Phil Gramm

Mr. GRAMM

Mr. GRAMM. Mr. President, to get to the bottom line, basically, the Internal Revenue Service has said that no matter what Congress does in terms of defining dues to the Farm Bureau as nontaxable income, they are going to pursue these lawsuits anyway. So we will be offering later as part of the managers' amendment an amendment that I have authored which basically says to the Internal Revenue Service, ``We have made a decision in Congress, we want these frivolous lawsuits to be dropped, and we want them to be dropped now.'' This is an issue that should be settled. The position of the IRS is indefensible in the opinion of the vast majority of Members of Congress and is indefensible in the opinion of the vast majority of the American people. We not only want the IRS to stop doing this in the future, we want them to go back to these old lawsuits and end this harassment once and for all. We are taking a major step in that direction in this bill. In an amendment that the chairman will offer on my behalf later and on behalf of others, we are also going to go back and, in essence, say to the IRS, ``Drop these lawsuits and end this issue once and for all.'' The second issue that I think is important in this bill is also another IRS issue. For some unexplainable reason, roughly 3 years ago, the Internal Revenue Service decided that newspapers and paperboys were cheating the Internal Revenue Service. The Internal Revenue Service, in a series of lawsuits filed all over the country against major daily newspapers, said that paperboys--and I use the term ``paperboy'' because there is no comparable gender neutral term in the English language that I have found, and though I was once a paperboy, if someone has a gender neutral term, I will be happy to use it--but until they do, I will use the one that people recognize. In any case, the Internal Revenue Service has argued that paperboys are not legitimate independent contractors and that they have, in essence, conspired with newspapers to avoid being employees and, in the process, have not paid Social Security taxes, withholding taxes, unemployment insurance, and Medicare taxes. The ultimate objective of the IRS, it appears, is to force paperboys to become employees of daily newspapers. Mr. President, in the grand scheme of things this is not a very important issue. But I was once a paperboy--I threw 106 newspapers--and for the life of me, I cannot understand why the IRS wants to destroy a system which allows literally hundreds of thousands of young people, both boys and girls, to be independent businesspeople. If the IRS had its way, it would raise the cost of having a daily newspaper delivered to your door and it would destroy an opportunity that has been part of the American system of small business since almost the colonial period. In my opinion, the negative impact of this approach goes far beyond newspapers and the cost to those who read them. Let me make the point as succinctly as I can: I am trained as an economist, and at some point in my career I became interested in various historic economic periods in America, the greenback and free silver movement period, and other periods in the 18th and 19th centuries. One of the things which I discovered was that people in the 18th and 19th centuries, for some unexplainable reason, understood economics and understood how our economy works much better than educated people do today. After having looked at this, I concluded that the reason this was so is that in the world of the 18th and 19th centuries--when most people were farmers or independent businesspeople--most people actually bought things, produced things, and sold things. They were both buyers and sellers in the market at the same time, and because of this, just carrying on their daily business provided a tremendous educational experience for them about how this great economic system works. Today, when people graduate from college, they go to work for some big company or for the Government, and for most of their lives they specialize in one particular field. They may buy things, they may sell things, they may produce things, or they may even deal with the huge paperwork and litigation trail that often goes with it--but very few people in America today are actually engaged in all facets of any business. One of the reasons that I have taken on this paperboy issue with a very strong commitment and zeal is that being a paperboy is one of the last jobs left where young people are actually in business for themselves. They buy their newspapers from the newspaper and then sell it to their customers. I bought 106 copies of the Ledger-Enquirer from the local newspaper and delivered it to 106 residences and businesses. I collected the money, as literally millions of paperboys have done since the colonial period, and in the process not only did I earn money, but I learned about how our market system works. I think it is vitally important that we not let the Internal Revenue Service destroy this great educational and business system that is available to young people all over America. So I have championed this provision in the bill that says to the Internal Revenue Service, get out of the paperboy business. Let paperboys be independent businesspeople. Stop challenging their independent status. Do not destroy a great American institution which not only brings the newspaper to our home at 6 o'clock in the morning, at a very low price, but also is a great business and learning opportunity for the young people of this country. So I am very proud of this provision. Is it going to change the world? No. But for hundreds of thousands of young people all over America, it is going to preserve their opportunity to be an independent businessperson. It is going to preserve a great American institution and it is going to tell the Internal Revenue Service to go make war on somebody else and leave America's paperboys alone. The third provision in the bill that I want to talk about is the research and development tax credit. This credit came into place in 1981 in an effort to try to encourage American businesses to invest in research and development. If I had the chart with me that I have used around the country, I could show that in every single year since 1970 Japan and Germany have invested a higher percentage of their gross domestic product in nondefense R&D than has the United States of America. We need more research and development if we want to produce the products of the 21st century, if we want to be competitive in the world market. If we really want higher wages in this country, we should not simply just mandate them in Congress, we should promote investment in research and development. We should promote investments which develop new products, which develop new tools, and which develop new ways of doing things. We need to be the leader of the world in science and technology, and extending the R&D tax credit is a critical part of that effort. Quite frankly, Mr. President, I am disappointed that we are only extending the R&D tax credit for 18 months. This tax credit should be made permanent because people need to know with certainty that if they undertake a long-term R&D project--that if they try to bring a new product on to the market, or to develop new tools and new techniques, or to bring the power of science to the farm and to the factory--that there will be a consistent and favorable tax policy. The R&D tax credit is broadly supported on both sides of the aisle. I think it is absolutely imperative that we adopt this bill and put the credit back into place, and eventually I want to make it permanent. This business of taking important features in the tax structure and every 6 months or every year going through the process of re-debating it creates uncertainty and it greatly reduces the positive benefit to the country of long-term research, development, and experimentation expenditures by private businesses. So I think it is imperative that we make this tax credit permanent. I am pleased that we are reinstituting it. I see it as a positive step forward, but I do not think we are going far enough. One final issue: Senator Hutchison has sponsored, and I have cosponsored, a bill to eliminate a terrible inequity in the Tax Code. And that terrible inequity is that if you work outside your home and the company you work for does not have a private retirement program, you can put up to $2,000 a year tax free into an individual retirement account. If, however, you decide to stay at home and raise your children and be what is traditionally called a homemaker, you lose the ability to put $2,000 a year into your individual retirement account. I believe, and Senator Hutchison believes, that the Tax Code discriminates against people who decide to stay at home to raise their children and to provide for their family. I want to make it very clear that neither Senator Hutchison nor I are trying to make a value judgment here as to what people should do. My mama worked all during my childhood because she had to. My wife has worked because she wanted to. But the point is this, the Tax Code should not discriminate against people based on whether they make a decision to work outside their home or inside their home. The provision that is in our bill makes it so that regardless of whether a person decides to take a job in the economy or whether they decide to stay, and work, in their home and to raise their children, they have the equal right to provide for their retirement and to provide for their individual security. Under this provision we will let a homemaker, as well as someone who works outside the home, set up an individual retirement account, and we will allow them to put up to $2,000 a year tax free into that account. The net result will be to strengthen families and to allow people who stay at home and raise their children to build up a retirement program like other people can. We will be eliminating an antifamily element in the Tax Code, and, therefore, I think this is an important provision. I am equally committed to the goal of trying to expand what people can use individual retirement accounts for. Last year, we were successful in both Houses of Congress in opening up individual retirement accounts to allow them to be used to build up a nest egg for a downpayment on a first home, to be used for college tuition, and to be used for major medical expenses. I think this is an important step in creating a lifelong saving program which will not only expand national savings and enrich the country in the process, but will make it easier for people to prepare financially for the expenditures that they are going to have to face during their lifetimes. In making it easier to save, we will make families stronger, we will make people more secure, and we will spread happiness, which is the only legitimate aim of a free government. I am afraid that with all of our efforts here to defy logic and economics and to repeal the laws of supply and demand that we are going to forget that there are other provisions being voted on today. Individually, they do not represent Earth-changing policy, but getting the IRS out of the business of trying to force the Farm Bureau to pay taxes on dues, getting the IRS out of the business of trying to destroy the independent contractor status of paper boys, extending the R&D tax credit, and letting homemakers have the same right to build up retirement that those who choose to work outside the home have are all important changes in tax policy. I think these changes will be beneficial to the country as a whole as well as to the individuals who are directly affected. I want to thank our chairman for his leadership on this bill and for allowing individual Members who care strongly about these small issues, which often end up falling through the cracks, to get them into this bill. I yield the floor.

Mr. GRAMM. I yield 10 minutes to the distinguished Senator from Missouri.

Mr. GRAMM. Mr. President, if we could amend the unanimous-consent request so that the distinguished Senator from Minnesota has 1 more minute but at the expiration of that minute the distinguished Senator from Missouri be recognized for 10 minutes.

Mr. GRAMM

Mr. GRAMM. Madam President, I thank the Senator for his response, and I join with him in expressing my willingness and desire to ensure that the language of the final legislation, as it emerges from conference with the House of Representatives, will preserve State revenue authority. I am aware that securities-related fees are an important source of revenue for the Texas State government, and I do not see it as our place here to impair that authority. I further know of no one who disagrees with this intent, so I also see no problem in fully resolving this matter in the final version of the legislation.

Mr. GRAMM. Madam President, I would like to address a question to the distinguished chairman of the Banking Committee, Mr. D'Amato. As the chairman is aware, this legislation takes the very important step of providing national rules for national securities markets. In doing so, however, it has been our intent to preserve State authority to collect revenues, either to fund their antifraud efforts or for other State government purposes. In fact, the bill as reported contains explicit language to allow States to continue to collect all fees and revenues related to registration and regulation of securities that they have been collecting, notwithstanding the provisions of the bill that reduce the States' role in registration of nationally traded securities and mutual funds. Does the chairman concur that this has been the intent of the Members both in drafting and approving this legislation?

Mr. GRAMM

Mr. GRAMM. Mr. President, I move to table. Mr. WELLSTONE addressed the Chair.

Mr. GRAMM

Mr. GRAMM. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.

Mr. GRAMM. Mr. President, let me define what I am trying to do here in basic terms and then outline very briefly the amendment and how it will work. I want to be brief because when you are winning, it is best to accept the victory and not do a lot of talking about it. But let me define the problem. Twenty and 30 years ago, young Americans took up the country's call by joining the military. What they were promised when they joined the military is that, if they served out to retirement--20 or 30 years-- among the benefits they would have is the ability to go into military medicine in retirement and, on a space-available basis, continue the same military medicine that they were accustomed to while they wore the uniform of the country. All over America hundreds of thousands of retirees are in a position today where that commitment was made 20 or 30 years ago. Interestingly enough, it is fulfilled from the moment they retire until they turn 65. But the moment they turn 65, they are now being excluded from the military medical system that they were promised they would have available to them. The incredible paradox is that they are among the few Americans who have earned not one system of medical care in their retirement but two. They earned access to medical care by serving 20 or 30 years in the uniform of the country. In the middle of their career, Congress decided to have them pay the Medicare payroll tax and qualify for Medicare. So our military retirees now find themselves in a very select group of people where they have earned not one medical benefit but two. What is now being done is they are being forced to opt to go on Medicare when many of them have grown accustomed to the military medical system and want to stay in it. We have also created two classes of retirees--those below 65 who qualify for military medicine and those 65 and above who lose it. At the very moment when people are turning 65, feeling more vulnerable about their health care, they are being uprooted from a system that they have grown accustomed to. In addition to that, there is the fundamental fairness issue, it seems to me. Our military retirees serve 20 or 30 years to earn their benefit. We promised it to them, and now we are not living up to our word. I submit that, if we want others to take up the cause of the country and to wear its uniform, it is very important that we live up to the commitments that we have made to those who have served in the past. The right thing to do is to give people a choice; to say to every military retiree that when you turn 65 you can opt for the Medicare which you paid for and have Medicare reimburse your medical care through the private medical system of the country, or on a space- available basis, you can continue to use military medicine as you did before you turned 65. Then an agreement should be worked out between Medicare and the Defense Department as to who is going to pay for this medicine. My view is we should have subvention, and Medicare should reimburse our military hospitals. That is what I want. That is what is fair. That is what we promised people. We are living up to our word when we do that. I have tried for the last 6 months to work out a bill to try to set up an experiment to prove that it does not cost more to give people the right to stay in military medicine, to have a test in three regions of the country--the south-central United States, Pacific Northwest, and Alaska--where we could take States that are quite different and see whether it costs more to have people stay in military medicine, if they choose to, or to simply go into Medicare and be reimbursed. I thought we might be able to work that out. But with the session getting short, we have worked out a compromise that I believe is generally supported and is going to be accepted, I believe, on both sides. Our compromise will require the administration to submit, by September 6 of this year, a detailed subvention demonstration implementation plan. This will give the administration 2 months to make up their mind how they want to do it and still gives Congress time to act before we adjourn to set up the program this year. We also authorize $75 million of funding, based on Congressional Budget Office scoring, that would be available if in fact the program does cost more than conventional Medicare, which I doubt. This will allow us to move ahead but, on the other hand, not impose on Health and Human Services and the Defense Department a program that they are not fully comfortable with. My objective here is not to impose a plan that I have written. My objective is to simply provide equity. It seems to me that equity is giving people the right to choose. My goal is that through this amendment, which hopefully we will adopt today, we will plant the seed whereby on September 6 the administration will give us a concrete program that we can adopt to begin the process of living up to the commitments we made to our military retirees. In addition, we also mandate that by January 3 the administration present a feasibility study to allow military retirees to consume medicine in our military hospitals on a fee-for-service basis. With the combination of these two requirements I think we are making a major step toward living up to the commitments we gave to our military retirees. I am hopeful that we will be successful with this amendment. I think it is a very important amendment. My view is, when you tell people you are going to do something, you have an obligation to try to live up to it. We can do that with this amendment and with a follow up that will be required from it. I am delighted to know that the amendment is going to be accepted. I thank the distinguished chairman of the committee. I yield the floor.

Mr. GRAMM. Mr. President, I ask unanimous consent to temporarily set aside the Kyl amendment.

Mr. GRAMM. Mr. President, I send an amendment to the desk and ask for its immediate consideration.

Mr. GRAMM

Mr. GRAMM. Mr. President, it is my understanding that we will be going back to the Defense authorization bill.

Mr. GRAMM

Mr. GRAMM. Mr. President, let me thank our dear colleague from Georgia. I want to say a few words on another subject, but let me address the subject at hand first. Let me say to our dear colleague from Georgia, I do not think he ought to be surprised. I believe that the final battle for the rights of man, the final determination of whether freedom, both economic and political freedom, will survive and prosper on this planet is not going to be determined on the frozen tundra of Russia, it is not going to be determined by debate in the Kremlin; it is going to be determined right here on the floor of the United States Senate. I try to make a distinction because I think Americans get confused about what freedom is. Freedom is not just the right to get up and criticize the Government. Freedom is not just the right to exercise political choices. Freedom is the right to exercise economic choices. Freedom is the right to buy the products you choose. Freedom is the right to spend your own money which you have earned by the sweat of your own brow. That is what we are talking about here today. I think probably most people are totally confused about what this debate is. Our Democratic colleagues are hoping they are. Because what this debate is all about is freedom. There are some Members of the U.S. Senate who are for it and there are some Members of the U.S. Senate who, in its economic manifestation of the right of people to choose what kind of health insurance they want, are against it. Senator Kennedy and the Democrats are saying, in holding up the conference on a health care bill that passed the Senate 100 to 0--100 to 0--he is saying that he is opposed to it because if we go to conference with the House to work out our differences, medical savings accounts could end up in the bill. What are medical savings accounts? What we are talking about here is simply the right of people to choose between buying a low-deductible health insurance policy, which for a family of four costs about $4,200 a year, where the insurance company starts paying almost immediately if somebody in your family gets sick. That is conventional health insurance. It has one big problem, and that is, once you are sick, you are spending somebody else's money. You have no incentive to be conscientious. Costs are exploding. Just imagine if you went to the grocery store, and you had a grocery insurance policy. For everything you put in your basket, the grocery insurance policy paid 95 percent of it. You would eat differently, and so would your dog. But what would happen is, grocery insurance would explode in cost. That is exactly what has happened in health insurance. What we are trying to do is to let people, especially young people who do not have much money, buy a new kind of health insurance policy that would have a higher deductible. You could buy a Blue Cross-Blue Shield policy, with a $3,000 deductible, for about $2,200 a year rather than the $4,200 a year you are paying for by buying the comprehensive low-deductible policy. Why $2,000 less? Because a lot of that is, for all practical purposes, prepaid medicine. What we are proposing is that people be able to take that $2,000 they save and put it into a tax-free savings account and use it to pay deductibles. But the magic, almost magical power of it, is that if they do not use the money for medical purposes, they get to keep it. So unless they get very sick, 92 percent of American families would never spend beyond their medical savings account in a year. So unless they get very sick, they have an incentive to be cost conscious because they are spending their own money. Here is the point. We are not trying to make people buy medical savings accounts. There is nothing in our proposal that makes anybody buy it. What we are trying to do is to let them do it. This is about freedom. Senator Kennedy and the Democrats claim, ``Oh, this program only helps rich people.'' Have you ever noticed that everything Democrats are against supposedly helps rich people? They did not want to cut taxes on working families, a $500 tax credit per child, because they say that helps rich people. If they want to raise taxes, of course, they claim they are taxing only rich people. In any case, do rich people care about this? What difference does it make to rich people whether they buy a low-deductible or high deductible policy? By definition, if you are rich, you have a lot of money. It cannot make possibly any difference. But let me tell you who it makes a difference to. I have a son who just turned 23 years old. He is off my insurance policy. For the first time in his life, he is trying to decide how he is going to get health insurance and how he is going to buy it. He is as healthy as most 23- year-old males and females are. Why not allow him to buy a high- deductible policy and take the savings, put them into a medical savings account and build up a nest egg to go to graduate school, or to try to start a business, or to buy a home when he gets married? When we debated this subject before, I had quotes from two so-called rich people who use medical savings accounts. One of them was a united mine worker, because the United Mine Workers Union has medical savings accounts, but they do not get fair tax treatment on them. They have to pay taxes on them. The other was a part-time bus driver. They were arguing they ought to be treated fairly, and I agree with them and not with the Senator from Massachusetts, who is objecting to letting us appoint conferees and bring this bill up. The second argument is, well, look, this helps young people and healthy people. Who does not have health insurance? Basically, young healthy people are not buying health insurance because, A, they do not think they need it right now and, B, they cannot afford it. Why not have a policy available that may not be used by everybody, but that will be used by young people so that they can buy basic coverage. The Democrats' solution is to guarantee that they can buy insurance in the future once they get sick rather than now when they are young and healthy, but at the cost of charging everybody else higher rates. We need medical savings accounts, and this is about freedom. The Democrats want the Clinton-type health care bill. That is what they want. And they know medical savings accounts move us toward private family decisions. They want Government decisions. That is what this debate is about, and if you believe in freedom, you are with us.

Mr. GRAMM

Mr. GRAMM. Now, I want to turn to another subject. The President has put out a new list of savings measures, and among the savings measures is an international departure tax increase--$2.3 billion of savings. Now, you might ask, what does a tax increase have to do with savings? The answer is, nothing. We have, in this administration, a new language where everyday words are changed into new words and they have nothing to do with each other. But this is basically a proposal to raise taxes on international travel by imposing a $10 per passenger tax on everybody buying a round-trip ticket in international travel, coming to the United States and going back, or leaving the United States and coming back. Now, if you have Americans traveling, some people assume they must be rich. So you want to tax them. So I am not going to get into that argument. I think it is absurd. We know that not everybody who travels internationally is rich. Let me talk about the 42,983,000 foreigners who come to the United States. Well, you might say, why not tax them? They cannot vote here, so why not tax their money while we have them? What do they come here for? Well, they come here to invest, to create jobs, and to be tourists. In fact, as tourists, they spent $76.485 billion last year. Why, I ask, should we be trying to raise barriers against people who want to come to Atlanta, or who want to come to Houston or who want to go to San Antonio to see the Alamo? Why should we want to raise barriers to people who want to come and see where great Americans come from, like South Carolina, and who came to the Alamo to defend freedom--especially when they are spending $76.485 billion on the trip? To save my life, I do not understand that. We did a little check in asking just one hotel manager that we happened to be having a conversation with, who works for Marriott Hotels in Houston, what percentage of the people staying in his hotels, on an average night, are foreign nationals. He estimated that 40 percent of the people staying in Marriott Hotels in Houston are foreign nationals. Now, why would we want to discourage all these people from coming to America to spend money? Well, it is interesting that by a fairly conservative estimate, in international tourism alone, this tax would cost us twice as much as the Government is claiming to collect. I know some people will make an argument that these people who would make this money from international tourism will squander it. They will spend it on their children, they might go to Disneyland, they might invest in some private business; and that the Government, collecting half as much money from this tax as these private citizens would earn, will spend it wisely--on the National Endowment for the Arts or the Legal Services Corporation--but not getting into those arguments, I am opposed to this departure tax increase. I want people to come to America. I want people from all over the world to come here and see the Alamo and see the Capitol and get to know our country and understand, personally, its greatness, get to know Texans and Americans, and bring that $76 billion a year with them and spend it here. This is a poorly designed tax that will cost us jobs. It is a bad idea. I just want to remind people that taking the whole travel industry in America, we have almost a million people employed--about 960,000 people--because of international travelers. In fact, hundreds of thousands of people are going to come, for example, to Atlanta to the Olympics. People are coming to many different places around our country. My view is, let them come, let them spend their money when they get here. But the idea of erecting barriers to them coming, to collect a tax, it seems to me, is foolhardy and should be rejected. This is part of something bigger. The Securities and Exchange Commission now collects twice as much in their taxes on securities as it spends to run the SEC. None of this money the President calls savings through this new tax would go to support the Federal Aviation Administration--not one penny of it. It would go to fund Government programs in general. We have fees on the transportation of hazardous materials that began as a relatively low figure. It is now $300. It was initially applied to trucks, railroads, and barges hauling things like crude petroleum. It is now being applied in Texas to 10,000 independent oil producers, who do not even transport the crude oil themselves. The administration has proposed to raise it to as much as $5,000 a year and collect as much as $50 million out of my State just from independent oil producers. Why? Because these increased fees could be used as taxes to fund Government in general. They would not be used for the purposes they were set out for. Just like this gasoline tax we have been trying to repeal, which is not going to build roads, it is going to general revenue. My view is--and I will conclude on this--when you collect taxes on gasoline, motor fuel, it ought to go to roads. When you collect taxes on airline tickets, it ought to go to the FAA to build airports, to support the infrastructure. What is happening in this administration is all these fees are being raised because they want to spend the money and they want to hide the tax. This departure tax increase on airline tickets is wrong. I wanted to come down today to say I am opposed to it, and I do not intend to see it become the law of the land. I thank my colleague from Georgia. When all those millions of tourists coming through Atlanta and spend all that money, remember, I did not want to erect the barrier. (Mr. INHOFE assumed the chair.)

Mr. GRAMM

Mr. GRAMM. Mr. President, by his skill and courage, Bob Dole has earned a place in history, alongside the modern giants like Lyndon Johnson and Bob Taft, as one of the greatest leaders in the history of the Senate. I think it is fair to say that of all the people who I have worked with in my service in the House and the Senate, Bob Dole is the greatest legislator, and I am very proud to have served with Bob Dole in a period which inevitably will be called in the history books the ``Dole era.'' Bob Dole has my strong support and my deep affection as he leaves the Senate he loves to fight for the leadership of a nation that he loves even more. I think for many of us here today, this is a sad moment. Bob Dole has been the leader of the Republicans in the Senate every day that I have served in the Senate. My first vote that I cast 12 years ago when I came to the Senate was a vote to make Bob Dole the majority leader. I have known him as an ally and an adversary. I think I can say I know Bob Dole pretty well. I know that he is a good and great man. I know that as Americans get to know him in the coming months that they are going to conclude that he has the leadership and the convictions that we need to change America. So as he leaves us in the Senate, I am delighted that he is leaving us to seek higher service, and I am confident that he is going to get an opportunity to provide that service. I am very proud to join his colleagues today in paying tribute to him, the greatest legislator of his era, as he serves his last day in the Senate. I yield the time that is remaining back to the Senator from Oklahoma. Mr. NICKLES addressed the Chair.

Mr. GRAMM

Mr. GRAMM. Mr. President, today, I am joined by Banking Committee Chairman D'Amato in introducing the Securities and Exchange Commission Fee Reduction Act of 1996. This legislation is similar to a bill that was approved overwhelmingly by the House of Representatives earlier this year, and it should enjoy similar support in the Senate. Today, so-called user fees collected by the Securities and Exchange Commission [SEC] will pay for the entire SEC budget nearly three times over. These fees have become transformed into a tax on investment and capital formation. The legislation that we are introducing today will reduce these excess fees in stages over a period of 5 years until the amounts collected are approximately in line with the budget of the SEC. Mr. President, permit me to review the history of these fees, so that this bill, and its importance, can be placed in context. For many years a variety of user fees have been assessed to support the budget of the SEC. The most significant of these fees is assessed on new securities issues as they are registered with the Commission. A lesser fee is imposed on New York and American Stock Exchange trades. From their inception, fees were kept minimal, closely related to the cost of actually running the SEC, and therefore could be called user fees, paid so that the SEC could guard the integrity of our securities markets, a clear benefit to everybody. That began to change with the 1990 budget. The slump in market activity following Black Monday in 1987 caused worry in some quarters that the money generated by existing fees might not keep pace with the growing budget of the SEC. So the registration fees were raised, temporarily. That not only made up for lost revenue, it inadvertently produced annual surpluses of up to $70 million over and above the SEC's budget. Creating a surplus by raising a fee is a dangerous precedent. Before 1992, the SEC user fees had become a cash cow. Even so, the registration fee ratio was altered again. The surplus then jumped to $180 million and had continued to climb each year since. It will approach $400 million this year. It it improbable that a more destructive way to raise revenues could be found. Not unlike an increase in interest rates, the registration fees increase the cost of raising equity capital, with the unavoidable result that equity investment is lower than it would otherwise be. These fees have raised the cost of entry into the equity markets. The cost to the economy is immense. These fees tax our economy's seed capital--the money needed to create a harvest of new jobs, goods, services, economic growth, and opportunity. Clearly, the cost of these taxes imposed on new stock issues and stock trades measured in loss of economic activity must be counted in billions of dollars. Since a tax on new issues and equity transactions must be among the most inefficient ways to raise revenues, such a tax should never be used to fund general government. That is why I oppose setting fees at a level higher than necessary to fund the SEC. The adoption of this bill will return us to this principle, which governed SEC fees prior to the change in 1990. These excess fees have been recognized as a tax by the House Ways and Means Committee. This fact resulted in a near shutdown of the SEC 2 years ago in a dispute between the Appropriations and Ways and Means Committees over jurisdiction for tax legislation. To prevent a recurrence of that problem, a compromise was reached whereby the Ways and Means Committee will withhold its objections to such fees being raised in appropriations bills, but only while the excess fees are on track to their elimination. This bill implements that compromise, which also has the full support of the authorizing committee in the House and the SEC. This legislation is revenue neutral, since the excess SEC fees have not been used for deficit reduction but rather as offsetting collections in appropriations bills. The fees collected for deficit reduction purposes remain unchanged. Mr. President, this position finds a strong consensus in this Congress. The legislation adopted by the House of Representatives had the support of Republicans and Democrats and was carefully crafted in consultation with the Ways and Means, Commerce, and Appropriations Committees of the other body. I believe that the companion bill we are introducing today will find similar support here. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. GRAMM

Mr. GRAMM. Mr. President, today, I am joined by Banking Committee Chairman D'Amato in introducing the Securities and Exchange Commission Fee Reduction Act of 1996. This legislation is similar to a bill that was approved overwhelmingly by the House of Representatives earlier this year, and it should enjoy similar support in the Senate. Today, so-called user fees collected by the Securities and Exchange Commission [SEC] will pay for the entire SEC budget nearly three times over. These fees have become transformed into a tax on investment and capital formation. The legislation that we are introducing today will reduce these excess fees in stages over a period of 5 years until the amounts collected are approximately in line with the budget of the SEC. Mr. President, permit me to review the history of these fees, so that this bill, and its importance, can be placed in context. For many years a variety of user fees have been assessed to support the budget of the SEC. The most significant of these fees is assessed on new securities issues as they are registered with the Commission. A lesser fee is imposed on New York and American Stock Exchange trades. From their inception, fees were kept minimal, closely related to the cost of actually running the SEC, and therefore could be called user fees, paid so that the SEC could guard the integrity of our securities markets, a clear benefit to everybody. That began to change with the 1990 budget. The slump in market activity following Black Monday in 1987 caused worry in some quarters that the money generated by existing fees might not keep pace with the growing budget of the SEC. So the registration fees were raised, temporarily. That not only made up for lost revenue, it inadvertently produced annual surpluses of up to $70 million over and above the SEC's budget. Creating a surplus by raising a fee is a dangerous precedent. Before 1992, the SEC user fees had become a cash cow. Even so, the registration fee ratio was altered again. The surplus then jumped to $180 million and had continued to climb each year since. It will approach $400 million this year. It it improbable that a more destructive way to raise revenues could be found. Not unlike an increase in interest rates, the registration fees increase the cost of raising equity capital, with the unavoidable result that equity investment is lower than it would otherwise be. These fees have raised the cost of entry into the equity markets. The cost to the economy is immense. These fees tax our economy's seed capital--the money needed to create a harvest of new jobs, goods, services, economic growth, and opportunity. Clearly, the cost of these taxes imposed on new stock issues and stock trades measured in loss of economic activity must be counted in billions of dollars. Since a tax on new issues and equity transactions must be among the most inefficient ways to raise revenues, such a tax should never be used to fund general government. That is why I oppose setting fees at a level higher than necessary to fund the SEC. The adoption of this bill will return us to this principle, which governed SEC fees prior to the change in 1990. These excess fees have been recognized as a tax by the House Ways and Means Committee. This fact resulted in a near shutdown of the SEC 2 years ago in a dispute between the Appropriations and Ways and Means Committees over jurisdiction for tax legislation. To prevent a recurrence of that problem, a compromise was reached whereby the Ways and Means Committee will withhold its objections to such fees being raised in appropriations bills, but only while the excess fees are on track to their elimination. This bill implements that compromise, which also has the full support of the authorizing committee in the House and the SEC. This legislation is revenue neutral, since the excess SEC fees have not been used for deficit reduction but rather as offsetting collections in appropriations bills. The fees collected for deficit reduction purposes remain unchanged. Mr. President, this position finds a strong consensus in this Congress. The legislation adopted by the House of Representatives had the support of Republicans and Democrats and was carefully crafted in consultation with the Ways and Means, Commerce, and Appropriations Committees of the other body. I believe that the companion bill we are introducing today will find similar support here. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. GRAMM

Mr. GRAMM. Jefferson and Adams, after having both served as President and after having had one of the most bitter political debates in America history, started a correspondence, much of which is now known as the ``Jefferson-Adams Debate.'' Adams, ever the pessimist, argued that Americans would discover that they could use Government to redistribute wealth, and that in doing so they would tax productive effort, reward indolence, and that ultimately democracy would fail. Jefferson, ever the optimist, agreed that Americans would make the discovery that they could use Government to redistribute wealth, and agreed that all the tendencies that Adams identified would clearly be present, but Jefferson argued that Americans would realize that what Government could take away from someone else to give them today it could also take away from them and give to someone else tomorrow. Jefferson believed that opportunity would always be so prevalent in America that Americans would ultimately reject Government's redistribution of wealth. We are, today, living out the Jefferson-Adams debate, and the future of our country is going to depend on the outcome of this dispute. I believe that Jefferson was right. I believe that if America understood what we are choosing every day by choosing more and more government and choosing less and less freedom, I believe that if we could just let Americans look at the end of the path we are following and then decide which fork in the road to take, there would not be any doubt as to which path they would choose--they would choose Jefferson's. The problem is that the whole spending process distorts the view and prevents us from seeing clearly the end of the path we are now following. Even in the Republican budget which we tout this year, we will spend $17 billion more on discretionary spending than we promised to spend last year, and we are the party of fiscal responsibility. The Democrats would start dozens of new programs, that would bankrupt the country, without ever telling anybody that they would require a massive increase in taxes. There is only one way we can bring this to an end, and that is to pass a balanced budget constitutional amendment, send it to the States, let the States ratify it, and then have it imposed on Congress. ``Congress shall make no law which raises the deficit.'' This is the constraint we need. There are those who have argued, ``Well, you are endangering Social Security by forcing the Government to live on a budget.'' Does anybody really believe that we protect Social Security by going deeper and deeper in debt every single day? Does anybody believe that the explosion of Government programs can ultimately do anything except destroy Social Security? Does anybody believe this continued spending spree under Democratic and Republican administrations, under Democratic and Republican Congresses, can do anything other than undermine the creative genius of our country? We can cut interest rates, we can expand economic growth, we can create more jobs, create more growth, and create more opportunity for our people, but we can only do it if we stop the deficit and force a real debate, and the real debate is this: Do the Democrats want more Government enough to raise taxes to pay for it? Do Republicans want more freedom enough to cut spending to make it possible? Both parties are living a lie today. We could end that by passing a balanced budget amendment to the Constitution. We were one vote short the last time we voted on this because six Democrats, having voted for it in the past, changed their votes when it really counted. I hope today will be the beginning of a change. I hope people see this as a golden opportunity to change America. I doubt they will, though I am confident that some day we are going to pass this amendment. The sooner we can pass it, the better off the country will be and I continue to hope we will do it today. I yield the floor.

Mr. GRAMM. Mr. President, I yield myself 10 minutes. Mr. President, today we are once again engaging in an ancient debate about whether or not there ought to be binding constraints on the ability of the Government to incur debt. I say this is an ancient debate because it actually started at the very beginning of the constitutional process. When Thomas Jefferson first saw the Constitution, he was serving as Minister to France and, therefore, was not in the country when it was written. When he first saw the Constitution, he made, in a letter, the following statement: ``I wish it were possible to obtain a single amendment to our Constitution. I would be willing to depend on that alone for the reduction of the administration of our Government to the genuine principles of its Constitution. I mean an additional article taking from the Government the power of borrowing.'' Now, I submit, Mr. President, that today we are engaged in the same debate that was initiated the very first moment Jefferson saw the new Constitution. It was recognized at that point, by no less a keen observer than Thomas Jefferson himself, that there was a problem in the Constitution. Fortunately, at that time, we were on a gold standard and the amount of money in the economy was limited by a requirement that it be converted into gold at the rate of $20.67 an ounce, and except during wartime, when this requirement was suspended, we had a relatively stable situation. Every time this requirement was suspended, however, we had an explosion in prices, and when we went off the gold standard in the 1930's, this constraint on the amount of money in the economy was totally removed. We now find ourselves in the situation where we have not balanced the Federal budget since 1969. Every year since 1969, we have run a deficit. The cumulative debt of the Federal Government, which converts into a debt for each individual citizen, has risen from $1 trillion to $2 trillion to $3 trillion. I know throughout this debate we have had charges hurled back and forth between the Democratic side of the aisle and the Republican side of the aisle as to who is responsible for this situation. I, for one, do not have any trouble saying that the blame can be found on both sides of the aisle, both in the Congress and in the White House. The plain truth is, our Democratic colleagues who want more Government have consistently underestimated the cost of the Government that they want, and in doing so they have planted the seeds for more and more Government spending without being willing to look the American people in the eye and say, ``We are going to have to raise taxes to pay for this additional Government.'' Might I also say that, on our side of the aisle, we are very generous in promising less Government and more freedom--we love to talk about cutting taxes. But when it gets down to the bottom line of cutting Government spending, we have never ever been willing to cast the votes needed to place ourselves in a position where we are living up to the high commitments we have made. Some of our colleagues have said, ``Well, why do we need a binding constraint on Government?'' They are forgetting, however, what is the purpose of the Constitution. If the Founders had trusted Congress to respect freedom of religion, freedom of assembly, and freedom of the press, and if the Founding Fathers had trusted Congress to protect private property, there would never have been a Constitution. The whole purpose of the Constitution is to limit the power of Government. In fact, the genius of the Constitution is that it actually says there are certain things that Government just cannot do. Does anybody believe that this Congress, this President--that any Congress, or any President--can be trusted to balance the Federal budget, to limit the growth of Government spending, or at least have the courage to pay for it by raising taxes? I do not believe this Congress can be trusted, and I can not envision any Congress which could be elected that, year in and year out, could be trusted to act in this manner. Let me explain why: Every time we vote on a spending bill, all the groups who want the money are looking over the Congressman's left shoulder, sending letters back home, telling people whether their Representative cares about the old, the poor, the sick, the tired, the bicycle rider--the list goes on and on and on. But nobody is looking over the Congressman's right shoulder to see if he cares about the future of the country or the future of our children. What happens, as we vote on these individual bills, is that the average beneficiary may get $1,000, or $1,500 while the average taxpayer may spend only 50 or 75 cents. You do not have to have a Ph.D. in economics to know that one person will do much more to get $1,000 or $1,500 than a lot of people will do to prevent spending 50 cents. So what happens on vote after vote after vote, is that we end up spending more and more money. Well, as a result, what has happened to taxes? When I was a boy, 8 years old in 1950, the average family in America with two little children sent $1 out of $50 it earned to Washington in taxes. Today, the average family with two children is sending $1 out of every $4 it earns to Washington in taxes. If we do not create a single new Federal program in the next 30 years, if we simply pay for the Government we have already committed to, in 20 years the average family will be sending $1 out of every $3 to Washington, and in 30 years the average family will be sending $1 out of every $2 to Washington, DC. This is the cold reality we face. In my opinion, there is only one thing we can do, short of a crisis, to change this picture, and that is to adopt a balanced budget amendment to the Constitution. A constitutional prohibition against deficit spending, which allows for a period of time to come into compliance, will end all of this foolishness. The President will be forced to sit down and work with Congress and the Congress will be forced to work with the President, because under this constitutional constraint we will have no other choice. If we want the games to end, if we want the Government to be forced to live on a budget, if we want to stop the explosion of the tax burden, if we want to have any real chance of preserving Medicare and Social Security for our parents and for ourselves, and if we really care about the future of our country, the most important single change we could make in America Government is to adopt a balanced budget amendment to the Constitution. Mr. President, I had a previous agreement for 15 minutes. I yield myself the final 5 minutes.

Mr. GRAMM. Mr. President, how much time do I have under the previous order?

Mr. GRAMM

Mr. GRAMM. Mr. President, I want to talk about this issue of naming conferees, and about the health care bill itself. I know many people think that when we have these little confrontations it is just partisanship and that it does not mean anything, but I wanted today to take a little time to talk about the real issue here and explain what it really means. Let me begin by noting that the Senate passed a bill 44 days ago which would make health insurance permanent and portable, and which set out a procedure to try to make it easier for people to get and keep good private health insurance. It was this little bill right here. Now, 44 days ago, the distinguished majority leader, Senator Dole, tried to appoint conferees to work out the differences between our health care reform bill and the health care reform bill that passed the House of Representatives, so that both Houses of Congress could then bring up and pass a final bill. For 44 days, Senator Kennedy has objected, and for 44 days he has denied working Americans the following provisions: No 1, an 80-percent deduction for health insurance premiums that are paid by the self- employed. This is a provision which is contained in the bill that we passed thanks to an amendment that was written and offered by Senator Dole; No 2, the deductibility of long-term health insurance premiums; No 3, the ability of people with terminal illnesses, with the certification of a physician, to go ahead and collect their life insurance--a very important provision for people who have AIDS; No 4, State-sponsored high risk insurance pools--that will help low-income people who have high medical risks get health insurance in the State they reside in; and, finally, No 5, the ability to, on a penalty-free basis, draw money out of your IRA's, your individual retirement accounts, if you have high health insurance bills. These are things that have been agreed to and these are things that, with certainty, would happen if we passed this bill. But, for 44 days, the Democrats have prevented us from going to conference and working out an agreement that would let us pass this bill. What does 80 percent deductibility of insurance premiums for the self-employed really mean? In the last year for which figures are available, there were roughly 3 million Americans who had insurance through self-employment. They were allowed a 25 percent tax deduction on the cost of that health insurance, even though, if they worked for somebody else, it would be 100 percent deductible. So the 3 million Americans who work for themselves had to pay 75 percent of their insurance premium with after-tax dollars because the Tax Code discriminates against the self-employed. Again, in the last year for which figures are available, the average self-employed American, in buying health insurance, got a deduction of $713. If we had passed this bill 44 days ago when we had a chance to go to conference and work out our differences, the average American who works for himself would ultimately be able to deduct $2,283 for the payment of private health insurance premiums. In other words, for over a month now, we have delayed over $1,500 of savings to every self-employed worker in America. In addition, we now have in America over $1 trillion in individual retirement accounts or other forms of tax shelter. By allowing that money to be used to pay health insurance costs, when those costs exceed 7.5 percent of your gross adjusted income, we would be liberating $1 trillion of assets that could be used to help working Americans at a time when not only has a rainy day arrived, but it is pouring cats and dogs as a result of exploding health insurance costs. Yet we have not passed any of these provisions because the Democrats have objected to naming conferees. Well, why do we have a filibuster of a bill that the Democrats, in huge numbers, support? Why is this happening? That is the point I want to address right now. The Democrats say they are filibustering this bill because they are opposed to medical savings accounts. They are fearful that medical savings accounts will be in the final bill since the House of Representatives overwhelmingly adopted a provision that would permit Americans, who freely choose to set up medical savings accounts, to do so on a tax exempt basis--and they object to this. It is very interesting to note that this objection is a rather new phenomenon. In fact, some of the objectors have, in the past, been some of the strongest proponents of medical savings accounts. Let me quote Senator Daschle, the Democratic leader, who introduced a bill--which contained medical savings accounts--with Senator Nunn, Senator Breaux, Senator Boren, and others. In a statement related to that bill here is what he said: ``We have introduced a bill * * * which would allow employers to provide their employees with an annual allowance in a 'medical care savings account' to pay for routine health care needs.'' That was his position 2 years ago. Let me quote the Democratic leader in the House, Dick Gephardt, who also had a bill which contained medical savings accounts. He said, talking about medical savings accounts, ``It's very popular. A lot of people like that option and I think it will be in the final bill.'' That is the final health care bill. ``I think it is a great option.'' This was Dick Gephardt's position on medical savings accounts just 2 years ago. Even the Kassebaum-Kennedy bill endorses the idea of medical savings accounts. So why the change of heart? What has happened? The Democrats say they discovered that medical savings accounts only help rich people. Well, let me read you some quotes from some of these supposedly rich people who have medical savings accounts. This is an allegedly rich person who is the political director of the United Mine Workers in Illinois. In writing to Senator Simon he said: An amendment to the health care package has been offered to add a medical savings account provision. The United Mine Workers has a similar provision in our current contract that is anticipated to produce significant savings versus our previous insurance. Let me read from another rich person who writes on behalf of medical savings accounts. This is a part-time bus driver from Danville, OH who writes: Today I would like to appeal to President Clinton to please support the medical savings account issue. Nearly 3 years ago we went to a medical savings account plan and it has been very helpful. Why, all of a sudden, having introduced bills that provided for medical savings accounts--why, all of a sudden, are people like Senator Daschle and Minority Leader Gephardt and other Democrats in Congress now so adamantly opposed to medical savings accounts? Let me tell you my theory as to why, all of a sudden, Democrats who have been for medical savings accounts in the past are now so adamantly opposed to them. I think that the discovery they made is not that medical savings accounts are for rich people, but rather their discovery is that medical savings accounts give people freedom. They let people choose. They empower people. Republicans are not trying to force Americans to take medical savings accounts. We just want to allow them to do make a choice without discriminating against them in the Tax Code. Our Democratic colleagues oppose letting Americans have that choice because they do not want Americans to choose their own health care. They want Government to choose. They claim they are for this little bill, but it is actually this big stack of bills that they support. This is what they are for. This is what we have been debating over the last 2 years--the Clinton health care bill and all of its derivatives. Our Democratic colleagues know that to let people choose their own health care means that Government cannot choose it for them. The holding up of this bill and their new-found opposition to medical savings accounts shows one thing very clearly: the Democrats do not want families to choose, they want the Government to choose. This little bill is not the health care bill they are for--this big stack of bills is the health care bill they are for. They really believe that they will get this big stack of health care bills someday, but only if they do not give people the freedom to choose their own health care. So why are we being held up? Why for 44 days have we not named conferees on a bill with provisions that virtually everyone says they are for? Remember, all 100 Members of the Senate voted for it. The reason is that the Democrats do not want people to have the freedom to choose their own health care is because their real plan is not to make insurance portable and permanent and it is not one that would empower people to be efficient in buying health care through medical savings accounts. After all, that is what this bill and the House bill are trying to do. The bill the Democrats long to get back to is a bill which is represented by all of the bills that we wisely rejected last year. They want to get back to a bill where the Government, not the family, chooses. The truly amazing thing is that Senator Kennedy today had a press conference attacking Senator Dole for holding up a bill that he, Senator Kennedy, has been filibustering for 44 days. For 44 days, Senator Kennedy has stood up and objected to naming conferees, and then today he attacks Bob Dole for holding up an agreement? But why has Senator Kennedy objected? He has objected because he rejects the right of people to choose. He rejects the right of individual citizens to decide whether they want low-deductible health insurance or high-deductible health insurance. Further, he rejects the right of those who choose high-deductible health insurance to put the savings into a medical savings account which they can use to pay those deductibles tax free or which, if they do not use it for that purpose, is available to send their children to college, to make a downpayment on a new home, or to start a new business. Senator Kennedy and the Democrats do not want people to have that right to choose, because deep down in their hearts, they want the Government to choose. This is the health care plan they are for--it is not the health care plan that we debated this year. The Democrats know if we get medical savings accounts, if families have an incentive to be cost conscious, if families have the right to choose their own health care, that this will work, and it would mean that they never get the opportunity to have these health care purchasing collectives where Government would make the decisions. So I simply want to remind my colleagues, when the minority leader or Senator Kennedy stands up and objects to naming conferees, what they are really objecting to is freedom. They are really objecting to the right of people to choose--they do not want people to have a right to choose, because they want Government to choose. That is what this debate is about. Do you want Government to run the health care system, or do you want family choice to dominate the health care system? To me, that is a very easy question to answer. And let me note the difference between what the Democrats are doing this year and what I did last year--just in case our colleague from Massachusetts should come over and say, ``Well, here is Phil Gramm, he held up the Clinton health care bill in 78 days of debate.'' Yes I did. It was God's work and I expect to be remembered for it when I get to the golden gates, but I never denied it. I never stood up and said, ``This is a great bill the President has proposed. These are wonderful ideas. I'm for it, but I'm just not going to let you pass it.'' I said over I am not going to let you pass this, except over my cold, dead political body. This is not what Senator Kennedy is saying. Senator Kennedy says he is for this bill, yet he is not allowing us to name conferees because he does not want people to be free to choose. He wants the Government to choose. This is what the debate is about-- freedom--and I wanted to come over today to be sure that people understood with certainty what we are talking about. I want them to understand that the Republicans want families to choose, the Democrats want the Government to choose, and that this is about as big a difference as you can have in the world. I yield the floor, and I suggest the absence of a quorum.

Mr. GRAMM

Mr. GRAMM. Let me say to my dear colleague from South Carolina that I do not want to talk about who is in the White House. I want to change who is in the White House. Today I want to talk about drought.

Mr. GRAMM

Mr. GRAMM. Mr. President, we have 45 million bushels of feed grain in emergency reserve in the United States. We pay $10 million a year in rent to store that feed grain. We have a major drought in many parts of the country. Obviously, much of it is centered in my part of the country. I thought last night we had worked out an agreement whereby we could pass a resolution calling on the Secretary of Agriculture to release this emergency feed grain to let it flow into the market and flow to people who are being forced to liquidate their livestock herds because they cannot obtain food. It is my understanding that we have now worked that out. I think it is very important this resolution pass tonight. This is not going to make it rain in Texas, Oklahoma, and Kansas. It is not a solution for the kind of divine intervention that we need in eliminating the drought, but it is a small step in the right direction. I hope this resolution tonight will pass. I was disappointed the Democratic leader objected to it yesterday. We could have sent good news out last night. I hope we can do that tonight. In addition, Senator Hutchison and I hope, tonight, to pass a resolution on haying on conservation reserve land. If you will remember, the President wisely, in an action that I applauded, allowed people to put livestock on conservation reserve land. We want to let them hay it in drought areas. I think that is also a step in the right direction. I thank the distinguished Senator for yielding.

Mr. GRAMM

Mr. GRAMM. Mr. President, is there time available in opposition to the amendment?

Mr. GRAMM. Mr. President, I am strongly opposed to this amendment. I want my colleagues to look at some simple numbers. Last year in the budget resolution for fiscal year 1996 we adopted a budget that called for spending on discretionary nondefense accounts in fiscal year 1997 of $255 billion. The budget before us now calls for discretionary spending for the same year of $267 billion, so that we have increased nondefense discretionary in this budget $12 billion above last year's budget resolution. If we adopt this amendment we will be at $271 billion, and we will have increased nondefense discretionary spending by $16.7 billion above the level we called for in last year's budget resolution. Either we are serious about controlling spending or we are not. It is something we are capable of controlling. I strongly oppose it.

Mr. GRAMM

Mr. GRAMM. Mr. President, today I am joined by Senators D'Amato, Dodd, Bryan, and Moseley-Braun in introducing the Securities Investment Promotion Act of 1996. This is important legislation incorporating reforms supported by business and by State and Federal Securities regulators. This legislation moves forward in a significant way to define a division of labor between the State and Federal governments for the supervision of the securities industry. In the process two very important goals are achieved. We improve administration of our nation's securities laws while at the same time greatly reducing the cost of that regulation. We must always remember that the cost of securities regulation, however desirable or effective that regulation may be, is ultimately born by the people who invest. Today, that includes almost everyone. Not everyone may have a stock portfolio, although an increasing number of American families do. But most Americans have investments in a mutual fund or have a stake in a pension fund that invests in our nation's securities markets. More and more small businesses are funding their growth, expansion, and job creation with financing from the securities markets. When I became Chairman of the Securities Subcommittee, I was struck by the number of State and Federal regulators, and people in the securities business, as well as investors, who commented on the need to reform out-of-date and unnecessary securities regulation. The most immediate need in that regard the Congress addressed last year, with our bill to reform securities litigation. That was a measured, bipartisan effort. The legislation that we are introducing today is a continuation of that bipartisan spirit. I am proud to be joined by the Chairman of the Banking Committee, Senator D'Amato, as well as by the Ranking Member of the Securities Subcommittee, Senator Dodd, together with Senators Bryan and Moseley-Braun of the Banking Committee. We have all worked closely in drafting the bill that we are introducing, and have in addition benefited from comments and suggestions from the SEC, State securities regulators, trade associations, the stock exchanges, and self- regulatory organizations, among others. I invite further comments as we consider this bill in the Committee and then on the floor of the Senate. I have intentionally sought to cast the net wide in seeking comment from the public on this legislation, since, ultimately, what we do in this bill affects the people of this country in very important ways. Mr. President, I would like to comment briefly on some of the key provisions of the bill. Title I of the bill is called the Investment Advisers Integrity Act. It is an updated version of a bill that I introduced on the first day of the 104th Congress, S. 148. There are approximately 25,000 registered investment advisers in the nation today, and the number keeps growing. The SEC has testified that they do not have the resources to supervise effectively such a large number of advisers. In the past, proposals were put forward to increase SEC funding for enforcement of the Investment Adviser Act of 1940 by assessing a $16 million tax on the industry. Even with such a tax, however, an investment adviser could have gone several years without an inspection. Title I of the bill tries a different approach, first suggested to me by former SEC Commissioner Rick Roberts. This approach addresses the problem through a partnership between the Federal and State securities regulators, dividing up the responsibility. The States would have exclusive jurisdiction to register investment advisers who manage less than $25 million in client assets. These are the investment advisers whose activities are most likely to be within their home State. In fact, about half of all investment advisers do not personally manage any client assets at all. The SEC would have exclusive responsibility for registration of investment advisers who manage $25 million or more of client assets, as well as for all investment advisors to mutual funds. These are the investment advisers most likely to be engaged in interstate commerce, appropriately a Federal concern. I would add, Mr. President, that this provision does not impose a Federal mandate on the States, for under the provisions of the bill, any State that did not want to assume the responsibility for registration of investment advisers is not required to do so. The advisers in such a State would then be required to register with the SEC, regardless of the size of their business. The effect of this division of responsibility will be that between two-thirds and three-quarters of investment advisers will be supervised by the States where they do their business. On the other hand, perhaps as much as two-thirds or more of the assets under management will be managed by investment advisers supervised by the SEC, demonstrating the concentration of managed assets in the hands of the larger investment advisers, having multi-state operations. I would like to express my appreciation to the representatives of the investment adviser industry, the SEC, and the Texas State Securities Commissioner, Denise Crawford, for their assistance in revising and crafting this title of the bill, and the support that they have expressed for this approach. Whereas today investment adviser supervision is limited at best, and more often than not effectively non-existent, this division of labor will mean that adequate resources and attention can not be brought to bear to encourage the integrity of the industry and further increase the investment opportunities for American families. Mr. President, perhaps the most significant impact of this bill will come from the provisions assigning responsibility for mutual fund prospectuses review to the SEC. Mutual funds spend tens of millions of dollars each year complying with a patchwork of varied and often conflicting State requirements governing the prospectuses by which funds are offered to investors. These requirements are merely different, usually duplicative, and to not provide investors with any added useful information than what is already required by the SEC. Moreover, complying with these requirements is time consuming. In just one example, while a particular mutual fund was awaiting delays in clearing its prospectus with a certain State regulator, its value increased by 16%. That was a 16% growth denied to the investors of that State who could not place funds with the mutual fund until its prospectus had cleared the State regulators. No investor was helped by that delay. The mutual fund industry has dramatically increased the investment opportunities for American families of all levels of income, and I am please to further the efforts of my colleagues, Congressmen Fields and Bliley, to move forward this important relief from unnecessary regulatory burden. Similarly, stocks that are traded on the national stock exchange and trading systems would be exempted from State regulation under the provisions of this bill. Again, as with mutual funds, this is a national business, the very kind of activity contemplated by the Founding Fathers with the interstate commerce clause of the Commission. One of the provisions of the bill, which I consider of high importance, is a requirement that the Chief Economist of the SEC conduct and publish an economic analysis of each new regulation before the regulation can enter into effect. Mr. President, the SEC is a lawyer-heavy agency. The Officer of General Counsel, for example, has a budget of over $10 million and 120 staff members. By comparison, the Office of Economic Analysis, even with the increase required by my amendment to the appropriation bill, has a budget of $3 million and about two dozen employees. The actions of the SEC in regulating the nation's capital markets have a profound impact on the economy of the nation and of the world. It is therefore of paramount importance that a high priority be given within the SEC to careful examination and analysis of the economic and market consequences of its regulations. Otherwise, we are in danger of regulating blindly, which the economic livelihood and health of the nation cannot risk. While there are many other important provisions of the bill, I will conclude, Mr. President, by emphasizing the last section of the bill. This provision addresses the need for improving the access to U.S. stock exchanges for the listing of world-class foreign companies. Today, U.S. accounting standards are in many points different from the accounting standards of other countries. They are not necessarily better, just different. Under current regulations, a foreign company wishing to list on a U.S. stock exchange would first have to meet U.S. accounting standards, which in effect may mean that the company would have to keep two sets of books. The SEC has sought to address this problem through a greater harmonization of international accounting standards. The bill encourages the SEC to redouble its efforts to achieve a level of generally accepted accounting standards and to report to the Congress on its progress. Our nation's stock exchanges are the preeminent exchanges in the world. It is hard to see how we can continue that position long into the next century while maintaining formidable obstacle to the listing on our exchanges of the major corporations of the world. I do not see how any American investor is protected by being forced to resort to the London or Frankfurt stock exchanges in order to invest in foreign corporations. Mr. President, this is important legislation. Congressman Jack Fields and the members of the House Commerce Committee have done the country a great service by setting in motion a process by which the Congress will begin to delineate clearly the roles of the State and Federal governments in securities regulation. I hope that this bill can be adopted in short order and meet in conference with similar legislation recently adopted unanimously by the House Commerce Committee. Mr. President, I ask unanimous consent that additional material be printed in the Record.