Phil Gramm

Mr. GRAMM

Mr. GRAMM. Mr. President, let them go ahead if they want to. We have over an hour and they have 39 minutes. What we were going to do is try to run ours down. But I always am interested in being informed by our colleagues. Let them go ahead and respond and then, if I could be recognized, I will speak.

Mr. GRAMM. Mr. President, I yield myself 10 minutes.

Mr. GRAMM. Mr. President, this is not a debate about taxes, this is a debate about class warfare. I do not understand how people can love jobs and yet hate the process that creates those jobs. If America is going to be saved, it is going to be saved at a profit, and I am not going to apologize for trying to provide incentives to create jobs, growth, and opportunity in America. We can stand here and shout back and forth with our colleagues who are saying, ``Well, if you make $30,000 a year but you own your own home, if you rented your home, you would get another $8,000 of income, so you make $38,000. And if you own a life insurance policy, it is building up internally, and so while you think you are making $30,000, but you actually have $8,000 from your home and another $6,000 from your insurance policy, and your retirement is going up, and, really, you are making $45,000 a year--you only think you are making $30,000 a year, but really you are rich.'' Let me tell you, I can cut through all that stuff. There is a simple code that if you understand, you will understand everything they are saying: If you pay taxes, then you are rich under the Democrats' plan. Their basic program is very simple: Never cut taxes, because taxes are only imposed on rich people. Always raise taxes, because taxes are always imposed on rich people. So, as a result, they always want to raise taxes, but never want to cut them. It is interesting to note that the average tax burden on working Americans today is at the highest level in the history of the United States of America. We have heard a lot of talk about their great bill in 1993. Might I remind my colleagues that the word then was that this bill only taxes rich people. Who were those rich people? Everybody who buys gasoline. Who were those rich people? People on Social Security in the President's original bill who made $25,000 a year, if you counted what they would get if they moved out of their own homes and rented it for income. But, look, this is not a debate that is worthy of America. What we should be debating is, will this tax cut create jobs? Our objective should not be trying to spread the misery or redistribute the wealth. It ought to be to try to create wealth. We hear our colleagues say, ``Can you believe that the tax cut before us does not cut taxes for the lowest 20 percent of all income earners in America?'' Did you hear that? ``This bill does not cut taxes for the lowest 20 percent of income earners in America. How could that possibly be so?'' Well, the reason it is possibly so is because the lowest 20 percent of income earners in America pay no income tax. This is not a welfare bill. This is a tax-cut bill. The top 20 percent of income earners in America pay 78.9 percent of all the income taxes in America. The bottom 40 percent, on balance, pay no income taxes at all. Is anybody surprised that the top 20 percent, who pay almost 80 percent of the income taxes, will get a tax cut when you are cutting taxes and that the bottom 20 percent, who do not pay any income taxes, will not? Why is that supposed to be a revelation? Do we have to increase welfare every time we try to help working families? In the bill that is being proposed, we have yet another massive increase in a welfare program. It has a wonderful name, EITC, the earned-income tax credit. What it has become is an unearned-income tax credit. This is a program which pays people who do not pay taxes but is called a tax cut. The last time taxpayers got a tax cut was in 1981. In 1981, the average amount we were giving away in EITC, this welfare program the Democrats call a tax cut, was $285. Today, that average beneficiary is getting $1,395. The average American who does not pay income taxes but who is getting an earned-income tax credit to offset taxes--in many cases when they have no tax liability--has had their subsidy increase from $285 a person to $1,395; while working families who do pay taxes have not gotten a dollar of tax cuts. In fact, their after-tax income has actually declined. Now we are here trying to give a $500 tax credit per child for every working family in America, so that Americans who make $30,000 a year and have two children will be off the income tax rolls. What is the complaint from our Democratic colleagues? Their complaint is that we are not giving money in our tax cut in large enough amounts to people who are not paying taxes. This is a tax-cut bill. This is not a welfare bill. We pass a lot of welfare bills around here--too many of them--but this is not one of them. This is a tax-cut bill. We should ignore all this malarkey about the bottom 20 percent not getting any income tax cut, they do not pay any income taxes. Our colleagues have lamented the payroll tax. They claim that they are really worried about the payroll tax. Well on May 22, 1996, John Ashcroft, the Senator from Missouri, offered an amendment to allow moderate-income people to deduct their payroll tax from their income in calculating their income tax. Every person who has spoken in favor of this amendment, who has criticized the underlying bill for not giving tax cuts to people who do not pay income taxes, and who has lamented the payroll tax--every one of them voted against Senator Ashcroft when he tried to cut taxes for people who are paying big payroll taxes. Let me also say that all of those who I have heard today speak in favor of this amendment also supported the Clinton health care bill that would have raised the payroll tax by 8.9 percent to pay for socialized medicine. Of course, today they are terribly upset about the payroll tax and they want to give income tax cuts to people who are not paying income tax. What is their program? Their program is tax cuts for people who do not pay taxes, capital gains tax cuts for people who do not own capital. Our program is to cut taxes for people who actually pay taxes. I am not going to apologize for the fact that when 20 percent of the people pay 80 percent of the taxes, when you are going to do a tax cut, that 20 percent is going to get a bigger tax cut. Listening to all this talk, you would think that every year the tax burden is getting heavier and heavier on lower income people. It is not true. The tax system has become more progressive every day since Ronald Reagan became President. In fact, his tax cut made the system more progressive, as does our tax cut. We really should not even be talking about this because it just smacks of us pitting one group of people against another based on their income. Many of the people in the Senate today grew up in families that were low- or moderate-income families. You are not stuck being poor your whole life because your parents are poor. Neither of my parents graduated from high school, but they did not resent people who made money, nor did they feel the Government should come along and take it away from somebody else to give it to them. Now, maybe this sells. Maybe this sells politically to say, ``Twenty percent of the income earners get no tax cut.'' Maybe it sells. But remember, they do not pay any income taxes either. This is a tax-cut bill. In 1993, taxes were increased by $250 billion in the Clinton tax- increase bill. We are cutting it by $74 billion in our bill and 75 percent of it is going to families that make $75,000 a year or less. Maybe those families are rich to the Democrats. Maybe a working couple making $75,000 should be taxed into poverty. I do not think so. I want them to be able to keep more of what they earn. I thank the Chair for its indulgence. Mr. BINGAMAN addressed the Chair.

Mr. GRAMM

Mr. GRAMM. I think Senator Biden is going to offer an amendment first, and after his amendment is disposed of, then I will have an amendment, as will several other people. Mr. BIDEN addressed the Chair.

Mr. GRAMM

Mr. GRAMM. But that is what we have done, and we need to preserve the ability of these mechanisms to function. It is important we waive the point of order.

Mr. GRAMM. Mr. President, by giving a broad range of choices to our seniors, we have given them the ability to opt into a private fee-for- service health insurance policy. Now, if we come along and start restricting the way that a private health insurance policy can function, and tell them how they are to bill for physician services, we take away the whole competitive nature of what we are trying to create. I know some people do not like the idea of expanding choices for seniors.

Mr. GRAMM. Mr. President, we are always looking for bipartisanship. The President is in favor of repealing the Boren amendment. The National Governors' Association is in favor of repealing the Boren amendment. The amendment of the Senator from Maryland will raise the deficit and reduce our savings by $1.2 billion. How does anybody know what is reasonable and adequate? The Boren amendment has produced endless lawsuits. States want to negotiate with hospitals and get the best rate they can. Repealing the Boren amendment takes it out of the courts.

Mr. GRAMM. Mr. President, I have heard a lot of people speak in my 13 years in the Senate, but I don't think I have ever seen anybody do a better job of taking complicated issues and explaining them in a very short time as Senator Domenici has done in the last 2 days. I think we have made history on this bill, and I think the Senator from New Mexico has been a very important part of that.

Mr. GRAMM

Mr. GRAMM. We don't need the yeas and nays.

Mr. GRAMM. Mr. President, I will be brief. I don't think this amendment is controversial anymore. We had a technical drafting error in the welfare bill last year where, after the conference had concluded, the staff added words that, in essence, made the work requirement discretionary with the Secretary. We were going to correct it in the welfare bill. However, Senator Bob Graham raised some legitimate concerns about giving flexibility for regional recessions and for natural disasters. We have corrected that in this technical amendment. I submit it to my colleagues, and I thank the Chair.

Mr. GRAMM. There is no opposition that we know of.

Mr. GRAMM. Mr. President, I move to reconsider the vote by which the amendment was agreed to.

Mr. GRAMM. I move to lay it on the table. The motion to lay on the table was agreed to. Amendment Nos. 485, 486, and 487 Withdrawn

Mr. GRAMM

Mr. GRAMM. Mr. President, I think that with all of the loud talking and discussion of subsidiary issues, people have by now forgotten what this whole issue is about. So I would like to give a little bit of history and then appeal to reason and responsibility on behalf of the Finance Committee on this issue. First of all, the President proposed taking the fastest growing part of Medicare out of the trust fund and transferring it to general revenue in order to hide home health costs and claim that we have extended Medicare solvency for a decade. As a result, we have included the transfer into the budget agreement, even though I think it is totally and absolutely irresponsible and indefensible. We are simply taking the fastest growing part of Medicare, home health care, out of the Medicare trust fund and putting it into general revenue, which equates to taking a bill from one pocket and putting it in another. As a result, we can now claim that we have saved Medicare for a decade. As I pointed out when we started this debate, I could save Medicare for 100 years by taking hospital care out of the trust fund and putting it into general revenue. But, does anybody believe that that represents any kind of reform? So, that is what started this debate. Now, having agreed in the budget agreement to make the transfer, the Finance Committee has sought to find ways to be responsible. One of the ways of being responsible is to note that there is a difference between services covered by part B and services covered by the part A trust fund. Those items that are in the part B program, which are outside the trust fund, have historically required two things. No. 1, beneficiaries pay 25 percent of the cost out of their own pocket in a part B premium; and, No. 2, they have a 20 percent copayment. That, basically, is how Medicare has worked. Now we have followed the President's dictate and transferred home health care out of the part A trust fund into general revenues--part B or voluntary part of Medicare. But we have not instituted an immediate 25 percent payment in the part B premium to pay for 25 percent of the cost. Instead, responding to concerns raised by the President and others, we phase that up over a 7-year period. But, to address specifically the issue raised by Senator Kennedy, the norm for types of care covered under the part B section of Medicare is for beneficiaries to pay 20 percent copayment. Recognizing that this was a dramatic change in policy, in transferring home health care from part A to part B, rather than having a 20-percent copayment, which would be the norm, we simply asked for a $5 copayment. This is not only eminently responsible, it is clearly something we have to do. Home health care is the fastest growing item in Medicare. It used to be that you qualified for it only right after you got out of the hospital. But Congress changed the law to let people qualify for home health care whether they have been to the hospital or not. As a result, this program has exploded. It has grown exponentially, averaging some 30 to 40 percent a year in growth. It is now bigger than the total funding for the National Institutes of Health and the space program. It has become the most explosive element of Medicare. We are not doing what we ought to do, which is to put it into part B. If we were required to do that, we would have a 25 percent premium where people would have to pay 25-percent of the cost like they do other programs under part B. Instead, we are phasing it up over 7 years. We are not requiring a 20-percent copayment, which is the norm under part B. But the one thing we have done, which is responsible, is require a $5 copayment; the logic basically being that even very small payments affect people's behavior. What we are trying to do is to provide the service for people who need it while trying to cut down on the explosive growth and the abuse of this program. Our colleague from Oklahoma referred to a front-page article in the Wall Street Journal, but I don't think he did it justice. What that article did was outline the rampant abuse in this program, pointing out that people have even gotten out of the garbage collection business and gone into the home health care business and become almost instant millionaires. This is a program that demands change. We have made a very, very modest change. However, if every time we try to do something responsible, we end up having people jump up and down and saying, ``You can't do anything that is responsible,'' then there is no way we are going to be able to maintain Medicare. The program will be insolvent in 4 years under any kind of justifiable accounting. It will be a $1.6 trillion drain on the Federal Treasury over the next 10 years. The unfunded liability in Medicare is already $2.3 trillion. We have guaranteed two generations of Americans benefits, and we never set aside money to pay for the benefits. And now we hear all this screaming and hollering when we try to put a $5 copayment on the most explosive part of Medicare. Mr. President, if we are not going to begin to do these kinds of things, it is going to be only a very short period of time until this program is going to be bankrupt. I don't know if the Senator from Massachusetts is going to be here proposing to triple the payroll tax to pay for it, but that is what is going to be required 25 years from now if we don't do something about this program. I support this change because it is absolutely essential that we do something to stop the explosive growth in this program. I support this change because I don't think a $5 copayment is asking too much. I support this change because I don't want to have to pick up the phone 4 years from now and say to my 83-year-old mother, ``Well, mom, Medicare went broke today. Of course, I have known it was going broke for years, but I didn't have courage enough to do things, like vote for a $5 copayment on home health care.'' I believe this is something that is absolutely essential. It is the absolute minimum we should do. We should be doing a lot more. We are not because of exactly the kind of attacks that we have heard on the floor of the Senate. The Finance Committee, on a bipartisan basis, supported this $5 copayment. It is a very small reform, but the principle of it is critically important. I think it would be a major, major setback for this bill if we lost this component. Losing this component would mean that we have simply played a shell game. We will have taken the fastest growing part of Medicare out of the trust fund to hide the explosive cost. Even though it is growing at 30 to 40 percent a year, we will have done absolutely nothing to try to deal with that explosive cost. I know the administration says, in the sweet by-and-by, they are going to have some kind of prospective payment system, and they can't tell us what it is today, but we need to do something right now. The $5 copayment is the absolute minimum we ought to do. I urge my colleagues to stay with this very small modest reform. I yield the floor. Mr. CHAFEE addressed the Chair.

Mr. GRAMM. May I have 1 additional minute?

Mr. GRAMM. The plain truth is we have guaranteed two generations of Americans benefits under Medicare, and we have not set any money aside to pay for it. We have an outstanding liability of $2.6 trillion. If we wait 10 years to do something about it, it will be $3.9 trillion. If we wait 20, it will be bigger than the entire national debt of the country at $6.1 trillion. The Finance Committee, in an extraordinary act of courage, decided to make this change and not count any of it toward balancing the budget and not count any of it to pay for the tax cut but to simply do it so we will never have to call up senior citizens and tell them Medicare went broke today. I supported this provision because I have an 83-year-old mother who depends on Medicare, and I don't want to pick up the phone someday and say, ``Mama, Medicare went broke today. I knew it was going broke, but I did not have courage enough to do anything about it.'' We have an opportunity over the next 30 years to phase up the eligibility date for Medicare to conform to Social Security, something we have already had to do under crisis circumstances. Let's not wait until the house is on fire to do something about the problem. I urge this point of order be waived.

Mr. GRAMM. Mr. President, I yield myself 4 minutes.

Mr. GRAMM

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

Mr. GRAMM. Mr. President, the amendment that I sent to the desk is really a technical correction. When we were drafting the welfare bill in the Senate, we had a 5-percent penalty for failure to meet the work requirement. It went up from 5 percent the first year to 10 percent the second and 15 the third, up to 100 percent. In conference, we decided to reduce the penalty for noncompliance in consecutive years from an additional 5 percent to an additional 2 percent. So the penalty would be 7 percent in the second year and 9 percent in the third, with a cap of 21 percent. Inadvertently--and everyone agrees it was a technical mistake--the staff added three words, ``not more than,'' which gave the Secretary discretion over the size of the penalties. Senator Graham of Florida raised the question in committee as to whether or not we should give the Secretary the power to waive or reduce the size of the penalty where there was a natural disaster or where there was a regional economic crisis. So my amendment goes back and puts the actual language that we had agreed to in conference on the welfare bill. But it also addresses the concerns that Senator Graham of Florida raised. It gives the Secretary the power to waive the penalties for not meeting the work requirement in two additional cases which were not included in the original bill. One is a natural disaster, and the other is in the case of where you have a regional economic problem. I think this deals with the concern that was raised. I ask my colleagues to support the amendment. I yield the floor.

Mr. GRAMM. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. GRAMM. I will be happy to yield.

Mr. GRAMM. That's right, and pays none of the cost during their working lives.

Mr. GRAMM. That's right.

Mr. GRAMM. Mr. President, I want to begin by reading from the report of the trustees of Social Security and Medicare programs. In their annual report dated April 1997 they state: As we reported for the last several years, the Medicare trust fund would be exhausted in 4 years without legislation that addresses its financial imbalance. Further delay in implementing changes makes the problem harder to solve. We urge the earliest possible enactment of legislation extending the life of the HI trust fund. The HI trust fund is the Medicare part A trust fund. That is not me talking. This is the trustees of Medicare, three of whom are Cabinet officials of the Clinton administration. No one disputes the facts. This chart represents the cumulative deficit of Medicare as we look toward the future, and we know with relative certainty that over the next 10 years, Medicare is going to be a cumulative drain of $1.6 trillion on the Federal budget. We now know about some of the things that the Senator from Massachusetts is against. We know he doesn't want to conform the eligibility age for Medicare with the retirement age under Social Security. We know that he doesn't want to ask high-income retirees to pay more of their share of the cost. However, we don't know what he is for. We don't know if he is willing, as will be required in the year 2025, to triple the payroll tax? It is very easy to say what you are against. It is easy to say, let's not do this today, let's not do it this year, let's not do it this decade, let's never do it. But the problem is, 4 years from now, Medicare will be in the red, and the system is going to be bankrupt if we don't act. What have we done? First of all, all this rhetoric about playing by the rules of the game and paying into Medicare over our working lives is good rhetoric, but it has nothing to do with the bill before us. Nobody pays for any part of part B of Medicare, which is basically physician services, during their working lives. Let me repeat that. During our working lives, we pay 2.9 percent of our wages into the part A trust fund which funds hospital care, but only after we retire do we pay anything for our part B benefits. We now pay 25 percent of the cost as a premium. The bill before us means tests that premium. It says that for those individuals who in retirement have incomes of $50,000 to $100,000, or couples $75,000 to $125,000, that we are going to phase up the part B premium from 25 to 100 percent so that individuals who have $100,000 of earnings in retirement and couples who have $125,000 of income in retirement will be asked to pay another $1,577 a year in their part B premiums. Let me remind people that part B of Medicare is voluntary; it is not a mandatory program. Nobody makes anybody participate in this program. If asking people who have incomes of $125,000 a year to pay $1,577 more a year for this coverage is too much, they don't have to do it.

Mr. GRAMM. That's right.