Chuck Grassley

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, before I start to speak, it is my understanding I have 30 minutes for our side and I ask unanimous consent that Senator Dorgan be recognized immediately after my time.

Mr. GRASSLEY. Mr. President, I wish to tell my colleagues why I think the bill before us, S. 3816, is not a good approach. This bill is being sold as somehow having the potential to create American jobs, but it would likely have the exact opposite effect. It would lead to a net decrease in American jobs. For that reason, I encourage my colleagues to vote against this bill. The bill has three key aspects: a payroll tax holiday for employers hiring U.S. workers to replace foreign workers; a denial of business deduction for any costs associated with moving operations offshore; and lastly, ending deferral for income of foreign subsidiaries for importing goods into the United States. This last provision, according to my colleagues on the other side of the aisle, is the principal issue of the three, and from that standpoint, in my opposition, I agree. It certainly is the most dangerous, so that is the one I wish to address in detail. To understand this partial repeal of deferral, it is best to consider the topic of deferral more generally and then we can consider this particular idea in context. The term ``deferral'' refers to how U.S. corporations pay U.S. income taxes on foreign earnings of its foreign subsidiaries, only when those earnings are repatriated to the United States. That is, the U.S. tax is deferred until the earnings are paid by means of dividend back to the U.S. parent corporation. Deferral is not a new policy. Rather, it has been a feature of the tax law since 1918. President Kennedy proposed outright repeal of deferral, but the then- Democratic Congress did not agree with him. Instead, the Congress and the President compromised. The compromise was this: For the passive kinds of income such as interest, dividends, royalties, and the like earned by a foreign subsidiary, the U.S. parent company would pay immediate U.S. tax whether or not the foreign subsidiary sent the earnings back to the parent. However, for active business income of the foreign subsidiary, there would be no U.S. tax until the foreign subsidiary sent such money to the parent corporation. In short, the compromise during the Kennedy era was this: For passive income, deferral was repealed. For active income, deferral was still allowed. That compromise is embodied in subpart (f) of the Internal Revenue Code. That compromise was hammered out in 1962 and, with slight tweaks at the margin, that compromise has stayed in place for the last 48 years. The compromise struck in the John F. Kennedy administration was the right one. Passive income is easy to move from one jurisdiction to another. If a U.S. corporation had a lot of interest income, it was very easy to instead have the foreign subsidiary earn such interest income in a low tax jurisdiction. So when interest income was earned by a foreign subsidiary of a U.S. parent corporation, there was a high likelihood that it was earned in the foreign jurisdiction out of motivation for the sole purpose of avoiding the U.S. tax. But with active business income, there are usually legitimate nontax business reasons for the income to be earned overseas. The reason a U.S. car company sells cars in Hong Kong is not out of some desire to avoid U.S. tax but, rather, out of a desire to sell cars to customers that live in Hong Kong. So the underlying rationale to the subpart (f) compromise is this: If there is a high likelihood that a particular type of income is earned overseas out of a desire to avoid U.S. tax, then deferral will not be allowed. If there is not a significant likelihood of that, then deferral will still be allowed. This is a very sensible rationale that was agreed to during President Kennedy's administration in the 1960s, because one of the most fundamental tax principles of all this is transactions should not be tax motivated but should be motivated by business or other nontax reasons. Tax motivated transactions should not be allowed the benefits of the favorable tax treatment sought. This fundamental tax principle prevents the tax laws from distorting decisionmaking and from distorting the economy. And the bill that is now before the Senate called the ``runaway plant'' bill cannot be justified by any similar rationale. They say they want to repeal deferral for foreign subsidiaries having income from importing goods back into the United States. But are they claiming that when a foreign subsidiary of a U.S. company imports back into the United States, there is a high likelihood that the production of the good would have been in the United States but for the motivation to avoid U.S. tax? They would have to be claiming that, if they wanted to be consistent with a half century of reasons why certain specific limitations on deferral have been justified. But that simply can't be. There are numerous nontax reasons for having a foreign subsidiary of a U.S. parent company import goods into the United States, and I will mention a few. One reason could be that there is only small demand for the product back in the United States as compared to the overseas markets. For example, diesel engine cars are very popular in Europe, comprising 50 percent of all car sales. Here in the United States, diesel engine cars are well less than 10 percent of all car sales. So there is a very good reason for having diesel engine cars made in Europe and not here. Nonetheless, the bill before the Senate acts as if the reason these cars are not made here is because of our tax laws. It may be that some items simply aren't found in appreciable quantities in the United States. For example, there is no diamond mining or chromium mining to speak of in the United States. A U.S. parent mining corporation with a foreign subsidiary engaged in diamond mining or chromium mining where such diamonds or chrome are imported into the United States may find deferral repealed. This could be true to the extent that the parent had any domestic restructuring at the same time it started up any foreign operations. But obviously the reason for the diamond and chrome mining outside the United States is not tax avoidance. The reason is those minerals are not found here within the United States. So I wish the sponsors of this bill to make clear whether minerals not found in the United States and imported into the United States would be included in this proposal. I wish also to know whether this proposal would have applied to the Ford Motor Company's ownership of Volvo. Ford owned Volvo cars from 1999 to 2008. During that time, many Volvos were made in Sweden and imported into the United States for sale. If the acquisition had happened after the date of enactment, deferral would be denied in this situation, at least to the extent that Ford may have been shutting down any plants in the United States. However, no one can seriously claim that the reason the cars were made in Sweden rather than in the United States was from the desire to avoid U.S. taxes. Keep in mind that another foreign car company--let's say Volkswagen-- would not be treated the same way Ford's Volvo car income would be treated. Volkswagen would be better off taxwise on competing auto sales into the United States market over Ford's Volvo, thanks to this bill, if it were to pass. There are lots of nontax reasons for having foreign subsidiaries of U.S. companies import into the United States. But it seems that the bill before the Senate does not recognize that fact, or maybe it doesn't care. Perhaps the bill is motivated not by a desire to curb tax-motivated transactions but by something else. Perhaps the bill has an anti-free trade motivation. Perhaps the bill is attempting to make it more difficult for American companies to conduct business outside of our country. Whatever the case, the bill's sponsors should make the rationale clear--is it to curb tax avoidance or something else? Perhaps the bill's sponsors will admit that the bill has nothing to do with curbing U.S. tax avoidance. Perhaps they will say that it instead has to do with preserving and creating U.S. jobs. But if that is their position, that cannot be right. In some limited circumstances, perhaps it would increase employment in the United States, although probably mostly for tax lawyers than anybody else. But whatever the case, the net effect would be to decrease employment in the United States. Allow me to explain why the net effect of the bill would be to decrease U.S. employment. First of all, if a U.S. parent company has a foreign subsidiary, then this creates managerial headquarters jobs in the United States that would otherwise not be here. The bill before us might encourage American companies to simply sell off their foreign subsidiaries. This would, in turn, mean laying off employees in management positions at the American headquarters. A bigger way this bill would hurt employment in the United States would be to discourage assembly jobs in the United States. A U.S. parent company could have foreign subsidiaries engage in manufacturing parts that are shipped back to the U.S. parent. The U.S. parent, in turn, might assemble those parts here in the United States into a finished product. So, yes, maybe this bill would encourage the company to repatriate the parts production, but it is just as easy to imagine that this bill would encourage the company to expatriate the assembly jobs. So this bill is an unacceptable gamble with American jobs. In the words of the late Senator Moynihan, who preceded me and Senator Baucus as chairman of the Senate Finance Committee--he spoke in opposition to this proposal 14 years ago, so this issue has been around this body for a period of time. He said this: ``Investment abroad that is not tax driven is good for the United States.'' Senator Baucus's concern that this would put the United States at a competitive disadvantage is exactly right. I don't have the exact quote of Senator Baucus, but it was in Congress Daily recently. I am sorry I don't have that quote for my colleagues. Senator Baucus very rightly states it. Phil Morrison, the Treasury Department's international tax counsel, criticized this proposal in congressional testimony 19 years ago. Mr. Morrison noted that the bill would be very hard to administer and that it departed from the traditional focus of the limited areas where deferral is denied. As President Clinton's international tax counsel, Joe Guttentag, explained in 1995, during the Clinton administration: Current U.S. tax policy generally strikes a reasonable balance between deferral and current taxation in order to ensure that our tax laws do not interfere with the ability of our companies to be competitive with their foreign-based counterparts. This proposal has been made year after year for 20 years. I ask that my colleagues again reject it, in an effort to keep American companies globally competitive, to protect American jobs, and to preserve the underlying rationale of why deferral should only be denied in limited circumstances. Finally, I wish to briefly comment on one other aspect of the bill-- the payroll tax holiday. This, too, has provisions that will be difficult to administer. For example, do foreign workers actually have to be fired to have their employer get the payroll tax holiday in the United States or do they need only to be reassigned job roles? This provision only scores, according to the Joint Committee on Taxation, as costing $1 billion. Let's make sure we are clear on this point. The other side is seriously considering raising taxes on small businesses--the lead creator of jobs--by tens of billions of dollars by letting top individual tax rates go back up in the year 2011. But in an effort to support job creation, they offer this $1 billion payroll tax holiday. According to the Joint Committee on Taxation, 50 percent of small business flowthrough income will be hit by a marginal tax hike of somewhere between 17 percent, on the low end, and 24 percent, on the high end. That tax increase is scheduled to hit these job-creating small businesses in just a little over 3 months. Finance Committee Republican tax staff calculates the effect of that tax hike to be 50 times the benefit provided by this bill. On our side, we don't see the logic of raising $50 in taxes and providing a complicated tax benefit of just $1. Why aren't we dealing with the real problem for the folks responsible for creating 70 percent of American jobs? Of course, that is small business. We ought to take time out on the tax hit that is coming to small business this December. That is what we ought to be debating on the Senate floor. But the Democratic leadership would rather spend valuable time talking about a bill that is artfully politically labeled a jobs bill. Given that the bill will lead to a net loss in American jobs, it seems there might be a truth-in-labeling claim against the Democratic leadership. Let's have votes on real job creation incentives and get out of this gamesmanship. Let's do the people's business and forestall the big tax hike coming at American small business. I also wish to take some time to address the issue of the estate tax, which is going to expire at the end of this year, at the very same time. The majority party has had control of the Senate since January 3, 2007. That is 3 years, 8 months, and 24 days ago. During the 3\1/2\ years of Democratic control, my colleagues have had an opportunity to address the death tax. More pointedly, the Democratic leadership had a duty to provide certainty in the law as it relates to the estate tax. My colleagues have had the duty to address the fact that this ill- conceived tax will snap back to pre-2001 law on January 1, 2011. That is only a little over 3 months away. To be exact, it is 3 months and 5 days from now. Unfortunately, as this chart shows, the estate tax is not the only piece of long overdue tax legislation. Mr. President, the practice of ``good government'' is providing certainty in the law. What I mean is, our country is made up of law-abiding citizens. As legislators, we were hired by these law-abiding citizens to make the law. When we fail to provide certainty in the law, we fail to do our jobs. But despite the fact that the Democratic leadership has not acted in over 3\1/2\ years we still have 3 months before the estate tax reverts back to a 55-percent tax rate and a $1 million exemption amount. So Congress still has time to act. But I am skeptical that the Democratic leadership will indeed act. Why? Because when my friends on the other side of the aisle were in the minority earlier in this decade, they blocked--let me repeat blocked--Republican efforts to make permanent an estate tax law that law-abiding citizens all across America could rely on. The first effort was made in 2002. Specifically, on June 12, 2002, the Democratic leadership blocked legislation that would have permanently repealed the estate tax. In 2004, Republicans in the House of Representatives approved a bill that would have permanently repealed the estate tax. But due to maneuvering by the Democratic leadership, a vote in the Senate was never allowed to occur. Finally, in 2006, Republicans offered a compromise proposal on the estate tax. Under that compromise, the estate tax unified credit exemption would have gradually been increased to $5 million. The rate would have also been phased in to a 30-percent tax rate. But again, the Democratic leadership filibustered the proposal to its death. Mr. President, I believe on our side were practicing good government as it relates to the estate tax. We were doing our jobs, and providing certainty in the law. Yet the Democratic leadership stymied the practice of good government. To this day, the Democratic leadership continues to stymie efforts to provide certainty in the law. So why is the estate tax being held hostage? Because a number of liberal leaning Senators would be satisfied if the estate tax reverted back to pre-2001 law--that is, a 55-percent tax rate and a $1 million unified credit exemption amount. And why wouldn't they? There is $233 billion in extra revenue to spend. Also, in this hyperpartisan environment that is plaguing the Senate, many policymakers are politicizing the estate tax issue. What do I mean? A number of Senators have taken to the Senate floor and characterized a reasonable estate tax rate as a ``give-away'' to the rich. These Senators also argue that if the estate tax is ratcheted up to a 55-percent tax rate, we could use that revenue to reduce the deficit. I respect every Senator's opinion, but I question whether these members are actually going to use this revenue to reduce the deficit. Unfortunately, we have seen my friends' desire to spend, spend, spend. Increasing the deficit one dollar at a time. Not the other way around. I will acknowledge that due to the budget rules that we must live by here in the Senate, making permanent an estate tax regime at a tax rate lower than a 55 percent will result in revenue loss to the government. For example, my friend Congressman Pomeroy--a Democratic Congressman from North Dakota--sponsored a bill to make permanent the estate tax at a 45-percent tax rate and a $3.5 million unified credit exemption amount. When you compare this proposal against what the estate tax would revert to in 2011--a 55 percent tax rate and $1 million exemption--you find that this change in the law would cost around $233 billion over 10 years. Now, when you compare $233 billion to the $2.5 trillion health care reform bill that was recently signed into law, it is a drop in the bucket. Also, compare this to our $13 trillion national debt. But $233 billion is nothing to sneeze at. While it could be used to reduce the deficit, my colleagues on the other side of the aisle have made every indication that they will simply spend this money. My colleagues on the other side will gloss over their plans to spend, and instead attack any proposal that includes a tax rate lower than 55- percent as a ``give-away'' to the rich. I have some news for my colleagues. A large number of Americans who would be impacted by a 55-percent tax rate and a $1 million unified credit exemption are not ``rich.'' Let me repeat that. Those taxpayers that would be impacted by the estate tax if it reverted back to pre-2001 levels are not wealthy people. I would like to take a moment and provide my colleagues with a real world example of an Iowan who would not consider herself ``rich.'' Recently, I received an email from Landi McFarland, who is a sixth generation Iowa farmer. This is what Landi had to say about the impact of the estate tax and her ability to continue the family farm: . . . As a 6th generation Iowa farmer whose family homesteaded land in Union county 154 years ago, I have concerns about current estate tax law. I am 26 years old and have a dream of pursuing a future in agriculture, the same as the generations that have come before me. I currently raise Angus cattle with my parents and grandparents, where we are tax-paying citizens and supporters of our local economy and schools. My grandparents are both 84 years old, and own about 90 percent of the land, cattle, and equipment on our farm. Their combined estates will total approximately $7 million (the vast majority of this being farm assets like land and cattle). Recent land values have escalated the values of my grandparents' estate. This rise in land values, however, does not increase the value of what the land produces (Angus cattle sell for the same price no matter if the land is valued at $1000 or $4000 per acre). If my grandparents pass away AFTER 2010, and current estate tax laws are not fixed, my family will not be able to afford to pay the estate taxes without liquidating the herd and selling a large portion of the farm ground. This will put an end to our business that we love, and hence and end to our support of local businesses through daily business operations. In the last four years, my family has worked on estate planning to try to help ease the burden of estate tax. This includes taking advantage of the $12,000 tax-free gifting each grandparent can do per person per year. However, this only amounts to a total gifting of $48,000 per year, a drop in the bucket for a combined $7 million estate. We are one of the oldest Angus operations in the country, and is all we wish to do is continue our family business that has been built with our own blood, sweat and tears over the past years. If current estate tax laws are not fixed, there will be thousands of small family businesses like ours put out of business. We need a SENSIBLE and PERMANENT fix. Thanks for your help, --Landi Mr. President, Landi's story is not unique to her. There are more farmers like her in Iowa and around the country. I want to talk more broadly now about how failing to address the estate tax sunset will affect Iowa farmers. Over the past few years, farm prices have been escalating dramatically. According to the U.S. Department of Agriculture, U.S. farm prices have nearly doubled in the last decade. While recent economic troubles have led to home prices dropping, this has not been the case for farmland. In fact, as reported in a recent LA Times article, Wall Street investors have actually turned to purchasing farmland in hopes of finding refuge from an unstable stock market. This in turn has pushed farm prices higher. Based on a recent survey by the Federal Reserve Bank of Chicago, Iowa farm prices are up 8 percent in the past year alone. Why is this discussion of escalating farm prices significant? Because this means that should the estate tax law revert to 2001 law, many farmers are going to be surprised to discover they will be considered ``rich.'' Now, I am not talking about wealthy corporate farmers, I am talking about many family farmers, just like Landi, who are taking over a farm that has been passed down for generations. Mr. President, let me walk my friends through some data. In 2007, the U.S. Department of Agriculture reported that there were 92,800 farms in Iowa. In 2007, the average Iowa farm was 331 acres. According to a survey conducted by Iowa State University, in 2009 the average acre was worth $4,371. Let's do some simple math. If we multiplied the average acreage of an Iowa farm--which was 331 acres as reported in 2007--by the average cost per acre in 2009--which was $4,371 in 2009--we find that the average Iowa farm is worth $1.4 million. Mr. President, $1.4 million exceeds the $1 million unified credit exemption amount that would be in place on January 1, 2011, if Congress does not act. Admittedly, the value of a farmer's farmland does not tell us conclusively whether or not the farmer will be subject to the estate tax. Farmers sometimes carry debt. That would reduce the value of the farm. But they also have assets, including equipment and bank accounts, that would increase the value of the estate. Let me shift gears and provide my friends with some national statistics. The Joint Committee on Taxation has told us out of 92,700 estates of people dying in 2011, 49,000 of these estates would be taxable under the 55-percent rate and $1 million exemption. If the law were changed to a 35-percent tax rate and $5 million exemption amount, for example, 3,900 estates would be taxable. That is a ratio of 13 to 1. For every one estate that would be taxable under a 35-percent and $5 million estate tax regime, a whopping 13 estates would be taxable if the law reverted to a 55-percent rate and $1 million exemption. Even if the rate were set at 45 percent and an exemption amount of $3.5 million, this ratio is 8 to 1. That is, for every one estate that would be taxed under the 45-percent rate, with the $3.5 million exemption, eight estates would be taxable under the 55-percent rate and $1 million exemption if we do not change the law. I will conclude this way. Let's now look at farmers who would be affected. Based on the Joint Committee on Taxation in 2011, 3,200 farms would be taxed if the law included a $1 million exemption amount. Compare that to 300 farms that would be taxable if the exemption was $3.5 million. That means the result of no action will be that 10 times as many family farms will be hit by the death tax. The time for action on the estate tax is now, not a month from now or 3 months from now. We owe it to the farmers and small business owners and their young heirs to give them certainty. We need to give to the tax lawyers and consultants who advise people on their estate planning some certainty. I yield the floor.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I intend to object to proceeding to H.R. 4862, a bill that amends the Immigration and Nationality Act with regard to naturalization authority. H.R. 4862 would permit Members of Congress to administer the oath of allegiance to applicants for naturalization. I object to the bill because, according to administration officials, it would require Members of Congress to administer the oath of allegiance only at times determined by the Secretary of Homeland Security, notwithstanding the Senate Calendar or the legislative work that is required by Members of Congress. We need to understand what exactly this bill allows or requires and not just rush it through in the waning hours and minutes of this Congress. Mr. President, I also intend to object to proceeding to the nomination of Norm Eisen to be Ambassador to the Czech Republic at the Department of State for the following reasons. I object to the proceeding to the nomination because of Mr. Eisen's role in the firing of the inspector general of the Corporation for National and Community Service, CNCS, and his lack of candor about that matter when questioned by congressional investigators. The details of Mr. Eisen's role in the firing and his misrepresentations about that matter are detailed in the Joint Minority Staff Report of the House Committee on Government Reform and the Senate Finance Committee, dated November 20, 2009.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, as a parent and grandparent, I have long been concerned about the dangers that face our kids. I have been especially concerned about the large amount of dangerous drugs in this country and their use by anybody but particularly young people. It is clear drug dealers will stop at nothing to get our kids hooked on drugs. All too often, we learn of new and emerging threats to communities that often have negative impacts on our youth. But when these drug threats emerge, it is crucial that we unite to halt the spread of the problem before it consumes families and communities. Today we are confronted with new and very dangerous substances packaged as somewhat innocent products. Specifically, young people are able to go online and/or to the nearest shopping mall and purchase incense laced with chemicals that alter mind and body. These products are commonly referred to as ``K2'' or ``Spice,'' among other names. I have a chart Members can see behind me. They can see the package varieties of K2 products. I will not go into detail, but look at them. Specifically, kids are able to actually purchase these products with a great amount of ease. Kids and drug users are smoking this product in order to obtain what they think is a legal high, and the word ``legal'' tends to imply harmless. It is believed K2 products emerged on the scene beginning 4 or 5 years ago. Their use spread quickly through Europe and the United States. According to a study conducted by the European Centre for Drugs and Drug Addiction, most of the chemicals found in K2 products are not even reported on the label. This study by the European Centre concluded that these chemicals are not listed because there is a deliberate marketing strategy to represent this product as somewhat a natural substance. However, K2 is anything but natural. Most of the chemicals the Drug Enforcement Administration has identified within K2 products were invented by Dr. John W. Huffman of Clemson University and for a very worthwhile purpose--research purposes. These synthetic chemicals were never intended to be used for any other purpose other than research. They were never tested on humans, and no long-term effects of their use are currently known. As more and more people are experimenting with K2, it is becoming increasingly evident that K2 use is anything but safe. The American Association of Poison Control Centers reports significant increases in the amount of calls concerning these products. There were only 13 calls related to K2 use reported in 2009. Look at the figure for 2010. There have been over 1,000 calls concerning K2 use. So it is very evident: A dramatic increase in a short amount of time of the public concerned about K2 use, probably reflecting increased use of K2. Common effects reported by emergency room doctors include increased agitation, elevated heart rate and blood pressure, hallucinations, and seizures. The effects from the highs from K2 use are reported to last several hours, and in some cases up to one week. Dr. Huffman has stated that since so little research has been conducted on K2 chemicals, using any one of them would be like ``playing Russian roulette.'' In fact, Dr. Anthony Scalzo, a professor of emergency medicine at St. Louis University, reports that these chemicals are significantly more potent than even marijuana. Dr. Scalzo states that the amount of chemicals in K2 varies from product to product, so naturally no one can be sure exactly the amount of drugs you are putting into your body when you use these K2 products. Dr. Scalzo reports that this can lead to significant problems such as altering the state of mind, addiction, injury, and even death. I will refer to the death issue in a moment. According to various news articles across the Nation, K2 can cause serious erratic and criminal behavior. In Mooresville, IN, the police arrested a group of teens after they were connected to a string of burglaries while high on K2. The local county attorney prosecuting the case stated this was an unusual crime spree. These kids were not the type who are normally seen in the criminal justice system. The county attorney stated these kids had ``no prior record, good grades, athletes, so that got me wondering: is there a correlation between K2 and the crime?'' Another case in Honolulu, HI, shows police arrested a 23-year-old man after he tried to throw his girlfriend off an 11th floor balcony after he was smoking K2. A 14-year-old boy in Missouri nearly threw himself out of a fifth story window after smoking K2. Once the teen got over his high, he denied having any suicidal tendencies. Doctors believe he was hallucinating at the time of the incident. K2 use is also causing serious health problems and increased visits to emergency rooms. A Louisiana teen said he became very ill after trying K2. The teen said he experienced numbness, starting at his feet and traveling all the way to his head. He was nauseous, light-headed, and was having hallucinations. The teen stated that K2 is being passed around at the school. The teen also stated that many people were trying it without fear, assuming it was safe because it was legal. I said that previously in my remarks: a legal drug, it has to be safe is kind of the attitude. Another case has a teenager in Indiana being admitted to an emergency room with a blood pressure of 248 over 134 after testing positive for K2. A teen in Texas became temporarily paralyzed from the waist down after smoking K2. Another teen in Texas had a heart attack after smoking K2 but, fortunately, survived the event. Regrettably, K2 use also has deadly consequences. I want to speak about an individual and family who suffered from a tremendously bad consequence of K2. The picture behind me is of David Rozga. David was a recent 18-year- old Indianola, IA, high school graduate. According to his parents and friends, David was a bright, energetic, talented student who loved music, was popular, and active in his church. David was looking forward to attending the University of Northern Iowa this fall, my alma mater. On June 6, 2010, David, along with some of his friends, smoked a package of K2 thinking it was nothing more than just having a little fun. David and his friends purchased this product at a mall in Des Moines, after hearing about it from some college students who were home for the summer. After smoking this product, David's friends reported that David became highly agitated and terrified. When he got home, he found a family shotgun and committed suicide 90 minutes after smoking K2. The Indianola police believe David was under the influence of K2 at the time of his death. David's parents and many in the community who knew David were completely shocked and, obviously, saddened by this event. As a result, the Iowa Pharmacy Board placed an emergency ban on K2 products in Iowa, which began on July 21, 2010. David's tragic death may be the first case in the United States of K2 use leading to someone's death, but, sadly, it was only the beginning. A month after David's tragic death, police reported that a 28-year- old Middletown, IN, mother of two passed away after smoking a lethal dose of K2. This woman's godson reported that anyone could get K2 easily because it can be sold to anyone at any price and at any time. This last August, a recent 19-year-old Lake Highlands High School graduate in Dallas, TX, passed away after smoking K2. The medical examiner confirmed that this boy had K2 in his system at the time of his death. These incidents throughout the country give me great concern that K2 use is a dangerous and growing problem. Twelve States, including Iowa, have acted to ban the sale and possession of the chemicals found in K2 products. Many more States, counties, and communities throughout the country have proposed bans or are in the process of banning these products. However, a recent article in the Des Moines Register highlights the fact that some stores are working around these bans by the simple process of changing some of the chemicals and by simply relabeling the product. So I believe it is time we have a national discussion about these dangerous substances. I hope in the coming weeks and months my colleagues will begin to take notice of this issue. As cochairman of the Senate Drug Caucus--I cochair that with Senator Feinstein from California--it is my hope we will have a hearing on this issue in the not too distant future. It is important to fully understand the magnitude and implications of allowing these products to remain legal in the United States. It is clear the sale and use of K2 products is obviously a growing problem. People believe these products are safe because they can buy them online or at the nearest shopping mall. We need to do a better job at educating the public and our communities about the dangers these products present. We, in fact, need to nip this problem in the bud before it grows and leads to the tragedy of more death or the tragedy of other health consequences. I ask each of my colleagues in the Senate to join me as we explore positive actions to stem the use of K2. I yield the floor and suggest the absence of a quorum.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, today, I have the distinct pleasure of recognizing before the Senate some of the most talented and brightest young people in the United States. The 2010 Davidson Fellows Award is being given to 20 young students who are under the age of 18 and have already demonstrated superior ability and achievement in the areas science, music, literature, mathematics, and technology. I would like to take this time to recognize each of these extraordinary young individuals and their projects. In the area of science, we have 12 young students with remarkable projects that have contributed to scientific progress. This includes Kyle Loh, a 16-year-old young man from Piscataway, NJ, who conducted screening of chemical libraries and identified compounds that can help convert human and mouse skin cells into pluripotent stem cells. Pluripotent stem cells have the potential to differentiate into many different cell types. The chemical compounds he identified obviate the need to destroy embryos. Kyle's studies advance regenerative medicine and provide insights into the molecular mechanisms that underlie the conversion of skin cells into pluripotent stem cells. Jonathan Rajaseelan, a 17-year-old young man from Millersville, PA, synthesized six new chemical carbene complexes of the metal Rhodium. Rhodium complexes act as catalysts in multiple organic synthesis reactions, including the manufacturing of pharmaceuticals and industrial chemicals. The catalytic effects of his complexes make these processes safer, inexpensive, and less environmentally hazardous by eliminating the need for large quantities of hydrogen gas, a dangerous explosive. Jonathan's work has the potential to contribute to greener methods of making medicines, pharmaceuticals, and other chemical products. Eric Brooks, a 16-year-old young man from Hewlett, NY, studied the genetic factors affecting metastatic progression of prostate cancer. Approximately 30 percent of men with prostate cancer will die from it, but it is difficult to predict who will get the metastatic diagnosis. Eric developed models based on evolutionary selection to identify genes that may affect metastatic potential either positively or negatively. His observations may be used to design better clinical predictors to indicate who must undergo painful treatment and for whom the treatment is unnecessary. Meredith Lehmann, a 14-year-old young woman from La Jolla, CA, researched the spread of epidemics. Using trip data from all 3,076 counties in the continental United States, she found long distance auto travel, which accounts for five times as many passenger-miles as air travel, governs simulated epidemic evolution. Large hub airports near population centers are not disproportionately more important in contrast to existing research. Meredith's findings suggest epidemic models should incorporate automobile and air travel data, but transportation network restrictions are unlikely to be effective. Laurie Rumker, a 17-year-old young woman from Portland, OR, investigated the susceptibility of organoclay to biodegradation by microorganisms within river sediments. Organoclay is a chemically modified clay material used to prevent hydrophobic pollutants from rising into the water ecosystem. Through spectrophotometric analyses and oxygen uptake tests, Laurie found biodegradation of the chemical structures within organoclay which could impair the ability of the organoclay to adsorb and retain pollutants. Laurie's work has important implications for the treatment of contaminated sediments. Benjamin Song, a 16-year-old young man from Audubon, PA, researched colon cancer biomarkers in urine. Colon cancer is the second leading cause of cancer death in the United States, even with the sensitive but invasive colonoscopy. Benjamin designed and tested polymerase chain reaction assays targeting a known colon cancer epigenetic marker. His work shows potential for a urine test for colon cancer that is noninvasive, fast, affordable, and sensitive. In addition, his method could be adapted to virtually any cancers with known DNA alterations. Merry Sun, a 16-year-old young woman from Chappaqua, NY, studied therapeutic ultrasound's potential in treating recurrent and metastatic cancers. Traditional therapies like radiation, chemotherapy, and surgical resection are ineffective in immune responses against tumor cells. Merry found that therapeutic ultrasound causes stress and light damage to tumor cells, which alerts the immune system to respond and target the tumor. Her results demonstrate the possibility of a novel, non-invasive, non-toxic cancer therapy that treats solid tumors as well as systemic metastases. James Ting, a 17-year-old young man from Holmdel, NJ, synthesized bismuth nanowires which demonstrate quantum confinement, the reduction of electrons to a one-dimensional axis. By using physical vapor deposition, he created lawns of bismuth nanowires as well as isolating single nanowires to add to silicon chips. James' research focuses on the creation of single electron transistors, which are useful in the new field of spintronics. The spins of these electrons could then be harnessed and used for information storage and act as the building blocks for quantum computers. Scott Boisvert, a 16-year-old young man from Chandler, AZ, demonstrated a link between amphibian aquatic environments and the growth of pathogenic fungus, Batrachochytrium dendrobatidis, which has contributed to the loss of over 32 percent of amphibian species worldwide. Using ion chromatography and ion-coupled plasma spectrometry, Scott studied how the water chemistry of a habitat affects the growth of the microorganism. Scott's project has broad implications for understanding the pathogen's propensity to infect an amphibian host and controlling the spread of infection, benefiting conservation efforts. Janie Gu, a 16-year-old young woman from Morganville, NJ, researched noise reduction of atomic magnetometer systems, advanced devices that measure magnetic fields with extreme precision. To increase the signal- to-noise ratio, she tested the loss factors, such as measurements of magnetic noise produced, of various ferromagnetic materials for use in the magnetic shield around the system, improving the precision by more than 44 percent. Janie's work has applications in the military, medicine, information storage, mineral and oil detection, space exploration and fundamental physics experiments. Rebecca Jolitz, a 15-year-old young woman from Los Gatos, CA, examined whether hypolithic cyanobacteria, a photosynthetic organism found under rocks in climatically extreme environments, could theoretically have enough sunlight to survive on Mars. Using an original computer program that simulated a million individual beams of sunlight hitting a Martian rock, Rebecca found that there was enough light for cyanobacteria to survive on Mars, indicating that Mars may not be a dead world. Rebecca's research could help to discover the means through which life on Mars may exist. Sahil Khetpal, a 17-year-old young man from Plano, TX, developed a carbon nanotube-based drug-delivery system for tumor targeted chemotherapy and photo-therapy of cancer, a dual therapy. This versatile platform attacks tumors on two fronts and mitigates the severe side effects associated with conventional chemotherapy. He also investigated a gadonanotube for the development of a new drug delivery system. Sahil's system has the potential to both diagnose cancer at an earlier stage and provide the dual therapy mechanism to efficiently combat it. In the area of music, there are two talented young musicians that have produced significant contributions to the art of music. Yeeren Low, a 13-year-old young man from East Stroudsburg, PA, explored and experimented with sound in various aspects of music through five compositions. In his portfolio, Art of Sound, his goal is to enrich the body of the contemporary classical music genre, and create new musical expressions and listening experiences. Yeeren is particularly interested in promoting greater awareness and exposure to the richness of the classical music genre, thus contributing to its wider recognition, appreciation and overall advancement. Kevin Hu, a 16-year-old young man from Naperville, IL, traverses the globe and explores cross-sections of humanity in his violin portfolio, Sociomusicology: Exploring and Sharing the Worlds of Music. His portfolio includes selections of music that, at times, were repressed by political regimes, or conversely, celebrated for their heartbreaking beauty, all while representing an array of raw humanity. Kevin's goal is to present music as a tangible and dynamic tool in human healing, self-discovery, and dignity. In the area of literature, we have one creative and inspired student, John Michael Colon, a 17-year-old young man from Wayside, NJ. John's portfolio, Art as Empathy: A Study of the Syncretic Potential of Literature, demonstrates the utility of literature and art in society. He writes that although human beings want to communicate their fundamental experience, this worldview is too ineffable to express directly; art and literature articulate this on a visceral level. John Michael proposes through art and literature, the expression of ideas can help tame the tendency to dehumanize others by helping us see their ideas the same way we see ours, inspiring empathy. We have two bright young individuals whose projects have advanced the field of mathematics. Damien Jiang, a 17-year-old young man from Raleigh, NC, studied the parallel chip-firing game, PCFG. Though not a game, the PCFG is played on a graph, or network of nodes and edges, and is closely related to a variety of mathematical models for complex phenomena such as earthquakes, avalanches, and forest fires. By running computer simulations of randomized PCFGs, Damien studied their tendency to reach a cycle of repeating configurations, and mathematically proved a theorem about its behavior on a graph. Damien's work has broad applications in disaster preparedness. Jonathan Li, a 17-year-old young man from Laguna Niguel, CA, developed a mathematical model and computer simulation to analyze tumor growth and is the first to study motility and contact inhibition, a mechanism that limits cell growth when pressured by neighboring cells. His research also revealed an inherent flaw of the Cellular Potts Model, used to simulate cellular structure behavior. Jonathan's work provides a method to predict the effects of motility on tumor development and can be used to identify cancer phenotypes that chemotherapy drugs can target, potentially improving treatment. Finally, in the area of technology, we honor three innovative young minds. Anna Kornfeld Simpson, a 17-year-old young woman from San Diego, CA, developed a chemical-detecting robot. She used porous silicon, a material that changes color in the presence of chemicals like alcohols or nerve gas, and simple, low-cost circuit elements to detect color change. The robotic microcomputer then ``sees'' the chemical instead of ``smelling'' it. Prototypes had a 100 percent response rate. Anna's work has applications in security and counterterrorism, monitoring industrial settings for toxins, and exploring locations too hazardous for humans. Alexander Gilbert, a 16-year-old young man from McLean, VA, developed a computer algorithm which improves contrast in magnetic resonance imaging, MRI. His program has been successfully applied to brain MRI images, enabling more accurate image definition of tissues, such as areas of demyelination, or plaques, which are often present in patients with multiple sclerosis. Alexander's work is pertinent to MRIs of the spine and other areas, and offers the potential for better diagnosis and monitoring of multiple sclerosis and other neurological diseases including Alzheimer's disease. Gavin Ovsak, a 16-year-old young man from Hopkins, MN, designed a device to allow disabled individuals more effective access to computers. His project, known as CHAD, circuit head accessibility device, is a circuit board integrated onto a baseball hat to replace the functions of a computer mouse through head movements and a bite sensor. Gavin's work is less expensive, more efficient, and uses fewer complex software interfaces than are currently available in the assistive technology market, equalizing access to the social, occupational, and global significance of the Internet. I often say that America's gifted and talented students possess remarkable potential. These 20 young individuals have demonstrated more than potential. They have already made significant contributions to our society in their short lives and one can scarcely begin to imagine how much they will contribute to society throughout their lives, thanks in no small part to the encouragement of the Davidson Institute as well as their parents and mentors. They are an inspiration and a reminder that if we fully support our most talented young people, we can look forward to a bright future.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent the order for the quorum call be rescinded.

Mr. GRASSLEY. Mr. President, we have a tax bill before us that is supposed to help small business because small business creates 70 percent of the new jobs. The President says that. I think we have to look at the background of the high unemployment rate, particularly why it is staying up there--maybe not why it got up there but why is it still there. I spoke last night about a lot of uncertainty that comes because of the cap-and-trade bill, the bank regulatory reform bill, the health care reform bill, the biggest tax increase in the history of the country coming up this fall if we do not intervene and prevent the biggest tax increase, and a lot of other issues out there that tell us how uncertain it is, what Congress is going to do. That uncertainty keeps the entrepreneurs of America from opening up and creating jobs. If you want to quantify how they are tight-fisted about the situation right now, the last figure I saw was about $2.1 trillion in cash in the treasuries of major corporations of America. They are not making any money by storing that cash, but they do not know what sort of a future this Congress is going to give them, so they are very guarded on any moves they make. Then we have things such as shutting down all the oil drilling--unemploying tens of thousands of people. Then what I am going to visit with you about is the fact we did not pass the biodiesel tax credit December 31 last year when it sunset and that industry is shut down and 20,000 jobs have been lost. It is ironic to me that we spent weeks on a bill that is before the Senate, as legitimate as it is, to create jobs in small business, when, frankly, there are a lot of negative things going on in the Congress of the United States that cause people to be laid off or, because of uncertainty, not to be hired back. I wish to speak about the biodiesel industry. As we are faced today with a 9.6-percent unemployment rate, I have a solution that will create 20,000 jobs almost overnight. That solution is to extend the biodiesel tax credit today. This tax credit expired December 31, 2009. This democratically controlled Congress has failed to extend it, even though, on several occasions, I and other Members on this side of the aisle have taken action in that direction. The Democratic leadership claims, as the President does, that they want more green jobs--and I am in favor of that. I am the author of the Wind Energy Tax Credit, as an example. I have been a backer of ethanol. I have been a backer of biomass and this biodiesel tax credit. So there are plenty of opportunities to show that we, on this side of the aisle, support the President wanting to create green jobs. If the President and the Democratic leadership want to do that, they have not acted to prevent the loss of green jobs in the biodiesel industry. The biodiesel industry has lost tens of thousands of jobs as a result of this neglect. It would be nice if the Democratic leadership's rhetoric met with reality. I have twice sought to have the biodiesel tax credit simply passed through the Senate by unanimous consent. However, both times my request was objected to by those on the other side of the aisle. Meanwhile, these biodiesel plants in Iowa and throughout the country continue to lay off workers. In fact, most of them are just plain shut down because the democratically controlled Congress has not extended the biodiesel tax credit. I made a speech similar to this in December, when we were on the health care reform bill. I said: Can't we find some time to pass these tax extenders so we do not let them lapse--and all these question marks. That was 8 months ago, 9 months ago. But somehow we thought last December, since Congress had not been in session on Christmas Eve since 1895, we ought to be in session once in 115 years--or because we just had to pass this health care reform bill before the end of the year because it takes effect by 2014, we couldn't find a little bit of time to keep 22,000 people employed in the biodiesel industry. So we asked for those consents and we did not get them. These workers are laid off because the democratically controlled Congress has not extended this tax credit. This is a simple and noncontroversial tax extension that will likely reinstate 20,000 more jobs nationwide and at least 2,000 within my State of Iowa. By the way, this is not controversial, and there are 71 other tax provisions that expired December 31, 2009, and I don't know that any of those are controversial. So the biodiesel industry has lost its jobs. These jobs have fallen victim to a tactic used by the Democratic leadership to hold this popular and noncontroversial tax provision hostage in an attempt to advance political objectives. Just last February I worked out a bipartisan compromise on tax extenders--all of them--with Chairman Baucus to extend the expired tax provisions, including biodiesel. However, the Senate Democratic leadership decided to put partisanship ahead of the job security for tens of thousands of biodiesel workers by destroying the compromise to which Chairman Baucus and I agreed. So I am here again to try to put tens of thousands of people back to work producing clean and renewable fuel that everybody in this Congress says they support, and the green jobs from these productions. There is a difference between a biodiesel tax credit and the other tax provisions in the tax extender bill that has stalled in the Senate. The failure to extend the biodiesel tax credit before it expired has ground the industry to a halt because biodiesel is now more expensive than gasoline. Gasoline stations, knowing they cannot sell biodiesel, do not buy it, and biodiesel producers have, therefore, stopped producing biodiesel because they have nobody to sell it to. Consequently, the layoffs. While the other tax provisions are important, most are not as time sensitive as biodiesel because they are not transactional tax incentives like the biodiesel tax credit but, instead, are based on a taxable year. Unfortunately, now it is clear the larger extenders bill has stalled for the time being. We need to pass the biodiesel tax credit separately. The last time I sought unanimous consent, which was the second time I did it, one of my colleagues on the other side of the aisle objected. The objection said something like, the biodiesel tax credit was part of a larger extenders bill they were working on. Now that the tax extenders bill is stalled, the Senate needs to pass the biodiesel tax credit by itself. I ask my colleagues to vote yes to waive the rules and put 20,000 biodiesel workers back to work. I move to suspend rule XXII, paragraph 2, for the purposes of proposing and considering amendment No. 4433, which is at the desk. Having said my part, I think before Senator Hatch speaks--he will speak about a very popular tax extender that needs to be extended and on which I do not know that there is one single disagreement. It is a noncontroversial provision but has still been languishing here for the last 9 months, and losing jobs as a result of it, at the very same time we are trying to create jobs through a bill that is before the Senate. I yield the floor.

Mr. GRASSLEY. Madam President, I have 1 minute to speak to my motion to suspend the rules to bring up this bill. We are on a bill now on the Senate floor that is supposed to create jobs. Hopefully, this bill will create jobs. But it is kind of small compared to what this Congress could do by passing the biodiesel tax credit. It should have been passed before December 31 last year. Senator Baucus and I put together a bipartisan bill to do it in February. That bill was delayed by the majority leader, so we are back here again for a third time, trying to get attention to jobs. This biodiesel tax credit will immediately put 20,000 more people back to work, and 2,000 in my State of Iowa. I hope we will suspend the rules and create jobs for sure because those jobs were there before December 31 and they will be there on September 17 if we pass this amendment. Madam President, I ask for the yeas and nays.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, while we are talking about taxes, I wish bring up something that is significant to about 26 million Americans. It doesn't deal only with small businesses, but obviously a lot of small businesses are affected by the issue I bring to my colleagues' attention. I do this several times a year. It deals with the alternative minimum tax, a tax that I am sure that out of the 26 million people who might be hit this year if we don't do something, a lot those are small businesspeople. The AMT was first enacted by Congress in 1969. The alternative minimum tax was created in reaction to some very wealthy and very high income individuals paying no income tax. These high-income individuals were able to do this because they were able to claim a huge amount of tax credits and deductions legally. Probably the sensible way to have dealt with this problem would have been to curtail the proliferation of those tax credits, tax deductions, and tax expenditures at that time. Unfortunately, that was not the course Congress took when the alternative minimum tax was set up, now 40 years ago. Instead, Congress created this alternative tax system that we call the alternative minimum tax. With the alternative minimum tax, an individual must first calculate his regular income tax, and then he must calculate his alternative minimum tax. The taxpayer compares the two numbers and pays the highest figure of tax owed. I know this is complicated, figuring one's taxes twice--as if the regular income tax all by itself isn't complicated enough--but it has gotten much worse over the decades. The alternative minimum tax has not merely added complexity; it has ensnared tens of millions of Americans in its clutches. What was originally intended for fewer than 200 very wealthy taxpayers back in 1969 because they didn't pay any income tax--legally didn't pay any income tax--now has grown to ensnare tens of millions of middle-class Americans. What is really worse is that it was supposed to get everybody to pay some income tax under the theory that if you live in America, even if you take legal advantage of everything the Tax Code allows you to do and still pay no tax, you ought to pay something, so the alternative minimum tax. But now the IRS tells us that there are a large number of people--not tens of thousands but thousands--who don't pay either the regular income tax or there are ways they don't legally have to pay the alternative minimum tax. So it isn't even accomplishing its original purpose of making sure everybody pays some income tax. The reason it has grown to include many middle-income Americans is because the exemption amount has not been indexed for inflation. Congress has increased the exemption amount so it would be targeted toward those people it was meant to hit--very wealthy people. We keep talking around here about patching the AMT. We have done it every year since 2001. Congress has passed the AMT so that only 4 million taxpayers have been subject to it in the past few years. At this point, however, the AMT is not patched for 2010. So unless Congress acts to patch the AMT, rather than only about 4 million Americans being subject to the AMT, more than 26 million will be. The chart I have here shows my colleagues a breakdown of the number of families and individuals State by State subject to the alternative minimum tax. These families and individuals should be paying the alternative minimum tax right now because Congress hasn't acted so far this year, after 9 months, to do the patch. That means that about 22 million families and individuals are currently scheduled for quite a surprise come April 15, 2011. Roughly 4 million Americans are presumably used to paying the AMT, but the additional 22 million families and individuals currently subject to it may not have realized they are standing in a hole dug by this Congress. Until Congress patches the AMT in 2010, these individuals should either have their wages withheld at a higher rate and/or pay estimated taxes to take into consideration the fact that the AMT has not been patched. But we would have to figure that very few of these 22 million Americans are, in fact, paying the higher estimated taxes in anticipation of Congress not acting on the AMT. They probably do not know. The third quarterly estimated tax payment is due today. Literally right now, taxpayers across the country are under the legal requirement to pay their estimated tax. They should be using the form depicted on this chart, the form 1040-ES. I hope I am not here in January when the final estimated payment is due. It is disappointing that Congress has created a situation where law- abiding citizens who still trust in Congress to look out for them are at odds with the law, even if only temporarily. The betting money is that Congress will get this job done before the end of 2010, but in the meantime, confusion reigns. In many ways, people simply do not know what to do about this. As I said, taxpayers don't know how much estimated tax to pay. The IRS doesn't know what forms to be preparing for publication. Tax software firms don't know how they should program their software. Tax professionals are not sure what to advise their clients. Government revenue estimators don't know whether to count the AMT patch in or out. And most important, our fellow Americans don't know how to plan their financial affairs. Can they afford that vacation or can they afford a new car? Can they afford some additional gift to charity? Should they contribute more or less to their 401(k)? The answers to these questions turn in part on whether Congress patches the alternative minimum tax. So what is to be done? The 2005 bipartisan tax reform panel had two different tax reform options: the simplified income tax and the growth and investment tax. But under either option, the bipartisan tax reform panel said that Congress should simply repeal the AMT. I think that is what has to be done. Don't forget the philosophy behind it 40 years ago, not indexed. That is why we have to patch, is because 200 people, maybe only 150 at that time, were not paying any income tax. Progressives thought: Well, everybody living in this free country, even if they legally don't have to pay any income tax, ought to pay ``some tax.'' So that is the philosophy behind it. We have not argued so much with that philosophy over the last 40 years. But we are in a situation where the IRS says there are some people in America who legally don't have to pay income tax or the alternative minimum tax. Does that make sense? Why would we have that law on the books if it is not fitting its original intention? That is what I would favor--complete repeal of the AMT. If that isn't to be done, I would favor then a permanent patch of the AMT. Given Congress's actions in this area, it seems likely we will patch it year after year after year, so wouldn't it help with everyone's plans to simply do that once and for all? That is the question. That would be the way to do it. It is predictable. But allow me to address the AMT in the context of statutory pay-as- you-go. The statutory pay-as-you-go was enacted earlier this year as part of the majority party's debt limit increase. Some on the other side of the aisle have described statutory pay-as-you-go as a fiscally responsible way in which to address the 2001 and 2003 tax relief extensions. Statutory pay-go provides that all the regular tax relief for taxpayers under $250,000 is permanent. Statutory pay-go, however, only provides for a patch to the AMT just for 2 years: 2010 and 2011. So what is going to happen in the next year, come 2012? There are at least four possible options. Option 1 would be: In 2012 and after, AMT will not be patched. But I do not really think that is an option Congress would seriously entertain--then or now--to add another 20 some million people paying this tax that middle-income taxpayers were never supposed to pay in the first place. Option 2: In 2012 and after, AMT will be patched and paid for with new taxes. That would be consistent with what we call statutory pay as you go, but does anyone think that would make sense, pay for tax relief with new tax burdens? Option 3: In 2012 and after, AMT will be patched and paid for with spending cuts. In general, I believe that we need to use spending cuts to tackle our deficits and debt. But we know our friends in the Democratic leadership are allergic to spending cuts. So, as much as we would like to reign in the record spending spree of the last 18 months, I don't see my friends on the other side agreeing to cure their allergy to spending restraints. They've rejected roughly $270 billion in spending restraints since adopting the much ballyhooed statutory pay-go regime. But then there is option 4: In 2012 and after, AMT will be patched and not paid for. That certainly is an option I am very open to and quite possibly what Congress will ultimately do and has done in the past. Money that wasn't supposed to be collected in the first place shouldn't be relied on as revenue and so doesn't need to be offset. However, if the AMT is patched and not paid for, then there is a hidden $1 trillion revenue loss in the package. This means the deficit impact of the so-called fiscally responsible package is understated by $1 trillion. The so-called fiscally prudent statutory pay-as-you-go legislation likely has a $1 trillion understatement of the deficit impact. If fiscally responsible is understating an increase to the deficit by $1 trillion, I wonder then what fiscal irresponsibility would be. The AMT is a serious problem and needs to be addressed in a comprehensive, permanent, prompt, fiscally prudent fashion. I yield the floor.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GRASSLEY. Mr. President, we have the Small Business Jobs Act of 2010 before us. For more than a year now, the mantra of my colleagues on the other side of the aisle, meaning the majority party, has been: jobs, jobs, jobs. Unfortunately, the only jobs the policies of my colleagues on the other side of the aisle have created are government jobs. The legislative fixes proposed by the other side have fallen short in creating private sector job growth. I have a chart here that will show unemployment reaching a high of 10.1 percent in October 2009. The administration promised that unemployment would not go above 8 percent if we enacted their $800 billion stimulus bill. Moreover, they asserted that 90 percent of the jobs would be in the private sector. The unemployment numbers have come down from their high in October, but this has not been the result of a robust hiring in the private sector. To the contrary, many people are simply no longer counted as being unemployed because they have stopped looking for work. For those who did find work, many found work with the U.S. Census Bureau helping to complete the 2010 census. The unemployment rate reached a low of 9.5 percent in July but once again has ticked up to 9.6 percent as 114,000 temporary census jobs ended. While those who put their faith in the stimulus package believed that this summer would become known as ``recovery summer'' due to all of the stimulus projects underway, it actually has ended in what a National Public Radio story termed as an ``economic pothole.'' To be fair, the private sector employment number has inched up slightly in the past few months. For August, the Bureau of Labor Statistics reported that private sector employment payroll edged up by 67,000. However, the problem is that around 150,000 jobs need to be added each month just to keep up with the growth in population. So basically, by adding 67,000 jobs, we are treading water too slowly to keep our head above water. Moreover, as pointed out in the September issue of the National Federation of Independent Business Small Business Economic Trends, 45,000 of those 67,000 private sector jobs were in education and health care. These jobs are heavily dependent on government spending, and that means these are not typical small business jobs on Main Street. It is clear, however, that the small businesses remain pessimistic about the economy and are hesitant to hire new workers. According to the National Federation of Independent Business's most recent survey-- and we have a chart here on this point--a net negative 1 percent of business owners plan to create new jobs in the next 3 months. A net negative 8 percent of business owners expect the economy to improve. Only 4 percent of the business owners said it was a good time to expand. A net negative 30 percent of owners reported higher earnings. This last component is especially important for businesses when it comes to hiring new employees since businesses need to know that revenue generated from an additional employee will exceed the costs. Given the current unemployment rate, it is not surprising, then, that we are once again looking at ways to create jobs. Hence the bill that is before the Senate. The question remains: Are we going to continue to look to the government to be the job creator or are we going to realize that job creation and real economic growth comes from the private sector? This question also brings to mind that government doesn't create wealth; government consumes wealth. So if we are going to increase the economy in this country, it has to be done through the private sector. The bill before us appears to recognize the importance of the private sector--in particular, the importance of small businesses and entrepreneurs in getting our economy back on track and getting the employment numbers to move in the right direction. I have been beating the drum for some time now that if we want to get our economy back on track, we need to focus on small business. After all, small business is responsible for creating 70 percent of the jobs in our economy. That is not a Republican percentage put out there by my party. That is also a figure I have heard the President of the United States, our President, say in speeches as well--70 percent of the new jobs are created in small business. During the debate on the $800 billion stimulus bill, I pointed out that it contained too little in terms of provisions aimed at small business. In all, less than one-half of 1 percent of the stimulus bill was tax relief for small businesses. Unfortunately, my concern that the stimulus bill provided too little relief to small businesses has proved correct. Since the stimulus bill was signed into law, small businesses have been hemorrhaging jobs. According to the ADP national employment data, since the stimulus was enacted, small businesses, which are those defined as fewer than 500 employees, have lost a net amount of 2.6 million jobs. During this same time, large businesses, which are those with over 500 employees, lost a net amount of 716,000 jobs. According to this data, small businesses have accounted for nearly 80 percent of the decline in employment since the stimulus bill was signed into law. With the consideration of the small business package before us today, I hope this body is finally starting to get serious about tracking unemployment through a true jobs bill. Compared to previous stimulus or jobs bills promoted by the majority, this small business bill has a rather modest cost, with tax provisions totaling about $12 billion. It is targeted at job creation by providing small businesses with incentives to invest in new equipment, expand their operations, and ultimately hire new employees. The bill includes provisions that would encourage small businesses to invest in new equipment and real property by increasing the amount of capital expenditures small businesses can expense. For equipment, the amount that can be expensed is increased to $500,000 and for real property, to $250,000. Moreover, it encourages investment by providing additional first-year bonus depreciation. It promotes entrepreneurship in another way by increasing the amount allowed as a deduction for startup expenditures. It increases access to capital by allowing 100 percent of gain from investment in qualified small business stock to be excluded from income. It also takes the general business credits out of the alternative minimum tax for those sole proprietorships, flowthroughs, and nonpublicly traded C corporations with $50 million or less in annual gross receipts. Another way is increasing access to capital by extending the 1-year carryback for general business credits to a 5-year carryback for small businesses. Finally, this bill promotes small business fairness by limiting harsh penalties that have been imposed on small businesses by the IRS and equalizing the tax benefits for health insurance that self-employed individuals may receive to those received by employees. In regard to the Small Business Administration provisions, I strongly support many of the bipartisan provisions included in the bill. This legislation would increase small business lending by lowering small business loan program fees while at the same time raising loan guarantees and lending limits. Specifically, this bill extends the fee reductions and eliminations for the Small Business Administration's 7(a) program and 504 program and the 90-percent loan guarantee limit for the SBA's 7(a) program. I am pleased that these well-established, effective measures have been included in the bill. Raising the 7(a) guarantee rate and reducing lenders' and borrowers' fees in the 7(a) and 504 loan programs has been enormously successful. These modifications, which expired in May, have led to a significant increase in lending capacity and access to capital. I am a supporter and, in fact, have been a leader of the many bipartisan small business provisions in the current small business package. I am an original cosponsor of S. 3604, standalone legislation introduced by Senator Snowe, the ranking member of the Committee on Small Business and Entrepreneurship, which would extend the same Small Business Administration lending provisions that are in the bill currently before the Senate. Additionally, many of the small business tax incentives included in the small business package were taken from legislation I introduced last year entitled the ``Small Business Tax Relief Act of 2009.'' Of course, there are differences and additional provisions I would have liked to have been included, but, as with any piece of legislation in the Senate, there is a need to compromise if you want to get anything done. My bill generally would have made the small business tax provisions permanent law. I believe this would have provided small businesses with certainty and promoted job creation over the short run as well as the long run. However, the Senate small business package generally only makes the tax provisions applicable for 1 year. That gets us back to the point that the word ``uncertainty'' crops up so often when used by small businesses as well as big businesses--the uncertainty of what Congress is going to do or the fact that when they make policy, they don't make it for a long enough period of time. That word, ``uncertainty,'' is the one reason jobs are not being created. It is kind of a sin that Congress would bring about this sort of uncertainty--or maybe the executive branch of government is bringing about some uncertainty--when, in fact, corporations have a historically high amount of cash just lying around. The last figure I saw was $2.1 trillion, and with $2.1 trillion, one would think there would be a lot of jobs expanded, except the people who could do it don't know what Congress is going to do to them next, so they are taking caution. Well, if we could reduce that caution and encourage them a little bit by letting them know what we are doing over the long haul, it would go a long way to getting this unemployment down. Getting back to what I said, I would have liked to have seen in this bill an additional provision from my bill included in the final package. This provision would have provided small businesses with a 20- percent deduction off of their small business income. It is unfortunate that this provision was left out. This was the largest and most important provision of the bill I introduced in the summer of 2009. However, in all, the tax provisions included in the Senate small business package provide real relief to small businesses. They generally have the support from Members on both sides of the aisle. In fact, you would have thought this small business bill would have been a slam dunk. However, the Democratic leadership has used the small business bill as a political football, scoring political points. The majority leader refused to allow the small business bill to be considered under regular order. The majority leader filled the amendment tree, thereby limiting amendments that could be offered. The Democratic leadership and the administration then proceeded to blame Republicans for blocking relief for small business. This is despite the fact that the Democrats were unable to get their own Members in line on the small business package. It still remains unclear whether the Democrats in the House, with their large majority, will pass the small business bill should it pass this body. Moreover, the waters of the small business package were further dirtied by the inclusion of a controversial lending provision that would create a $30 billion lending fund. This fund is designed to provide billions of taxpayer dollars to banks for the purpose of making loans to small businesses. To me and to many experts, the fund resembles the TARP bailout program, which has been badly mismanaged. Elizabeth Warren, head of the TARP Congressional Oversight Panel, expressed skepticism that the fund would be effective in increasing small business lending. She stated that: Such a fund runs the risk of creating moral hazard by encouraging banks to make loans to borrowers who are not creditworthy. The Special Inspector General of TARP stated that: In terms of its basic designs, its participants, its application process, and perhaps its funding source from an oversight perspective, the [small business lending fund] would essentially be an extension of TARP's Capital Purchase Program. There is also disagreement about the cost of the program. Proponents argue that the lending fund will raise $1.1 billion. However, the Congressional Budget Office has indicated that if you score the fund on a fair value basis, the program would score as a cost to taxpayers of $6.2 billion. The Congressional Budget Office has indicated that the fair value basis is a more comprehensive measure of the cost than estimates done on a cash basis. Many Members in this body voted for the Emergency Economic Stabilization Act in 2008 because we were led to believe our economy was on the brink of failure. We were told the Treasury Department would purchase toxic assets. But after its passing, the executive branch changed course and picked winners and losers. Where? Not on Main Street but on Wall Street. We should not be fooled again by the same officials at Treasury who have mismanaged TARP and have been less than transparent with the American people about how the taxpayers' money has been spent. I compliment my friend, Chairman Baucus, for diligently pressing the tax provisions in this bill. There are many good things in this bill, but I believe it could have been better. Unfortunately, the Democratic leadership is more interested in scoring political points than actually providing relief to small businesses. If the majority was actually interested in passing small business relief, a small business package could have been put together that would have garnered 80, 90, or more votes. But instead the majority leader filled the tree, prohibiting amendments being offered to improve the bill. The small business fund in the bill just doesn't have the safeguards in place to ensure that recipients are creditworthy or that taxpayers may be made whole in the end. Should this bill be signed into law, I will do my part to make sure the implementation is in the best interest of the taxpayers as well as small businesses. Watch-Dogging the Watchdogs Mr. President, I want to speak about watch-dogging the watchdogs. I first started watch-dogging the Pentagon in the early 1980s, when President Reagan was trying to ramp up the defense budget. A group of Defense reformers were examining spare parts pricing. We found the Pentagon buying a $750 toilet seat and $695 ashtrays for military airplanes. That experience taught me an important lesson: If you are going to watch-dog the Pentagon like the inspector general, or IG, is supposed to do, then you better sharpen your wits and have the tools of the trade ready. One of the most important oversight tools is the simple tool of the audit. The audit is the IG's main weapon for detecting and reporting fraud, waste, and theft. Mr. President, I am sad to report that the IG's Audit Office at DOD is not ready to tackle fraud and waste. The lack of IG audit readiness comes at a time when aggressive audits are sorely needed. Secretary Gates recently announced that he wants to cut $100 billion in wasteful spending. But he is relying on the Pentagon bureaucrats to eliminate it. Asking those who created the waste in the first place to then turn around and get rid of it is not a good plan. He needs a better mix of weapons. To win this declared war on waste, Secretary Gates needs the independent backup from the IG. Unfortunately, the inspector general's Audit Office is AWOL doing policy audits instead of financial audits. Policy audits are not known for exposing waste. Last year, I received a series of anonymous letters alleging mismanagement and low productivity in the IG's Audit Office. This is a huge Audit Office. It has 765 auditors and an annual budget of $90 million. In response, I and my staff conducted an indepth review of all the pertinent issues. That oversight report was just completed, and I forwarded it to Secretary Gates with recommendations within that report for corrective action. My oversight should fit right in with Secretary Gates' plan to cut waste at the Defense Department. My people in Iowa are aching for some commonsense fiscal policy in Washington. My oversight report puts the spotlight on a good starting point. That oversight report indicates this vital piece of inspector general oversight machinery--the important tool of the audit--has been disabled. It is broken, leaving hundreds of billions of tax dollars vulnerable to fraud, waste, and abuse, outright theft. The status quo is totally unacceptable. The IG's audit machinery needs to be brought back up to standard. IG Heddell needs to hit the reset button. He needs to refocus the audit effort on priority areas consistent with the inspector general's core mission, which is to detect and report fraud, waste, and abuse. The problem identified in my oversight report is twofold. The first big problem is the broken Defense Department's accounting system. That system is incapable of generating accurate and complete financial data. The success or failure of an audit turns on the quality of data available for that audit. Unfortunately, the quality of Defense Department data presented to auditors should probably be rated as poor to nonexistent. The consequences are then predictable. Auditors consistently report ``no audit trail found.'' But what does ``no audit trail found'' mean? It means critical supporting documentation and data are missing. Vital records are not available for audit. Money has been paid out but for what? When there is no audit trail to follow, that question gets no answer. The ``no audit trail'' finding is like a bad toothache that doesn't go away. The IG's own audit manuals warn that a ``no audit trail'' scenario is a red warning flag. It is a very common indicator of fraud. So we have clear-cut indicators of fraud that show up in one IG report after another and, do you know what. Nothing seems to happen. It is like the IG is howling in the wilderness. There is no followup, no corrective action. Why is this being tolerated? How many more times does the IG need to be confronted by such obvious signs of fraud before decisive action is taken? Maybe next time the auditors can't find an audit trail on a big contract, they should ``lock the doors and call the law''--just drop a net on the place and call for backup. This brings me to my second audit issue. The IG's Audit Office has allowed itself to be buffaloed by the ``no audit trail'' scenario. It just backs off and rolls over instead of attacking the problem head on with solutions. The heart and soul of my financial oversight operation is a contract audit. In the government, there can be no expenditure of public money without a written binding contractual agreement. That document must specify what goods and services are to be delivered. That is the law. That is where the money trail starts, with a contract. That is where audit work should begin. It is square 1 on the audit roadmap. Beyond the contract, there are a number of critical data points or, you might say, dots. These should pop up on the auditor's radar screen. These may include contract modifications, recorded obligations, inspection and receiving reports, invoices, and payments, eventually. To get a handle on fraud and waste, auditors then need to connect all the dots between the contract that starts over here at the beginning and the final payment of money over here. They need to make all of the hookups. For example, when contract requirements can't be matched with payment, well then, bingo; there is a potential problem. This is what is called a full-scope, end-to-end audit. This is what auditors must do to document and verify fraud and waste. Doing that work positions them to answer two key oversight questions: Did the government get what it ordered at the agreed-upon price and schedule or did the government get ripped off? Top audit officials repeatedly and consistently told my investigators that doing genuine contract audits was ``impossible, we can't do it, it's too difficult.'' One audit appears to illustrate and typify the seemingly impassable obstacle, or brick wall, perceived by the auditors. The report is entitled ``The U.S. Air Force's Central War Reserve Material Contract.'' It is report No. D-2009-108. Instead of attempting to verify payments at the primary source, which is the Defense Finance and Accounting Service, the audit team opted for an unauthorized shortcut. When you are following the taxpayers' money to see if there is fraud involved, you are going to find some shortcut? They chose, then, to rely on payment data provided by who? The contractor, DynCorp, the target of the audit. Even using this flawed audit procedure, examiners were unable to match contract requirements with payments. Then when they could not do it, they just give up. The report concluded: The government did not know what it was paying for. . . . It may have paid for services DynCorp did not perform. The auditors then simply turned a blind eye to the potential fraud here in this instance. One hundred sixty-one million dollars went out the door, and for what, we don't know. The report does not tell us. It does not nail down all of the pertinent facts. It is inconclusive and unfinished. The auditors just kicked the can down the road, bucking it to another Defense Department audit agency. Clearly, auditing large, complicated Defense Department contracts where there is no audit trail to follow is, we have to admit, a daunting task. But that does not mean it is a mission impossible. It can be done. It has to be done. Senior managers refer to this task as ``audit trail reconstruction work. It is labor intensive pick and shovel work.'' Today, the inspector general relies on small rinky-dink 5- or 10- member audit teams. That doesn't cut it. The IG needs to deploy much larger teams consisting of 25, 50, or even 100 auditors or more to tackle the most egregious contract jobs. And I don't mean hire more than the 675 employees who are already there eating up $90 million. Let me make one point crystal clear right now--and I am repeating because I think it is important. I am not suggesting the IG needs to hire more auditors. This should be done within available resources. What I am saying is this: The audit office needs to switch from a large number of small teams to a small number of large teams. That would be a reallocation of audit resources. The top audit office official said it would be possible ``to cobble together such an audit team to look at one of the big weapons programs.'' However, doing that would ``deplete resources needed to meet other priorities.'' The ``other priorities'' referenced by this top official are probably wasteful reviews of the Department's policy and procedures--in other words, doing policy auditing instead of doing financial auditing. In 2009, the audit office did not conduct one in-depth contract audit of a major weapon system or contract. Aren't major weapon systems an audit priority? The record suggests that it is not an audit priority. To this Senator from Iowa, this is an astonishing revelation. The inspector general is not doing contract audits. How can this be? If the IG is doing contract audits, then the office of the IG is not or should not be open for business--ought not to be spending that $90 million. The core IG mission is to detect and report fraud, waste, and abuse to the Secretary and to the Congress and to recommend corrective action. To detect and verify fraud and waste, auditors need to be on the money trail 24/7. That is where most fraud occurs. They need to be connecting all the dots between contract signing over here and the last payment being made over here. Instead of trying to do contract audits, the audit office gave up and moved to greener, easier pastures. Most audits now focus on policies and procedures. In moving in this direction, the inspector general has strayed far from a core mission costing $90 million. Today's preference for policy audits yields zero benefits to the taxpayers. These reports cost about $800,000 apiece. Cranking out worthless policy audits may not qualify as misconduct, but it surely is a blatant waste of precious tax dollars, at $90 million a year. The current focus on policy audits helps me understand why 765 auditors--with an annual budget of $90 million--could not root out any measurable fraud or waste last year. The IG there at the Department of Defense needs to hit the reset button and refocus the audit effort on the core IG mission. First, he needs to resume full-scope contract audits to root out fraud and waste. Second, the audit office needs to aggressively review all the Defense Department's plans and programs for deploying a modern accounting system. It needs to offer specific recommendations that would help the Department reach the 2020 readiness goals. I am receiving assurances from the IG at the Department of Defense that he is moving smartly in the right direction. The signals from that office are very encouraging. Yet I remain skeptical. The audit office still seems to think that full-scope contract audits are a nonstarter and policy reviews are highly relevant. We need a change of course. Mr. President, I yield the floor.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Senate proceed to a period of morning business with Senators permitted to speak for up to 10 minutes each.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I submit the following notice in writing: In accordance with rule V of the Standing Rules of the Senate, I hereby give notice in writing that it is my intention to move to suspend rule XXII, paragraph 2, for the purpose of proposing and considering the following: After part IV of subtitle A of title II, insert the following:

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that Matthew House and Brandon Scheuring of my Finance Committee staff be granted privileges of the floor for the duration of the 111th Congress.

Mr. GRASSLEY

Mr. GRASSLEY. Madam President, I thank the Senator from Arkansas for what she has said. It really is unfortunate that we cannot get this Pigford legislation passed. I know the distinguished Presiding Officer, the junior Senator from North Carolina, has been working on this very hard as well. In fact, she and I have cosponsored a piece of legislation to give justice in this area as well. Today, we have an opportunity to finally take care of this situation of bringing justice to Black farmers who have been waiting for decades to settle their discrimination claims against the Department of Agriculture. Earlier this year, Secretary Vilsack was able to reach a settlement agreement with the Pigford II claimants who were denied a determination on the merits of their claims against the USDA for no reason other than they had filed late. The government has an obligation to fund the settlement, which is subject to court approval, and Congress must act to provide relief for these claimants and do it quickly. The Black farmers have been asking for stand-alone consideration of this bill. That is what I was hoping to get done today. I have nothing against what my colleagues are doing on the Cobell settlement as well. I think it is fair to say that such appropriation for the Pigford settlement ought to be offset. There is an advocate for the Black farmers--John Boyd. I have been working with him for a long period. He was working hard on this a long time before I was. We should be getting this resolved for the benefit of the farmers but also for the advocates, those people who have been working so hard finding ways to get it done. We thought now was the opportunity to get it done. The farm bill we passed last year does one thing right: it focuses a considerable amount of resources on new and beginning farmers and ranchers. Many of the Pigford claimants were in that same boat 20 years ago. We have an opportunity to rectify that misjustice. We know USDA has admitted the discrimination occurred. Now we are obligated to do our best getting relief to those who deserve it. It is time to make these claimants right and move forward into a new era of civil rights in the Department of Agriculture. I look forward to the time we can get this done. I plead with my colleagues, as the Senator from Arkansas pleaded, to get this done right now. I yield the floor.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, we spent nearly 6 weeks debating a bill that would help small business. My friends on the other side of the aisle exclaimed that the bill was a jobs bill, one that would help small business--the engine of our economy. The senior Senator from Louisiana--for whom I have great admiration as an advocate for small business--said, ``If the Democrats aren't for small business, I don't know what we're for.'' Well, the small business jobs bill was not passed by this body. My friends on the other side will claim that Republicans blocked the bill. But I think my friends need to look in the mirror when placing blame on their inability to govern. Even if the small business jobs bill would have passed, the tax measures in that bill are only a drop in the bucket when it comes to the taxes and increased regulation small business is going to have to endure. That's right, although Democratic leadership and the White House continue to say that they are for small business, any legislative measure that has been advertised as helping small business has not lived up the hype. Let's start with the new health care reform law. During the debate over health care reform, my friends on the other side of the aisle--including top officials in the White House-- explained that the new law would provide tax credits to small business to help them pay for health insurance. My friends said it so many times, you would almost think that the so- called tax credit was the best thing since sliced bread. Many Democratic Senators based their vote in favor of the health care reform bill solely on the belief that the small business tax credit for health insurance would help struggling small businesses. Well, even after the White House spent taxpayer dollars to send postcards to 4 million small businesses informing them of the so-called tax credit for health insurance, the tax credit has been a dud. That is not according to this Senator; that is according to small business owners and brokers who are in the business of selling insurance to small business. For example, just the other day--Thursday, July 29--the Bloomberg news organization wrote an article noting that the response to the so- called tax credit for small business ``has been cool'' according to ``health-plan brokers across the country.'' Here are some quotes from the article about the small business tax credit: James Stenger, director of business development for Benefit-Mall, said, ``The reality is it doesn't meet the hype . . . It's had very little traction so far . . .'' Russ Childers, a broker in Americus, GA, said, ``It fell short of what was needed to help businesses.'' Todd Page, of Warrenville, IL, said, ``We've really wanted it to work, because we'd sell more . . . It just hasn't worked out, and most firms have been disappointed.'' Thomas Harte, president of Landmark Benefits, Inc., said, ``We're not seeing more people becoming insured as a result of a subsidy coming their way.'' They are not the only ones decrying the so-called tax credit for health insurance. The chief executive officer of the largest organization representing small business--the National Federation of Independent Business-- questioned the effectiveness of this tax credit. Small business owners who also had high hopes that the credit would help them were surprised and extremely disappointed when they found out they did not qualify for the credit. A May 20 Associated Press article chronicles these frustrations. I would like to read one passage from the article before I move on. The article said: Zach Hoffman was confident his small business would qualify for a new tax cut in President Barack Obama's health care overhaul law. But when he ran the numbers, Hoffman discovered that his office furniture company wouldn't get any assistance with the $79,200 it pays annually in premiums for its 24 employees. `It leaves you with this feeling of a bait-and- switch,' he said. Every day, I hear from Iowa small business owners who are frustrated with the so-called small business tax credit for health insurance. I have been told that--after gathering all of the required information and paying an accounting professional to calculate all of the phaseouts and limitations--the time and cost almost outweighs any benefit for those businesses lucky enough to qualify. Steven Yeater of Wilton, IA, the co-owner of a products finishing business, wrote me a letter telling me that the tax credit is ``(1) not well thought out or discussed, (2) ridiculously complicated for a small business owner to understand and implement, and (3) once again, Congress is over-selling/over-promising the benefits of the tax credit.'' This is just one example where the Democratic majority has failed small business. This is one example where the Democratic majority has touted a so- called benefit for small business that did not live up to its hype. And now, small business is faced with mounting tax increases and regulatory burdens. What do I mean? The new health care reform law included 20 tax increases. Thirteen of them fall on individuals and families, and 7 of them hit businesses. These tax increases will be devastating for small business. Moreover, these tax increases far outweigh the benefit of the so-called small business tax credit for health insurance that some businesses are lucky enough to receive. And this is not the only tax increase small business will face. When Congress returns after the August recess, we are going to debate the bipartisan tax relief that was enacted back in 2001 and 2003. That tax relief is set to expire at the end of this year unless Congress acts. Allowing the bipartisan tax relief to expire will result in the largest tax increase in our Nation's history. My friends on the other side of the aisle have indicated that they would like to extend the bipartisan tax relief for the ``middle class.'' I want to emphasize that this means that my Democratic colleagues want to extend 80 percent of the bipartisan tax relief that they like to call the Bush tax cuts. Actually, the only reason why they call it the Bush tax cuts is to vilify the tax relief. But my friends seem to support 80 percent of the tax cuts they enjoy vilifying so often. Which brings me to my final point. My friends on the other side of the aisle would extend some of the tax relief but not all of it. My friends want to allow the top marginal tax rates--and a number of hidden taxes that affect these taxpayers--to expire. Why? Because my friends say the country--our Federal Government--cannot afford to give tax cuts to the ``rich.'' But, it is not the rich who are going to be burdened if the rates were allowed to expire; it is small business that will suffer. So in closing, I refer back to the statement of the distinguished Senator from Louisiana, which was, if Democrats are not for small business, I don't know what we are for. The Democratic leadership is not for extending all of the bipartisan tax relief. So I will leave it to others to decide whether or not my Democratic colleagues are for small business. I ask unanimous consent to have the items to which I referred printed in the Record.

Mr. GRASSLEY

Mr. GRASSLEY. I thank the Senator from Rhode Island. He is always very courteous to me. Mr. President, I rise to take a few minutes to discuss the reasons why I am voting against Elena Kagan to be Associate Justice. An appointment to the Supreme Court is one of the most important positions an individual can hold under our Constitution. It is a lifetime position on the highest Court of the land. I take very seriously my constitutional role of advice and consent. The Senate's job is not only to provide advice and consent by confirming nominees who are intelligent and accomplished. Our job is to confirm nominees who will be fair and impartial judges, individuals who truly understand the proper role of a Justice in our system of government. Our job, then, is to confirm nominees who will faithfully interpret the law and the Constitution without personal bias or prejudice. When the Senate makes its determination, we must carefully assess the nominee's legal experiences, record of impartiality, and commitment to the Constitution and rule of law. We need to assess whether the nominee will be able to exercise what we call judicial restraint. We have to determine if the nominee can resist the siren call to overstep his or her bounds and encroach upon the duties of the legislative and executive branches. Fundamental to the U.S. Constitution are the concepts of these checks and balances and the principle of separation of powers. The preservation of our individual freedoms actually depends on restricting the role of policymaking to legislatures rather than allowing unelected judges with lifetime appointments to craft law and social policy from the judicial bench. The Constitution constrains the judiciary as much as it constrains the legislative branch and the executive branch under the President. When President Obama spoke about the criteria by which he would select his judicial nominees, he placed a very high premium on a judge's ability to have, in his words, ``empathy when deciding the hard cases.'' This empathy standard glorifies the use of a judge's heart and broader vision of what America should be in the judicial process. He said that individuals he would nominate to the Federal judiciary would have ``a keen understanding of how the law affects the daily lives of American people.'' So when President Obama nominated Elena Kagan to the Supreme Court, we have to assume he believed she met his ``empathy'' standard. This empathy standard is a radical departure from our American tradition of blind, impartial justice. That is because empathy necessarily connotes a standard of partiality. A judge's impartiality is absolutely critical to his or her duty as an officer of an independent judiciary, so much so that it is actually mentioned three times in the oath of office that judges take. Empathetic judges who choose to embrace their personal biases cannot uphold their sworn oath under our Constitution. Rather, judges must reject that standard and decide cases before them as the Constitution and the law requires, even if it compels a result that is at odds with their own political or ideological beliefs. Justice is not an automatic or a mechanical process. Yet it should not be a process that permits inconsistent outcomes determined by a judge's personal predilections rather than from the Constitution and the law. An empathy standard set by the President that encourages a judge to pick winners and losers based on that judge's personal or political beliefs is contrary to the American tradition of justice. That is why we should be very cautious in deferring to President Obama's choices for the judicial branch. He set that standard; we did not. We should carefully evaluate these nominees' ability to be faithful to the Constitution. Nominees should not pledge allegiance to the goals of a particular political party or outside interest groups that hope to implement their political and social agendas from the bench rather than getting it done through the legislative branch. When she was nominated to the Supreme Court, meaning Ms. Elena Kagan, Vice President Biden's Chief of Staff, Ron Klain, assured the leftwing groups that they had nothing to worry about in Elena Kagan because she is, in his words, ``clearly a legal progressive.'' So it is pretty safe to say that President Obama was true to his promise to pick an individual who likely would rule in accordance with these groups' wishes. A Justice should not be a member of someone's team working to achieve a preferred policy result on the Supreme Court. The only team a Justice of the Supreme Court should be on is the team of the Constitution and the law. I have said on prior occasions that I do not believe judicial experience is an absolute prerequisite for serving as a judge. There have been dozens of people, maybe close to 40, who have been appointed to the Supreme Court who have not had that experience. Solicitor General Kagan, however, has no judicial experience and has very limited experience as a practicing attorney. Unlike with a judge or even a practicing lawyer, we do not have any concrete examples of her judicial method in action. Thus, the Senate's job of advice and consent is much more difficult. We do not have any clear substantive evidence to demonstrate Solicitor General Kagan's ability to transition from a legal academic and political operative to a fair and impartial jurist. Solicitor General Kagan's record and her Judiciary Committee testimony failed to persuade me that she would be capable of making this crucial transformation. Her experience has primarily been in politics and academia. As has been pointed out, working in politics does not disqualify an individual from being a Justice. However, what does disqualify an individual is an inability to put politics aside in order to rule based upon the Constitution and the law. In my opinion, General Kagan did not demonstrate that she could do that during her committee testimony. Moreover, throughout her hearings, she refused to provide us with details on her views on constitutional issues. It was very unfortunate we were unable to elicit forthcoming answers to many of our questions in an attempt to assess her ability to wear the judicial robe. She was not forthright in discussing her views on basic principles of constitutional law, her opinions of important Supreme Court cases or personal beliefs on a number of legal issues. This was extremely disappointing. Candid answers to our questions were essential for us as Senators to be able to ascertain whether she possesses the proper judicial philosophy for the Supreme Court. In fact, her unwillingness to directly answer questions about her judicial philosophy indicated a political approach throughout the hearing. I was left with no evidence that General Kagan would not advance her own political ideas if she is confirmed to the Federal bench. General Kagan's refusal to engage in meaningful discussion with us was particularly disappointing because of her position in a 1995 Law Review Article entitled ``Confirmation Messes, Old and New.'' In that article she wrote--and she was then Chicago Law Professor Kagan--that it was imperative that the Senate ask about, and the Supreme Court nominees discuss, their judicial philosophy and substantive views on issues of constitutional law. Specifically, then-Professor Kagan wrote: When the Senate ceases to engage nominees in meaningful discussion of legal issues, the confirmation process takes on an air of vacuity and farce, and the Senate becomes incapable of either properly evaluating nominees or appropriately educating the public. That is in Professor Kagan's own words. Bottom line, General Kagan did not live up to her own standard. She was nonresponsive to many of our questions. She backed away from prior positions and statements. She refused to discuss the judicial philosophy of sitting judges. When asked about her opinions on constitutional issues or Supreme Court decisions, she either declined to answer or engaged in an overview of the status of the law rather than a discussion of her own personal views. Because of her shallow record on the issues, this approach to the hearing was extremely troubling. At her confirmation hearing, General Kagan told us to ``look to [her] whole life for indications of what kind of judge or Justice [she] would be.'' Well, General Kagan's record has not been a model of impartiality, as we looked at her record and her life just as she asked us to. There is no question that throughout her career she has shown a strong commitment to far-left ideological beliefs. Solicitor General Kagan's upbringing steeped her in deeply held liberal principles that at one point she stated she had ``retained . . . fairly intact to this date.'' Her jobs have generally never required her to put aside her political beliefs, and she has never seen fit to do so. Her first instinct and the instincts she has relied upon throughout her career are her liberal, progressive political instincts put to work for liberal, progressive political goals. I have no evidence that if Solicitor General Kagan were confirmed to the Supreme Court she would change her political ways or check her political instincts or goals at the courthouse door. In fact, General Kagan gained her legal expertise by working in politics. She started out by working on Congresswoman Liz Holtzman's Senate campaign, hoping for, in her words, a ``more leftist left.'' She also worked as a volunteer in Michael Dukakis's Presidential run. The Dukakis campaign wisely put her to work at a task that is political to the core--opposition research. There she found a place where she was encouraged to use her political savvy and make decisions based upon her liberal, progressive ideology. Moreover, while clerking for Justice Marshall, General Kagan's liberal personal convictions--rather than the Constitution and the law--seemed to be her ultimate guide when analyzing cases. General Kagan consistently relied on her political instincts when advising Justice Marshall, channeling and ultimately completely embracing his philosophy of ``do[ing] what you think is right and let[ting] the law catch up.'' Her Marshall memos clearly indicate a liberal and outcome- based approach to her legal analysis. In several of her memos, it is apparent she had a difficult time separating her deeply held liberal views and political beliefs from the law. For example, in one case she advised Justice Marshall to deny certiorari because the Court might make ``some very bad law on abortion.'' In another case, she was ``not sympathetic'' that an individual's constitutional right to keep and bear arms had been violated. In essence, her judicial philosophy was a very political one. During her tenure at the White House, Solicitor General Kagan worked on a number of highly controversial issues, such as abortion, gun rights, campaign finance reform, and the Whitewater and Paula Jones scandals. She herself described her work for President Clinton as being primarily political in nature. In a 2007 speech, she said: During most of the time I spent at the White House, I did not serve as an attorney, I was instead a policy adviser. . . . It was part of my job not to give legal advice, but to choose when and how to ask for it. Her documents from the Clinton Library prove just that. She forcefully promoted far-left positions and offered analyses and recommendations that were far more political than legal in nature. For example, during the Clinton administration, General Kagan was instrumental in leading the fight to keep partial-birth abortion on the books. Documents show that she boldly inserted her own political beliefs in the place of science. Specifically, she redrafted language for a nonpartisan medical group to override scientific findings against partial-birth abortion in favor of her own extreme views. Despite the lack of scientific studies showing that partial-birth abortion was never necessary and her own knowledge that ``there aren't many [cases] where use of the partial-birth abortion is the least risky, let alone the `necessary,' approach,'' Solicitor General Kagan had no problem intervening with the American College of Obstetricians and Gynecologists to change their own policy statement. After her intervention, this doctor group's statement no longer accurately reflected the medically supported position of the obstetricians and gynecologists. Rather, the group's statement now said that partial-birth abortions should be available if the procedure might affect the mother's physical, emotional or psychological well-being. The reality is that General Kagan's change was not a mere clarification. It was, in fact, a complete reversal of the medical community's original statement. Other documents show that Solicitor General Kagan also lobbied the American Medical Association to change a statement it had issued on partial-birth abortion. These documents demonstrated her ``willingness to manipulate medical science to fit the Democratic Party's political agenda on a hot button issue of abortion.'' During her hearing, General Kagan refused to admit she participated in the decisionmaking process of what language the gynecologists would use in their statement on partial-birth abortion. The documents present a very different picture. Although she stated that there was ``no way she could have intervened with the ACOG,'' she did exactly that. Instead of responding to a legitimate inquiry in an open and honest manner, she deflected the question and gave, at best, nonresponsive answers. In addition, Solicitor General Kagan worked on a number of initiatives to undermine second amendment rights. She was front and center of the Clinton administration's anti-second amendment agenda. She collaborated closely with Jose Cerda on the administration's plan to ban guns by ``taking the law and bending it as far as we can to capture a whole new class of guns.'' After the Supreme Court in Printz v. U.S. found parts of the Brady antigun law to be unconstitutional, she endeavored to find legislative and executive branch responses to deny citizens' second amendment rights. Even in academia, Solicitor General Kagan took steps and positions that were based on her strongly held personal beliefs rather than an evenhanded reading of the law. As dean of Harvard Law School, she actively defied Federal law by banning military recruiters from campus while the Nation was at war. Prior to her appointment as dean, the Department of Defense had made clear to Harvard that the school's previous recruitment policy was not in compliance with the Solomon Amendment, so Harvard did what Harvard should have done: changed its policy to abide by the Federal law. But when the Third Circuit, which does not include Massachusetts, ruled on the issue, then-Dean Kagan immediately reinstituted the policy barring the military from the Harvard campus. She took this position because she personally believed the military's longstanding policy of don't ask, don't tell, in her words, was ``a profound wrong--a moral injustice of the first order.'' She claimed her policy was equal treatment. However, the Air Force believed the policy was playing games with its ability to recruit. The Army believed the policy resulted in it being stonewalled. Then-Dean Kagan was entitled to her opinion, but--no different than anybody else in this country--she was not free to ignore the law. The Solomon Amendment required that military recruiters be allowed equal access to the university as any other recruiter. The bottom line is that then-Dean Kagan refused to follow the law and instead interpreted that law in accordance with her personal beliefs. The Supreme Court unanimously rejected her legal position on the Solomon Amendment and upheld our military. I am concerned that Solicitor General Kagan will continue to use her personal politics and ideology to drive her legal philosophy if she is confirmed to the Supreme Court, particularly since her record shows she has worked to bend the law to fit her political wishes. Further, I am concerned with the praise Solicitor General Kagan has lavished on liberal jurors who promote activist philosophies such as those of Israeli Judge Aharon Barak. Judge Barak is a major proponent of judicial activism who believes judges should ``bridge the gap between law and society.'' He also went on to say that we ought to use international law to advance a social and political agenda on the bench. At a Harvard law event attended by then-Dean Kagan, Judge Barak noted with approval cases in which ``a judge carries out his role properly by ignoring the prevalent social consensus and becoming a flag bearer of new social consensus.'' When I asked General Kagan if she endorsed such an activist judicial philosophy, she replied that Judge Barak's philosophy was something ``so different from any that we would use or want to use in the United States.'' But that contradicts her previous statement about Judge Barak that he is a ``great, great judge'' who ``presided over the development of one of the most principled legal systems in the world.'' I am not able to ascertain if Solicitor General Kagan agrees with Judge Barak or if she rebukes his positions, so I am left to believe she endorses the judicial method of what she calls her ``judicial hero'' and his views on judicial restraint or lack thereof. I cannot support a Supreme Court nominee whose judicial philosophy endorses judicial activism as opposed to judicial restraint. With respect to the second amendment, General Kagan testified that the Heller and McDonald cases were binding precedent for the lower courts and due all the respect of precedent. However, I worry that, if confirmed, her deeply engrained personal belief will cause her to overturn this precedent because she does not personally agree with those decisions or the constitutional right to bear arms. At the hearing, Solicitor General Kagan was unwilling to discuss her personal views on the second amendment or whether she believes the right to bear arms is what it is today--a fundamental right. When I asked her about her thoughts on the issue, she simply replied that she ``had never thought about it before.'' I also asked her whether she believed self- defense was at the core of the second amendment. She could only respond: ``I have never had the occasion to look into the history of the matter.'' As a former constitutional law professor both at Chicago and Harvard, Solicitor General Kagan's response ought to be troubling to anybody who heard it. A key theme in the U.S. Constitution reflects the important mandate of the Declaration of Independence. It is the recognition that the ultimate authority of a legitimate government depends on the consent of a free people, the ``consent of the governed.'' As Thomas Jefferson wrote: We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men deriving their just powers from the consent of the governed. As former Attorney General Edwin Meese explains: That all men are created equal means that they are equally endowed with unalienable rights. . . . Fundamental rights exist by nature, prior to government and conventional laws. It is because these individual rights are left unsecured that governments are instituted among men. So I am concerned that Elena Kagan refused to agree with my comments about the Declaration of Independence--that there are such things as inalienable rights and if government does not give, government cannot take away. Similarly, Senator Coburn asked General Kagan if she agreed with William Blackstone's assessment about the right to bear arms and use those arms in self-defense. She replied: I don't have a view on what are natural rights, independent of the Constitution. If you don't have a view about rights that existed before the Constitution was ever written, do you have the knowledge to be a Supreme Court Justice? So this is concerning to me because, as one commentator stated: A legal scholar with no take on such a fundamental constitutional topic [of which individual rights qualify as natural or inalien in character] seems at best disingenuous and at worst, frightening. How can one effectively analyze and apply the Constitution without a firm grip on what basic freedoms underlie our founding documents and national social compact? How can one effectively understand the original intent of the Framers without any opinion on the essential place of certain liberties within the American legal framework? Bottom line: The fact that General Kagan refused to answer our questions about her personal opinions on the right to bear arms leads me to conclude that she does not believe people have a natural right of self-preservation, unrelated to the Constitution. I am concerned about Solicitor General Kagan's views on our constitutional right to bear arms not only because of her anti-second amendment work during the Clinton administration but also in light of her memo in the Sandidge case when she clerked for Justice Marshall. In her memo, she summarily dismissed the petitioner's contention that the District of Columbia's firearm statute violated his second amendment right to keep and bear arms. Instead of providing a serious basis for her recommendation to deny the certiorari, her entire legal analysis of this fundamental right consisted of one sentence: ``I am not sympathetic.'' A further basis for my concerns about whether she will protect or undermine the second amendment if she is confirmed is the decision of the Office of Solicitor General under her leadership not to even submit a brief in the second amendment McDonald case. Solicitor General Kagan's record clearly shows she is a supporter of restrictive gun laws and has worked on numerous initiatives to undercut second amendment fundamental rights. So, not surprisingly, as Solicitor General, she could not find a compelling Federal interest for the United States to submit a brief in a case that dealt with fundamental rights and the second amendment of the Constitution. This was a case that everyone knew would have far-reaching effects. It is apparent that political calculations and personal beliefs played a role in Solicitor General Kagan's decision not to file a brief in this landmark case to ensure that constitutional rights of American citizens were protected before the Supreme Court. With respect to the Constitution's commerce clause, Solicitor General Kagan was asked whether she believed there are any limits to the power of the Federal Government over the individual rights of American citizens. Unfortunately, her response didn't assure me that, if confirmed, she would ensure that any law Congress creates does not infringe on the constitutional rights of our citizens. Specifically, Senator Coburn asked her whether she believed a law requiring individuals to eat three vegetables and three fruits a day violated the commerce clause. Though pressed on this and other lines of questioning on the commerce clause, she was unwilling to comment on what would represent appropriate limits on Federal power under the Constitution--and probably the commerce clause has been used more than any specific power of Congress for greater control of the Federal Government over State and local governments or over the economy and probably depriving individual rights in the process. I am not sure Solicitor General Kagan understands that ours--meaning our government--is a limited government and that the restraints on the Federal Government's power are provided by the Constitution and the concept of federalism upon which our Nation is founded. The powers of the Federal Government are explicitly enumerated in article I, section 8 of the Constitution. Further, the 10th amendment provides that the powers not expressly given to the Federal Government in the Constitution are reserved to the States. The Founding Fathers envisioned that our government would be constitutionally limited in protecting the fundamental rights of life, liberty, and property and that the laws and policies created by the government would be subject to the limits established by the Constitution. As James Madison wrote in Federalist No. 45, ``The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State government are numerous and indefinite.'' I am not convinced the Solicitor General appreciates that there are express limits the Constitution places on the ability of Congress to pass laws. I am not persuaded by her nonanswers to our commerce clause questions that she won't be a rubberstamp for unconstitutional laws that threaten an individual's personal freedoms. With respect to the institution of marriage, I am concerned with Solicitor General Kagan's ability to disregard her own personal beliefs in order to defend the Defense of Marriage Act. Under her supervision, the United States filed a brief stating that ``the Administration does not support DOMA as a matter of policy, believes that it is discriminatory, and supports its repeal.'' At the hearing, she refused to say whether this was an appropriate statement to make considering that it is the duty of the Solicitor General to vigorously defend the laws of the United States. How are we to believe she will uphold a law as a Supreme Court Justice when she disagrees with that law? When she was tasked as the government's lawyer to vigorously defend the law, clearly she put her personal politics and beliefs first. It is obvious that supporting the repeal of a law is not vigorously defending that law. There are other occasions where General Kagan's personal beliefs rather than the law appear to have guided her decisions as Solicitor General. For example, with respect to her handling of the lawsuits attempting to overturn the don't ask, don't tell policy, she didn't file an appeal in the Witt v. Department of the Air Force case to uphold the constitutionality of the law, even though there was a split in the circuit courts on this issue. I have already discussed Solicitor General Kagan's actions at Harvard Law and how she thwarted our military's recruitment efforts because of her deeply held views against the don't ask, don't tell policy. I cannot imagine that her personal opinions on this matter did not play a role in decisionmaking at the Solicitor General's Office with respect to the Witt case. I am also concerned about Solicitor General Kagan's views on property rights. The fifth amendment states that the government ``shall not take private property rights for public use without just compensation.'' In 2004, the Supreme Court took an expansive view of the words ``public use'' in Kelo v. City of New London, allowing the government to take private property so that it could be transferred to another person promoting economic development. At the hearing, Solicitor General Kagan refused to comment on whether she believed the Court had correctly interpreted the text of the Constitution in the Kelo case. She also did not elaborate on any limits to the government's ability to take private property. I am concerned that she does not agree that the ruling in Kelo undermines citizens' property rights contained in the Constitution. Solicitor General Kagan's view of the role of international law is disturbing. At the hearing, she stated that a Justice could look to international law to find ``good ideas'' when interpreting the U.S. Constitution and our laws. However, when I pressed her on which countries a Justice should look to in order to find those ``good ideas,'' she refused to answer. I am unaware of how international law can help us better understand our great Constitution. That is because international law should not be used to interpret our Constitution. When we begin to look to international law to interpret our own Constitution, we are at a point then where the meaning of the U.S. Constitution is no longer determined by the consent of the governed. The importance Solicitor General Kagan places on international law is made abundantly clear by her actions as dean of Harvard, when she implemented a curriculum mandating that all first-year law students take international law. She said that the first year of law school is the ``foundation of legal education,'' forming lawyers' ``sense of what the law is, its scopes, its limits, and its possibilities.'' Yet, U.S. constitutional law, the class that teaches the founding document of our legal system--a class that almost every other law school in the country believes first-year students should have--is not a mandatory first-year course at Harvard Law. I don't disagree that it is helpful for students to understand international law, but I question why it should be a first-year requirement and thus mandatory to graduate--especially when U.S. constitutional law is not required to graduate from Harvard Law School at all--yes, hard to believe; a student can graduate from Harvard Law without having to take a single constitutional law class. When General Kagan was asked about this, she answered: Constitutional law should primarily be kept in the upper years, where students can deal with it in a much more sophisticated and in-depth way. This may seem reasonable, but it does not address why a student is never required to take a constitutional law class to graduate. Because, as dean, she never saw the need to make constitutional law a requirement to graduate, then I am led to believe Solicitor General Kagan believes international law is more important than U.S. constitutional law. This is remarkable--or maybe I should say it is shocking--considering that the Constitution of the United States is our most fundamental law. I am deeply concerned then that if confirmed to the Supreme Court, General Kagan will put her own strongly held personal views above that of the Constitution and the law. Throughout her life, Solicitor General Kagan's background has allowed her to work without having to check her political and ideological views. Her experiences throughout her life have allowed her to indulge, reinforce, and ultimately submit her deeply ingrained liberal beliefs. In my opinion, her record strongly suggests she will not be able to act in an unbiased manner as a Justice. Her answers and evasions to our questions at the Judiciary Committee hearing also raise serious concern about her ability to set aside her personal political goals when interpreting the Constitution. I am convinced that once confirmed to the Court, her ``finely tuned political antenna'' and her ``political heart'' will drive her judicial method, rather than judicial restraint. At the hearing, General Kagan tried to distance herself from her Oxford thesis, where she embraced judicial activism. In that thesis, she wrote that ``it is not necessarily wrong or invalid'' for judges to try to ``mold and steer the law in order to promote certain ethical values and achieve certain social ends.'' Our great American tradition and the U.S. Constitution soundly reject the notion of judges overstepping their constitutional role by implementing their personal, political, and social goals from the bench. I am not convinced that, if confirmed, General Kagan will actually be able to resist the temptation to do that. That is because I believe her judicial philosophy is really nothing more than a political philosophy. This being the case, I am not at all convinced she will be able to apply the law impartially and not be a rubberstamp for the President or the leftwing interest groups' political and social agenda. Solicitor General Kagan acknowledged that it is ``difficult to take off the advocate's hat and put on the judge's hat.'' Yet she could not show us that she had the ability to make the transition from an academic and political operative to what we believe ought to be a fair and impartial jurist. Her testimony did not disprove her far-left record or demonstrate she would not let her political views dominate her approach to the law. I am not persuaded Solicitor General Kagan will be able to overcome that difficulty and transition into an unbiased judge, so I will vote no on her confirmation. I yield the floor.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that Jessica Waters and Aaron Smith of my Finance Committee staff and Carolyn Coda and Thomas Ryan of my Judiciary Committee staff be granted the privileges of the floor during the 111th Congress.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GRASSLEY. Mr. President, last week there was a news conference by a group of outside people who attacked ethanol, and then the senior Senator from Arizona gave a speech on that subject last week. I told the senior Senator that I was going to have something to say about ethanol this week; I didn't tell the news conference people that I was. So it seems to be that time of year once again. Without fail, every few months or so, we have big oil on the one hand and big food interest groups on the other hand start a misinformation campaign in an effort to denigrate the U.S. biofuels producers. In other words, they are attacking renewable fuels. Last week, almost as if on cue, a group opposed to domestic efforts to reduce our dependence on foreign oil began their usual song and dance. A press conference led by the Grocery Manufacturers Association and other special interest groups was held to malign the benefits of homegrown renewable fuels. Don't forget that this is the same group of folks who, a few years ago, waged a high-priced, inside-the-beltway smear campaign against ethanol for allegedly leading to higher food prices. At that time, the price of corn was going up because there was speculation in commodities, the price of oil was going up, and so the grocery manufacturers decided: We have to have an excuse to increase the price of food--20 percent, roughly. Well, you know what, the price of grain came down, but the price of food has not come down. So I think it was simply a diversionary tactic to get away with what they maybe would not have gotten away with with the consumers. Well, I think 2 years ago, maybe 3 years ago, that myth was roundly dispelled, but I want to keep reminding people that there was that campaign out there. Economists proved what Iowa farmers and our Nation's farmers knew to be true: The higher cost of corn was responsible for just a tiny fraction of the increase in food prices. So while food manufacturers wanted consumers to believe that corn ethanol was doubling or tripling their grocery prices, nonbiased observers knew that the corn input costs were just pennies of the retail price of food. However, with dozens of multibillion-dollar corporations and profits to protect, it is not surprising to see this group--or maybe I better say these groups--attack our country's farmers and ranchers, who are working to produce our Nation's food, our Nation's feed, our Nation's fiber, and now, with renewable fuels, producing fuel that you and I burn in our car tanks almost daily. And farmers can do that. They can do all of that. They are doing it right now. This year, we will have the largest corn crop this country has ever produced, and doing it on 3 million less acres of cropland. So these same groups are at it again. They see new opportunities to undermine our domestic biofuels industry, and they have a bottom line to look out for and pockets to line. They are now arguing that our Nation cannot afford government policies to foster the growth of renewable energy. In other words, they are arguing that the cost of energy independence is too high and we cannot afford it. They would prefer that we increase our reliance on fossil fuels and imported crude oil. The unfortunate outcome of such attacks, however, is that less informed individuals begin to believe this misinformation. So it is time that we review the true cost of imported fossil fuels. In 2008, Americans sent over $450 billion to foreign countries to satisfy our demand for oil. At $80 a barrel--and I suppose oil is, I think, roughly $75 now, but if it is $80 a barrel, we will send nearly $350 billion overseas, out of this country, this year for oil. We rely on foreign oil to meet 60 percent of our oil demand. But do not forget, much of the world's oil reserves are located in the volatile and very unpredictable Middle East. According to the Energy Information Administration, oil price shocks and price manipulation by the Organization of Petroleum Exporting Countries cost our economy about $1.9 trillion between 2004 and 2008. Our dependence on imported oil accounts for about one-half of our trade deficit--one commodity--a very important commodity for us, but it accounts for one-half of our trade deficit. The Federal Government's support for homegrown ethanol equals less than 2 percent--just less than 2 percent of the money we will send to Canada, Saudi Arabia, Mexico, Venezuela, Nigeria, and other countries where we import oil. The domestic ethanol industry supports 400,000 green jobs in the United States. Last year, ethanol contributed over $50 billion to our gross domestic product. It contributed $8.4 billion in tax revenue to the Federal Government. The incentives we provide for ethanol production lead to a surplus of tax revenue for the Federal Treasury. So which is the better bargain--being dependent on foreign countries for 60 percent of our energy needs at a cost of $350 billion or keeping this money at home, creating green jobs and increasing our national and economic security? I believe the choice is very obvious. Up to this point, I have only considered the economic cost. There are other costs. I will put up a chart with one of the environmental costs. This chart depicts a small example of the environmental cost of our dependence upon foreign oil. The first photo, the lower photo, is the one we are all too familiar with, the explosion and the ensuing oilspill at BP's Deepwater Horizon oil rig. The other photo might look like Mars or the Moon, but it depicts land in Canada where oil is being extracted from tar sands. The fact is, fossil fuels are getting more expensive to extract and are likely to come at greater environmental cost. That is the negative aspect, environmentally, beyond the economic issues I have discussed. We have an alternative. That alternative, which the next chart shows, is homegrown, renewable biofuels. The chart shows the cornfield on the left, and where we go to the gasoline station to get the renewable fuels to power the car on the right. Today, ethanol accounts for 10 percent of our transportation fuels. No other fuel alternative comes close to ethanol's contribution to a clean environment and less dependence on foreign energy and less dependence upon fossil fuels. Domestically produced ethanol contributes more to the fuel supply than all imports except Canada. More ethanol means less greenhouse gas emissions. A University of Nebraska study found that ethanol reduces direct greenhouse gas emissions by 48 to 59 percent compared to gasoline. Ethanol production continues to improve, and increasing crop yields means we are producing more fuel from less grain on fewer acres. Let me repeat something I said earlier: Probably 13 billion bushels of corn, the largest crop ever produced in the United States, and we have 3 million less acres in crop production this year compared to a year ago. Ethanol producers are reducing energy and water usage. So the production of ethanol is becoming more efficient. Finally, it is important we consider the national security cost of our dependence upon foreign oil. I will put up a chart about the Middle East. The Middle East accounts for 20 percent of U.S. oil imports; 17 billion barrels of oil are shipped each day through the single most important shipping chokepoint; that is, the Straits of Hormuz out of the Persian Gulf. In fact, the military people say that is one of the serious problems in dealing with Iran, if they decided to sink ships there, what they could do economically to the rest of the world and what they could do national security wise to the rest of the world. They have threatened that. They have never done it, probably because their livelihood depends on it as much as the rest of the world. But it is still one of those chokepoints. On average, 15 crude oil tankers pass through the Straits of Hormuz every day, with much of that oil headed to the United States. We have two other large oil shipping chokepoints; one at the Suez Canal and the other one at the Gulf of Aden at the bottom of the map. To determine the true cost of America's dependence on foreign oil, it is important to understand the cost to the taxpayers of defending and protecting these shipping lanes. A New York Times editorial, in the late 1990s, calculated the true cost of a gallon of gas, including the military cost of making sure it can get from the oil wells of the Middle East to the United States at $5 a gallon. Last week, I questioned four-star retired U.S. Army GEN Wesley Clark on the true cost of gasoline, when he appeared before the Committee on Agriculture. He estimated it to be around $7 to $8 a gallon today, 10 years later than the New York Times editorial. Homegrown ethanol produced in the Midwest--I suppose anyplace in the United States, but most of the corn is produced in the Midwest--doesn't need a military escort to the gas stations on the east or west coasts such as oil from the Middle East does. Homegrown ethanol does not need the Department of Defense to protect its transport from our farm fields to consumers. Again, our Nation's investment in ethanol is a real bargain. It is increasing our economic and national security. That is why it is important we continue to support this industry. Some have claimed it is a mature industry and it no longer needs our help. This statement ignores the fact that ethanol is competing with a century-old industry dominated by big oil, which itself has received billions of dollars from the taxpayers over many decades and for decades longer than the ethanol industry. Getting back to the detractors I referred to, most often the people who held the press conference a week ago today denigrating oil, these ethanol detractors continue to undermine these efforts. One organization estimates that a lapse in the tax incentive for ethanol would shut down 40 percent of the industry and result in the loss of 112,000 green jobs. That is 112,000 jobs that rely on the production of ethanol. We can't allow ethanol to follow the path of biodiesel which has essentially shut down because this Congress failed to extend that tax incentive that ran out last December 31. While President Obama spoke in his address on Saturday about investing in homegrown clean energy, 45,000 biodiesel jobs have vanished because of the lapse of the biodiesel tax credit. It is inexcusable. President Obama touted the goal of creating 800,000 clean energy jobs by 2012. Why not take action today to extend the lapsed biodiesel tax credit and immediately put 45,000 people back to work? The same thing could happen to the ethanol industry, if we fail to extend the tax incentive which runs out December 31 this year. If we undermine ethanol, we are putting out the welcoming mat for dictators such as Hugo Chavez. In fact, last night on the television, it said Chavez is talking about maybe not selling oil to the United States. Then, last week, as I referred to in my speech--and I told the Senator from Arizona I was going to speak on ethanol this week--we had the senior Senator from Arizona question the wisdom of domestic renewable fuel incentives. He was quoted as saying: Maybe we will stop this damned foolishness called ethanol subsidies. It's one of the greatest rip-offs that takes place on the American taxpayers. So to those who would do away with our domestic ethanol production, I have one question: Which country should we look to for 10 billion gallons of fuel? Would we want to go to Saudi Arabia? Would we want to go to Venezuela? Would we want to go to Nigeria? Whom would we rather support with our hard-earned money? I want to ask this question: Would we rather support Hugo Chavez or the American farmer? Would we rather support Chavez, which is an insane thing to do? Sending money to someone who buys guns to fight us is insanity. In this chart we have these two people on the left, Chavez and the President of Iran. We have the farmer of America on the right. Where would we want to get our energy from? Whom would we want to rely on? It is pretty easy to answer that question. We shouldn't be reducing our use of renewable fuels. We should be increasing it. We should produce all we can from corn and from the biomass that is left over from corn and from grasses and from wood waste. We should increase the use of biofuels by mandating the production of flex-fuel vehicles and increasing the availability of blender pumps. Ethanol is here today. It is creating a cleaner environment. It is keeping money at home in our economy and increasing our national security. Undermining the only renewable fuel that has the proven ability to accomplish these goals would be insanity, a little bit like the two people we see on the left but not the person on the right. The person on the right is the backbone of the American economy because nothing has contributed to the national wealth except what comes from the national resources of the country. Bottom line: Ethanol is good for America, but let's segment that. It is good for agriculture. It is good for good-paying jobs in small town America, where these renewable plants are located. It is good for the environment. It is good for lessening our dependence on foreign oil, which helps our trade balance, which helps our national security. There isn't another issue Members can come before the Congress with that has no negatives and all positives. In other words, everything about ethanol is good, good, good. I yield the floor.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I rise to pay tribute to a brave and patriotic son of Iowa who gave his life for his country, CPT David Anthony Wisniewski. He graduated from Woodbury Central High School in Moville, IA, before attending the Air Force Academy. It had been his dream to be an Air Force pilot since visiting Offutt Air Force Base as a young child and he died doing what he loved. By all accounts, David Wisniewski was a remarkable man and his numerous accomplishments include the saving of many lives during his several tours of duty in support of the global war on terrorism. In reference to the reason for his service, I understand that he would end letters to his parents with the reminder that, ``I do this so you can sleep safe at night.'' That is an excellent reminder for all of us to never take for granted the tremendous cost of our freedom. I find that words fail me in trying to describe the debt of gratitude we owe to the courageous and selfless Americans like Captain Wisniewski. We can never begin to repay the debt, but we can honor it by honoring David's memory and by fully appreciating our way of life and the sacrifices made to preserve it. Of course, his loss will be felt very deeply by his parents, Chet and Beverly Wisniewski, and all his family and friends. My prayers go out to them in this difficult time. They are no doubt very proud of their son, and all Iowans can be proud to call him one of our own.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I have long worked for the continued viability of rural low-volume hospitals so that Medicare beneficiaries living in rural areas in Iowa and elsewhere in the country will continue to have needed access to care. Today, I want to discuss another concern, one regarding low-volume dialysis clinics in rural areas and the kidney dialysis patients they serve. Congress enacted a new end-stage renal dialysis, ESRD, bundled payment system in the Medicare Improvements for Patients and Providers Act of 2008 that takes effect next year. I support the establishment of a fully bundled payment system for renal dialysis services. It is intended to improve payments for ESRD services and to ensure access to critical renal dialysis services, including those in rural areas. It will also improve the quality of care for dialysis patients by requiring ESRD providers to meet certain standards through a new quality incentive program that is established for ESRD providers. It establishes a permanent annual update for ESRD providers. It also provides for payment adjustments in certain circumstances, such as payments for low-volume facilities and for dialysis facilities and providers in rural areas that need additional resources. Last fall, the Centers for Medicare and Medicaid Services, CMS, issued a proposed rule to implement the new ESRD bundled payment system. That rule will be finalized later this year. I am concerned that overall some of the proposed adjustments that reduce payments for dialysis treatment may be unduly low. But today I want to focus on one issue in particular--the adjustment that CMS has proposed for low-volume facilities. The legislation that established this new bundled payment system specifically requires CMS to adopt a payment adjustment of not less than 10 percent for low-volume facilities to ensure their continued viability with other facilities. The Secretary was given the discretion to define low-volume facilities. Unfortunately, CMS has proposed a very restrictive definition and set of criteria to qualify as a low-volume facility so the payment adjustment would only apply to facilities that furnish fewer than 3,000 treatments a year. According to CMS, ``the low-volume adjustment should encourage small ESRD facilities to continue to provide access to care to an ESRD patient population where providing that care would otherwise be problematic.'' CMS also notes that low-volume facilities have substantially higher treatment costs. Previously, CMS considered an ESRD facility with less than 5,000 treatments a year to be small. But now CMS is proposing to limit eligible ESRD facilities to those with less than 3,000 treatments a year and requiring this limit to be met for 3 years preceding the payment year, along with certain ownership restrictions. CMS has not proposed any geographic restriction that would limit the low-volume payment adjustment to dialysis facilities in rural areas. Medicare reimbursement is already problematic for small dialysis organizations because they operate on very low Medicare margins. According to the March 2010 report of the Medicare Payment Advisory Commission, MedPAC, large dialysis organizations have Medicare margins of 4.0 percent compared to other dialysis facilities with Medicare margins of only 1.6 percent. MedPAC also found that rural dialysis providers have Medicare margins that average -0.3 percent compared to urban providers with positive margins of 3.9 percent, and they expressed concern that the gap in rural and urban margins has widened. They project that Medicare margins will fall from an aggregate 3.2 percent margin in 2008 to an aggregate 2.5 percent in 2010. If corresponding declines are seen in rural areas, negative margins for rural facilities will increase, and low-volume rural facilities will be hit even harder. And this projection does not take into account any of the additional reductions that CMS has proposed as part of the new bundled payment system even though these reductions would have a significant adverse impact on small dialysis facilities. Should the proposed restrictions on low-volume facilities be finalized, the continued viability of these small dialysis facilities will be questionable. This will be especially true in rural areas, and beneficiary access to these critical dialysis services will be severely jeopardized. Small rural dialysis clinics provide beneficiaries with end-stage- renal disease access to critically-needed dialysis services in medically underserved areas. In some rural areas, a single clinic may be the only facility that furnishes this life-sustaining care. Should the unduly restrictive treatment limit for low-volume facilities be finalized as proposed, small rural facilities with slightly higher treatment volumes will lose these essential low-volume payments. Since rural dialysis facilities already face negative Medicare margins, many are likely to close, further limiting access to crucial dialysis services that these kidney patients depend upon to survive. New facilities would not be eligible for low-volume payments until their fourth year of operation under the proposed rule, making it unlikely that other facilities would take the place of those that had closed. The prospect of Medicare beneficiaries' losing access to these life- sustaining services is simply unacceptable. I, therefore, urge CMS to modify the proposed restrictions for low- volume adjustments by raising the treatment limit to the existing 5,000 treatment definition for small rural dialysis facilities. One of my constituents, Laura Beyer, RN, BSN, is the manager of dialysis at Pella Regional Health Center, a critical access hospital in rural Iowa. She has written an editorial about this problem and the financial crises that small outpatient dialysis facilities, such as Pella Regional Health Center, are facing. Her editorial will be appearing in Nephrology News in July. I ask unanimous consent to have printed in the Record this editorial.

Mr. GRASSLEY

Mr. GRASSLEY. Madam President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. GRASSLEY. Madam President, I wish to address my colleagues for a few minutes about the pending legislation that was recently introduced by my chairman and friend, Senator Baucus of Montana. This bill is targeted at creating jobs by providing targeted relief to our Nation's job engine, and that happens to be small businesses. Our Nation is currently facing challenging economic times, as we have now for about 20 months. While there have been some signs of improvement, such as the recent growth of our gross domestic product, job losses continue to mount and many hard-working Americans are struggling to make ends meet. According to our Bureau of Labor Statistics, around 8 million jobs have been lost since our economy officially slipped into recession in December of 2007. The unemployment rate is currently 9.7 percent, which is simply an unacceptable level. Small businesses in particular have been hit hard, with most job losses being attributed to businesses with fewer than 500 employees. According to the ADP national employment data, from December of 2007 through May of this year, small businesses with fewer than 500 employees saw employment decline by 6.4 million, while businesses with 500 or more employees saw employment decline by 1.66 million. According to this data, small businesses--those with fewer than 500 employees-- accounted, then, for nearly 80 percent of the decline in employment during that period of December 2007 through May 2010. The lack of job creation continues despite aggressive actions taken at the Federal level to stabilize the economy. This includes the enactment of the TARP bill, also the $800 billion stimulus bill, and more recently a bill we termed the ``HIRE Act.'' However, these bills were all missing a critical ingredient for spurring job creation; that is, substantial tax relief targeted at small businesses. The reason for that is most small businesses hire or do not hire according to what their cash flow is. When taxes are high, there is less cash flow or when tax policy is in a state of flux, as right now--what is it going to be this year because of sunsets this year--that uncertainty causes businesses not to be as aggressive as they normally might be in hiring. While President Obama and my Democratic colleagues agree that small businesses create 70 percent of the jobs in our economy, less than one- half of 1 percent of the stimulus bill was tax relief for small businesses--in other words, not putting the money where it would do the most good. The HIRE Act, which the Democratic leadership sold as a so-called jobs bill, did not fare much better in providing tax relief to our Nation's job engine. There was only one provision directed solely to small business tax relief. That was a provision I supported that increased expensing equipment purchased by small businesses. But it is a very small provision, and it only gave small businesses what they have already been getting for the last couple of years. That provision was only $35 million out of a $21 billion bill. With the recent introduction of the small business tax relief bill, it looks as if this body is finally starting to get serious about tackling unemployment through a true jobs bill, compared to previous stimulus or jobs bills promoted by the majority. This small business bill has a rather modest cost of about $12 billion to $15 billion. It is targeted at job creation by providing small businesses incentives to invest in new equipment, expand their operations, and ultimately hire new employees. The bill includes provisions that would encourage businesses to invest in new equipment and real property by increasing the amount of capital expenditures small businesses can expense. For equipment, the amount that can be expensed is increased to $500,000, and for real property it is $250,000. Moreover, it encourages investment by providing additional first-year bonus depreciation. It promotes entrepreneurship by increasing the amount allowed as a deduction for startup expenditures. It would increase access to capital by allowing 100 percent of gain from investment and qualified small business stock to be excluded from income and taking the general business tax credit out of the alternative minimum tax for sole proprietorships, for flowthroughs and nonpublicly traded C corporations with $50 million or less of annual gross receipts. It also increases access to capital by extending the 1- year carryback for general business credits to a 5-year carryback for small businesses. Finally, the bill promotes small business fairness by limiting harsh penalties that have been imposed on small businesses by the IRS and equalizing the tax benefits for health insurance that self-employed individuals may receive to those received by employees. While this small business bill would go a long way in informing small businesses Congress is very serious about reducing the burdens imposed on them, many businesses continue to struggle and will not hire new employees simply because it is the stated policy goals of Congress. According to the most recent survey from the National Federation of Independent Businesses--and we refer to that organization around here as the NFIB--when businesses are asked what the single most important problem facing their business is, the No. 1 answer is lack of sales, but this is closely followed by taxes and then by government regulation and redtape. I have a chart here from the most recent NFIB survey listing the top problems facing small businesses, and you can see there, as I said, that first is poor sales; secondly, taxes; and then government regulation and redtape being the hindrances to small businesses expanding to create the jobs small businesses can create. Consequently, you can see tax policy is very important because, as I said, small businesses tend to operate out of cash flow to a greater extent than companies with equity and stock. The small business community is currently being strangled by a climate of uncertainty. Whether we are speaking about cap and trade-- some people refer to that as cap and tax--that will drastically increase energy costs or about health care reform that will require small businesses to offer health benefits that will increase the cost of labor or about the call for tax increases on so-called wealthy taxpayers earning over $200,000, that will largely fall on the backs of small businesses. Whether you are talking about any of these three--or more that I could mention--there is a great deal out there that causes small businesses to stop and think of whether now is the time to expand and hire new workers. Taxpayers earning above $200,000 are frequently identified as coupon clippers by many of my friends on the other side of the aisle. A disproportionate level of business activity is attributable to small businesses owned by that group, and we have a chart here that shows evidence of this linkage. This chart is based upon Gallup survey data showing that over half of the larger small businesses--the ones with the good share of the workforce--are controlled by taxpayers who are targeted by the other side's marginal rate hikes. Twenty-seven percent of the medium-sized small businesses are controlled by taxpayers targeted by as much as a 17-percent marginal rate hike. The owners of the smallest of the small business community are also affected. You see from the chart that it provides an example of how a fairly typical small business owner would be impacted by the increase in just the two marginal tax rates, which is the proposal of the President and I assume something we are going to be dealing with between now and the end of the year because everything sunsets on December 31. And I can tell you that nobody wants to be out there campaigning this fall with the largest tax increase in the history of the country happening without even a vote of the people and particularly as it is going to hit middle-income taxpayers. So you have this possibility whether it is Congress legislating, in the higher tax brackets, higher taxes or whether it is just the tax increase going into effect without a vote of Congress. You can see here in the charts that a small business owner who is married and has two children, who has $500,000 in taxable income could see a $19,600 tax hike. That is a 13-percent increase in taxes. One way Congress can try to put some certainty back into the lives of small businesses and entrepreneurs is by dealing with the unfinished tax legislation business. As this chart shows--and I think I brought this chart to the floor at least four times in the last 3 weeks I have been addressing this issue of taxes--there are four major pieces of legislation dealing with expired or expiring tax provisions that have yet to be addressed by this Congress, meaning between now and adjournment this December. I have talked about this unfinished tax legislation business several times over the past few weeks, but I cannot stress enough how important dealing with these time-sensitive matters is for the business community because one of the reasons they are not hiring is because of the uncertainty that is out there--what is Congress going to do and when are they going to do it? Without certainty in tax policy, businesses are unable to plan for the future, and many businesses are in a holding pattern waiting to see what Congress will do. So it is quite obvious this is very bad for the economy and it will not be an environment for job creation. The list of unfinished tax legislative business includes everything we have here, but I will mention them: the tax extenders, which are overdue by over a half year; it also includes the alternative minimum tax patch; another area is the death tax; and the final area is the 2001 and 2003 tax rate cuts. I am going to discuss that policy today and its implication for small businesses because until we get small businesses confident of the future and willing to spend money and invest, we are not going to create jobs. And that is a big void that is out there--not that this Senator is the only one saying so. Many Senators on the other side, including the leader of the Senate, have said that 70 percent of new jobs are created by small businesses. As important as the AMT patch and the death tax are, they are dwarfed by the impact of this fourth package of expiring tax provisions--the 2001 and 2003 rate cuts. This was a bipartisan tax relief package. I get so tired of people talking about the Bush tax cuts from the standpoint that it was an entirely Republican-driven effort with no support from the other side of the aisle. There were a large number of Senators in the then-Democratic minority--which soon became a majority because of the switching of one Senator from a Republican to a Democrat--who helped push through this bipartisan tax relief enacted in 2001. Under statutory pay-as-you-go, the amount permitted in this area by the budget of last year is about $1.4 trillion. It covers about 80 percent of extending all the marginal tax rates and family tax relief from the 2001 and 2003 bipartisan plans. That number makes sense because the bipartisan tax relief plan cuts taxes for virtually every American family who pays income tax. How significant and how widespread is that tax relief, you may ask. This chart, drawn not by Republicans or Democrats but by the Congressional Budget Office data, sheds some light on that very point I bring up. In other words, the significant and widespread tax relief is very dramatic for most Americans. The line above measures the effective tax rate paid by the top 5 percent of taxpayers. What is significant about that 5 percent is this is where the small business owner tax hit occurs. This group roughly represents those taxpaying families with incomes over $250,000. Under the Democratic leadership's budget, this line will go back up to where it was in the year 2000. So you can see where the white vertical line goes is where we were in the year 2000. And this is also where the President's budget and the statutory pay-as-you-go regime would take the raise. People on my side of the aisle--Republicans--believe this significant tax increase will be a mistake. We hope we will be able to debate this policy in the House and Senate, in committees and on the floor. That was, after all, the process we followed when the bipartisan tax relief plans were passed in 2001, 2003, and 2005. We will point out, as we did then, that the tax increase falls primarily on the backs of small businesses. Data from the Joint Committee on Taxation--and these are the nonpartisan official congressional scorekeepers on tax issues the way the CBO is on spending issues--shows that 44 percent of the flowthrough business income will be hit with the increase in the top two tax rates proposed by the President and the Democratic congressional leadership. A lot of this income is concentrated in the larger small businesses I have referred to here earlier, particularly those of up to 500 employees. This hits small businesses particularly hard since most small businesses are organized, as I have said, as flowthrough entities. So it will increase taxes on a single small business owner who makes more than $200,000 per year even if they plow all their income back into their small business to keep paying their workers or hire additional workers. The top marginal rate on small business owners will rise by almost 17 percent. Democrats and Republicans agree that small businesses are the key job creators of the past and the future. President Obama correctly pointed out that small businesses create 70 percent of the new jobs. The rest will also hit investment hard. The top capital gains rate will rise by 33 percent. The top dividend rate could nearly triple. All of this is set to occur, not at some far distant future point, it occurs about a half year from right now. We all hope the economy is on a path to recovery, but does this heavy tax increase on small business owners and investment ever make sense? Even the most liberal Members on the other side might wonder whether it makes sense. Do we think the private sector will grow if we hit small business investors this hard 6 months from now? And think of the uncertainty between now and then. They are not going to do anything. I remember that this President, between his election and January 20 when he was sworn in, decided that going into a recession--or by then in a recession--even though he campaigned on a promise of increasing taxes on higher income people, it was not the right thing to do at that time of a recession. Last December the President had some of us down to talk about jobs, helping turn the economy around, getting people hired. When he called upon me I offered him that same advice that he decided by himself 12 months before, that being in a recession was no time to increase taxes. We were in a recession still in December of 2009, as we were in December of 2008, and we still have 9.7 percent unemployment. The President could help the economy if he would announce, as he did before being sworn in, that even though I campaigned on a platform of increasing taxes on higher income people, now is not the time to do it. But he seems inclined to increase taxes, even though it is detrimental to job creation, particularly job creation by small business. You can see, then, that the bipartisan tax relief brought, at the time we passed it, the effective rate down with respect to the bottom 95 percent of the taxpayers as well. That is the bottom line of my chart right here. So it was a tax cut across the board for almost every American. I stress this because some of my colleagues on the other side of the aisle may be thinking to themselves: Sure, this is true for income taxes. But what about other Federal taxes, such as Social Security, which make up a large percentage of taxes paid by lower and middle-income individuals? This chart is not just a depiction of Federal income taxes; this includes all Federal taxes. This includes Social Security, other payroll taxes and excise taxes frequently referred to by my colleagues on the other side as ``regressive taxes.'' Even including all Federal taxes over the last 30 years, the top 5 percent of income earners have paid a lot higher effective tax rate than the bottom 95 percent. It has been that way no matter which party has controlled the White House, Congress, or both the White House and Congress. It shows something that you would never know if you listen to the rhetoric of the majority Members of this body or even listen to the punditry on the left and some in the media. Here is what it shows: A progressive income tax system is deeply embedded in our culture. The bipartisan tax relief plans of 2001 and 2003 made the system yet more progressive. These plans brought the rates down for the bottom 95 percent of the taxpayers, as you can see here on the bottom line. The 2001 and 2003 tax relief plans dropped the effective tax rates for tax-paying families under $250,000 to their lowest levels in a generation. This is the current law, the current level of taxation. In about a half year these rates will pop back up for all of these taxpayers. That is the checkered line going across there. That is where they are going to return to. The President, as powerful as he is, cannot unilaterally hike or cut taxes. He needs a bill from Congress to do that. On our side, we want all the tax relief made permanent. We want the opportunity to debate and to amend a bill that deals with this basic level of taxation, the basic level of taxation where the solid lines take us both for high-income people and low-income people; otherwise, they go back up to the checkered line there. This is unfinished business that affects virtually every American taxpayer. It is clear that over the last 3\1/2\ years, Republicans do not control this Congress. We cannot decide the fate of the marginal rate cuts. It will have a fiscal consequence. There are pretty significant fiscal consequences, but if the Democratic leadership wants to keep these levels of taxation low, then they have to deal with the fiscal consequences. Alternately, the Democratic leadership can raise taxes and claim the revenue. Not changing the law by failing to act is the same as raising rates on virtually every American taxpayer. But they will have to explain to those taxpayers why they raised taxes by almost 10 percent on average. In the 2006 election almost 4 years ago, the American people provided the Democratic leadership with control of this Congress. In the election 18 months ago, the American people provided the Democratic leadership the largest majorities that any one party has had in this body in more than a generation. They also provided the Democratic leadership with a President of their party. The Democratic leadership spent the period of 2001 to 2006 thwarting efforts to make the bipartisan tax relief of 2001 and 2003 permanent--which, if they had not fought it, would be permanent law and we would not have this uncertainty that keeps small business from hiring and expanding. Upon assuming control, the majority has spent 3\1/2\ years with no legislation to make permanent or even extend the marginal rate cuts and family tax relief packages. My friends in the Democratic leadership need to step to the plate. We have had budget and statutory pay-as-you- go, we have debated and voted on the breadth and composition of the marginal rate cuts and family tax relief in those contexts. No legislative action whatsoever. No House committee or floor action. No Senate committee or floor action--as you can see by my ``to do'' list. The Democratic leadership needs to step to the plate. Blaming former President George W. Bush and the Republican Congresses of many sessions ago is no substitute for running this time-sensitive tax legislative business through the legislative process. Put forward some proposals. Let's debate those proposals. Let's allow for amendments. Do the people's business. It is time to fill in each of these boxes with a checkmark instead of an X. Fiscal history shows us that raising these marginal rates on small businesses by as much as 17 percent will not necessarily improve the fiscal picture. The relationship between higher rates and higher revenue is tenuous at best. I have a chart that tracks this history for over 50 years, I believe. Yes, for 55 years and, who knows, maybe farther back than that. Taxpayers are not automatons. Small business taxpayers will respond dramatically to higher rates. I am afraid the response will not help the economy. It will not mean expansion. It could mean contraction. This is not the right signal to send if we want businesses to create more jobs. I want to emphasize this chart. You can see, over a period of 55 years, the red line is the revenue coming into the Federal Treasury from all Federal taxes as a percentage of gross domestic product. Then you can see over that 55 years we have had varying years of high marginal tax rates and lower marginal tax rates. It was 93 percent under Eisenhower, down to a low of 28 percent under Ronald Reagan, back up to 35 percent for several years as a result of the Bush tax increase, continued by the Clinton tax increase. Then with the 2001 bill you see it go down, the marginal tax rates, to 35 percent from 39 percent. What that ought to tell you is that the people of this country are smarter than we are here in the Senate. We can think we are going to increase marginal tax rates and bring in a lot of revenue. But the people of this country who have the capability of deciding whether they are going to invest and create jobs and invest so they can make more money have decided that they are only going to send so much money to Washington, DC, for those of us in the Congress to decide how the resources of this Nation are divided. You can have 93-percent tax rates or you can have a low of 28-percent tax rates, but you still get about the same amount coming in. So we ought not fool ourselves that we can direct to this country that we are going to force you to pay more taxes with higher marginal tax rates, because the people in this country have the ability to decide that they are going to work and produce or is it worth working and producing if you have high marginal tax rates and then maybe decide not to work and invest so hard and maybe take a life of leisure--more so. But you find when you reduce marginal tax rates you get more economic activity from it. You get more economic activity from it because, quite frankly, we in this Congress, 535 of us, when we decide what to do with the resources of this country it does not do as much economic good as when you leave the money in the pockets of 137 million taxpayers and they decide whether to spend or whether to save or to spend and save and how to save it and what to spend it on. It creates more jobs. I hope we look at helping small business. The bill before us is a good bill with solid initiatives for small business. I compliment my friend Chairman Baucus for diligently pressing these issues. They would be even more effective if we could address the uncertainty a small business faces on the tax front. When it comes to whether small business can do a better job of creating employment or whether government can do it, I wanted to ask the question: How many jobs did the stimulus bill create? Here we were, February of 2009, passing an $800-some billion stimulus bill supposedly to keep employment under 8 percent, and it has not been under 9\1/2\ percent for well over a year. That is government, through stimulus, trying to create jobs--and not enough in the private sector, by the way. So in recent weeks, a number of my colleagues have come to the floor to proclaim the success of this massive, now I guess it adds up to a $862 billion stimulus bill that Congress enacted in February of 2009. Similar statements were made earlier this very day. Although the number of private sector jobs has increased by only half a million since 2009, my friends on the other side continue to insist the stimulus bill has created millions of new jobs. So I would like to see how they justify those claims. The stimulus bill requires certain recipients of stimulus funds to report the number of jobs they have created or saved or, more accurately, they report the number of jobs funded with stimulus dollars. The stimulus bill also requires the Congressional Budget Office, CBO, to issue a quarterly report on those numbers. CBO is careful to point out that the number of jobs being reported by stimulus recipients is not a comprehensive estimate of the economic impact of the stimulus bill. CBO says the actual numbers could be higher or lower. According to CBO: Estimating the law's overall effect on employment requires a more comprehensive analysis than the recipients' reports provide. For this analysis, CBO relies upon computer models. In other words, CBO does not look at the actual jobs data; instead, it looks at a model of the economy. CBO is very upfront about this to all of us. CBO used a computer model to predict how many jobs the stimulus bill would create before it was enacted into law. Now that the stimulus bill is law, CBO is using a computer model to tell us it did just what they said the model would do, create jobs. Why would CBO rely upon a model instead of actual data? According to CBO: Data on actual output and employment . . . are not as helpful in determining [the stimulus bill's] economic effects . . . because isolating those effects would require knowing what path the economy would have taken in the absence of the law. Because that path cannot be observed, there is no way to be certain about how the economy would have performed if the legislation had not been enacted. In other words, CBO does not know how much better or worse the economy would have been if the stimulus bill had not been enacted. That means CBO does not know how much better or worse the economy is now as a result of the stimulus bill. So, basically, CBO is saying: Trust us--or more specifically, trust our model. But if the model was wrong to begin with, then it is still wrong. According to CBO, their model relies on historical relationships to determine estimated ``multipliers'' for each category of taxes and spending in the stimulus bill. The problem is, there is no way to know whether these historical relationships remain constant over time or whether they change under different economic circumstances. In short, the jobs numbers attributed to the stimulus bill are based on assumptions that may or may not have any basis in reality. The bottom line is this: CBO cannot be cited as an authority for the proposition that the stimulus bill actually created jobs. All CBO has done is confirm that its model, and I repeat, CBO's model, projected jobs would be created from the stimulus bill. CBO has not confirmed that the stimulus bill actually created jobs. What we do know is that in 18 months, since the $862-plus billion stimulus bill went into effect, the private sector has added a relatively small number of new jobs, about half a million. This is a small portion of the number of new jobs asserted by my friends on the other side of the aisle. I want to make the Record very clear on this very important point. I yield the floor, and I suggest the absence of a quorum.