Phil Gramm

Mr. GRAMM

Mr. GRAMM. But the issue really boils down to this: You can denounce the tobacco companies all you want to and rejoice in it. I would join you if I thought it would do any good. But I think we are doing it so much, I am not sure it is achieving its stated objective. In the end, you are not taxing tobacco companies. In the end, you are taxing blue- collar workers in this country, who are going to be brutally punished by this tax if they are addicted to cigarettes and they cannot quit smoking. In my State, we have 3.1 million people who smoke cigarettes. If they smoke one pack a day, they are going to pay $1,015 in new Federal taxes as a result of this bill. For somebody who is making $10,000 or $20,000 or $30,000 a year, that is a brutal, punishing tax. All I am saying is, quite frankly, Americans believe this bill is about the $700 billion. They believe that this has long ago stopped being about teenage smoking, that this is really more of the old tax and spend, getting $700 billion of easy tax money and then spending it. It is easy because people believe that we are taxing tobacco companies. When they understand that we are taxing the people who smoke, and who in many cases are addicted and who can't quit, or at least are going to take time to quit, I do not think they are going to be sympathetic to what we have done. No one can argue that in the endless billions of dollars of money spent in this bill, that we could not give a third of this money back to blue-collar workers by repealing the marriage penalty. So my goal is to offer the amendment. I hope it will be adopted. I think it is the right thing to do. I think it would marginally help this bill. But my objective is to see that if, in fact, we raise taxes on working people, that we raise the tax to change the price of cigarettes and therefore encourage people to quit smoking. I do not want to simply raise the tax to spend money on endless Government programs, many of which have nothing to do with smoking. And the ones that have anything to do with smoking, we have endless redundancy in setting up community action programs and international smoking cessation programs and the worst kind of duplicative bureaucracy. The net result will be to hire tens or hundreds of thousands of people, spend hundreds of billions of dollars, every penny of which will come out of the wallets and purses of blue-collar working Americans. Finally, let me say that someone suggested that if we repeal the marriage penalty, it might help couples where the wife stays at home and works in the home. If that is a criticism, please note me down as having been criticized. I do not have any apologies to make. I think the people who do the work and pay the taxes and pull the wagon in this country pay too much in taxes. I am not happy that we are getting ready to sock them with another $700 billion of taxes. If I can, through my modest involvement, see that they get a third of the money back, so that we get the impact on smoking without impoverishing blue-collar workers, I want to do it. And that is what I am trying to achieve. I yield the floor. Mr. KERRY addressed the Chair.

Mr. GRAMM

Mr. GRAMM. Mr. President, I ask unanimous consent on behalf of the Governmental Affairs Subcommittee on Oversight of Government Management, Restructuring, and the District of Columbia to meet on Thursday, June 4, 1998, at 10 a.m. for a hearing on ``Competition for Commercial Activities in the Federal Government''.

Mr. GRAMM

Mr. GRAMM. Reclaiming my time--and then I will yield the floor--my amendment is targeted to moderate-income families. No family making more than $50,000 would get a penny of benefits out of it. My amendment would eliminate the marriage penalty where moderate-income Americans who fall in love and get married wouldn't pay the Government $1,400 a year for the privilege. My wife is worth $1,400 a year, but I think she ought to get the money, and not the Government. I am not apologizing for that proposal. I want to get a vote on it at some point. I would like to follow it with another one that would say moderate-income people get the same tax treatment when buying health insurance as General Motors does by being able to deduct the cost of their health insurance premiums from their taxable income. What I am saying is, I could support a bill that gave the money back through these kinds of tax cuts and kept just enough money to fund our smoking cessation and whatever we did on drug prevention for teenagers. I could support a bill like that. But what I can't support is a $700 billion tax increase that pays tobacco farmers $21,000 an acre and allows them to go on growing tobacco; that gives money to people for problems that have nothing to do with smoking and that creates all kinds of new agencies. I hear my colleague say over and over again, ``This is not about taxes. This is not about money. We don't want the money.'' But all I know is, I have an amendment that is pending that gives some of the money back to working families, the very people who smoke in the highest proportions, and yet I can't get a vote on it because my colleagues have covered it up with other amendments. Now we will get a vote at some point, so I think really what I was trying to do today, for those who are for this bill and want to see something passed--and I will conclude on this--I was simply trying to point out how we might find a middle ground here. I don't object to making tobacco products more expensive. But I do object to impoverishing 3.5 million Texans. I do object to taking money we are taking from people, 60 percent of whom make less than $30,000 a year. I do object to taking that money and spending it on programs that make people millionaires many times over, that pay people $88,000 to $100,000 an hour for legal services, that pay tobacco farmers $21,000 a acre and they can keep right on growing tobacco and that create all of these Government programs and nobody knows what they do. Nobody knows what this big community action program does, other than put a lot of political activists on the payroll. So if the goal is to stop people from smoking, and we can do it by raising tobacco prices, I would like us to be sure we don't start a big black market and have it so that some hood is running around saying to our children, ``Do you want to buy a cigarette, or some dope?'' or whatever. I don't want that to happen. Within those constraints, I could support higher prices for tobacco if you gave the money back to blue-collar workers in tax cuts and if you didn't spend it on all these other programs. But in the end, I am fearful that we will not reach a general consensus, because I am afraid that along the way, with the best intentions, this bill has become a tax and spend bill. I don't know how we get away from it. I don't know how we now go to all of these groups that hope to get tens of billions of dollars from this bill and say, well, you know, it was in that original bill, but we could not get that bill passed, and we have had to throw it in the trash can where it belongs, and we have to start over, and now we are not going to have a big community action program, we are not going to have a big international program, we are not going to pay money to people who have asbestos poisoning, we are not going to pay for child care; we are going to focus on smoking, raising the relative price of tobacco, and then we are going to give the money back to the blue-collar workers who are going to bear the burden, because we are not taxing tobacco companies, we are taxing blue-collar workers who smoke. That is what I hope we can do, but I am not optimistic that we are going to, because this thing has taken on a life of its own as the largest taxing and spending bill of my political career. I am afraid that the only alternative we are going to have is to defeat this bill. Hopefully, if it is defeated, we can come back and try to do it right, and maybe at some point we can do that in the first place. But having spent the recess thinking about it, I wanted to simply come over and outline what I, as one Member, saw as a potential compromise--raise the price, keep a little of the money for smoking cessation, and spend some of the money on drug enforcement. As long as we are trying to keep the children from smoking, we should try to get them away from drugs. We can give the rest back in tax cuts, so nobody can say you are taxing and spending, you are just raising the price of tobacco. Maybe we can make that happen, but I don't see any motion in that direction. I yield the floor.

Mr. GRAMM. What about the tobacco farmers?

Mr. GRAMM. A point of information. My amendment, as it is now drafted and pending before the Senate, would take about half the money and give it back. So in terms of the numbers, those are the circumstances. Here is where we differ. I would agree that we can have an impact on smoking by raising prices. But what I don't agree on is that we ought to take $700 billion, basically from Americans who make $30,000 or less, and set out on a massive spending spree. So I am saying if you want to raise the price of cigarettes, why don't you support an effort to give at least half of the money back to the people from the same income group, rather than setting out programs to pay tobacco farmers $21,000 an acre or plaintiff attorneys $100,000 an hour, or starting massive new programs that have virtually nothing to do with smoking. I think that is where we differ. I think until we come to an agreement there that we are not going to have a resolution.

Mr. GRAMM. Now wait a minute. Will the Senator yield?

Mr. GRAMM. Will the Senator yield for one question, since I yielded to him four times?

Mr. GRAMM. If I could reclaim my time, I don't necessarily agree with that. First of all, we could impose a windfall profits tax on tobacco companies. We could make tobacco companies pay part of the tax. But the important thing is that--I would like to just try speaking like an economist for just a minute--I am perfectly willing to raise the relative price of cigarettes; that is not what I object to. What I object to is that 3\1/2\ million people in my State, 60 percent of them making less than $30,000 a year, those who are really addicted, who are really the victims, are going to pay $1,015 a year in new Federal taxes. So if they are making $30,000 a year, you are taking a 30th of their income in this new tax. All I am saying is, raise the tax to get them not to smoke, but take the money and cut other taxes they pay so you don't impoverish them. That is what I am saying.

Mr. GRAMM. I just said it may well be that in some compromise I can support the method in your bill. It is not so much the tax that I object to; it is what we are doing with the money and what the tax is doing to moderate-income people. If we take your revenue figure and we throw out all these spending programs and we give the bulk of the money back to moderate-income people, for example, by repealing the marriage penalty for moderate- income Americans, make health insurance tax deductible for moderate- income Americans and make that subject to the earned-income tax credit, so that we are raising the price of tobacco but we are not brutalizing moderate-income people, blue-collar people, economically, it may be that you can get more people to support that.

Mr. GRAMM. What I was saying was, if we believe that by raising the price of tobacco we can discourage consumption--and, being a person who used to be an economist, I believe that demand curves are downward sloping--and other things being the same, that we could produce some results there. What I am saying is that I think we might put together a bill that raises the price of tobacco products either with a hidden excise tax or one out front. But where I disagree is, since almost 60 percent of the people paying the tax make less than $30,000 a year, rather than using this as a piggy bank to fund massive new programs, I think we need to raise the price of tobacco as part of a coordinated effort, and I would like to include an antidrug effort with it, but I would like to give most of the money we raise back to low-income people so that we don't end up punishing the victims, which is what I see happening.

Mr. GRAMM. But beyond those modest programs, we have to give the money back if our purpose is not to impoverish people but in turn to get them to quit smoking. It is not clear to me how we are going to get everybody--from lawyers to tobacco farmers to asbestos beneficiaries to whoever these thousands, hundreds of thousands of people who hope to man these agencies for massive community action, for these world organizations, and all the people who hope that this could be the winning of the lottery for everything from child care to you name it--how do we get everybody to back off those things so that we might really have a bill here to do something about reducing teen smoking? We often, it seems to me, overstate our ability to really make people do things or get them to do things. But I simply despair at figuring out how we are going to get a bill that is focused on smoking, that discourages smoking but at the same time does not impoverish blue- collar workers, and that does not set off a massive wave of hundreds of billions of dollars of new spending. If we could do that, and combine it with an effort to do something about illegal drug use, along with illegal cigarette use by children, then I think we would have served the public well. But I am not sure how we do it. There is a lot of dead weight in this bill that has to be gotten out. I hope that as we go through the debate that reason and responsibility will prevail on everything from the tobacco farmers to the lawyers' fees to asbestos, to all of these X, Y, Z bureaucracies. But today, in my State, the people that have any awareness of this issue basically have concluded two things: that, No. 1, we are probably not going to get children not to smoke by raising this tax and that, No. 2, the tax is about revenue to fund a whole bunch of new Government programs, that the tax is not about getting people not to smoke. If we are going to convince people--I have always found that telling the truth does not always convince people, but it is easier when you tell them the truth. And if this is really not about money, then let us not create all these spending programs that are not directly related to smokers' cessation, let us take the money, the tax, and give it back to the workers by cutting their taxes, let us throw all this subsidiary stuff overboard and write a real bill. If we don't do that, I don't see how in the end we will convince people that raising taxes by $700 billion and creating literally dozens and dozens of new programs that have virtually nothing to do with smoking--I don't see how we convince people that we are doing anything other than the old-fashioned tax and spend. But we have found a new wrinkle, and the new wrinkle is to find an industry that deserves vilification, vilify them, then tax their victims, and then tax and spend. If that is not our objective, then we are going to have to change this bill dramatically to actually achieve the goals we sought. I have covered a lot of things here. I thought about this a lot over the recess, trying to figure out how we could get from where we are to having a real bill. I have concluded that it is going to be hard, very difficult, because when you have convinced all these special interest groups that we are going to give them $700 billion, and you start taking the money back--because, in reality, we can't impose a tax that big--people are going to be disappointed and you are going to have problems. Now, the Senator from Massachusetts wanted me to yield. I know it has been a long time; that is part of the problem with our procedure. I am happy to yield for a minute. Then I have to go back over to the Medicare Commission.

Mr. GRAMM. No. I let the Senator go on for some time. I would like to do the same. When we get through, I have to go back to the Medicare Commission meeting, but I will yield for a moment at that point. So one of the concerns I have had in trying to see what we might do to fix this problem is that we are looking at the potential of 3,130,000 people in my State, if they smoke one pack of cigarettes a day, having a tax increase of $1,015 each year. Now, I thought, looking at the figures that were put out by the Joint Committee on Taxation, that there must be something wrong with these figures, but when you look at that $1,015 Federal tax for a Texan or an American who smokes one pack of cigarettes a day, it makes the number believable that the Joint Tax Committee put out, and that number was, for Americans who make less than $10,000 a year--some smoke, some don't smoke--but for all Americans who make less than $10,000 a year, this bill will drive up their Federal taxes by 41.2 percent. So one thing that has worried me from the very beginning, and one thing that I do not find to be trivial, is that we are talking about a massive, $700 billion tax increase that is being imposed not on the companies that have inspired teens and others to smoke but it is being imposed on the very people who are the victims, and in my State it has the potential of imposing a $1,015 new Federal tax on a blue-collar worker making less than $30,000 a year who is addicted to smoking. And if you have a blue-collar couple who may have two jobs, a lady who works in a restaurant, and a man who drives a semi, and they both smoke a pack of cigarettes a day, you are talking about imposing a $2,030 increase in Federal taxes on them. It may be that this increase in taxes would induce some of them not to smoke. Over and over our colleagues who support this massive tax increase have said this is not about money, that they don't want the money, they want to get people not to smoke. So before we left on the recess--having listened to this debate and having heard over and over and over again that this was not about money, that they just wanted to drive up the price of cigarettes, that they weren't trying to decimate blue-collar workers financially, that they just wanted to get them not to smoke--I sent an amendment to the desk. My amendment said: If the purpose of this is to get people not to smoke by driving up the price of cigarettes, let's raise the price of cigarettes, but let's take that money and instead of giving it to the Government to spend, let's give at least some of it back to blue-collar workers by changing the Tax Code. And the proposal that I made was let's eliminate the so-called marriage penalty where two workers, both of whom work outside the home, fall in love, get married, and end up paying $1,400 more in taxes being married than if they stayed single. I focused it on moderate-income Americans. The idea being, raise the price of cigarettes to discourage smoking, but because we are not raising the price of cigarettes to impoverish blue-collar workers, why not raise the price of cigarettes to discourage smoking, but return the money through new tax cuts to the same people? So you raise the price of smoking but so that people who are really addicted and who either can't or don't quit smoking--that we simply don't pound them into the ground economically. I was somewhat taken aback that when I offered this amendment, it shut down the Senate, and that we clearly have Members of the Senate who do not want to vote on giving some of this money back to blue- collar workers. I am somewhat at a loss to explain that. If the tax is not about money, why wouldn't we want to give some of it back in tax cuts to the very blue-collar workers who have been victimized by the tobacco companies? Also, I would have to say for those who want to talk about the health care cost of smoking, when Senator Domenici and I, in the budget, dedicated the money to Medicare, many of the same people who were for this bill opposed that amendment. The point I am making is, first of all, I am going to get a vote on my amendment. I had to write my amendment as a motion to recommit with instructions. Some people have gotten confused in the media and believe that somehow my amendment delays the bill or kills the bill. It does not. My amendment simply directs that the bill notionally be taken back to committee and be brought back immediately with this tax cut attached to it. If it were adopted, it wouldn't delay the Senate for a second, nor would it pull the bill down. I believe if this issue is about smoking instead of about money that the Senate will adopt my amendment, and hopefully another amendment which would give blue-collar workers the same tax treatment General Motors has in buying health insurance. But we will get an opportunity to vote on those issues. Let me also say that in traveling around my State for 8 days and meeting with editorial boards, holding public meetings, and on several occasions raising the tobacco issue, I received not a question about the tobacco bill. We are debating this issue as if this is the all- consuming issue on the planet, and yet all over the State, in meeting after meeting, in editorial boards where I raised the issue, I don't recall a single question anyone asked me about it. In fact, we have had two polls come out since we have been considering this bill. One, published in USA Today asked people, ``Do you believe higher cigarette taxes will reduce teen smoking?'' Seventy percent say ``no;'' 29.9 percent say ``yes.'' When you ask parents what they are most concerned about with their teenagers, 39 percent say using illegal drugs--something that has doubled since 1992, something that this bill doesn't deal with, something the substitute that Senators Domenici and Coverdell and I will offer does deal with, with the toughest antismoking, antidrug program that will be considered in the Senate during this debate--16 percent say joining a gang, 9 percent say drinking alcohol, 7 percent say having sex, 7 percent say driving recklessly, and 3 percent say smoking or chewing tobacco. I would like to explain what I believe has gone wrong on this bill and why it is going to be so hard for us to fix it. I have given this a lot of prayerful thought. Let me just share with you the results of this thought. First of all, why are we dealing with this issue to begin with? Why is this issue on the floor of the Senate? We had settlements between tobacco companies and States. Why are we considering it? I will tell you why we are considering it. It is completely lost in this debate, but we are considering it because the attorneys general came to us and said, in essence, this whole thing has gotten out of control and the only way we can enforce these settlements is for the Federal Government to step in and impose some reason and responsibility on the process. In fact, presumably, the attorneys general recognized something--some people may be offended by the analogy but it is a good analogy--that a parasite can live only if the host animal does not die. What the attorneys general recognized was that the way this whole thing was going, the tobacco companies were all going broke and they weren't going to collect this money. They weren't going to be able to pay for Medicaid with it. As a result, they would have won a big victory in court, but it would not mean anything to their States, to their constituencies. So they came to Congress and said look, this thing has gotten completely out of control. It is unlikely that the kind of money, in essence, that we are talking about can never be paid. What we want Congress to do is step in and set levels that will make it possible for us to actually collect these settlements. What has happened in the process? Sadly, the settlements started out at roughly half the cost of the bill that is before us. Quite far from the objective of the attorneys general in asking us to get involved in this issue to begin with, we have roughly doubled the cost of the bill and every concern that drove this issue to the Congress has now been multiplied by a factor of two. How did it happen? How did the cost of this bill get so high? This is what I think is the most revealing part of this whole process. I could go through 100 examples, but I am only going to go through a couple. One of the things that happened when the bill got to Congress was that, as normally happens in these situations, everybody wanted some of the money. So we start dozens of new agencies. We have programs for community action. Nobody knows what they are. We set up international programs. We have programs to buy out vending machine owners. We have programs to subsidize tobacco farmers. But we don't just have programs, we have spending programs that are completely out of any realm of reason and responsibility. A perfect example of it is the tobacco program. It was perfectly reasonable that those who represent tobacco States, when we were getting ready to collect a lot of money from the tobacco companies, would want some of it. You would think in going about trying to get some of it that we would have ended up with a figure that would be somewhat similar to the transition payments we paid in the legislation we call freedom to farm. Under the Freedom to Farm bill we, in essence, provide transition payments to wheat producers, corn producers, grain sorghum producers, barley producers, oat producers, upland cotton producers and rice producers within a 7-year period. You might have thought that what we would have done was set up a program for tobacco similar to those other programs. Such a proposal might not have been an unreasonable addition to this bill. But reason has nothing to do with this bill, because since we could, in essence, act as if the tobacco companies were paying these costs when, in fact, the consumer was paying the cost, the sky was the limit in terms of the amount of money spent. Let me tell you what we have done in tobacco. We have two proposals now before us. We are going to be asked to choose between one of the two on the floor of the Senate. The Ford proposal costs $28.5 billion. The Lugar proposal costs $18 billion. The Ford proposal will pay tobacco producers $21,351.35 per acre. It will also continue the tobacco program. Nobody will have to stop growing tobacco. No one will have to give up their land, but we will give them a payment of $21,351.35 an acre. The Lugar bill will make a similar payment while ending the tobacco program at $22,297 an acre. Who knows what a billion dollars is, but let me put it in English. That is almost 20 times the amount we pay every other commodity combined to end their program. We have before us a bill that will pay tobacco brokers 20 times more than we paid, on a per-acre basis, wheat growers, corn growers, grain sorghum growers, barley growers, oat growers, upland cotton growers and rice growers combined--nearly 20 times as much per acre as we paid all those programs combined. Let me explain a little bit about the program. In 1938, we set up this program. It was aimed to do one thing and that was to raise the income level of tobacco farmers. We set out a quota system where you can't grow tobacco unless you have a quota. What happened almost immediately is people with quotas in many cases quit growing tobacco and they rented their quota to other people so that now 63 percent of the people who own the quotas don't even grow tobacco. What we are going to do under these two proposals is pay them roughly $20,000 an acre, and allow them to continue to grow tobacco and keep the acreage. Madam President, 1997 is the last figure I have, but in 1997, you could have bought the quota to grow an acre of tobacco for $3,564. I ask the following question, and it can't be answered: If I could go out today and buy a quota to produce an acre of tobacco for $3,564, why in the world would the Government want to pay me six times that amount in this tobacco bill, six times the amount that I just paid yesterday for the quota? They are going to pay me six times that amount of money, and I can go right on producing tobacco. How could such a provision possibly get into a bill about which Members of the Senate would not blush? How can we let a person go out today and buy a quota to produce an acre of tobacco and sell it to the Government next month for six times what they paid for it and still grow tobacco and not give up the land? Whoever heard of paying people $20,000 an acre because we are going to pass a tobacco bill, but they can go right on growing tobacco, or six times what you can buy the right to grow it for? How did it happen? It happened because of the feeding frenzy of spending money that was coming from tobacco consumers, basically blue-collar workers--59.1 percent of them earning below $30,000 a year. By making it look like the tobacco companies were paying the bill, we could, in essence, pay people $20,000 an acre who are growing tobacco and let them keep on growing. There is no logic to that happening, except that this has become a giant piggy bank, or as a candidate for comptroller in my State has said about the tobacco settlement in Texas, ``We won the lottery.'' This is the kind of consumption people do when they win the lottery. We have had an extensive debate on this subject, but those who have studied the settlement in Texas have concluded that lawyers in Texas will make about $100,000 an hour under that bill --$100,000 an hour. Why would we have a bill that allows that to happen? Can you imagine if we were appropriating the money to hire lawyers to do work for the Government, allowing a situation where attorneys' fees could range between $88,000 and $100,000 an hour? Can anybody imagine that happening? How did it happen in this bill? How could it have happened? What happened is the attorneys general came to us and said, ``Look, we have these settlements that have gotten out of control, and people aren't going to be able to collect money because the judgments cumulatively are going to be so big that they are going to drive the tobacco companies out of business, and we're not going to be able to collect our money. Congress needs to do something about it.'' So what did Congress do about it? Congress doubled the amount of money that we are taking and, in the process, set off a spending spree the likes of which we have not seen since Lyndon Johnson became President. There has been no period of time in American history since the first year of Lyndon Johnson's Presidency where we will have an explosion of new programs and new discretionary spending. Many of these programs have absolutely nothing to do with smoking, and the list goes on and on from child care to international programs to you name it. How did asbestos settlement get into this bill? How did we end up with billions of dollars going to asbestos settlements in this bill? Where did that come from? How did that happen? My guess is that there was this lottery that we won, and so somebody said, ``Well, look, you have all this money, why don't we give some of it to people who have asbestos-induced health problems.'' And they then said, ``Well, many people were around asbestos in World War II. Since most people in World War II smoked, they were around asbestos, why don't we take money out of this and give it to them?'' Here is my point. How do we get back to something that would be reasonable and, quite frankly, try to figure out how we might put together something that would actually achieve what we want? I wanted to share with my colleagues why I despair, why it is going to be very difficult to fix this bill. Let us say we decided we were going to go back to the tobacco farmers issue, and we said, ``OK, now look, we want to be generous. We'll pay tobacco farmers the cumulative amount that we paid every other farmer per acre combined.'' And that would be $1,496 per acre. We will give them that amount of money because they might be affected by this tobacco bill. We do not know they will be because we do not know for certain what else will happen, whether demand will go down or not. Other things being the same, it should. So you might say, ``Well, look, why don't we offer them the amount we pay every other crop combined?'' Well, how can our colleagues from tobacco States--when they have been debating giving people $20,000 an acre or $21,000 an acre--how can they go back and say, ``We're actually only going to get one-twentieth of that amount''? They can't go back, because once you let the feeding frenzy start, and once you get expectations built up--anyone who went to tobacco farmers a year ago and said, ``I, as your Senator, have arranged for you to get the amount of money equal to the per-acre payment of all the other seven major crops combined,'' you would have gotten a standing ovation. But today, when we are talking about paying 20 times that amount, you would get stoned. So we are not going to be able to break that impasse as long as people believe this bloated bill is at all possible. How are you going to go back to people who have suffered from asbestos poisoning and say, ``We're not going to give you anything''? The bill never had anything to do with them, but nevertheless, now there is a big constituency there. We contemplated in the bill that we would set some limits on attorneys' fees. We are going to have a vote on $1,000 an hour. That is not a minuscule amount. But even if we could be successful on that--and I am not sure we could--you have expectations so high that I do not know how you ultimately put this together. Let me tell you what I think the final solution would look like if you could get there. You have to throw all of these add-on spending programs overboard. They never should have been here to begin with. This is an obscene feeding frenzy. All of these X, Y, Z bureaucracies, all of these community action programs, all of these international smoking alliances, all of these payments for other purposes--all that has to go. Secondly, if we are going to raise prices, and we are not going to beat blue-collar workers into pulp economically, some of the money that comes in has to be given back to them in other taxes where we discourage them from smoking but we do not impoverish the people who are addicted to cigarettes and either will not be able to quit or at least will take an extended time to quit. Senator Domenici and I fund in our bill, through Medicaid, Medicare, and through tax deductibility, smoking cessation programs. Those are the kinds of things it seems to me that we ought to be focusing on here. But a bill is going to have to be back within the range that we could ever hope to collect. Secondly, we are going to have to be aware of the fact--and I heard my colleague talking about black markets, but, you know, the Canadians raised the price of cigarettes by about the price increase we are talking about. They have highly educated people. They have law enforcement. But what happened is, after their experiment had failed, the Health Minister, Diane Marleau, said the following: ``The government decision to cut taxes would actually reduce consumption among youngsters because it will end the smuggling trade and force children to rely on regular stores for cigarettes where they are forbidden to buy them until they are 19.'' Maybe we are so much smarter than the Canadians that we will be able to prevent black market activity. Smuggling among the Canadian provinces is still a problem. The British have 50 percent of their market for cigarettes now in the black market. We have been independent of Britain for over 200 years and maybe we now are so smart that we can solve the problem. But I would just like to point out to my colleagues that maybe we are that smart but that our friends and our kin folks--if you go back a few generations in places like Britain and Spain and Italy, Eastern Europe--they are all plagued with the massive black marketing of cigarettes. So if there is a solution to this problem, it seems to me that the solution lies in the following: That, No. 1, we have to throw all this feeding frenzy overboard. We have to cut back the reimbursement for tobacco farmers and to lawyers to reasonable levels; we have to throw out all of this extraneous material where we are spending hundreds of billions of dollars on programs that have nothing to do with smoking; we have to raise the price of tobacco and give the money basically to two things--smokers' cessation programs and attendant health-related matters, such as the health provisions that Senator Domenici and I have proposed where Medicaid and Medicare will be able to fund smokers' cessation programs and where taxpayers can get a tax credit if they participate in the programs designed to try to help people break their addiction.

Mr. GRAMM. Madam President, I wish we could pass a resolution or a bill that would stop every child from starting to smoke and that would stop every adult from smoking. I begin with a little personal experience. I have been alive for 55 years. I have spent much of that time trying to get my mother, who is now 85, to quit smoking, and I have had no success, nor do I believe that by raising the price of cigarettes we will achieve that result, either. But the point I want to make, to begin with, is that if we could have a resolution that would, in fact, keep people from starting to smoke and stopping people from smoking, I can't imagine that anybody would vote against that resolution. Also, contrary to the rhetoric of much of this debate, I don't find any love anywhere for tobacco companies. I think if there is a problem in the debate, it is that we create the impression we are punishing tobacco companies with this bill, when this bill has, in fact, extraordinary provisions to guarantee that tobacco companies will not be punished. We talk about tax increases as if the tobacco companies were paying those tax increases, but in reality not only do they not pay them, but we have written into the bill provisions that make it illegal for them to not pass the tax through to the consumer and therefore the tobacco company is held harmless for the general increase in taxes on cigarettes. The cold reality is that we have before us a bill that raises taxes by $700 billion--one of the largest tax increases in history. This tax is not randomly distributed among the population. Those who make less than $15,000 a year will pay 34 percent of these taxes, those who make less than $22,000 a year will pay 47 percent of these taxes, and those who make less than $30,000 a year will pay 59.1 percent of these taxes. The cigarette companies will pay none of these taxes. Over the recess, I examined carefully data about cigarette smoking in my State. What I would like to do is talk a little bit about this data and the tax and describe what I am trying to do with an amendment that is now pending but that has other amendments piled on top of it in such a way as to prevent me from getting a vote on it. I want to talk about why that amendment is important. I want to say a little bit about the substitute that Senator Domenici and I will offer with Senator Coverdell and others, and then I want to talk about how we have lost control of this legislation. I have spent the last 8 days back in Texas and I have listened to people all over my State and have thought about what we could do to fix this bill so that we could actually move ahead. I want to share those thoughts with my colleagues, not so much thinking that anybody might be swayed by those thoughts but at least to perhaps encourage others to think that, well, maybe other people are thinking about this problem the way I am and maybe we ought to try to get together and work out some of these things. In my State, 23.7 percent of the adults smoke. That is 3,130,723 Texans. If I could snap my fingers or do anything other than using police powers, I would like to induce these people to stop smoking. But the first thing I have to be aware of is the fact that these are the victims. The whole logic of this tobacco bill is that the tobacco companies have conspired to get young people to smoke. To use the language of our colleague, the chief proponent of the bill, they have gotten people addicted to smoking, and so that is what I mean when I say that there are 3,130,723 Texans who smoke, who are the victims. These are the people who the tobacco companies, through advertising and through encouraging some of them when they were young to smoke, have gotten addicted or at least attached to the product to the extent that they continue to buy the product. Now, here is one of the things that concerns me greatly about this bill. We all agree that the smokers are the victims. We all agree that the tobacco companies are the villains. And yet we have a bill that holds tobacco companies harmless, that requires by law that they pass the tax through, doesn't allow them to pay a penny of it in terms of the initial tax that is imposed. And yet if, in fact, as most people who are knowledgeable about the marketing of this product say, this bill will have the effect of raising the price of a pack of cigarettes by $2.78 a pack, it will mean that the annual cost of buying one pack of cigarettes a day for the people in my State who smoke will rise by $3,176,744,628 which means nothing, but let me give you a number that does mean something. For every person in my State who is addicted to cigarettes, who has been victimized by a process that we are trying to fix in this bill, the people who are the sole purpose of this bill, we are imposing a tax on them of $1,015 a year in the process of helping them. As my 85-year- old mother said the other day, ``Why aren't you taxing the tobacco companies instead of taxing me? If I am the victim, why am I paying?'' Well, the point I want to make sure my colleagues understand is that while we may love pounding our chest and vilifying the tobacco companies, with good reason, we have before us a bill that is punitive not to the tobacco companies but to the people who are their victims. And the level of punishment is a level that is virtually without precedent as far as I am aware. In fact----

Mr. GRAMM

Mr. GRAMM. My point, and I will yield the floor on this point, our objective was to guarantee that we spent money on highways, but we didn't want to start a new entitlement program. I think when you try to do something that has not been done before, it is often very difficult. But I think we can take pride in the fact that we do have all of the offsets in the bill. We are not going to bust the budget. We didn't start a new entitlement.

Mr. GRAMM. What it is is an earmarking of funds to be appropriated for the purpose that the tax was collected. The Appropriations Committee must still act for the money to be spent, but we have a guarantee that the money cannot be spent on anything else.

Mr. GRAMM. Let me say this. We had a long, running battle over this issue. We had a long, running battle over this issue. Senator Byrd and I put before the Senate the proposition that the money collected in gasoline taxes ought to be spent. We thought it was wrong to have it diverted to other uses. We had a choice. The Senate voted overwhelmingly for it. We had two ways we could go. As the Senator knows, the House wanted to do an entitlement to take it completely out of the appropriations process and out of the budget. We rejected that. We tried to find a compromise that would solve both objectives. One, not to take it out of the budget process, not to take it off budget, not to take it out of the appropriations process. But on the other hand, to be faithful to the commitment we made that the gasoline tax would be spent. I think, given the commitment the Senate made overwhelmingly on the amendment that I offered with Senator Byrd, we did as well as we could do in meeting everyone's concern. I am proud of what we have done. I think it is a good compromise. I conclude by again saying what a great privilege it was for me on this bill and my small involvement to work with Senator Byrd.

Mr. GRAMM. Mr. President, we are only going to have an hour when the bill comes over, if that. I know many of my colleagues are eager to start the Memorial Day recess. I thought I might do a good turn for some people who have tickets to go ahead and speak now on the highway bill rather than waiting for my assigned time, which has been previously reserved under a unanimous consent request, to speak on the bill. So as a matter of courtesy to my colleagues, I wanted to go ahead and speak now. Mr. President, we have before us a highway bill that will have a profound impact on our country. I am very proud of this bill. I am proud to have played a small role in making this bill happen. I started 2 years ago in an effort to convert our tax system on gasoline into what I would call honesty in taxation. We had a situation where for almost a decade Americans were being told that when they bought gasoline and paid taxes, that that money was going to build roads. And yet last year, roughly 25 cents out of every dollar of gasoline taxes ended up going to general government to fund everything, except highways. And yet, when Americans went to the filling station and stood there pumping gas in their car or truck, they could read right on the gasoline pump the bad news, that a third of the price of a gallon of gasoline was taxes, and the good news, that at least the taxes went to build roads. The only problem, as is often true with government, the bad news was true; the good news was not true. I was able to get an amendment on the Finance Committee bill cutting taxes last year that shifted all revenues from gasoline taxes into the highway trust fund. Senator Byrd and I started a crusade at that moment to guarantee that the money collected in gasoline taxes that went into the trust fund was actually spent on highways. That crusade has reached a successful conclusion with the adoption of this bill. Under this bill, every penny collected in gasoline taxes over the next 6 years will be obligated to be spent on highways and on mass transit in this country. The net result is a dramatic increase in resources to build new roads, to maintain the roads we have, and it is literally true that thousands of lives will be saved as a result of the adoption of this bill and the increased resources. It is true that millions of hours that people would have spent snarled in traffic will be saved so that they can spend more time at work earning a living, so they can spend more time with their families doing the things that parents want to do, spending time with their families and enjoying the fruits of their labor. A second achievement of this bill is that we have taken a long step-- big step--toward eliminating inequity in the distribution of funds. We have a National Highway System. And I would not have it any other way. But part of the problem with the National Highway System is that when you are building certain sections of interstates or you are building big projects, it produces a situation where some States are donor States, that is sending more money to Washington than they are getting back, and other States are beneficiary States, getting more money spent in their State during that time period than they received back. My State in recent years has been a donor State. When we were building the big east-west interstate highway systems, we were briefly a beneficiary State. But under the last highway bill, which lasted for 6 years, Texas averaged getting back only 77 cents out of every dollar we sent to Washington in taxes. One of my goals--and a goal that was championed in this bill by Senator Warner--has been a goal of trying to guarantee that no State in the Union will ever get back less than 90 cents out of every dollar they send to Washington to be spent on highways, no matter what national project is being undertaken. We actually did slightly better than that in this bill. But that was our objective. I think it is a major improvement in highway construction, and I think it is fairer to our States than the old system. I am, obviously, proud of a provision of this bill which provides money for border infrastructure and for international trade corridors. We have entered into an international trade agreement with Canada and Mexico. It has literally filled up my State with trucks hauling goods and services back and forth. The good news is that it is creating jobs on both sides of the border. It has brought great prosperity to my State. The bad news is it has literally pounded our roads and highways into dust in many parts of the State. It has made I-35 in my State a parking lot for hundreds of miles. And we are looking at a doubling of the truck traffic over the next 7 years. So one of my major priorities in the bill was to begin to provide funding to develop international trade corridors and border infrastructure. We provide $700 million in this bill for that purpose. I really see it as the beginning of something bigger. If you look at a map of America and you look at our Interstate Highway System, and you stand back from that map, the plain truth is that we, with just a few exceptions, we have an east-west interstate highway system. And what we need to do over the next 50 years is to build a north-south interstate highway system to go with it. NAFTA will require that we do that. And I think this $700 million will be a major step in that direction. There are many other provisions of the bill that I could talk about that I am pleased with--greater flexibility for mass transit in my State, other provisions that are of a parochial interest. But I will talk about basically the big picture on the bill. The big picture on the bill, in trying to sum it up, is every penny collected in gasoline taxes in the next 6 years will be spent for transportation infrastructure--by dramatically reducing discrimination against donor States, at least within the level you can achieve it, and have a National Highway System. The combination of those two factors--honesty in taxation and dramatically reducing the inequity in the distribution of funds--will mean that Texas will get 61 percent more money under this highway bill than we did under the previous highway bill. Our total level will be $11.3 billion. That money is desperately needed in my State, as I am sure the money from the bill is needed in every State in the Union, to build the highways we need, to maintain the roads we have, to rebuild bridges that are structurally unsound. And obviously this is a very important day for me. I want to especially thank Steve McMillin, who has been my staffer working on these issues. It is literally true that his involvement and dedication and the hours he has worked, the quickness of his wit, has really been the difference between many of these provisions being in the bill and those provisions not finding their way into the bill. I have been constantly amazed at how well he knows the details of these issues. I would also like to say that I appreciate the assistance and the work of two staffers who work for Senator Byrd--Jim English and Peter Rogoff. I do not think we have any staffers who knew more about the substance of this issue or did more than they did. Often people who serve in the Senate get great credit for work we do. And often much of that work is done by our staffs. I wanted to be sure to single out these two staffers for Senator Byrd, and Steve McMillin on my staff who has rendered great service to my State and to the country. Let me also say it has been one of the great privileges that I have had in public life in working with Senator Byrd on this issue. When we joined forces here I felt it was like having a team of good, solid, strong mules attached to a wagon that has been stuck in the mud for a very long time, stuck in the mud as funds were taken out of the gasoline tax and spent on general government, really cheating the taxpayer and deceiving the taxpayer in terms of where money was going. We have worked together for over a year, literally had dozens and dozens of meetings with our staffs, together with outside groups. We have worked together to build a nationwide coalition. We have undertaken, I believe, the only true bipartisan effort in this Congress. We have been successful. Senator Byrd obviously was a critical part of that. It has been a great privilege for me to have been partners with him on this issue and to have an opportunity, at least in this way, to link my name with the premier legislator of our generation. Mr. President, I want to congratulate Bud Shuster on this bill. This bill, I am sure, in many ways is the culmination of his successful career in the House. I am sure he hopes to have many other successes. But for the chairman of the Transportation Committee in the House to have put together a bill which achieves one of his lifelong objectives as a legislator, to assure that funds that are collected in gasoline taxes end up being spent for the purpose they are collected, this has to be, at least to this point, the seminal achievement of his career. I want to thank Senator Chafee for his leadership and his help in this bill. I want to thank Senator Domenici for working to see that we guaranteed money for highways, but that we didn't start a new entitlement program in the country. Finally, I want to thank Senator Lott for his leadership in pushing this effort forward. I do think this is an important bill and will certainly go down as one of the most important things we have done in this Congress, one of the most important things we have done in many Congresses.

Mr. GRAMM. I am happy to yield to the Senator.

Mr. GRAMM

Mr. GRAMM. Would the Senator yield before she starts for a unanimous consent request? Mr. President, I ask unanimous consent that the Senator might yield to me for 1 minute.

Mr. GRAMM. Is the Senator aware that under the amendment that we have offered, that same couple would be able to lower their income by $3,300, before they measured whether they qualified for the earned- income tax credit, so that the net result would be that moderate-- people who make such a low income that they don't pay any income taxes, potentially, would still benefit from the provision in our amendment, so that people who are paying as much as $712 as a couple in these tobacco taxes would get some of that money back through lower income taxes?

Mr. GRAMM. Is the Senator aware that a waitress who had three children, and made $9,000 a year, and her prayers were answered and she met a janitor who made $12,000 a year and his prayers were answered and they got married, not only would she lose a $3,000 tax deduction, but she would lose her earned-income tax credit?

Mr. GRAMM. Will the Senator yield for a question?

Mr. GRAMM. First of all, I want to make it clear--and I assume both the Senator from Texas and the Senator from New Mexico agree with me--I am sure not ashamed of trying to let working families, moderate-income families, keep more of what they earn. What we are doing here on the EITC is saying--let's say that you have two very low-income people, both of whom work. They fall in love. They get married. What we are saying is, to see whether they are eligible for the earned-income tax credit, which they will be. In another example, a single mother with two children----

Mr. GRAMM. Will the Senator yield further?

Mr. GRAMM. The answer was ``no.''