with Asian nations, particularly in the textile industry. At present, the textile products of most Asian nations are subject to quotas imposed by the Multi-Fiber Agreement, now known as the Agreement on Textiles and Clothing. This restriction on Asian textiles has enabled the nations of the Western Hemisphere to remain competitive, and further, the Andean region-- specifically Colombia--has become a significant market for fabric woven in U.S. mills from yarn spun in the U.S. originating from U.S. cotton growers. However, in 2005, these Asian import quotas will be phased out. At that time, textile production in both the Andean region and the Caribbean basin will be placed at a distinct and growing disadvantage. Disinvestment in the region will occur, reducing the incentive to use any material from U.S. textile mills or cotton grown in the United States. The Congress must act this year to renew and expand trade benefits for the Andean countries. If we do not move forward, the current benefits will expire and these countries will lose an important means of developing legitimate industries and employment.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, today I introduce a bill along with my colleagues Senators DeWine, Hagel, Breaux, McCain, Dodd, Thompson, Biden, and Ben Nelson to introduce the ``Andean Trade Preference Expansion Acts,'' a bill that would provide additional trade benefits to the countries of Bolivia, Colombia, Ecuador, and Peru. The Andean Trade Preference Act, commonly known as ATPA, was passed in 1991. That legislation is set to expire. If we are serious about halting the flow of drugs into this country, we must not let this happen. If we are committed to stabilizing the situation in Colombia, we must act this year, to both extend and expand those trade benefits. The office of the United States Trade Representative recently published a report assessing the operation of the Andean trade agreement so far. The report concluded that this agreement is strengthening the legitimate economies of countries in the region and is an important component of our efforts to contain the spread of illicit activities. Export diversification in beneficiary countries is increasing, net coca cultivation has declined slightly. Although there is still progress to be made, these countries are working constructively with the United States on issues of concern including working conditions and intellectual property protection. Despite this success, renewal of ATPA in its current form is not our goal. The landscape has changed since 1991. Perhaps the most significant alteration was last year's passage of the ``Trade and Development Act of 2000,'' which provided significant new trade benefits to countries of the Caribbean Basin Initiative. As a result of enhanced trade benefits to these countries, the Andean region stands to lose a substantial number of apparel industry jobs--up to 100,000 jobs in Colombia alone. At least 10 U.S.-based companies that purchase apparel from Colombian garment manufacturers have already indicated their near-term intentions to shift production to Caribbean countries due to the significant cost savings associated with the new trade benefits afforded the region. Some of these U.S. companies have utilized Colombia as a manufacturing base for more than 10 years, providing desperately needed legitimate employment to the Colombian economy. The immediate reaction of these companies to enhanced Caribbean trade benefits creates a dilemma. Clearly, it does not make sense for Congress to provide foreign aid on the one hand, and implement trade legislation that puts tens of thousands of people out of work on the other. This bill will address that critical, unintended contradiction by harmonizing the trade benefits of the Caribbean and Andean nations. Specifically, our bill would extend duty-free, quota-free treatment to apparel articles assembled, cut or knit in Andean beneficiary nations using yarns and fabric wholly formed in the United States, and provide benefits to non-apparel items that were previously excluded from the Andean trade preferences package. These new benefits will create parity with the Caribbean Basin Initiative nations as well as expand an important source of economic and employment growth for the U.S. textile and apparel industry. The United States is at now a critical juncture with its neighbors in the Andean region. Last year, the United States government responded generously to Colombia's needs by providing a supplemental appropriations package of more than $1.6 billion dollars to help the country in its time of crisis. These funds were in addition to over $4.0 billion being spent by Colombia itself. Fundamental to Plan Colombia, and to the government's ability to succeed in its efforts to safeguard the country, will be efforts to encourage economic growth and provide jobs to the Colombian people. Today in Colombia more than one million people are displaced, the unemployment rate is nearly 20 percent and Colombia is experiencing the worst recession in 70 years. Without new economic opportunities, more and more Colombians will turn to illicit activities to support their families or seek to join the growing numbers of people who are leaving the country to find a better, safer future for their families. This ``trade plus aid'' approach to stabilizing the Andean region has been widely embraced. In its March 2000 report. ``First Steps Toward a Constructive U.S. Policy in Colombia,'' a Task Force I co-chair with General Brent Scowcroft recommended the extension of the ATPA, to include the same benefits as those contained under the Caribbean Basin Initiative. Although this bill provides benefits to all ATPA beneficiaries, it is particularly critical to Colombia, which in 1998 exported 59 percent of all textiles and apparel from the Andean region to the U.S., two-thirds of which were assembled and/or cut from U.S. yarns and fabric. Colombian President Pastrana recognizes this. In his visit to Washington last week he stressed that access to U.S. markets was among the top priorities. On a more comprehensive scale, passage of this legislation is critical to ensure that all nations in the Western Hemisphere can maintain their long-term competitiveness with Asian nations, particularly in the textile industry. At present, the textile products of most Asian nations are subject to quotas imposed by the Multi-Fiber Agreement, now known as the Agreement on Textiles and Clothing. This restriction on Asian textiles has enabled the nations of the Western Hemisphere to remain competitive, and further, the Andean region-- specifically Colombia--has become a significant market for fabric woven in U.S. mills from yarn spun in the U.S. originating from U.S. cotton growers. However, in 2005, these Asian import quotas will be phased out. At that time, textile production in both the Andean region and the Caribbean basin will be placed at a distinct and growing disadvantage. Disinvestment in the region will occur, reducing the incentive to use any material from U.S. textile mills or cotton grown in the United States. The Congress must act this year to renew and expand trade benefits for the Andean countries. If we do not move forward, the current benefits will expire and these countries will lose an important means of developing legitimate industries and employment.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, it is an unfortunate irony that the important things in life are often left unsaid. It may surprise some to know that, of all things, congressional legislation cannot escape this truism. In fact, the most important piece of education legislation Congress considers this year will not mention schools or students. The most important law enforcement legislation we consider this year will not recognize the officers that safeguard our streets. And, the most important piece of emergency services legislation we address this year will not reference the firefighters and paramedics who keep our communities safe. In 1998, Congress passed the Internet Tax Freedom Act. That bill imposed a three year moratorium on specific State taxes applicable to the Internet. The legislation didn't affect the States' ability to impose sales tax on Internet purchases, nor did it fix the unfair advantage ``e-tailers'' currently have over their main street competitors with respect to their responsibility to collect sales and use taxes. As a result of two Supreme Court rulings, a State is prohibited from requiring out-of-State retailers from collecting sales tax on purchases made by its residents if the business has no presence in the State. The sales tax still applies, it just has to be collected directly from the purchaser. For a variety of reasons, very little of this tax is ever collected. The Internet Tax Freedom Act created the Advisory Commission on Electronic Commerce which was supposed to come up with a solution to this problem. Instead the Commission was hijacked by a small group who opted to demagogue this issue to further their ``anti-tax'' agenda. The result was a year-long study of an issue with little in the form of useful recommendations. The game plan of the forces supporting the status quo is clear: delay, delay, delay. Keep extending the moratorium until there is a sufficiently large political constituency to permanently block the collection of sales taxes on purchases made over the Internet. This is not a hidden agenda. Governor Gilmore, Chairman of the Advisory Commission on Electronic Commerce stated it clearly when he said that ``I believe America should ban sales and use taxes on the Internet permanently, for all time. If we secure tax freedom on the Internet through 2006, tax freedom on the Internet will become an entitlement for the American people and a political inevitability. No tax collector will be welcome on the Internet after 2006.'' Let me be clear: this is not about whether purchases made over the Internet are subject to sales tax. They already are. The question is whether Internet sellers should have the same responsibility to collect the sales tax as their Main Street competitors. If we answer this question with a ``no,'' funding for education, law enforcement and emergency services will suffer. Why? Because States have the fundamental responsibility of financing public education in our country. Patrolling our streets, safeguarding the health and safety of our citizens--these tasks could not be accomplished without our State and local governments. For most States, sales tax revenue is the primary means by which States fulfill these responsibilities. Because many States rely on sales taxes for their general revenue, the equation is simple--no collection of sales tax on the Internet means less money for new schools, police officers, and rapid response equipment. Six States-- Florida, Nevada, South Dakota, Tennessee, Texas and Washington rely on sales taxes for more than half of their total tax revenue. According to the General Accounting Office, by 2003 losses to State and local government revenues from uncollected sales taxes on Internet sales could climb as high as $12.5 billion. Florida's share of that lost revenue could be as much as $1 billion. When asked why he robbed banks, Willie Sutton replied, ``that's where the money is.'' Today, the money is increasingly on the Internet. There is another reason to fix this issue: fairness. No one would seriously consider a proposal that barred State and local governments from collecting sales and use taxes from retailers who operate in green buildings. That would be unfair to those businesses that aren't located in green buildings. Yet that is fundamentally what proponents of the status quo argue for Internet retailers. Our position should be clear: no more delays. No more moratoriums until Congress agrees to a process whereby States are directed to simplify their sales tax systems in exchange for the authority they need to require remote sellers to collect their sales taxes. The legislation introduced last Friday takes the first positive step in this direction. That bill extends the current moratorium on Internet access taxes and multiple or discriminatory taxes on the Internet, a prohibition that virtually all agree should be imposed. More importantly, however, it establishes a process whereby States can cooperatively unify and simplify their sales and use tax systems. Sales tax laws must be made significantly more uniform across the states and the administration of the tax must be substantially overhauled and simplified. The goal of this legislation is to develop a simple, uniform and fair system of sales tax collection. It will reduce the burden on remote sellers while protecting State and local sovereignty. Once States have adopted this simplified system, they would then have the authority to require remote sellers to collect and remit sales and use taxes to the State. Previous attempts to require remote sellers to collect sales and use taxes have been criticized on the grounds that it was unreasonable to require businesses to keep track of the nearly 7,500 separate jurisdictions levying sales and use taxes. This bill addresses that criticism by requiring the states to dramatically simplify their sales and use tax systems by establishing uniform definitions and fewer rates. The streamlined sales and use tax system envisioned by this legislation follows the guidance offered by the Advisory Commission on Electronic Commerce. The attributes of this streamlined system include: a centralized, one-stop, multi-state registration system for sellers; uniform definitions for goods or services that would be included in the tax base; uniform and simple rules for attributing transactions to particular taxing jurisdictions; uniform rules for the designation of and identification of purchasers exempt from tax; uniform certification procedures for software that sellers may rely on to determine State and local taxes; uniform returns and remittance forms; consistent electronic filing and remittance methods; State administration of State and local sales taxes; uniform audit procedures; reasonable compensation for tax collection by remote sellers; exemption for remote sellers with less than $5 million in annual sales for the previous year; appropriate protections for consumer privacy; and such other features that a member states deem warranted to promote simplicity. Critics of this legislation argue that it is anti-technology, and that the Internet must be protected from this threat. That is not true. The sponsors of this bill yield to no one in their support and enthusiasm for a vibrant information technology industry. But that support does not necessitate special breaks for companies doing business over the Internet. This legislation is more appropriately characterized with one word: fairness. It promotes fair treatment for all retailers. In addition it protects States' abilities to collect the resources necessary to make the education investments that will pave the way for the next technological breakthrough--the next Internet. I hope my colleagues will join the sponsors of this bill and support this approach.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I rise today with my colleagues, Senators Jeffords, Rockefeller, and Snowe, to introduce the Social Services Block Grant Restoration Act of 2001. This important block grant, commonly known as ``SSBG,'' is more than just money. When SSBG was written into law two decades ago, the goals were spelled out clearly. SSBG was created to ``prevent, reduce or eliminate dependency.'' It exists to help people ``achieve or maintain self- sufficiency.'' It meant to ``prevent or remedy neglect, abuse or exploitation of children and adults unable to protect their own interests,'' and for ``preserving, rehabilitating or reuniting families.'' In other words, SSBG is a commitment on the part of this country to the most vulnerable members of our society. SSBG has become a commitment by this country to help address the pressing needs of many of our senior citizens. SSBG dollars are used to provide training services for those making the transition from welfare to work. It is a commitment to protect children. It is a commitment to those in need of mental health services and those with disabilities. It is a commitment to states that the federal government recognizes and shares the responsibility for providing human services programs. For too long we shrugged off this commitment and directed these vital federal dollars to other programs. Data from the Department of Health and Human Services shows how many lives this has affected. In 1998, SSBG accounted for 25 percent of all federal, state, and local expenditures for services for the disabled; 24 percent of all expenditures for child protective services; and 22 percent of all expenditures for adult protective services. The state of Florida relies on SSBG for 25 percent of its budget to protect abused and neglected elderly persons. These are all programs that touch the lives of the people who sent us here--people who are rarely able to lobby us here in our nation's Capitol. This program directly relates to the goals that the new markets tax credit would achieve--enhancing peoples' lives and giving vulnerable communities the ability to thrive. I urge my colleagues to join us in cosponsoring this critical piece of legislation.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I rise today with my colleagues, Senators Jeffords, Rockefeller, and Snowe, to introduce the Social Services Block Grant Restoration Act of 2001. This important block grant, commonly known as ``SSBG,'' is more than just money. When SSBG was written into law two decades ago, the goals were spelled out clearly. SSBG was created to ``prevent, reduce or eliminate dependency.'' It exists to help people ``achieve or maintain self- sufficiency.'' It meant to ``prevent or remedy neglect, abuse or exploitation of children and adults unable to protect their own interests,'' and for ``preserving, rehabilitating or reuniting families.'' In other words, SSBG is a commitment on the part of this country to the most vulnerable members of our society. SSBG has become a commitment by this country to help address the pressing needs of many of our senior citizens. SSBG dollars are used to provide training services for those making the transition from welfare to work. It is a commitment to protect children. It is a commitment to those in need of mental health services and those with disabilities. It is a commitment to states that the federal government recognizes and shares the responsibility for providing human services programs. For too long we shrugged off this commitment and directed these vital federal dollars to other programs. Data from the Department of Health and Human Services shows how many lives this has affected. In 1998, SSBG accounted for 25 percent of all federal, state, and local expenditures for services for the disabled; 24 percent of all expenditures for child protective services; and 22 percent of all expenditures for adult protective services. The state of Florida relies on SSBG for 25 percent of its budget to protect abused and neglected elderly persons. These are all programs that touch the lives of the people who sent us here--people who are rarely able to lobby us here in our nation's Capitol. This program directly relates to the goals that the new markets tax credit would achieve--enhancing peoples' lives and giving vulnerable communities the ability to thrive. I urge my colleagues to join us in cosponsoring this critical piece of legislation.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I ask unanimous consent to have printed in the Record the text of the bill.

Mr. GRAHAM. Mr. President, with my colleague, I rise today to introduce the Economic Insurance Tax Cut of 2001. In his 1862 message to Congress, President Abraham Lincoln surveyed our fractured national horizon and concluded that: The occasion is piled high with difficulty and we must rise to the occasion. As our case is new, so we must think anew and act anew. The same could be said about our current circumstances. The United States has not experienced a recession since the one that occurred in 1990-1991. At that time, the old economic assumptions were shattered and new ones born. Over the past 5 years, it seemed as if nothing could stop the American economy from roaring on. It was during this comparatively serene time that then-candidate George W. Bush, in the debates leading up to the Iowa caucus in the winter of 1999-2000, announced his plan to cut taxes by $1.6 trillion over the next 10 years. The landscape has shifted dramatically since the winter of 1999 to the spring of 2001. That shift in the landscape did not just occur in Seattle. Today's headlines are filled with ominous news. Economic activity in the manufacturing sector declined in February for the seventh consecutive month. DaimlerChrysler has laid off 26,000 workers. Whirlpool has slashed the estimates of its earnings and plans 6,000 job cuts. Gateway is dismissing 3,000 workers, 12.5 percent of its workforce. Over the past 2 months, layoffs totaling more than 275,000 jobs have been announced. This bad news has had, as would be expected, a negative effect on consumers' confidence. Consumers' confidence has plunged 35 points from an all-time high of 142.5 in September of 1999. When their confidence is shaken, consumers stop spending. When consumers stop spending, the economy gets worse. When the economy gets worse, consumer confidence falls further. The cycle feeds on itself. In an attempt to staunch the bleeding, the Federal Reserve has twice lowered interest rates in January. Monetary policy, the adjustment of short-term interest rates, is a trusted and often effective tool in stimulating the economy. I am confident that the Federal Reserve will continue to exercise wise judgment. But there is a growing consensus that more must be done, that fiscal policy can also play an important role in boosting the economy, if not immediately then certainly in the second half of this year. In his testimony before the Senate Budget Committee in January, Chairman Alan Greenspan of the Federal Reserve Board stated: Should the current economic weakness spread beyond what now appears likely, having a tax cut in place may in fact do noticeable good. On February 13, Treasury Secretary O'Neill told the House Ways and Means Committee that he, too, supports the use of fiscal policy as a tool to boost the economy. Mr. O'Neill said: To the extent that getting it [the surplus] back to them [the American people] sooner can help stave off a worsening of the economic slowdown, we should move forward immediately. Finally, during the President's speech to the Nation a week ago, he stated: Tax relief is right and tax relief is urgent. The long economic expansion that began almost 10 years ago is faltering. Lower interest rates will eventually help, but we cannot assure that they will do the job all by themselves. Senator Corzine and I agree. We think there are several perspectives from which this issue must be viewed. The first is the contextual perspective: How large a tax cut can the American economy and the Federal fiscal system sustain? We share the belief that we are facing a serious demographic challenge in the next 10 to 15 years, as large numbers of persons born immediately after World War II will retire and place unique strains on our Nation's Social Security and Medicare system. That is but one example of the kinds of steps that we need to be cognizant to take and prepare for which will utilize a portion of our current surplus. After we have determined how large a tax cut is prudent in the context of these other responsibilities, the next step is crafting a plan that can, in fact, be helpful in averting a prolonged economic slowdown. According to economists, a tax cut aimed at stimulating the economy should have four characteristics. First, the tax relief should be simple enough to be enacted quickly. One of the principal criticisms of the attempts to use fiscal policy to stimulate the economy on a short-term basis is that, historically, Congress and the President have been sufficiently slow in reaching agreement for enactment of such tax cuts that by the time the tax relief is available, the problem has passed. The longer Congress deliberates, the less likely tax relief will get to the American public in time to do some good. Therefore, a simple, straightforward approach is absolutely essential to getting a bill passed quickly. The more components this tax relief includes, the more debate, discussion, deliberation, and the likelihood of procrastination. The second characteristic is the tax relief must be significant enough to have a measurable effect on the economy. The economists we have consulted suggest that tax relief in the amount of $60 billion to $65 billion would boost the gross domestic product by one-half to three-quarters of a percentage point. At a time when the economy is at virtually zero growth, that would be a welcome improvement. Third, the tax relief must be conspicuous. The more transparent the tax cut, the more positive effect it will have on consumer confidence. Finally, the tax relief must be directed at those who will spend it. Two-thirds of the Nation's economic output is based on consumer spending. Recessions are largely a result of a letup in that consumer demand. Common sense suggests that broad-based tax cuts, the bulk of which are directed at low- and middle-income American families, are much more likely to be the tax cuts that will stimulate consumption. Any tax cut that claims to provide an economic stimulus must be measured against these four standards. When scrutinized this way, both the President's proposal and the plan which was reported last week by the House Ways and Means Committee, and may, in fact, be voted on by the full House as early as tomorrow, display significant weaknesses. One, context: At $1.6 trillion, the Bush plan would consume nearly 75 percent of the non-Social Security, non-Medicare surplus, when interest costs are included. That leaves precious few resources for other important initiatives like desperately needed prescription drugs for our seniors, modernization of our armed forces, improving our schools. No funds would be left to add to the debt reduction that can come through the application of the surpluses coming into Social Security and Medicaid. The Ways and Means proposal is a more expensive down- payment of the Bush plan in that its implementation is pushed forward by a year. Two, simplicity: The President's tax cut plan contains several complicated proposals that will require Congress to carefully consider their ramifications. This deliberation is likely to delay enactment of the President's plan until it is too late to stimulate the economy. Three, sufficiency: The president's budget tallies the total tax relief for 2001 at $183 million. For 2002, the total is $30 billion. Tax relief at that low level will do little to boost the economy. The President's tax relief is so small because it is phased in over a five- year period. Phasing in tax relief is exactly the opposite policy to adopt if your goal is economic stimulus. Even the Ways and Means package, despite applying retroactively to 2001, falls far short of injecting tax cuts into the economy during the second half of this year. That plan provides only $10 billion of ``stimulus'' during this period. Four, propensity to Spend: Economic stimulus occurs when consumers are encouraged to spend. Only one of the proposals in the President's plan meets this standard. Eighty percent of all taxpayers are affected by changes to the 15 percent tax bracket. Therefore, the President's idea for creating a new 10 percent bracket--which has the effect of lowering the 15 percent tax rate--will apply quite broadly across those paying income taxes. In contrast, three-quarters of all taxpayers are unaffected by changes to the remaining four tax brackets. Yet, nearly 60 percent of the total cost of both the President's and the Ways and Means' tax cut packages are devoted to these upper rate cuts. Earlier this year, noted economist Robert Samuelson wrote in the Washington Post that the time had come for tax cuts whose purpose was to stimulate the economy. He too, criticized the President's tax plan as being poorly designed for this purpose. Specifically, he argued that the President should make his tax cuts retroactive to the beginning of this year and focus more toward the bottom income brackets. Samuelson also argued that other proposals, whatever their merit-- marriage penalty relief, estate tax repeal, new incentives for charitable giving--should wait their place in line; that the first place in this line of America in the year 2001 should be economic stimulation to keep this economy from falling into a deep ditch. Mr. President, I ask unanimous consent that the columns by Robert Samuelson be printed in the Record immediately after my remarks.

Mr. GRAHAM. Mr. President, Senator Corzine and I have an alternative that makes the improvements to the President's tax cut plan suggested by Mr. Samuelson, and makes it consistent with the characterization which I have outlined. Senator Corzine and I have an alternative that builds upon a proposal included in the President's tax cut plan. President Bush has proposed the creation of a new 10-percent rate bracket. His proposal is that for incomes up to $6,000 for an individual and $12,000 for a couple, that the first $6,000 or $12,000 would be taxed at 10 percent rather than the current 15 percent. The problem with his proposal is that he proposes to implement this change over 5 years. It is not until the year 2006 that this plan is fully in place. Senator Corzine and I propose to fully implement this 10-percent bracket retroactive to January of this year. In addition, we suggest the bracket needs to be expanded so the incomes on which it would apply would be $9,500 for an individual, and $19,000 for a married couple. There are several reasons why we believe their proposal makes sense. First, it provides tax relief to a broad range of taxpayers. Every American income tax payer would participate in this plan. All couples with income tax liabilities would save $950 annually, or have their tax liability eliminated entirely. Second, our proposal provides significant tax relief to middle-income families who are more likely to spend their additional money, and, therefore, create demand within our economy. Our plan would be more effective in stimulating our economy, particularly at this time of concern about our economic future. This proposal will lower taxes by $60 billion in both 2001 and 2002. I point out this contrast with the President's plan with the lower taxes in 2001 by less than $200 million, and the plan of the House Ways and Means Committee which will lower taxes in 2001 by approximately $10 billion. We believe this infusion of energy into the economy--$60 billion in this and the next year--is the first portion of tax relief which will be strong enough to be able to have a meaningful effect on the economy. We would propose that a large portion of the first year's tax relief be reflected in workers' paychecks during the second half of the year, precisely the time that would be needed to forestall a prolonged economic downturn. The 10-year cost of this proposal is $693 billion. This is less than half of the President's total plan, and it could be reduced further if the Congress were to decide it wished to sunset any portion of this tax cut before the end of the 10-year period. Fourth, this proposal is simple. There is no reason this proposal could not be enacted by July 4. The Treasury would be directed to adjust its withholding tables as quickly as possible. Families could expect to see an increase in their paychecks by a reduction in the amount withheld for income tax in time for their August vacations. Instead of staying home that week, they could take their children to the beach or take themselves out to dinner. They could use the money to fix the car and head for the mountains, or fix up the backyard and celebrate with a barbecue. In doing so, they could begin to reverse the cycle--to put money back into the economy, to feed expansion, to stimulate growth, to create jobs, to increase Americans' confidence in their economic future. This tax cut would truly be the gift that keeps on giving. There is one additional benefit to proceeding in the manner that Senator Corzine and I are suggesting. Enacting this stimulative tax cut first and waiting until later to address other tax matters will give Congress time to evaluate the seriousness of the economic downturn and to evaluate how effective this economic insurance policy has been in putting a foundation under that downturn. In particular, this time will give us a better idea of whether the slowing economy will adversely affect the surplus projections on which additional tax cuts are predicated. Again, I return to President Lincoln's suggestion during one of the most trying times of his service as President of the United States. This is not the time for timidity and hand-wringing. This is the time for swift, bold action. The occasion is piled high with difficulty, and we must rise with the occasion. Exhibit 1 [From the Washington Post, Jan. 9, 2001] Time for a Tax Cut (By Robert J. Samuelson) For some time, I have loudly and monotonously objected to large federal tax cuts. The arguments against them seemed overwhelming: The booming economy didn't need further stimulating; the best use of rising budget surpluses was to pay down the federal debt. But I regularly attached a large asterisk to this opposition. A looming economic slowdown or recession might justify a big tax cut. Well, the asterisk is hereby activated. By now, it's clear that most commentators missed the economy's emerging weakness. Indeed, a recession may already have started. Industrial production has declined slightly since September. Christmas retail sales were miserable; at Wal-Mart, same-store sales were up a meager 0.3 percent from a year earlier. The story is the same for autos; sales declined 8 percent in December. Montgomery Ward is going out of business. Last week's surprise interest-rate cut by the Federal Reserve confirms the large miscalculation. A tax cut is now common sense. It would make it easier for consumers to handle their heavy debts and, to some extent, bolster their purchasing power. The fact that President-elect George W. Bush supports a major tax cut is fortuitous. But his proposal is poorly designed to combat recession. Although the estimated costs--$1.3 trillion from 2001 to 2010--are large, they are ``back-loaded.'' That is, the biggest tax cuts occur in the later years. In 2002, the tax cut would amount to $21 billion, a trivial 0.2 percent of gross domestic product (national income). This would barely affect the economy. What Bush needs to do is accelerate the immediate benefits (to resist a slump) while limiting the long-term costs (to protect against new deficits). This would improve a tax plan's economic impact and political appeal. The required surgery is easier than it sounds: Bush's across-the-board tax-rate cuts should be compressed into two years--making them retroactive to Jan. 1, 2001-- instead of being phased in from 2002 to 2006. The idea is to increase people's disposable incomes, quickly. (Under the campaign proposal, today's rates of 39.6, 36, 31 and 28 percent would be reduced to 33 and 25 percent. The present 15 percent rate would remain, but a new 10 percent rate would be created on the first $6,000 of taxable income for singles and $12,000 for couples.) Similarly, the proposed increase in the child tax-credit, from $500 to $1,000, should occur over two years, not four. The distribution of the tax cut should be tilted more toward the bottom and less toward the top. One criticism of the original plan is that it's skewed toward the richest taxpayers, who pay most of the taxes. (In 1998 the 1.6 percent of tax returns with incomes above $200,000 paid 40 percent of the income tax.) The criticism could--and should-- be blunted by reducing the top rate to only 35 percent, while expanding tax cuts for the lower brackets. This would concentrate tax relief among middle-class families, whose debt burdens are highest. Bush should defer most other proposals: the gradual phase- out of the estate tax, new tax breaks for charitable contributions and tax relief from the so-called marriage penalty. Together, these items would cost an estimated $400 billion from 2001 to 2010. They are the most politically charged parts of the package and the least related to stimulating the economy. Proposing them now would muddle what ought to be Bush's central message: a middle-class tax cut to help the economy. The case for this tax cut rests on a critical assumption. It is that the slowdown (or recession) could be long, deep or both. If it's just a blip--as some economists think--the economic argument for a tax cut disappears. The economy will revive quickly, aided by the Fed's lower interest rates. Then the debate over a tax cut should return to political preferences. Do we want more spending, lower taxes or debt reduction? My preference would remain debt reduction. But I doubt that the economic outlook is so charmed. Just as the boom--the longest in U.S. history--was unprecedented, so may be its aftermath. The boom's great propellant was a buying binge by consumers and businesses. Both spent beyond their means. They went deep into debt. Put another way, the private sector as a whole has been running an ever-widening ``deficit,'' says Wynne Godley of the Jerome Levy Economics Institute of Bard College. By his calculation, the deficit began in 1997 and reached a record 8 percent of disposable income in late 2000. Household debt hit 100 percent of personal disposable income, up from 82 percent in 1990. What may loom is a protracted readjustment. ``An increase in private debt relative to income can go on for a long time, but it cannot go on forever,'' writes Godley. People and companies reduce their debt burdens by borrowing less and using some of their income to repay existing loans. The private-sector ``deficit'' would shrink. But this process of retrenchment would hurt consumer spending and business investment, which constitute about 85 percent of the economy. It's self-defeating for government to exert a further drag through growing budget surpluses. Of course, government could spend more. But politically, that isn't likely--and spending increases take time to filter into the economy. A tax cut could be enacted quickly and enables people to keep more of what they've earned. Roughly speaking, the Bush tax cuts could raise disposable incomes of middle-income households (those between $35,000 and $75,000) by $1,000 to $2,500. This would make it easier for consumers to manage their debts and maintain spending. It's also an illusion to think that lower interest rates (through Fed cuts and government-debt repayment) can instantly and single-handedly stimulate recovery. ``The danger of a severe and prolonged recession is being seriously underestimated,'' writes Godley. If you believe that--and I do--then a tax cut that made no sense six months ago makes eminent sense now.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, with my colleague, I rise today to introduce the Economic Insurance Tax Cut of 2001. In his 1862 message to Congress, President Abraham Lincoln surveyed our fractured national horizon and concluded that: The occasion is piled high with difficulty and we must rise to the occasion. As our case is new, so we must think anew and act anew. The same could be said about our current circumstances. The United States has not experienced a recession since the one that occurred in 1990-1991. At that time, the old economic assumptions were shattered and new ones born. Over the past 5 years, it seemed as if nothing could stop the American economy from roaring on. It was during this comparatively serene time that then-candidate George W. Bush, in the debates leading up to the Iowa caucus in the winter of 1999-2000, announced his plan to cut taxes by $1.6 trillion over the next 10 years. The landscape has shifted dramatically since the winter of 1999 to the spring of 2001. That shift in the landscape did not just occur in Seattle. Today's headlines are filled with ominous news. Economic activity in the manufacturing sector declined in February for the seventh consecutive month. DaimlerChrysler has laid off 26,000 workers. Whirlpool has slashed the estimates of its earnings and plans 6,000 job cuts. Gateway is dismissing 3,000 workers, 12.5 percent of its workforce. Over the past 2 months, layoffs totaling more than 275,000 jobs have been announced. This bad news has had, as would be expected, a negative effect on consumers' confidence. Consumers' confidence has plunged 35 points from an all-time high of 142.5 in September of 1999. When their confidence is shaken, consumers stop spending. When consumers stop spending, the economy gets worse. When the economy gets worse, consumer confidence falls further. The cycle feeds on itself. In an attempt to staunch the bleeding, the Federal Reserve has twice lowered interest rates in January. Monetary policy, the adjustment of short-term interest rates, is a trusted and often effective tool in stimulating the economy. I am confident that the Federal Reserve will continue to exercise wise judgment. But there is a growing consensus that more must be done, that fiscal policy can also play an important role in boosting the economy, if not immediately then certainly in the second half of this year. In his testimony before the Senate Budget Committee in January, Chairman Alan Greenspan of the Federal Reserve Board stated: Should the current economic weakness spread beyond what now appears likely, having a tax cut in place may in fact do noticeable good. On February 13, Treasury Secretary O'Neill told the House Ways and Means Committee that he, too, supports the use of fiscal policy as a tool to boost the economy. Mr. O'Neill said: To the extent that getting it [the surplus] back to them [the American people] sooner can help stave off a worsening of the economic slowdown, we should move forward immediately. Finally, during the President's speech to the Nation a week ago, he stated: Tax relief is right and tax relief is urgent. The long economic expansion that began almost 10 years ago is faltering. Lower interest rates will eventually help, but we cannot assure that they will do the job all by themselves. Senator Corzine and I agree. We think there are several perspectives from which this issue must be viewed. The first is the contextual perspective: How large a tax cut can the American economy and the Federal fiscal system sustain? We share the belief that we are facing a serious demographic challenge in the next 10 to 15 years, as large numbers of persons born immediately after World War II will retire and place unique strains on our Nation's Social Security and Medicare system. That is but one example of the kinds of steps that we need to be cognizant to take and prepare for which will utilize a portion of our current surplus. After we have determined how large a tax cut is prudent in the context of these other responsibilities, the next step is crafting a plan that can, in fact, be helpful in averting a prolonged economic slowdown. According to economists, a tax cut aimed at stimulating the economy should have four characteristics. First, the tax relief should be simple enough to be enacted quickly. One of the principal criticisms of the attempts to use fiscal policy to stimulate the economy on a short-term basis is that, historically, Congress and the President have been sufficiently slow in reaching agreement for enactment of such tax cuts that by the time the tax relief is available, the problem has passed. The longer Congress deliberates, the less likely tax relief will get to the American public in time to do some good. Therefore, a simple, straightforward approach is absolutely essential to getting a bill passed quickly. The more components this tax relief includes, the more debate, discussion, deliberation, and the likelihood of procrastination. The second characteristic is the tax relief must be significant enough to have a measurable effect on the economy. The economists we have consulted suggest that tax relief in the amount of $60 billion to $65 billion would boost the gross domestic product by one-half to three-quarters of a percentage point. At a time when the economy is at virtually zero growth, that would be a welcome improvement. Third, the tax relief must be conspicuous. The more transparent the tax cut, the more positive effect it will have on consumer confidence. Finally, the tax relief must be directed at those who will spend it. Two-thirds of the Nation's economic output is based on consumer spending. Recessions are largely a result of a letup in that consumer demand. Common sense suggests that broad-based tax cuts, the bulk of which are directed at low- and middle-income American families, are much more likely to be the tax cuts that will stimulate consumption. Any tax cut that claims to provide an economic stimulus must be measured against these four standards. When scrutinized this way, both the President's proposal and the plan which was reported last week by the House Ways and Means Committee, and may, in fact, be voted on by the full House as early as tomorrow, display significant weaknesses. One, context: At $1.6 trillion, the Bush plan would consume nearly 75 percent of the non-Social Security, non-Medicare surplus, when interest costs are included. That leaves precious few resources for other important initiatives like desperately needed prescription drugs for our seniors, modernization of our armed forces, improving our schools. No funds would be left to add to the debt reduction that can come through the application of the surpluses coming into Social Security and Medicaid. The Ways and Means proposal is a more expensive down- payment of the Bush plan in that its implementation is pushed forward by a year. Two, simplicity: The President's tax cut plan contains several complicated proposals that will require Congress to carefully consider their ramifications. This deliberation is likely to delay enactment of the President's plan until it is too late to stimulate the economy. Three, sufficiency: The president's budget tallies the total tax relief for 2001 at $183 million. For 2002, the total is $30 billion. Tax relief at that low level will do little to boost the economy. The President's tax relief is so small because it is phased in over a five- year period. Phasing in tax relief is exactly the opposite policy to adopt if your goal is economic stimulus. Even the Ways and Means package, despite applying retroactively to 2001, falls far short of injecting tax cuts into the economy during the second half of this year. That plan provides only $10 billion of ``stimulus'' during this period. Four, propensity to Spend: Economic stimulus occurs when consumers are encouraged to spend. Only one of the proposals in the President's plan meets this standard. Eighty percent of all taxpayers are affected by changes to the 15 percent tax bracket. Therefore, the President's idea for creating a new 10 percent bracket--which has the effect of lowering the 15 percent tax rate--will apply quite broadly across those paying income taxes. In contrast, three-quarters of all taxpayers are unaffected by changes to the remaining four tax brackets. Yet, nearly 60 percent of the total cost of both the President's and the Ways and Means' tax cut packages are devoted to these upper rate cuts. Earlier this year, noted economist Robert Samuelson wrote in the Washington Post that the time had come for tax cuts whose purpose was to stimulate the economy. He too, criticized the President's tax plan as being poorly designed for this purpose. Specifically, he argued that the President should make his tax cuts retroactive to the beginning of this year and focus more toward the bottom income brackets. Samuelson also argued that other proposals, whatever their merit-- marriage penalty relief, estate tax repeal, new incentives for charitable giving--should wait their place in line; that the first place in this line of America in the year 2001 should be economic stimulation to keep this economy from falling into a deep ditch. Mr. President, I ask unanimous consent that the columns by Robert Samuelson be printed in the Record immediately after my remarks.

Mr. GRAHAM. Mr. President, Senator Corzine and I have an alternative that makes the improvements to the President's tax cut plan suggested by Mr. Samuelson, and makes it consistent with the characterization which I have outlined. Senator Corzine and I have an alternative that builds upon a proposal included in the President's tax cut plan. President Bush has proposed the creation of a new 10-percent rate bracket. His proposal is that for incomes up to $6,000 for an individual and $12,000 for a couple, that the first $6,000 or $12,000 would be taxed at 10 percent rather than the current 15 percent. The problem with his proposal is that he proposes to implement this change over 5 years. It is not until the year 2006 that this plan is fully in place. Senator Corzine and I propose to fully implement this 10-percent bracket retroactive to January of this year. In addition, we suggest the bracket needs to be expanded so the incomes on which it would apply would be $9,500 for an individual, and $19,000 for a married couple. There are several reasons why we believe their proposal makes sense. First, it provides tax relief to a broad range of taxpayers. Every American income tax payer would participate in this plan. All couples with income tax liabilities would save $950 annually, or have their tax liability eliminated entirely. Second, our proposal provides significant tax relief to middle-income families who are more likely to spend their additional money, and, therefore, create demand within our economy. Our plan would be more effective in stimulating our economy, particularly at this time of concern about our economic future. This proposal will lower taxes by $60 billion in both 2001 and 2002. I point out this contrast with the President's plan with the lower taxes in 2001 by less than $200 million, and the plan of the House Ways and Means Committee which will lower taxes in 2001 by approximately $10 billion. We believe this infusion of energy into the economy--$60 billion in this and the next year--is the first portion of tax relief which will be strong enough to be able to have a meaningful effect on the economy. We would propose that a large portion of the first year's tax relief be reflected in workers' paychecks during the second half of the year, precisely the time that would be needed to forestall a prolonged economic downturn. The 10-year cost of this proposal is $693 billion. This is less than half of the President's total plan, and it could be reduced further if the Congress were to decide it wished to sunset any portion of this tax cut before the end of the 10-year period. Fourth, this proposal is simple. There is no reason this proposal could not be enacted by July 4. The Treasury would be directed to adjust its withholding tables as quickly as possible. Families could expect to see an increase in their paychecks by a reduction in the amount withheld for income tax in time for their August vacations. Instead of staying home that week, they could take their children to the beach or take themselves out to dinner. They could use the money to fix the car and head for the mountains, or fix up the backyard and celebrate with a barbecue. In doing so, they could begin to reverse the cycle--to put money back into the economy, to feed expansion, to stimulate growth, to create jobs, to increase Americans' confidence in their economic future. This tax cut would truly be the gift that keeps on giving. There is one additional benefit to proceeding in the manner that Senator Corzine and I are suggesting. Enacting this stimulative tax cut first and waiting until later to address other tax matters will give Congress time to evaluate the seriousness of the economic downturn and to evaluate how effective this economic insurance policy has been in putting a foundation under that downturn. In particular, this time will give us a better idea of whether the slowing economy will adversely affect the surplus projections on which additional tax cuts are predicated. Again, I return to President Lincoln's suggestion during one of the most trying times of his service as President of the United States. This is not the time for timidity and hand-wringing. This is the time for swift, bold action. The occasion is piled high with difficulty, and we must rise with the occasion. Exhibit 1 [From the Washington Post, Jan. 9, 2001] Time for a Tax Cut (By Robert J. Samuelson) For some time, I have loudly and monotonously objected to large federal tax cuts. The arguments against them seemed overwhelming: The booming economy didn't need further stimulating; the best use of rising budget surpluses was to pay down the federal debt. But I regularly attached a large asterisk to this opposition. A looming economic slowdown or recession might justify a big tax cut. Well, the asterisk is hereby activated. By now, it's clear that most commentators missed the economy's emerging weakness. Indeed, a recession may already have started. Industrial production has declined slightly since September. Christmas retail sales were miserable; at Wal-Mart, same-store sales were up a meager 0.3 percent from a year earlier. The story is the same for autos; sales declined 8 percent in December. Montgomery Ward is going out of business. Last week's surprise interest-rate cut by the Federal Reserve confirms the large miscalculation. A tax cut is now common sense. It would make it easier for consumers to handle their heavy debts and, to some extent, bolster their purchasing power. The fact that President-elect George W. Bush supports a major tax cut is fortuitous. But his proposal is poorly designed to combat recession. Although the estimated costs--$1.3 trillion from 2001 to 2010--are large, they are ``back-loaded.'' That is, the biggest tax cuts occur in the later years. In 2002, the tax cut would amount to $21 billion, a trivial 0.2 percent of gross domestic product (national income). This would barely affect the economy. What Bush needs to do is accelerate the immediate benefits (to resist a slump) while limiting the long-term costs (to protect against new deficits). This would improve a tax plan's economic impact and political appeal. The required surgery is easier than it sounds: Bush's across-the-board tax-rate cuts should be compressed into two years--making them retroactive to Jan. 1, 2001-- instead of being phased in from 2002 to 2006. The idea is to increase people's disposable incomes, quickly. (Under the campaign proposal, today's rates of 39.6, 36, 31 and 28 percent would be reduced to 33 and 25 percent. The present 15 percent rate would remain, but a new 10 percent rate would be created on the first $6,000 of taxable income for singles and $12,000 for couples.) Similarly, the proposed increase in the child tax-credit, from $500 to $1,000, should occur over two years, not four. The distribution of the tax cut should be tilted more toward the bottom and less toward the top. One criticism of the original plan is that it's skewed toward the richest taxpayers, who pay most of the taxes. (In 1998 the 1.6 percent of tax returns with incomes above $200,000 paid 40 percent of the income tax.) The criticism could--and should-- be blunted by reducing the top rate to only 35 percent, while expanding tax cuts for the lower brackets. This would concentrate tax relief among middle-class families, whose debt burdens are highest. Bush should defer most other proposals: the gradual phase- out of the estate tax, new tax breaks for charitable contributions and tax relief from the so-called marriage penalty. Together, these items would cost an estimated $400 billion from 2001 to 2010. They are the most politically charged parts of the package and the least related to stimulating the economy. Proposing them now would muddle what ought to be Bush's central message: a middle-class tax cut to help the economy. The case for this tax cut rests on a critical assumption. It is that the slowdown (or recession) could be long, deep or both. If it's just a blip--as some economists think--the economic argument for a tax cut disappears. The economy will revive quickly, aided by the Fed's lower interest rates. Then the debate over a tax cut should return to political preferences. Do we want more spending, lower taxes or debt reduction? My preference would remain debt reduction. But I doubt that the economic outlook is so charmed. Just as the boom--the longest in U.S. history--was unprecedented, so may be its aftermath. The boom's great propellant was a buying binge by consumers and businesses. Both spent beyond their means. They went deep into debt. Put another way, the private sector as a whole has been running an ever-widening ``deficit,'' says Wynne Godley of the Jerome Levy Economics Institute of Bard College. By his calculation, the deficit began in 1997 and reached a record 8 percent of disposable income in late 2000. Household debt hit 100 percent of personal disposable income, up from 82 percent in 1990. What may loom is a protracted readjustment. ``An increase in private debt relative to income can go on for a long time, but it cannot go on forever,'' writes Godley. People and companies reduce their debt burdens by borrowing less and using some of their income to repay existing loans. The private-sector ``deficit'' would shrink. But this process of retrenchment would hurt consumer spending and business investment, which constitute about 85 percent of the economy. It's self-defeating for government to exert a further drag through growing budget surpluses. Of course, government could spend more. But politically, that isn't likely--and spending increases take time to filter into the economy. A tax cut could be enacted quickly and enables people to keep more of what they've earned. Roughly speaking, the Bush tax cuts could raise disposable incomes of middle-income households (those between $35,000 and $75,000) by $1,000 to $2,500. This would make it easier for consumers to manage their debts and maintain spending. It's also an illusion to think that lower interest rates (through Fed cuts and government-debt repayment) can instantly and single-handedly stimulate recovery. ``The danger of a severe and prolonged recession is being seriously underestimated,'' writes Godley. If you believe that--and I do--then a tax cut that made no sense six months ago makes eminent sense now.

Mr. GRAHAM. Mr. President, I ask unanimous consent to have printed in the Record the text of the bill.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I ask, immediately upon the completion of my remarks, my colleague, Senator Corzine, be recognized.

Mr. GRAHAM. I thank the Chair. (The remarks of Mr. Graham and Mr. Corzine pertaining to the introduction of S. 481 are located in today's Record under ``Statements on Introduced Bills and Joint Resolutions.'')

Mr. GRAHAM. We will take approximately 15 minutes apiece.

Mr. GRAHAM. Mr. President, I ask unanimous consent to proceed as in morning business.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, on February 15, 2001 the Senate voted 91-0 to confirm Mr. Joseph Allbaugh to be Director of the Federal Emergency Management Agency. I was absent from this vote due to a pre-scheduled surgery that afternoon. Had I been in the Chamber on February 15, I would have voted for Mr. Allbaugh, and my vote would not have affected the outcome on this unanimous demonstration of support for this confirmation. I look forward to working with Mr. Allbaugh at his post at FEMA. This agency is the critical link in the ability of our communities to prepare for and recover from natural disasters which inevitably strike our nation.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, on February 15th, I was pleased to join Senator Thurmond in introducing a bill that would remove current restrictions preventing the expansion of the Junior Reserve Officers Training Corps, JROTC. This bill would also address the shortage of JROTC instructors by expanding the qualifying criteria to National Guard and Reserve Officers. There is nearly unanimous agreement that JROTC is turning today's children into tomorrow's leaders. Additionally, high school performance measures consistently indicate that JROTC cadets attend class more frequently, are responsible for fewer disciplinary infractions, and are more likely to graduate. JROTC's blend of local, State, and Federal involvement has also been a model for good government, and it has sponsored teamwork not just in its cadets but also in the agencies responsible for the program. As many members know, I have long been a supporter of the JROTC program, having secured $27 million in supplemental appropriation for JROTC in 1999. By removing the current limitations on its expansion, we are enabling more students to participate in what has proven to be an exemplary program. The legislation would remove the congressionally- mandated ceiling of 3,500 JROTC units. It would also allow the Marine Corps to continue to expand their program which had previously been capped at 210 units. All together the Army, Air Force, Navy, and Marine Corps have more than 2,700 school units totaling over 425,000 cadets, with hundreds of schools nationwide on waiting lists for a JROTC program. JROTC has carried bipartisan support since Congress established it in 1926. I urge my colleagues to support this legislation.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I am proud to join Senator McConnell and my other Senate colleagues in launching an initiative to increase Americans' access to college education. Today, we are introducing the Setting Aside for a Valuable Education Act. This bill extends tax-free treatment to all state sponsored prepaid tuition plans and state savings plans. This legislation also gives prepaid tuition plans established by private colleges and universities tax-exempt status. Prepaid college tuition and savings programs have flourished at the state level in the face of spiraling college costs. According to the College Board, between 1980 and 2000, the cost of going to a four-year college has increased 115 percent above the rate of inflation. The cause of this dramatic increase in tuition is the subject of significant debate. But whether these increases are attributable to increased costs to the universities, reductions in state funding for public universities, or the increased value of a college degree, the fact remains that financing a college education has become increasingly difficult. In response to higher college costs the states have engineered innovative ways to help its families afford college. Michigan implemented the first prepaid tuition plan in 1986. Florida followed in 1988. Today 49 states have either implemented or are in the process of implementing prepaid tuition plans or state education savings plans. Prepaid college tuition plans allow parents to pay prospectively for their children's higher education at participating universities. States pool these funds and invest them in a manner that will match or exceed the pace of educational inflation. This ``locks in'' current tuition and guarantees financial access to a future college education. In 1996, Congress acted to ensure that the tax on the earnings in these state- sponsored programs is tax-deferred. Senator McConnell and I believe the 107th Congress must move to make these programs completely tax free. Students should be able to enroll in college without the fear of incurring a significant tax liability just because they went to school. The legislation extends this same tax treatment to private college prepaid programs. We believe that these programs should be tax free for numerous reasons. First, prepaid tuition and savings programs help middle income families afford a college education. Florida's experience shows that it is not higher income families who take most advantage of these plans. It is middle income families who want the discipline of monthly payments. They know that they would have a difficult time coming up with funds necessary to pay for college if they waited until their child enrolled. In Florida, more than 70 percent of participants in the state tuition program have family income of less than $50,000. Second, Congress should make these programs tax free in order to encourage savings and college attendance. Finally, for most families, these plans simply represent the purchase of a service to be provided in the future. The accounts are not liquid, and the funds are transferred from the state directly to the college or university. The imposition of a tax liability on earnings represents a substantial burden, because the student is required to find other means of generating the funds to pay the tax. I am pleased to have this opportunity to join my colleagues in introducing this bill which makes a college education easier to obtain.

Mr. GRAHAM

Mr. GRAHAM. Mr. President, I am proud to join Senator McConnell and my other Senate colleagues in launching an initiative to increase Americans' access to college education. Today, we are introducing the Setting Aside for a Valuable Education Act. This bill extends tax-free treatment to all state sponsored prepaid tuition plans and state savings plans. This legislation also gives prepaid tuition plans established by private colleges and universities tax-exempt status. Prepaid college tuition and savings programs have flourished at the state level in the face of spiraling college costs. According to the College Board, between 1980 and 2000, the cost of going to a four-year college has increased 115 percent above the rate of inflation. The cause of this dramatic increase in tuition is the subject of significant debate. But whether these increases are attributable to increased costs to the universities, reductions in state funding for public universities, or the increased value of a college degree, the fact remains that financing a college education has become increasingly difficult. In response to higher college costs the states have engineered innovative ways to help its families afford college. Michigan implemented the first prepaid tuition plan in 1986. Florida followed in 1988. Today 49 states have either implemented or are in the process of implementing prepaid tuition plans or state education savings plans. Prepaid college tuition plans allow parents to pay prospectively for their children's higher education at participating universities. States pool these funds and invest them in a manner that will match or exceed the pace of educational inflation. This ``locks in'' current tuition and guarantees financial access to a future college education. In 1996, Congress acted to ensure that the tax on the earnings in these state- sponsored programs is tax-deferred. Senator McConnell and I believe the 107th Congress must move to make these programs completely tax free. Students should be able to enroll in college without the fear of incurring a significant tax liability just because they went to school. The legislation extends this same tax treatment to private college prepaid programs. We believe that these programs should be tax free for numerous reasons. First, prepaid tuition and savings programs help middle income families afford a college education. Florida's experience shows that it is not higher income families who take most advantage of these plans. It is middle income families who want the discipline of monthly payments. They know that they would have a difficult time coming up with funds necessary to pay for college if they waited until their child enrolled. In Florida, more than 70 percent of participants in the state tuition program have family income of less than $50,000. Second, Congress should make these programs tax free in order to encourage savings and college attendance. Finally, for most families, these plans simply represent the purchase of a service to be provided in the future. The accounts are not liquid, and the funds are transferred from the state directly to the college or university. The imposition of a tax liability on earnings represents a substantial burden, because the student is required to find other means of generating the funds to pay the tax. I am pleased to have this opportunity to join my colleagues in introducing this bill which makes a college education easier to obtain.