Phil Gramm

Mr. GRAMM

Mr. GRAMM. Will the Senator yield?

Mr. GRAMM. I say, if the Senator wanted to offer an amendment to impose that, he certainly could. And I will stop asking him to yield, but let me make this point.

Mr. GRAMM. If you offer that amendment, I would have to read it. I probably wouldn't.

Mr. GRAMM. But the point I am making is, we are talking about two things. One thing that you have to have is a CPA do the audit, and, two, the president of the union and the president of the company has to sign the report. They are liable if they knowingly are misleading people. Those are the only two things the McConnell amendment does. I just can't see what is wrong with it and why it doesn't make sense. Not that there is anything wrong with that part of the Leahy amendment; I support that part of the Leahy amendment. I just don't understand why this does violence to organized labor. It seems to me it makes perfectly good sense.

Mr. GRAMM. Will the Senator yield?

Mr. GRAMM. I remind my colleagues that in some 40 States in the Union, you can't work unless you are a member of a union. If unions are not public organizations, when you have mandatory requirements, I can't work in Maryland in an area that is unionized without either joining the union or paying union dues. To suggest that unions are somehow private when you have mandatory membership I think won't hold water.

Mr. GRAMM. I am not saying you are not getting anything for it. I am just saying that it is mandatory, and I don't see how you cannot say that unions are public institutions. Secondly, why do we require CPAs to do audits of companies? We can't audit every company in America. We don't have enough resources. So you try to get a system where the auditor has some degree of responsibility for helping to enforce the standards. I don't see why you wouldn't have CPAs required to do the audits of unions. I was handed this by Senator McConnell's staff. I am sorry he had an appointment tonight, but the OLMS, which does the compliance audits, did a high of 1,583 audits in 1984. Last year, that was only 238. So I don't know why you wouldn't want a union that has mandatory membership to have its reports done by CPAs who we are holding to a high standard in this bill. That is all I am saying.

Mr. GRAMM. My final point--and I appreciate the generosity of the chairman--it seems to me the most fundamental requirement is if you are going to make a public report and you have mandatory membership so you are a public institution, you ought to have a certified public accountant do that report and sign that they have done it. We have decided--I think it is one of the best things in our bill; whatever bill is adopted will have it--to require the heads of companies to sign these reports. I don't know why you wouldn't want the head of the union to sign these reports.

Mr. GRAMM. I would if the companies were companies that people had to do business with. If we had anything equivalent in the marketplace to a provision that said you have to buy things from this company or you can't buy them, which in essence we do in States that don't have right- to-work laws; we say that you have to pay the union dues in order to work--you don't have to join, but you have to pay the dues--I think when you have that mandatory element, having to report publicly is logical.

Mr. GRAMM. Mr. President, this is Mr. McConnell's amendment, and I will let him debate it. But the whole purpose of having CPAs, the whole purpose of having licensing and the taking of oaths is we cannot audit every company by the Government. I am pleased to say that nobody has proposed to have the Government take over the auditing function. We have proposed to strengthen the CPA process and impose higher standards because that is really our fundamental line of defense. I just don't understand. It seems to me this would be a logical amendment to take. It only says two things: When unions file a report, it has to be done by a CPA. You have a mandatory membership of unions in some 40 States, and they are public institutions. Secondly, the president of the union, as the president of the company, ought to have to verify the veracity of the statement and be liable if he knowingly is certifying it when he knows it is not valid. I mean you are not holding him accountable if somebody has not told him the truth. Senator McConnell is going to present case and verse of all of the problems. I don't know the problems, but it seems to me that when we are trying to improve reporting and improve transparency and improve accountability, the simple proposal that when unions file their annual report, as corporations do, a CPA should prepare the report--I just cannot imagine not requiring that. Secondly, the president of the union ought to have to sign the report and be accountable if he knowingly is saying something that is not true. Finally, the argument that there are other requirements--well, there are more requirements on corporate America. We just concluded there were not enough. So Senator McConnell is simply saying while you are improving one, improve both. If I were a member of a union, I would like having certified by a CPA a report showing how my money was spent. I think it would give me more confidence. I would think if the rank- and-file union members in my State would vote on this, there would be an overwhelming vote for it. I don't even know why we are debating this. This is sort of a no-brainer, in my opinion. But my opinion may not be the majority opinion. I yield the floor.

Mr. GRAMM

Mr. GRAMM. I don't have a time preference as such. My suggestion is whenever the Senator gets tired of talking and would like me to speak a while, I can speak, and then he can come back to it. But I have no objection if you want to go through your whole presentation. You certainly have that right. If you think it will work better doing it that way, that is fine. If you want to break at some point and have me speak, that would be fine.

Mr. GRAMM. Mr. President, I begin by thanking Senator Sarbanes for working with me as we have considered this bill. I congratulate him on this day that we are considering the bill in the Senate. We had a series of hearings that I wish every Member of the Senate could have attended. I am not surprised that at the end of those hearings good people with the same facts, as Jefferson said so long ago, were prone to disagree. I find myself in a position where Senator Sarbanes and I agree on many of the key issues of this bill; we differ on others. It is not the first time in managing a bill that we have been on opposite sides. I reminded Senator Sarbanes this morning that it might very well be this will be the last bill we will ever manage together. Since I am leaving the Senate, and we have something like 40 legislative days left, I do not know whether, after this bill is dealt with, the Banking Committee will warrant any of those 40 days. But I would like to say for the record that no one can object to the hearings we had, the approach the chairman has taken. Whether you agree with him or whether you do not, I think his approach has been reasoned and reasonable. It is clear this issue has attracted a great deal of attention. It is clear that there is a mind in the Congress, if not in the country-- Congress is not always reflective of the thinking of the country--but there is a sort of collective mind that we need to do something, even if it is wrong. I lament, as we have gotten into this debate, that the media has decided that the tougher bill is the bill with more mandates; that if you decided to set up a stronger committee, a stronger board with broader powers so they might decide to go beyond the legislative mandates, that that is a weaker proposal than having Congress actually write auditing standards or conflict of interest standards. I would submit to my colleagues--and I guess I would have to say at this point, I do not know that we will follow this adage--but I suggest this is a very important bill. I urge my colleagues, as you look at this bill, to realize we are not just talking about accounting. If this bill were just about accounting, it could do some good, it could do some harm, but it could not do too much of either. But this bill is far more than just a bill about accounting. This is a bill that has profound effects on the American economy; therefore, I think it is very important that we try to look at the problem and that we try to come up with a solution that will be good not just for today, not just that will bring forth a positive editorial in a newspaper tomorrow, but I submit we want to try to find one that meets the front porch of the nursing home test. That is the test where, when we are all sitting around in rocking chairs in a nursing home, and we look back at what has happened under this bill, that we will be proud of what we did and how we did it. I want to touch on several things. I want to go through and make several points, some related to what the distinguished chairman said, some just because I want to say them. I want to talk about what I believe the problem is. And I want to make it clear that I do not know how to fix it. I do not know that this bill fixes it. I do not believe it does. I do not believe my substitute I offered fixes it either. But I think somebody needs to talk a little bit about it. Then I want to talk about the bill that we have before us, and where I agree with it and where I differ, and what those differences are. I think the good news is--from the point of view of if consensus is a good thing--there is a consensus, and has been from the very beginning, that we need to pass a law. What this President cannot do is provide an independent funding source and a legal foundation for this independent board. I personally believe the President's 10-point program was a good program. What the Chairman of the SEC cannot do is provide an independent funding source and provide a legislative foundation for the board. The Chairman and I agree on that. There have been people who have reached a conclusion that if you differed from Senator Sarbanes, you did not really want a bill. I believe those of us who have differed do want a bill. And the one thing that we agree on, which I think is at the heart of this whole debate, is a strong, independent board to make determinations about conflict of interest and about ethics. Now, let me touch on the things that I wanted to touch on. I personally thank Senator Sarbanes for the approach he took in focusing on the problem and on the future. Everybody knows this has now become a political issue. We know that people are either trying to go back and pin this problem on past Presidents or SEC Directors or they are trying to pin the problem on the current President and the current SEC Chairman. I think it is a testament to Senator Sarbanes' leadership that he has had nothing to do with that. The plain truth is we have had a succession of great SEC Chairmen. Arthur Levitt and I disagreed on many things, but I do not think anybody could argue that he was not an effective SEC Chairman. It is true that he had the ability, under existing law, to go back and change GAAP accounting to set up a board, to do anything he wanted to do, and he did not do it. But it is always so easy to see these things when you are looking with that wonderful hindsight. Anybody has to give Arthur Levitt credit that he was the first to raise an issue about auditor independence. Whether you agreed when he raised it or not that it was a problem, that it was proven, it is clear that he saw a problem which may or may not be the source of our problem today, but many people believe it is. You have to give him credit. And I don't believe anybody else in his position would have done a much better job than he did. Let me also say that I think Harvey Pitt has done an outstanding job in the short period of time he has been at the SEC. Much is made of the fact that he did legal work for accounting firms. I continue to be struck by this approach that somehow knowledge is corruption, that somehow the perfect regulator is a guy who just came in off a turnip truck and who knows absolutely nothing. It reminds me of Senator McCain was once telling a story about talking to a journalist who was covering the Vietnam War and asking the journalist if he had ever read this seminal work about the history of Vietnam. And the journalist said: No, he had never read it because he wanted to approach the subject with a totally unbiased mind. There is a big difference, I submit, between an open mind and an empty mind. We make a grave mistake when we discount knowledge. Everybody today, when they are criticizing Harvey Pitt, talks about the fact that he represented accounting firms and security firms. I guess if he were being more aggressive than is the public mood, people would remember that he was probably the most rigorous chief counsel at the SEC in its history and, in that process, brought cases against numerous major companies. They would be saying that that experience had tainted him for his current work. The point is, the man has broad experience as chief counsel to the SEC, where he prosecuted major firms, and he has vast experience as probably the Nation's premier security lawyer where he defended associations and businesses. And quite frankly, when in doubt, I will go with knowledge. When in doubt, I will take experience. I do not believe that experience taints you. Let me also say that there is this current mood that anything having anything to do with accountants is somehow bad. Having just praised Harvey Pitt, let me point out an area where I disagree with him. When he set up his board to oversee accounting ethics and to look at issues such as the independence issue, on ethics issues, he does not allow people with an accounting background to vote. Now I would have to say that I strongly disagree with that for two reasons: No. 1, since when is a person's background a source of corruption? I will address that a little more in a minute. Secondly, when you are looking at what is and what is not ethical practice, I am not saying it is absolutely essential, but it is helpful to have somebody who knows something about what practice is. I submit that in all of these approaches, from the SEC approach to the approach of this bill, we are probably going too far in putting people in positions where they are going to have massive unchecked authority and they have no real expertise in the subject area. Anybody who thinks this board is just going to slap around a few accountants does not understand this bill. This board is going to have massive power, unchecked power, by design. I would have to say the board that Senator Enzi and I set up in our bill has massive unchecked power as well. I mean, that is the nature of what we are trying to do here. I am not criticizing Senator Sarbanes. I am just reminding people that there are two edges of this sword. We are setting up a board with massive power that is going to make decisions that affect all accountants and everybody they work for, which directly or indirectly is every breathing person in the country. They are going to have massive unchecked powers. We need to give some more thought to who is going to be on this board and is it going to be something that is attractive enough to make people want to serve. In the proposal Senator Enzi and I put together, I thought we could enhance its prestige by making it a little more independent of the SEC. Under the committee bill, which is before us, the SEC would appoint the members of the board. I thought that given the broad nature of its power, which goes far beyond just accounting and far beyond just securities, it would be helpful to have the SEC appoint two members-- Senator Enzi and I suggested that one have an accounting background and one not--have the Federal Reserve Board appoint two; have the CFTC appoint two; and then have the President appoint the chairman. I think that board would have a higher profile. With a Presidential appointee as chairman, it would raise the prestige of the board, and we would get better people to serve on the board. I urge my colleagues, think long and hard when you think about this board exerting tremendous, unbridled, unchecked power, about how many people you want on the board who know something about the subject matter. Today, in an environment where accountants are the evil people of the world, the enemies of the people, having no accountants on this board or relatively few and not letting them vote when ethics matters are being dealt with, I assert that kind of approach means you are not going to have first-rate people who are going to want to serve. Let me finally get it out of my system by saying: I don't know a whole bunch of accountants. I taught at a public university. About a third of my students in economics were accounting majors. I would have to say that I have a pretty high opinion of accountants. If I had to trust the safety and sanctity of my children and my wife today, after all these revelations about bad accounting, to a politician, a preacher, a lawyer, or an accountant drawn at random in America today, without any pause I would choose an accountant. I am not saying that there are not bad people in accounting. I am not saying there has not been abuse. But I think we have to separate people from professions. One of my concerns is, we have already had a decline in the number of people majoring in accounting. I am wondering, I don't care what kind of law you write, I don't care what kind of board you set up, if we don't attract smart young people into accounting, people who understand it is not talent, it is not personality, it is not cool, it is character that ultimately counts, then none of these systems are going to work very well. Now, I don't buy the idea that legislating something instead of setting up a reasoned system to make decisions is a tougher approach; and if it is, I don't want it. But what we have today is an approach that is largely taken in the media that the more mandates you have, that the more things chiseled inflexibly into law, that the more it is one-size-fits-all, whether it has any rhyme, reason, or responsibility, that that is tougher, and therefore it is better, that in today's environment is obviously appealing. I hope this doesn't happen, but it would not shock me if we have a series of amendments offered tomorrow when we start dealing with the bill, where people try to out-tough each other--maybe one to kill all the accountants and start all over and train new ones. Well, nobody would offer such an amendment, but I think we could very easily get into this oneupsmanship that we can end up regretting. I hope that will not happen. I want to discourage that. Let me give you an example of where Senator Sarbanes and I differ in our opinions. Who is right, I don't know. I think maybe being in this business for a while convinces you that nobody has a lock on wisdom and nobody knows in each and every case what is right and responsible, but I want you to understand the difference of our approach. Let me just go right to the heart of the matter. The substitute that I offered in committee with Senator Enzi has an independent board. I think it is better, but you can argue that the two boards are pretty similar. Ours is a little more independent of the SEC; though, in the end, to meet the constitutional test, the SEC has to have authority over it. We went a little further in terms of independence and appointing members, and I have already talked about that. But the whole heart of the difference--let's pick one issue-- comes down to auditor independence. If you ask me today, should the same company that does an external audit for a firm be able to do internal audits--and I argue today I don't have the knowledge to say this--I would argue today that I really don't know enough about accounting practice and how the process works, not just at General Motors but at the smallest corporation in America, to make that decision. The bill before us sets out the law. It is written in the law that if you do an external audit, you cannot do any one of these nine different things. I don't know, it may well be that after a reasoned analysis a competent board would decide they ought to do those things. My guess is that if I had to decide today, and you forced me to make a decision that was going to be binding on the country, which is a little frightening to me, I might well agree with most, and in some cases all, of these things. But I don't believe we ought to be writing that into law. I don't think anything is gained by writing it into law, and I think a lot is lost by writing it into law. Having read editorials, I know this makes the bill tougher, but I don't think it makes it better. What I believe we should do is set up the best and strongest board we can, make it independent, give it independent funding, and put competent people on it. The way Senator Enzi and I did it, and there is nothing magic about it other than that we did it, we decided to have the SEC, the Fed, and the CFTC appoint two members, one with an accounting background and one without, and then have the President appoint the chairman, and he could decide. I personally think that having more accountants rather than fewer is a plus, not a minus. I don't think they all ought to have an accounting background. I don't necessarily say a majority have to have an accounting background, but I believe that day in and day out, 20 years from now when we have all left the Senate and we are not paying attention to these things, it would help to have people who know what they are doing. I don't buy the idea that people who don't know what they are doing are more moral, other things being the same, than people who do know what they are doing. In any case, I believe that rather than writing out these nine things by law that you cannot do while you are doing an external audit, we ought to set up the strongest board we can, and we ought to give them external funding and plenty of power, and we ought to say to them: you need to look at these nine things and do a reasoned analysis. You need to talk to lots of people, such as smart theorists who are accounting professors at our best universities, and you probably ought to talk to the bookkeeper in Muleshoe who is actually doing bookkeeping work, look at the practical, the theoretical, and make a determination. Should you be able to do an external audit and do any one of these nine things? You make a decision and set it out in regulation. Why is that better than writing it into law? It seems to me it is better for two reasons: One, if you are wrong, or if accounting practices change, or if your perception of the problem changes, you can go back and change it by regulation. The problem with writing it into law is that Congress then has to come back and change the law. As we know from Glass-Steagall, it took us 60 years to fix something that had it been written in regulation by the 1940s, it would have changed. But we didn't change it until 1999. The second reason, which I think is equally important, if not more important, is the way the bill is now written might very well make sense for General Motors. That is, it might make perfectly good sense to have a process whereby General Motors might have three or four different CPA firms--maybe more--but they are operating all over the country and all over the world. That is perfectly feasible. But the last time I looked--and I don't know, but some of these may have gone out of business and, God willing, maybe some new companies have come into business--the last time my trusty staff looked, there were 16,254 publicly held companies in America. I don't care how smart you are, I don't care how good your intentions are, you cannot write a mandate, if you get too far in the detail, that fits General Motors and also fits the 16,254th largest company in America. It just doesn't work. One of the advantages of setting up an independent board, giving them a mandate to look at these areas, but not chiseling it into stone in legislation, is because they can then say, well, here is the principle and if you are General Motors, here is how it applies, but if you are XYZ Paint Company in Montana, or Wyoming, or wherever, you might only have one accounting firm operating in the town that you are domiciled in. I am not saying you cannot hire accountants to come from the Capital City, or wherever, to your town to do work for you, and maybe you ought not to be operating in a little town in a small State; but people choose that, and people who represent small States seem to like these companies being there. I am just saying that giving the board the ability to set a principle and apply it in one way to General Motors and in another way to a small company in a small town makes eminently good sense in practice. Now, I know it is not a mandate in the same sense as writing it into law, but I think the result would end up being better. One of the amendments that I will offer--and I thank Senator Sarbanes for trying--and one thing I have to say is that nobody on our committee can say that Senator Sarbanes did not listen. Nobody can say he failed to try to hear them out on their concerns and that, in many cases, he didn't change the bill to try to respond to their concerns. One of the changes that I support is giving the board, with the concurrence of the SEC, the ability to grant waivers to these rules and, in fact, to the law. The problem with waivers on an individual company basis is a practical problem, and that is, if 16,254 companies are trying to get waivers under their special conditions--they all come to Washington and hire lawyers and lobbyists; they all petition the board and the SEC--if that board has 16,254 petitions in 1 year, and it could have many times that if people are petitioning for different kinds of waivers, we are going to shut it down for any other purpose except waivers. What will happen, not because anybody wants it to happen but because of the very nature of Government, the people who will get the waivers will not in general be the most deserving people. They will be the people who hired the best lawyers, who had the best contacts, who knew how to go about it, and who had the money to spend getting the waiver. My guess is the smallest companies that need the waiver the most will not get them. Surely at some point we are going to fix the bill so that the accounting board, with the concurrence of the SEC, can say: OK, look, in applying this, if you fall into these categories, you have these circumstances, you have a waiver to do things in this way. Clearly, something like that has to make sense. One of the things we have to come to recognize, and I think we all recognize it, is that having a beautiful law in a law book does not make good law. It has to be practical, and it has to take into account the 1,001--in this case, the 16,254 different circumstances that can apply. What is the problem? I guess there are as many theories about the problem as there are people. I have my own theory about the problem, and I will share it with my colleagues and anybody else who is interested. Why is all of this happening now? I believe it is happening because of the problems in GAAP accounting. There are other extenuating circumstances, and I want to touch on them, but here is the problem in GAAP accounting. Senator Sarbanes used a perfect example of it, and I will just take his example. He talked about how WorldCom saw its market capitalization fall from $100 billion to $100 million. How is that possible? I remember when Enron went bankrupt. People said: Where are the assets? When a company goes from $100 billion to $100 million, what happened to the assets? Here is the problem. Increasingly, the asset is a combination of know-how, credibility, and a belief by the public that you are carrying out your business in an efficient and ethical way. Increasingly, the modern corporation does not have 12 steel mills. They do not own massive physical assets. Many companies have tried, basically, to get out of the asset business into the information business. The value of WorldCom was a discounted present value of what the public believed its revenue stream was relative to its cost. It never had $100 billion worth of physical assets, anything like it. That is what the value of the ideal was as the public perceived it in a period where our wise friend, Alan Greenspan, talked about irrational exuberance. That is what they thought that company was worth, but it never had assets that were anything near $100 billion. What it had was know-how, knowledge of a market, and it had credibility. Enron was like a bank in the 19th century before FDIC insurance. Their reputation was the source of their value, and when they made stupid business decisions that called that reputation into question, they collapsed. I have a great sympathy for accounting because I used to be an economist, and in economics, we have something called ceteris parabis. It means ``other things being the same.'' So when we do not know what those other things are, we just utter this Latin phrase and pretend they do not exist--literally pretend they do not exist. That is valuable in physics where you talked about force equals mass times acceleration, or for every action there is equal but opposite reaction. That is an assumption. That is a simplification because it leaves out friction, and it leaves out gravity. There is nothing wrong with it, but the problem is, accounting cannot do those things. I had a famous and great accounting professor named David McCord Wright. Nobody remembers him anymore. I can visualize him today easily defining WorldCom. He would have talked about the discounted stream of earnings, and he would have talked about the value of their equity or market capitalization and would have plotted out a projection of revenues and a projection of costs and integrating that area to add it up, and that is where the $100 million was. I doubt if WorldCom's physical assets ever totaled $50 million, probably not $20 million. You are an accountant and you have the job with the directions that are available through GAAP, generally accepted accounting principles. You have the job of trying to model, for accounting purposes, what WorldCom looks like. You do not have the ability to utter a Latin phrase and wish away things you do not understand. Our problem today is that our GAAP accounting has not kept pace with the world in which we live. In this world where knowledge is power, in this world where know-how is wealth, it is very hard to model with GAAP accounting. In the decade of the 1990s, when this new model was used on a massive basis in the American economy, accountants had to figure up how much all this stuff was worth. GAAP accounting has not kept pace with our changing economy. Our accounting is based on the old steel mill of the 1940s where you had how much you paid for the furnaces, and you had them a certain period of time, and you have depreciated them. How do you depreciate an idea? How do you book having brilliant young people who are committed to the future in your company because they own your stock? How do you put that down in value terms? So when we are pointing the finger at these people who call themselves accountants, when we are blaming them for every problem in the world, accountants did not put WorldCom into bankruptcy. Accountants did not put Enron into bankruptcy. Enron put Enron into bankruptcy by making bad business decisions. The accounting was a problem because it was slow to show it, but it was there. WorldCom's problems were there. The problem was not accounting. The problem was accounting did not show the problem soon enough. So if anyone is listening to this debate and thinks some investment is going to be more valuable because we have better accounting, in the long run that is true; in the short run, I am not sure that is true. In fact, I argue these companies would have gone broke anyway. Clearly, they would have gone broke, and they would have gone broke quicker had the accounting system been better. It should have been better. It needs to be better. The point I am trying to make is the following: When you are trying to model a company using GAAP accounting, it is hard. It is something nobody has ever done before. We are learning how to do this, and we will--using concepts like goodwill to try to be a proxy for things like intellectual capital and know-how. That is the source of our problems. I think the fact this came at the end of a financial bubble in the 1990s exacerbated the problem. The problem, in my opinion, is accounting was easier--maybe it was not easier initially. We figured out how to do it on the old model. We will figure out how to do it on the new model. There is some smart accountant, probably at Texas A&M right now, studying accounting, who will probably get an MBA, who will figure out how to get all this goodwill off our books--which is a silly concept in my opinion, but it is the only one we have--and come up with models of intellectual capital that will have meaning, just as that steel furnace in the 1940s and the write-down of it that made sense, but that is not the world in which we live. That has to be dealt with. Something the chairman's bill does, something that I very much am in favor of, is it gives independent funding to FASB. The two things that have to be done and only Congress can do them effectively, in my opinion, are: No. 1, we have to have an independent, self-funded accounting standards board, FASB, and we have to have accountants setting accounting standards. No. 2, we need to set up this board to oversee ethics in accounting. I do not think it matters whether it has a majority of accountants or not, but it needs to have a reasonable number of people who have a background in accounting so they know what they are doing and so they have an intellectual stake in it being done right. It is a dangerous thing when there are people with massive power who do not have any kind of intellectual stake in the application of that power, and it concerns me. So to conclude, let me say this: Senator Sarbanes and I, when we were at this point on the financial services modernization bill, were on opposite sides. I was for the bill. I saw it as the epitome of all wisdom. He was opposed to the bill and saw it in less glowing terms. By the time we got out of conference, it was our bill. We were together on it and 90 Members of the Senate voted for it. It passed the Senate initially on a very close vote, a very narrow margin. I do not think that will be the case here. I think this bill will pass by a very large margin. I also think it is possible that by the time we have reconciled this bill with the House, that we can have a bill that will be very broadly supported. At that point, I hope I will be in a position of supporting it. There are many good things in the Sarbanes bill. There certainly has not been a bill, since I have been in the Senate, that was better intended than this bill. I do think it can be improved. I think it legislates too much. I think it does one-size-fits-all mandates. It takes them a little bit too far. That, to some guy outside government, does not sound very important, but it is very important when one starts talking about application. If we do this thing right, and if we build a consensus and it works well, that will be the final monument of the bill. I hope we can offer germane amendments. As of right now, I think there will probably be two amendments I will offer. One will have to do with this issue about granting waivers on a blanket basis so that rather than making every individual company that has specific kinds of problems come in and ask for an individual waiver, that the SEC and the board, when they agree, could simply issue a set of principles, and if you qualify you would get the waiver. If you do not, you do not. Pretty straightforward amendment. The second amendment I believe I will offer will have to do with appeals. Under British common law, we have always taken a very strong position in affecting the right of a person to earn a living. We have set very high standards when it comes to taking somebody's livelihood. I believe there are people who are practicing accounting, or veterinarians or economists or any profession, there is somebody in it who ought not to be in it. I think when this board, which is a private entity--and again this is not a problem with the Sarbanes bill. This is a problem of our substitute as well. It is a strange kind of entity. We want it to be private, but we want it to have governmental powers. We have tried to structure it in ways to try to accommodate this. The bottom line is, when this board is taking away somebody's livelihood and that person believes they have been wronged, they ought to have a right to go to the Federal district courthouse. They ought to have a right to say: I do not think that was right, and I want my day in court. They ought to have to pay for it, and at that point I think all the material involved has to be made public, but that is a right I think people have to have. Those two amendments are very narrowly drawn, and they go to the very heart of the bill. I know some of our colleagues are thinking about offering a whole bunch of other amendments. I submit that trying to work out a compromise with the House is going to be difficult. I think we will succeed at it, but I think if we get a whole bunch of other issues involved, we are making the mountain higher. I believe we are ready to legislate in this area, and I think if we can limit what we are doing to this area that we can pass this bill, we can go to conference, and we can come back and have a bill signed into law before we leave. I think if we get into a lot of other areas, I am not saying the world comes to an end if you put an amendment on here-- having us write accounting standards with regard to stock options, for example, that is a tax issue. I would probably want to make the death tax permanent as a second-degree amendment, but I am not saying the world comes to an end if we do that. I am saying if we get off into those kind of issues, where you have strong feelings on both sides of the aisle--and that would not be any kind of partisan vote--I think it is harder for our chairman and for the members of this committee to get their job done. I hope we will have a limited number of amendments. I hope they will be germane to the bill. Finally, at some point we are going to take up Yucca Mountain. I am not up high enough in the pecking order to have gotten the word as to exactly when that is going to be. Other things being the same, I would rather finish this bill first and then go to Yucca Mountain than to stop in the middle of it. But it is a highly privileged motion. Any Member can make it. It is not debatable. I assume at some point sometime tomorrow that motion will be made. As I figure the time limit under that privileged motion, it would take about a day. I don't see any reason this bill should not be finished this week, and maybe much sooner if we can stay on the bill, if we don't drift on into these other areas. When people who are for the bill in its current form want to stay pretty close to the bill and people who are against it in its current form want to stay pretty close to the bill, we ought to stay pretty close to the bill. I thank my colleagues for their indulgence. I look forward to working on this issue. I yield the floor.

Mr. GRAMM. Mr. President, there isn't any objection. I think this clarifies the bill. I think it is something that both sides are for, even though we had a previous agreement not to do any amendments today. It is simply so technical that I don't think anybody would have any concerns.

Mr. GRAMM

Mr. GRAMM. Mr. President, I ask unanimous consent that Maureen Kelly, from Senator Domenici's staff, have access to the floor during this pending bill.

Mr. GRAMM

Mr. GRAMM. Mr. President, in this modern age, we are used to revisionist history, but I have to say the debate we just heard is one of the most extraordinary examples of revisionist history I have ever heard. I am tempted to get into this debate about this wonderful budget that when it was voted on not one Democrat voted for it and not one Republican voted for it. That is a vote of confidence, or lack thereof, which I have never witnessed before. The budget that was rejected without a single vote in favor was a budget that set taxes above the level requested by the President the first year, the first 5 years, the first 10 years, and consistently spent more money. In fact, it raided Social Security in the first year more than the President's budget, even though it had taxes higher than the level requested by the President because it increased spending by over $13 billion. But that is an old debate. Why debate a budget that was rejected unanimously? Now we are on another debate, and it is a wonderful debate because we have our colleagues who are saying we want to control spending, we are worried about spending, and we need this budget to control spending. There is only one problem. The budget increases spending. The budget proposes spending $9 billion above what the President requested. This amendment before us proposes spending $52 billion above last year, and it does not stop with spending $9 billion more than the President wants. That kind of budget constraint we have had a lot of. It not only spends $9 billion more than the President wants, but it allows $25.4 billion to be appropriated this year that won't count until next year, what is called advanced appropriations. Last year, we set a record in American history with $23 billion. This year, in this amendment, we would condone in advance $25.4 billion, but that is not the worst of it. We have had a budget provision that banned delayed obligations. Senator Domenici was a big proponent of this provision, as I remember. This was to try to deal with this phony little game we play by starting a program on the last day of the fiscal year and claiming in the budget that it costs one-three hundred and sixty-fifth as much as it really does, and then have it permanently in effect. Interestingly enough, not only does this amendment spend $9 billion more than the President requested, not only does it say you can spend $25 billion more than that, it gets us back in the game of deferred obligations by striking subsections (a) through (f), (h), and (i) of House Concurrent Resolution 290. That is the section that deals with deferred obligations. This doesn't have to be belabored. This is not about controlling spending. This is about spending. This is about force-feeding the President and making the President take $9 billion more than he requested, setting up a procedure where we will spend $25 billion more than that, which will not count because it will be spent next year, and then allowing us to get into the game of spending it, but deferring the spending until a point where it doesn't count. This is an issue about spending, and this point of order is about controlling spending. The President has not been silent on this. Last night he spoke. I will read what he said: I know there's going to be some tough choices on these appropriations bills, but I want to make sure that everybody understands with clarity that the budget the House passed is the limit of spending for the United States Congress. If we adopt this amendment, we will be saying the President wants $9 billion less, but we are going to go on record saying we are going to spend $9 billion more. I will be with the President on this issue. Other Members will have to decide where they are. We have a letter dated today from the OMB Director, and I will read part of it: It is my understanding that the Senate will continue consideration today of two pending amendments regarding budget enforcement--a Feingold amendment and a Reid/Conrad amendment. I ask that you strongly oppose these amendments and encourage your colleagues to oppose them as well. Both amendments would lock in a spending cap that is much too high--over $19 billion more than the President's budget request. Budget enforcement in Congress is vital and necessary but enforcement at the wrong number could be even more detrimental to our budget outlook. Now, if we had not waived the budget last week, maybe I would take this seriously. If 60 Members of this body had not last week voted to waive the Budget Act to spend more money, maybe I would take this thing seriously. But I don't take it seriously. We rejected making the death tax permanent. This amendment would spend nine times as much money next year as making the death tax penalty permanent would have cost. Our colleagues do not have a nickel, they do not have a penny, to let working people keep more of what they earn, but they have billions to spend. They never, ever, have enough to let working people keep what they earn, but they have always got plenty to spend. This is an effort to bust the President's budget. This is an effort to mandate that we set a budget $9 billion above the President's level. This is a proposal that would let us back into the gimmick business on deferred obligations. This is a budget that would let us advance appropriate--which is spending money but not counting it until another year--at a level unprecedented in American history. The President does not want this. OMB has asked that we oppose it. I hope my colleagues will oppose it. But I hope they will understand, whether they oppose it or whether they support it, that this amendment is not about budget control. This amendment is about spending, pure and simple. If you want to spend more, you want this amendment. Now, I am not saying it is going to be easy in the budget process not having a budget. But we don't have a budget. We have not passed a budget, and I don't believe we are going to see one brought to the floor. People are proud of the budget resolution considered in the Budget Committee, but not proud enough to bring it to the floor to debate it, amend it, and vote on it. The President has said he will veto appropriations that violate his budget and the budget adopted by the House. What this amendment would do would be to legitimize $9 billion in additional spending. That is what it does. Last week, we voted to waive the same points of order to spend money. We have done it over and over again. What we are doing here is legitimizing more spending. If you don't want to do it, you want to vote and sustain this point of order. Those who want to waive the point of order will have to have 60 votes. Maybe they have it. I pointed out earlier, this is not going to become law. I don't think it ought to be passed by the Senate. I don't think we ought to be slapping the President of the United States in the face today. When the President last night said he was going to hold the line on his budget, to then turn around and do this is to say: You say you are going to hold the line, but we are not going to let you do it. Count me with the man. Count me with the President. That is what this issue is about. I hope when people cast this vote, they won't be confused. I hope they will understand. This is not about budget points of order that we just waived last week. This is not about process. This is about spending $9 billion more spending next year, $25 billion more spending above that in advanced appropriations, and an unlimited amount of spending through a gimmick. I don't understand why people who support the budget process, after all our effort to get rid of these delayed obligations, can support this amendment. I am sure our colleagues remember the games that were played where we started a program on September 30 of a year so that it becomes law but you only count 1 day of the spending. Why anybody could say this is about controlling spending and could have an amendment that strikes the point of order on deferred obligation, I don't understand. This is about spending, pure and simple. Don't be confused. If you are for spending, if you are against the President, then vote to waive the budget point of order. But if you are with the President, if you are against all this spending, if you think it has to end somewhere, end it right here today. Let's stop this process today. Do not add $9 billion more than the President asked today. Do not spend $25 billion beyond that in advanced appropriations today. And do not let Congress back in the gimmick business today. Vote to sustain the point of order. I reserve the remainder of my time.

Mr. GRAMM. Mr. President, let me make clear I feel strongly about this amendment, but I have profound respect for my colleague. I am a longtime believer in the Jeffersonian thesis that good men, with the same facts, are prone to disagree. I point out the Gregg amendment that I voted for had 5 years of budget numbers; not just the 2 years where the budget went up, but 3 years where it went down. So I thought, in terms of the whole package, it was an improvement over nothing. But I do not think it is an accident that this amendment has only the 2 years where spending goes up. Maybe I was not tending my business, but I do not think that the Gregg amendment struck the provision on delayed obligations. If it did, I was not aware of it, and I would stand to be corrected if anybody corrected me. I think the Gregg amendment left advanced appropriations untouched, whereas this amendment increases them by $2.4 billion. But ultimately, if we are talking about this being a consensus product, there is one person who is not part of this consensus and that is the President. The President is taking a hard position, and, quite frankly, it is about time. I love our President. I have known him for a long time. I respect him. But I thought last year, in trying to work with both parties and trying to bring a new environment of bipartisanship to Washington, that he let Congress spend too much money. But it was a price he was willing to pay to try to work with everybody and try to be bipartisan. But our President is a Texan. And once you have slapped him once or twice, then he begins to think maybe you mean to fight. The bottom line is the President has said, I am going to limit spending to the budget that I proposed, and to the aggregate number adopted in the House. The amendment before us would add billions of dollars to that. It would not only condone but basically justify $25.4 billion of spending--in addition to the $9 billion I spoke of earlier--counted a year later through a process called advanced appropriations. This would be the highest level in American history. Finally, to add insult to injury--and I asked somebody to explain to me why it is in here--this amendment strikes the language on delayed obligations. If people weren't meaning to cheat, why do they make it legal? If people didn't expect to be in jail, why are they pulling the bars out of the windows? If people aren't expecting to take advantage of something we had stopped in the past, why are they taking the prohibition against it out? I do not know if my colleague from Oklahoma is aware of it, but the amendment before us in part strikes our old language preventing delayed obligation. Our colleague will remember the bad old days when you wanted to fund a great big old costly program but you didn't have the money in the budget, so you started it on September 30--the last day of the fiscal year. Then it cost only 1 day. It was just magic. You could spend 365 times as much money by just starting the program on the last day. We finally wised up to that. We stopped it. Now we have an amendment where our colleagues say they are trying to stop spending. They are not for spending. They want to stop spending. But yet they strike the language on delayed obligations, which is a gimmick that has been used to spend billions of dollars. I do not know how you could say they don't intend to do it when they are legalizing it. To sum up--because I know we have others who want to speak, including my colleague from Oklahoma--this comes down to whether you are with the President or you are with the spenders. With all good intentions--I don't doubt good intentions on the other side--the bottom line is that this amendment, if adopted, gives credence to and gives cover to people who mean to bust the President's budget in three ways: $9 billion on its face, $25.4 billion in advanced appropriations, and then cheating with delayed obligation. If you are with the President, if you are for fiscal restraint, if you want to stop the spending spree in Washington, this is not the way to do it. I don't mind people making the best arguments they can. But I don't think you can have it both ways. I don't think you can say this is about fiscal restraint, and then say: Oh, by the way, we want to bust the President's budget by adopting this. I mean you have to be fish or fowl. You are either with the man or you are against the man. I am with the man. I reserve the remainder of my time.

Mr. GRAMM. All right.

Mr. GRAMM. All right.

Mr. GRAMM. Madam President, I wish to explain why I am opposed to this amendment, why I intend to raise a point of order against it, and why I believe that point of order should be sustained. Let me begin by saying we have not adopted a budget this year. A budget has never been brought to the floor of the Senate during this session of Congress. We have not been in a similar position since 1974. We are now being asked on a Defense authorization bill to have the Senate commit to a budget figure outside the budget process. In fact, the point of order arises because we are basically going outside the budget process and dealing with an amendment that was not reported by the Budget Committee. In doing so, we would be committing the Senate to a level of spending that next year is $9 billion more than the President requested and $52 billion more than we spent last year. We would be going on record as agreeing to setting a constraint under which we could spend $25 billion this year that would not be counted until the following year. In other words, we could actually spend $25 billion more than the $9 billion more that we are committing above the level the President requested by what is called advanced appropriations. I do not believe the Senate should lock itself into a budget that has not been approved by the Budget Committee. We had a vote on that budget that was brought up on another bill. Nobody voted for it--not one Democrat or one Republican. We are now being asked to commit to a figure of $9 billion above the President's, $52 million above last year, with the ability to get around that constraint by spending $25 billion in advanced appropriations. Last year was the largest level of advanced appropriations in American history, and that was $23 billion. This would set a new global record. And I do not believe this represents good policy. This is adamantly opposed by the President. OMB has notified Members today that they are opposed to it. There is no possibility the House will agree to this. I say to any of my colleagues who are tempted by this and by the thought that any kind of budget numbering process is better than none, the bottom line is the House will never agree to this. What they would be doing in the process would be committing to a level of spending $9 billion above the level the President requested, with a $25 billion advanced appropriation escape hatch. I do not believe this is a good deal. I wish we had more than an opportunity to offer an amendment, but a consensus among Members that when we didn't adopt a budget, we needed a permanent budget enforcement process. This would give us the process but at numbers that are grossly beyond the level the President requested and far beyond the numbers I could ever support. So I hope my colleagues will sustain this budget point of order. I don't think it is good for the Senate to be trying to write a partial budget on a Defense authorization bill instead of bringing a budget up and debating it and amending it. The amendment will be subject to amendment if we do not sustain the point of order. There will be amendments offered. I will offer amendments if we do not sustain the budget point of order. Let me reiterate briefly that this is $9 billion more than the President requested, $52 million more than we spent last year. This would have advanced appropriations of $25 billion, which would be the largest in American history, that would be sanctioned under this agreement. The White House is adamantly opposed to this amendment. The House will never accept this amendment. Therefore, it cannot and will not become binding. I urge colleagues to sustain the budget point of order. This is a budget point of order with a purpose. Sometimes these budget points of order represent sort of a ``gotcha'' kind of circumstance, where they apply, but the logic of them is kind of convoluted. They are almost accidental. The budget point of order I raise is not accidental. It says that an amendment that alters the budget process has to come through the orderly process of being reported by the Budget Committee or else it is subject to a point of order. I remind my colleagues that we are under a unanimous consent request. So by making the point of order now, I am not cutting off anybody's debate. That will continue until 3 o'clock. I say that so everybody understands exactly where we are. The pending amendment contains matter within the jurisdiction of the Committee on the Budget, and it has been offered to a measure that was not reported from the Budget Committee. I therefore raise a point of order against amendment No. 3915 pursuant to section 306 of the Congressional Budget Act. Let me ask the Parliamentarian a question. Is 3915 the right number, given they have merged the amendments?

Mr. GRAMM. Madam President, I make that point of order against the pending amendment under section 306.

Mr. GRAMM. Why didn't you extend it?

Mr. GRAMM. Mr. President, first of all, I am not telling the President anything. The President was telling me. I read what the President said last night. I am joining my voice with the President's, but I am not speaking for the President. Second, our problem is that the whole budget enforcement expired--not just this one provision. We are extending the rest of it. We are not extending this provision. The bottom line is, this is about $9 billion. Senator Domenici says we can't live within the President's budget. I believe we can live within the President's budget. And the President has asked us to try. Now, granted, the President can do whatever he wants to do. The question is, Do Republican Senators want to vote to go on record for a budget number that is $9 billion more than the President says he is going to stand behind? I think that is why it comes down to the question of whether you are with him or whether you are against him. I am with him. Mr. President, how much time do we have?

Mr. GRAMM. Mr. President, I yield 10 minutes to the Senator from Oklahoma.

Mr. GRAMM. How much time do I have remaining?

Mr. GRAMM

Mr. GRAMM. Mr. President, I ask unanimous consent that privilege of the floor be granted to Mark Garrell, a legislative fellow with Senator Bunning, for the duration of the DOD authorization bill.