Chuck Grassley

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I am pleased today to introduce the Guaranteed Access to Medicaid for Newborns Act. This bill corrects a problem that has arisen during the implementation of the Deficit Reduction Act, DRA, of 2005. Through this act, we will guarantee that children born in America who are eligible for Medicaid can seamlessly get Medicaid coverage. For the last two decades, Medicaid recipients have been required to be a U.S. citizen or qualified alien who has been in the country for at least 5 years. In a July 2005 report, the HHS Office of Inspector General found that 47 States allowed individuals to ``self attest'' their citizenship status to qualify for Medicaid benefits. In short, the State simply asked a Medicaid applicant if they were a citizen. The applicant need only respond, ``Yes, I am an American.'' No documents necessary. And of those 47 States, 27 did no followup verification such as checking with the Social Security Administration. In response to this report, the DRA included a House-led provision that I supported to require States to more carefully document the citizenship of Medicaid recipients and applicants. Implementation of this provision, as is often the case with legislation, has not been without its challenges. The interim final rule that was issued by CMS effective July 6, 2006, did make many improvements so that the new statute could be implemented consistent with legislative intent. I think, on the whole, CMS did a good job. However, there was one specific provision in the interim final rule that I do not think is consistent with congressional intent: the provision that makes it more difficult for children born to undocumented mothers to gain Medicaid eligibility. In section 1903(v) of the Social Security Act, the Medicaid statute makes available payment to States for treatment of an alien who is not otherwise eligible for Medicaid in the case of an emergency medical condition. A woman who is undocumented or not otherwise eligible for Medicaid is covered under Medicaid for labor and delivery. Nothing in the DRA changed that nor was anything in the DRA intended to change that. Under section 1902(e)(4) of the Social Security Act, a child born to a woman receiving Medicaid at the time of the child's birth is deemed onto Medicaid for a year. States had been interpreting that to mean the child of a woman who was undocumented could be deemed onto Medicaid for a year since the mother, under 1903(v), was eligible for Medicaid at the time of the child's birth. The interim final rule now specifically prevents a State from deeming the child of an undocumented mother onto the State Medicaid program without properly documenting the child's citizenship first. In this case, I believe CMS has gone too far. A child born in the United States of America is a citizen. Before the DRA, children born to mothers on Medicaid were deemed onto Medicaid, and I think that is absolutely in the best interest of that newborn child. The DRA did not change two fundamental facts: First, the mother, regardless of documentation status, was eligible for Medicaid at the time of the child's birth and, second, the child is a citizen. In my mind, there is no reason then to have any new documentation requirement for the child. The legislation I am introducing today reinstitutes the pre-DRA policy with one notable exception. Under the old rule, a State could issue a temporary Medicaid identification number to the mother which served as the identification number for the child for up to a year. I don't think that it's necessary or appropriate for a State to provide a child Medicaid benefits by issuing the mother a Medicaid card. This especially problematic in cases where the mother may not be in the country legally nor eligible for Medicaid after delivery. My legislation changes the old policy by requiring the State to issue an identification number to the child of the undocumented mother. This does not in any way change the States' responsibility to provide the mother benefits when she comes to the emergency room in labor. The legislation makes one further change to the statute to benefit newborns. Under the interim final rule, all children born to mothers on Medicaid are required to document their citizenship within 1 year of birth. I do not think that is necessary. Medicaid paid for the birth of an American citizen. It is simple common sense that the child is a citizen and requiring any further documentation is redundant and counter-intuitive. I want to be clear that I support the requirement that a State more fully document the citizenship of applicants for Medicaid. Given what the Congressional Budget Office has told us would be the cost of making undocumented aliens eligible for public programs, the Deficit Reduction Act addressed a real concern by requiring documentation. I want the new statutory provision to go forward to ensure that the people getting the benefits are actually eligible for the benefits. However, CMS and the States should recognize what is to me, common sense: A child born in the United States whose birth was paid for by Medicaid is a citizen under current law. No further documentation necessary.

Mr. GRASSLEY

Mr. GRASSLEY. The same AP report notes that regulators have already denied those rumors and that the Shanghai Securities News ran a front page report to the same effect yesterday. Incidentally, the Shanghai Composite Index gained 3.9 percent yesterday. I think the Chinese regulator's swift debunking of rumors that a capital gains tax was going to be enacted shows the negative impact such a tax could have on growing markets and expanding economies. As I have said before, what is missing from the debate on extending tax cuts and clearly missing from the reasoning of the authors of the Goldman Sachs study is the option, and necessity, of reducing Government spending. The right thing to do is to let Americans keep as much of their own money as we can and not seize it from them to promote special interests, encourage high-priced lobbyists or give free rein to the big city press to tell everyone else what to do. It is often said by the Democratic leadership that tax cuts are not free. That statement is true. Tax cuts score as revenue losses under our budget rules. What is equally true, if you listen to economists and, more importantly, the American taxpayer, is that tax increases are not free as well. Taxpayers have to write a check to Uncle Sam. Tax increases change taxpayer behavior. Tax increases will affect work, investment, and other economic activities. From an economic policy standpoint, tax increases, especially those that are used to cover more Government spending, have a policy cost. Tax increases are not free to the taxpayers and are not free to a growing economy. So I would ask that the Democrat leadership, as they draw up their budget resolution, to hopefully keep this in mind. Tax increases have consequences to the American taxpayer and consequences to the American economy.

Mr. GRASSLEY. Mr. President, I rise to discuss the tax relief that was passed by Congress and signed into law by President Bush in 2001 and 2003, and to bring some reality to an upcoming debate this month that involves the budget resolution. Since that tax relief was enacted in 2001 and 2003, and especially since last November, we have heard from the liberal establishment in Washington and elsewhere that this bipartisan tax relief must be ended and that taxes should be increased on millions of Americans of all income levels. Today, I am going to look at what is driving the tax increase crowd and talk about why they are wrong and why increasing taxes is a bad idea. The liberal establishment uses deficit reduction as a primary excuse for their craving to raise taxes, but before we applaud their efforts to balance the budget, let's think about their solution. When anyone says we need to increase taxes to balance the budget, what they are saying is they are unwilling to cut Government spending. In actuality, the tax increase crowd wants to increase Government spending. Yesterday, I focused on what extending the bipartisan tax relief package means to nearly every American who pays income tax. So today, as I promised yesterday, I want to examine the tax relief and to look at the impact it has on our economy. Regardless of whether you look at Federal revenues, employment, household wealth, or market indexes, the impact of tax relief has been overwhelmingly positive. I am going to put a chart up that gives the figures I want you to consider as I go through the points I am making. The first chart illustrates the growth of revenue with the red line and the growth in GDP with the green line. As we can see, revenues are currently increasing, and are projected to increase in the near future, even before tax relief is scheduled to sunset under current law in the year 2010. Clearly, tax relief has not destroyed the Government's revenue base. I want to point out that this chart shows percentage changes in revenue and percentage changes in GDP. So if the lines are flat in places, it means revenues and GDP are increasing at a constant rate. The next chart graphs the Standard & Poor's 500 equity price index over a period of several years. So, here again, the lowest point of both the red line, representing the weekly S&P, and the green line, representing an average, seems to correspond closely with May of 2003, which, not coincidentally, is when dividend and capital gains tax cuts were signed into law. Aside from benefiting Americans directly invested in the stock market, this is good news for anyone with a pension who invests in the stock market as well. Of course, that happens to be well over half the people. I think somewhere between 56 and 60 percent of the people, either through pensions or directly investing in the stock market, have money reserves in the stock market. So this is not something that affects 10 or 15 percent of maybe the wealthiest people in the country, as it did 20, 25 years ago; more people are vested in the stock market, mostly through pensions. According to the Federal Reserve--I have another chart--net wealth of households and nonprofit organizations has increased from a low of around $39 trillion in 2002 to more than $54 trillion in the third quarter of 2006. Since tax relief went into effect, our Nation's households and nonprofit organizations have benefited from more than $15 trillion of new wealth. This trend is also apparent when we are looking at employment. I show you yet another chart. Total nonfarm employment was calculated to consist of around 130 million jobs in the summer of 2003 but is projected to be 137 million jobs in January of this year. This shows a 7 million increase in nonfarm employment since the 2003 tax relief bill was signed into law. I have just described to you four indicators of prosperity. All four of them have increased since bipartisan tax relief was passed by Congress and signed into law. I wish to emphasize that word ``bipartisan'' tax relief legislation of 2001 and 2003. Federal revenues are growing steadily at a rate, then, greater than the gross domestic product. The S&P 500 ended a downward slide and began moving upward around the time of the 2003 tax bill. Also, since the 2003 tax bill became law, household and nonprofit wealth has steadily increased, and literally millions of new jobs have been created. I think it is more than a coincidence that all of these positive economic indicators are correlated with tax relief. I do not think anything short of willful ignorance could lead anyone to say tax relief has been bad for this country. Now, going back to what I was saying before, the liberal establishment wants to reverse the tax relief that has done all the good things I was just talking about and that we demonstrated by chart, and all in the name of deficit reduction. However, this same crowd has not expressed any interest in reducing the deficit through reduced spending. I believe the reason for this is that this crowd, comprised of lobbyists, the big-city press, and the entrenched Federal bureaucracy, wants to raise taxes--your taxes--to spend your money on growing Government rather than working to trim spending. In fact, the more Government spends, the more power these interests are able to accumulate. The Federal bureaucracy gets to control more money, which will lead to more people hiring high-paid lobbyists to apply pressure to take a bigger piece of the pie the taxpayers are paying for. While these interests have no trouble thinking of themselves, they are not thinking of America's families, America's senior citizens, America's small business owners, and hard-working workers across America. These people may not be able to hire lobbyists or write syndicated columns, but their welfare should be our top priority. I am going to talk in greater detail about America's families, seniors, small business owners, and workers, but for now, I just want to mention some more about our economy as a whole and how rolling back the 2001 and 2003 tax relief would have dire consequences for our whole economy. There is an old saying that goes something like this: Figures don't lie, but liars can figure. This saying is especially true in Washington, DC. Any given issue has champions on both sides of the aisle able to generate studies and research that just happens to support their position. I say this because the source for the information I am going to present now is not one of those groups but, rather, the Goldman Sachs Group. Goldman Sachs is an enormously successful and well-respected financial services firm. I do not think it is possible for any Democratic politician, liberal think-tanker, or liberal journalist to accuse Goldman Sachs of being a tool of my party, the Republican Party. Clinton Treasury Secretary Robert Rubin served as cosenior partner and cochairman, and current New Jersey Governor and former Senator Jon Corzine served as chairman and CEO of Goldman Sachs. Our current Treasury Secretary also enjoyed a prominent career at that firm. So I would recommend that Republicans, but especially Democrats, pay attention when a Goldman economist sends up a red flag. In a report that is titled ``Fiscal Policy: Marking Time until the Tax Cut Sunsets,'' the U.S. Economic Research Group at Goldman Sachs, in this report, projects a recession--projects a recession--if the 2001 and 2003 tax relief is allowed to sunset. Now, this study actually came out in November of 2006, so I am a little surprised we have not heard more about it. For this report, Goldman Sachs economists used the Washington University macro model. To give a little background on the Washington model, it is a quarterly econometric system of 611 variables, 442 equations, and 169 exogenous variables. The Washington model was developed and is maintained by Macroeconomic Advisers, Limited Liability Corporation, out of St. Louis, MO. Macroeconomic Advisers is where former Congressional Budget Office Director Douglas Holtz-Eakin serves as a senior adviser. Plus, the firm won the prestigious 2005- 2006 National Association for Business Economics Outlook Forecast Award for their accurate GDP and Treasury bill rate forecasts. That ought to give them a great deal of credibility. Now, of course, Macroeconomic Advisers and their Washington model must be accurate enough for people to pay to use it, which is not true for every organization that has been modeling the effects on the economy of letting tax relief expire. Getting back to the Goldman Sachs study, the authors assumed that Congress would let the 2001 and 2003 tax relief expire, so they reset taxes to their year 2000 levels, grossed them up slightly to match the Congressional Budget Office estimate of the revenue impact of letting the tax cuts expire, and allowed for an appropriate monetary response. For monetary policy, the study's authors assumed that the Federal Reserve would call for interest rate cuts when output falls below its trend and for interest rate increases when inflation rises above its comfort zone. The study states that: In the first quarter of 2011, real GDP growth drops more than 3 percentage points below what it would otherwise be. Absent a strong tailwind to growth from some other source, this would almost surely mark the onset of a recession. If tax relief is allowed to expire, this study shows that a recession is likely to result. By not extending or making tax relief permanent, Congress will be deliberately inflicting a recession on the American people. Is a lot of hollow, high-sounding rhetoric about balanced budgets worth the job losses or business closures that would result in such a recession? The study eventually predicts higher output but notes that consumption would be lower. So that everyone has the opportunity to review this study, I ask unanimous consent, Mr. President, that it be printed in the Record, along with one of the very few news stories to note its findings.

Mr. GRASSLEY. The Goldman Sachs study was clearly not written by cheerleaders for tax relief; indeed, the authors seemed to share the point of view of many in this Chamber that a cut in spending is not an option. The authors regard an eventual drop in consumption as a forgone conclusion of tax relief and equate it with the necessity to pay back what had been borrowed over the previous decade. At the very least, the study says: ``The economy suffers a lot of short-term pain.'' Congress needs to act to extend or make permanent tax relief enacted in 2001 and 2003 or we risk plunging the country into a frivolous recession. I say frivolous because the recession will be the result of vanity on the part of those who use balancing the budget as a cover for tax-and-spend politics. More cause for concern of the impact of tax increases comes to us from China. I am sure everyone is aware that the Shanghai Composite Index lost 8.8 percent of its value this past Tuesday. According to various news reports, including a dispatch from the Associated Press, a factor in the drop may have been rumors that a capital gains tax on stock investment was in order. I ask unanimous consent that an ABC NEWS article entitled ``Shanghai Shares Rebound Nearly 4 percent'' be printed in the Record.

Mr. GRASSLEY

Mr. GRASSLEY. I ask unanimous consent to talk as in morning business.

Mr. GRASSLEY. Mr. President, I yield the floor, and I suggest the absence of a quorum.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent to speak as in morning business for 20 minutes. I don't think I will use all that time. If I need more time, I will ask for it.

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

Mr. GRASSLEY. Mr. President, as everybody who follows Congress on a regular basis knows, when you get close to the month of March, we are in budget season. The President sent his budget to the Hill, which he does regularly, the first week of February, about a month ago. So now it is up to the Congress. In the next few days the Senate Budget Committee will be marking up our budget resolution. For the public at large, don't confuse a budget resolution, which is a discipline for Congress on budgeting, with appropriations bills that actually give the President the authority to spend money. They come along a little bit later in the year. At a minimum, the budget resolution will lay out the fiscal priorities of the next 5 years. As everyone knows, the American people spoke last November and sent a Democratic majority to both Houses of Congress. For the first time in 12 years, Democrats will take the initiative on the Senate budget. As ranking Republican on the Finance Committee, which deals with taxes, trade, Social Security, Medicare, and Medicaid, and also as the senior Republican on the Budget Committee, which is the committee that sends the budget to the Senate, I am eager to see the direction the new Democratic majority wants to take on fiscal policy for this year, but the budget also has long-term implications of 5 years. There are a lot of questions I am waiting to get answered. What will be their plan on pay-go, which means pay as you go? With spending at higher-than-average levels of our economy, what kind of spending discipline will the Democratic majority show? On the revenue side of the ledger, will Democrats look to prevent a tax increase on virtually every American taxpayer a few years down the road, when the present tax policy sunsets, or will the Democratic majority, without a vote, set in motion, then, the largest Federal tax increase of all time? This is a fact. It will happen. When we have a sunsetting of tax law, it is possible to have a tax increase without Congress voting it. In this particular instance, this would put in place the biggest Federal tax increase ever. Over the next few days, I want to talk about the tax issues--I want to do it topic by topic--that are going to come up during debate on the process of the budget. There are probably many ways to do it, but this is how I split the general subject into topics: One, the importance of preventing a tax hike on virtually all American taxpaying families and individuals. That is what I want to visit about today. Next is the negative economic consequences of sunsetting the bipartisan tax relief plan that will be the biggest tax increase in the history of the country without a vote of the people, if we don't do something about it. Then another time, I am going to review Democratic tax increase offset proposals with a specific focus on the limits and problems associated with those tax increases. Next I will focus on one particular ill-defined but often mentioned offset; that is, reducing the tax gap. Everybody is for reducing the tax gap, and I am working with Senator Baucus to do that. He is chairman of our committee. But there has to be realism brought into that debate, and I hope to provide that realism. Then fifth and last, tax reform and simplification, its necessity and bipartisan opportunities to do so. These discussions are meant to be about the revenue side of the budget. But before we get into the revenue side of the budget, I want to issue a challenge to my friends on the other side of the aisle. It is a challenge I have made over the last few years. It is in the context of intellectually honest budgeting. It is also in the context of the bipartisan record of the Finance Committee on tax policy over the last few years. That tax policy has been led by this Senator, when I was chairman, and by Senator Baucus working with me during that period of time, or Senator Baucus, now leading the committee and, hopefully, my always working with him as he worked with me. That bipartisan record of the Senate Finance Committee shows about $200 billion of revenue raisers from antitax shelter measures and corporate loophole closures, basically doing something about abuse of the Tax Code, unintended by Congress, by people who can hire very sophisticated lawyers to find ways around paying taxes. We have closed $200 billion of those, and it has been bipartisan. So when I hear from self-styled deficit hawks, or from the media, who are sympathetic to those points of view that we need higher taxes to reduce the deficit, I believe the Finance Committee has anted up in terms of producing revenue raisers without raising general levels of taxation on the American people. Here is my challenge, and I will ask my friends to listen up. Anyone on the other side who considers themselves a deficit hawk needs to prove it, then, on the spending side. Compared to our committee already raising revenue by $200 billion by closing tax loopholes and tax abuse, show me, then, a spending restraint proposal for deficit reduction. I issued that challenge several years ago and have issued it repeatedly. No one from the other side has stepped up. We can look and look and look and we won't find such a proposal. All of those liberal think tanks that oppose tooth and nail any kind of tax relief are usually advocates of spending increases, all of this under the guise of fiscal responsibility. We won't find any proposals to restrain spending from these liberal think tanks. If we look at the media sources that are sympathetic to the views of the Democratic leadership or the liberal think tanks, we will find hard-line opposition to tax relief and a lot of tax increase proposals but, likewise, no proposal reining in spending. They will claim the mantle of fiscal responsibility but won't show anything on the spending side other than spending increases. For these folks, when it comes to deficit reduction, there is only one side of the Federal ledger. That is raising taxes. We have a Federal Government that is projected to spend $2.7 trillion for this fiscal year alone and is projected to spend $33.7 trillion over the next 10 years. Yet leadership on the other side of the aisle, the liberal think tanks that back them up, and the media that helps them get their message out so easily and is sympathetic to their views, can't find a dollar of savings on the spending side. To these folks, with all due respect, I want to call them out. They won in November. The Congress is in their hands. Let's see some credibility on the spending side of the ledger. Show the taxpayers the money. Show me a proposal to restrain spending and put it to deficit reduction. That is a preliminary point. Now I will move to talk about preventing tax hikes. The same group's position on current law tax relief is radically different than its position on spending restraint. Back in 2001 and 2003, Congress approved, and the President signed, legislation that provided across- the-board tax relief to nearly every American taxpayer. The Democratic leadership, liberal think tanks, and sympathetic east coast media criticized tax relief on a couple of grounds. One charge was that the tax relief was a tax cut for the rich. The other charge was that the bipartisan tax relief was fiscally irresponsible. Nonpartisan Joint Committee on Taxation distribution tables actually put a lie to that first charge. The record levels of revenue show that the growing economy, the expanding U.S. economy, and economic stimulus from tax relief better the Nation's fiscal situation, bringing in more tax dollars, not depriving the Federal Treasury of dollars. This debate on preventing tax increases is often couched only in macroeconomic terms. We will hear what it ``costs'' to extend bipartisan tax relief. We will hear very big numbers. For instance, the Joint Committee on Taxation projects that the revenue loss from making the bipartisan tax relief permanent is $1.9 trillion over the next 10 years. That is the way the Democratic leadership, liberal think tanks, and sympathetic east coast media will define proposals to prevent a tax hike. We won't see them talk about the number of families who benefit from the extension of the $1,000 child tax credit. You won't see them talk about the number of married couples who benefit or the average family benefit from marriage penalty relief. Today I am going to take a few minutes and shed some light on the side of the debate about extending bipartisan tax relief. Lord only knows, there is not much light shed on these important facts, because everybody is talking about tax relief for the rich. I will acknowledge the critics' point on the macro cost of extending tax relief. But keep in mind, a liberal's tax relief cost is a conservative's tax hike, when we are talking about extending current law. They are the two sides of the same taxpayer's coin. I will agree to that number, but call it a $1.9 trillion tax increase. So I am going to follow the Democratic leadership plan and dismantle the bipartisan tax relief package bit by bit. I am also going to challenge the Democratic leadership to show us the money by indicating whether they want to scrap each piece as I move through the package. Which pieces would they scuttle? I will work through the bipartisan tax legislation piece by piece. Let's start, then, with the basis for the 2001 bipartisan tax relief measure. That is the new 10-percent bracket. The revenue loss for this part of the package is $299 billion over 10 years, according to the Joint Committee on Taxation. The 10-percent bracket is a huge piece of tax relief for low-income people. The 10-percent bracket does that. No wonder 100 million families and individual taxpayers benefit from the 10-percent bracket. I do not think anybody wants to dismantle that piece. But I want to hear that from the Democratic leadership because that is a compromise of their position of whether the 2001 tax increases ought to sunset. Where do we go next, then? The marginal tax rate cuts, which include the 10-percent bracket, lose $852 billion over 10 years, according to the Joint Committee on Taxation. That proposal reduces the taxes of approximately 100 million families and individuals across America. It appears some folks think 35 percent is too low of a top rate. Well, guess what. Repealing the marginal rate cuts hits small business--the biggest source of new jobs in this great country of ours--and it hits small business the hardest. The Treasury Department estimates 33 million small business owners who are taxed on their business income at individual rates benefit from the marginal rate cuts. Repealing these cuts would cause 33 million small business owners to pay a 13-percent penalty. Do the Democratic leaders want to raise taxes on these small business taxpayers, restricting the ability of small business to create jobs? Treasury also projects that small business gets over 80 percent of the benefits of the cuts in the top two rates. Do we want to raise the tax rates on these people--small businesses for the most part--by 13 percent? Does that make any sense? So to the Democratic leadership, what do you say? How about the death tax relief package? The Joint Committee on Taxation scores that package at $499 billion over 10 years. Most of the revenue loss is attributable to increasing the exemption amount and dropping the rate to 45 percent on already taxed property. Is it unreasonable to provide relief from the death tax or should we raise the death tax on small businesses and family farms? That is what will happen if the bipartisan tax relief package is not extended. So to the Democratic leadership, what is your take on that provision? Do the opponents want to repeal the proposal to double the child tax credit, which the 2001 bill does? Mr. President, 31.6 million families benefit from the child tax credit, according to the Joint Committee on Taxation. Or how about the refundable piece that helps 16 million kids and their families? That proposal loses $135 billion over 10 years. I do not think we would have a lot of takers on that one. They are going to want to extend that. Democratic leadership, do you agree? How about the lower rates on capital gains and dividends? Thirty- three million Americans--a good number of them low-income seniors-- benefit from the lower tax rates on capital gains and dividends, according to the Joint Committee on Taxation. Does the Democratic leadership think we should raise taxes on these 33 million Americans benefiting from these lower tax rates? That would be families and individuals. On a side note, in another speech, I will be talking about the worrisome Goldman Sachs economic report on the adverse economic effects of failing to extend lower rates on capital gains--this line right here, as shown on the chart--when it expires. There are consequences to what Congress does. When you have a booming economy, there could be very detrimental consequences to the country when you take away the incentives that have had this economy exploding like not any time since the early 1990s. Let's take a look at the marriage penalty piece. It is the first marriage penalty relief we delivered in over 30 years. The Joint Committee on Taxation scores this proposal at $52 billion over 10 years, and Treasury estimates that in 2004, nearly 33 million married couples benefited from this tax relief. Again, I do not think many folks would want to raise taxes on people because they decided to be married. I hope the Democratic leadership would agree with that statement. Another proposal is expensing for small businesses; in other words, writing everything off in 1 year instead of stretching it out over 10 years. This is a commonsense, bipartisan proposal and directed specifically to small business--the engine that creates new jobs. According to IRS Statistics of Income, 6.7 million small businesses across the country benefited from this expensing provision in 2004. If we do not make it permanent, small businesses face a tax increase of $19 billion over 10 years and probably sputtering the engine that creates so many jobs in America. Does the Democratic leadership think small business expensing is an unwise tax policy? Continuing on through the bipartisan tax relief package, let's take a look at education tax relief. This package, which will help Americans deal with college education costs, scores at $12 billion over 10 years by the Joint Committee on Taxation. IRS Statistics of Income show nearly 16 million families and students benefited from this tax relief in 2004. In this era of rising higher education costs, should we gut tax benefits for families to send their kids off to college? Does the Democratic leadership think that is the way to go, which would be the way we would go if Congress does nothing and you let this tax law sunset? Finally, families where both parents work have to deal with childcare expenses. The tax relief package includes enhanced incentives for childcare expenses. Mr. President, 5.9 million families across America benefit, according to the Joint Committee on Taxation. Does the Democratic leadership think we ought to take away these childcare benefits? That is what would happen if the tax cuts of 2001 were sunset. It would happen without a vote of the Congress either. Now, I have taken you through about $1.9 trillion of tax relief. It sounds like a lot in abstraction, but it provides relief to every American who pays income tax. I would ask any of those who want to adjust or restructure--and those are words that are used around here about this tax relief package passed in 2001--do you want to adjust it or restructure it? Where would you cut in this package? Would you hit the 10-percent bracket, driving up the taxes of low- income people? Would you hit small business tax relief and sputter the growth machine, the job machine of America; or the now refundable child tax credit, and hurt low-income people; or the death tax relief; or the marriage penalty relief; dividends and capital gains relief; education tax relief; or childcare tax relief? I hope not. Because in a recovering economy, with above- average levels of individual income tax, as a percentage of GDP, even with the tax relief package in place, which areas would you adjust, which areas would you restructure? Why, then, undo bipartisan--with emphasis upon ``bipartisan''--tax cuts that make the Tax Code actually more progressive? Now get that, not regressive; it is more progressive now than before the tax bill of 2001. As folks on both sides of the aisle say, budgets are about priorities. As the Democratic leadership draws up its budget, we will hear a lot of talk about a big number for extending tax relief. It is a big number. It is the biggest tax increase ever. It is going to affect nearly every American taxpayer. If leadership now in the majority of this body, because of the results of the last election, decides to propose the biggest tax increase in history in the name of deficit reduction, I will be looking for that one, single dollar of spending restraint I never see. Now, maybe we will see it, but I will bet we would not. Only time will tell, and it will be within the next 2 or 3 weeks. Mr. President, I yield the floor. I do not think I see any colleagues who wish to speak, so I suggest the absence of a quorum.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, today I would like to honor SPC Travis Vaughn, who died on February 18, 2007, in a helicopter crash while fighting in Afghanistan. A Cedar Falls, IA, native, Travis served proudly and with distinction during Operation Enduring Freedom. With bravery and valor, Travis accepted the call to defend America against those who seek to undermine our values, our democracy, and our way of life. In Afghanistan, he and others from the 160th Special Operations Aviation Regiment out of Fort Campbell, KY, served their country in a dangerous part of the world, helping to make the rest of the world a safer place. Sadly, Travis's service to his country cost him his life, forever earning him the gratitude of the American people. Travis is remembered fondly and will be greatly missed. A longtime friend of Travis recently said of him, ``He was always there to help anybody that he could and do whatever he could to make people happy.'' Still other friends recalled Travis's fondness for adventurous recreational activities. These qualities made Travis well-suited for military service, and certainly we were fortunate to have a man of such drive and ability serving in the U.S. Army. On behalf of all Iowans and people throughout this country, I offer my heartfelt condolences to Travis Vaughn's friends and family. In particular, my thoughts and prayers go out to his wife Heather, his stepson Taylin, his father Brad, and mother Christine. They should know that the entire Nation stands behind them during this time of mourning. His loss is indeed tragic, but he will be remembered as a hero and a patriot.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the text of The American National Red Cross Governance Modernization Act of 2007 be printed in the Record.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the text of The American National Red Cross Governance Modernization Act of 2007 be printed in the Record.

Mr. GRASSLEY

Mr. GRASSLEY. Madam President, I ask unanimous consent to speak in morning business for such time as I might consume and that it be roughly 20 to 30 minutes.

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

Mr. GRASSLEY

Mr. GRASSLEY. This is an estimate of how various proposed fixes to the alternative minimum tax will impact revenues expected to be collected under the current law. What you should note is that full repeal aside--which I suggest is about the only way to do it but not considering that--each of those proposals will still allow the alternative minimum tax to bring hundreds of billions of dollars into the Treasury. If you consider any proposal aside from full repeal, you are saying that hundreds of thousands, if not millions, of people in our country deserve to bear the burden of an alternative minimum tax that is not even, in some instances today, taxing to people who are supposed to pay the tax: the very wealthy. One possible solution is to continue doing what we have been doing for the past several years. Ever since 2001, the Finance Committee has produced legislation that has kept additional taxpayers from falling prey to the alternative minimum tax because of inflation. In the tax increase prevention and reconciliation bill of 2005, we were able to extend the hold-harmless clause through December 31, just ended. That hold harmless now has expired and action will need to be taken this very year or the AMT will return to its pre-2001 exemption levels, and tens of millions of taxpayers will fall into the AMT and have to pay it this year. Suppose we are able to continue enacting 1- or 2-year temporary patches, as we did last year. First, this strategy assumes that Congress will have the time and the inclination to spend time dealing with the alternative minimum tax every year or two. This means that whatever the issues of the day may be--Iraq, unemployment, natural disasters such as Katrina--Congress will have to stop dealing with those other problems and periodically return to holding harmless people who would be otherwise hit by the alternative minimum tax. Is the alternative minimum tax an issue that we, as a legislative body, should revisit every year or wouldn't it be better to do away with a piece of legislation that was never intended to kill the middle class but will? Today I can show you some taxpayers who ought to be paying it who have found ways of getting around a provision that no wealthy taxpayer was supposed to get around. I hope this body would be ashamed to say that to anyone, that we would consider going down that road, but there we are. The second point I wish to make is Congress attempts to enact or do this every year. Every time a patch is considered, there is another chance for taxpayers to be subject to a stealth tax increase. Finally, we have to remember that more than 3 million taxpayers are currently caught by the AMT, and we are putting a chart up here now that will show more than 3 million families and individuals paid this tax in 2004. This is the way it hits every State. In case the Senator who is presiding can't see this, in the case of Minnesota, there are 69,000 people in that State who paid this for the last year we know about, 2004. In my State of Iowa, if I can find Iowa on here, 17,000, and I will bet most of these people in Minnesota or Iowa who are paying it-- you know, in 1969, it was never anticipated that they pay it. But they are paying it because that is the way our tax laws work, until you make some change in them, and because this wasn't indexed. In dealing with the alternative minimum tax, are we going to tell these people we know that isn't fair and we would like to help you, but in fact you are out there on your own? Well, no taxpayer hearing me say that wants to hear that. I hope this body would be ashamed to say to anyone, much less more than 3 million families and individuals, that any extension of a patch or hold harmless will be fundamentally flawed in that it doesn't take people already hit by the AMT into account. If we are going to decide to protect people from falling into the clutches of the AMT, it would be immoral to forget about those already subject to it. I wish to add, as someone involved in enacting the recent hold- harmless provisions, so people preparing their income tax right now, there aren't any more of them hit by the alternative minimum tax than were hit the previous year, but that is ended December 31. But as one who was involved in that, they were never intended to be a permanent solution. The patches were always ``kicking the can down the road'' and letting somebody else worry about them. Well, I am still here, and I have to worry about it, so I am creating problems for myself. But I don't know how you can get people tuned in to doing away with a tax, and you can't do away with it because you have to offset it, but you are offsetting it with a bunch of phantom income that was never supposed to be paid by these people in the first place. The public listening to this are going to say: Well, what planet did these Congressmen come from? Well, let's go on to another idea, to limit the reach of the alternative minimum tax based on income. We might decide, for instance, that anyone who makes less than $125,000 a year will not be subject to the alternative minimum tax or maybe we could set it at the amount of $200,000 or you could say $400,000. Now, in a nutshell, I have laid out a principal difficulty with setting a minimum threshold based on income. How do we set a number that would be equitable throughout the country? I am not thinking of myself so much as those who come from the so-called blue States, their taxpayers. Any Iowan who has spent any time in Washington, DC, knows right away that it generally costs more to live in those States than in other States, more rural States. It costs more to buy a house, to buy food at the grocery store. What I am trying to get at is that prices and incomes are relative. Taxpayers living in areas such as Manhattan or San Francisco could be especially hard hit by the alternative minimum tax by income. In fixing the AMT, I don't want to move problems around or reassign hardships. That is akin to reassigning the tables and chairs on the deck of the Titanic. Another proposal which has been suggested is to allow certain preference items in the calculation of the alternative minimum tax. This would allow taxpayers to count items, such as a personal exemption, the standard deduction, the State and local taxes, against their income for the purposes of calculating AMT liability. This approach is also fraught with difficulty and unnecessary decisions. To implement this proposal, we would have to arbitrarily give some taxpayers an escape hatch, while others would not be able to escape the AMT. If we allow State and local taxes to be a preferenced item, for example, we are giving an advantage to people who choose to live in high-tax jurisdictions over those who choose to live in low-tax jurisdictions. In my way of thinking, it is not fair for the Federal Government to give more favorable tax treatment to some taxpayers because of where they live. Also, it seems likely that taxpayers who pay the most in State and local taxes are going to be wealthy taxpayers whom the AMT was supposed to tax in the very first place. If we were to give the standard deduction preferential status in calculating AMT liability, then I have concerns about the impact this might have, for instance, on charitable giving. If we only allow the standard deduction to be taken against the AMT, people may decide not to make charitable donations they might otherwise consider. On the other hand, we could allow individuals to count their total charitable contributions when calculating AMT. This approach favors those wealthy enough to make large charitable contributions. The point I make is allowing taxpayers to consider certain preferenced items when calculating their AMT liabilities will make it necessary to favor some taxpayers and will lead to more bills making more changes in the future to the AMT as various groups or interests fight to allow a given exemption or deductibility they favor to be taken against the AMT liability. These are all items which have been floating around as suggestions to fix this problem we have. I don't think any of them are very sound tax policy. They might help some people, but they are going to hurt others. Before I explain how we can deal with the AMT once and for all--and I have already pointed out what I think that is, and that is repeal--I wish to explain how various proposals impact the number of taxpayers already hit by the AMT as calculated by the nonpartisan Joint Committee on Taxation. This chart shows numbers from last year. As the blue line on this chart shows, under current law, the number of AMT filers will jump by over 20 million this year if Congress does nothing. The red line shows what would happen if the exception applicable in 2005 was made permanent and indexed for inflation still at a higher level, hitting people who were never intended to be hit, but it would still moderate the impact for tens of millions of people. Clearly, the number of taxpayers affected is less, but still a very large number that, after dropping to a low of 1.7 million people in 2011, begins to increase again, to 2.1 million people by the year 2016. The orange line represents the establishment of a 24-percent rate along with the 2005 exemptions made permanent and indexed for inflation. This plan just described--the orange line--follows the trend of the red line as it incurs a drop before creeping back up. Finally, the green line on the chart shows what would happen if we took the 1985 exemption amount, which was $30,000 for individuals and $40,000 for joint returns, and indexed it for inflation. As with the other three lines, the number of taxpayers affected drops more before creeping back up once again. Although some of these options seem to assist most taxpayers, do not be fooled by the large scale of this chart. Even the option to index by 1985 exemption leaves at least several hundred thousand taxpayers exposed to the AMT. It would be difficult to explain to these people why others deserve fair treatment and they do not. Clearly, there is only one way, then, to fix the alternative minimum tax so that no taxpayer is subject to what has become a complete policy failure, because even some wealthy people who were supposed to pay a minimum tax for the privilege of living in America are able to get around it as well. We must completely repeal the individual alternative minimum tax. There is a bipartisan consensus that only complete repeal is an adequate solution to this problem. Chairman Baucus, with me and with Senator Crapo, Senator Kyl, Senator Roberts, Senator Schumer, and Senator Smith, last month introduced the Individual Alternative Minimum Tax Repeal Act of 2007. By the way, that is a bipartisan group of people. The alternative minimum tax was originally conceived as a means to ensure that the Tax Code was equitable and more progressive. Ironically, the only equitable thing to do is to completely banish the individual AMT from the Tax Code. Any other solution will entail we treat taxpayers in similar situations differently or that we arbitrarily choose winners and losers. As I have said many times, the alternative minimum tax has been a complete and absolute failure. The alternative minimum tax was only supposed to hit a very small number of wealthy taxpayers who were able to legally eliminate their entire income tax liability. In reality, the AMT is gradually consuming our middle class and is projected to absorb more revenue coming in from the alternative minimum tax than the regular income tax in just a little while. Furthermore, the alternative minimum tax does not even prevent wealthy taxpayers from eliminating their tax liabilities. If Members have heard me say that four times, I say it to impress that the original intent of the alternative minimum tax is not even being met. For the tax years 2003, the IRS calculated that there are 2,366 taxpayers with incomes of over $200,000 a year or more who did not pay any income tax. These 2,366 taxpayers did not use medical or dental expense deductions to limit their tax liability. We must repeal the AMT. We must do it without offsetting any revenue the AMT is expected to collect in the next few years because it was never intended in 1969 that these people pay the alternative minimum tax. I have made this point before but cannot make it too many times: The AMT was never intended to be a significant source of revenue. It was supposed to be making a point that when some of the very wealthiest use every legal means they can--and I stress ``legal'' because these are not criminals--every legal means to avoid paying income tax, they ought to pay a little bit for the privilege of being in America. Not that they don't pay in other ways--it is a matter of progressivity as much as it is the privilege of living in America, to be a matter of principle. It was never meant to be a significant source of income. Despite this, we will see the alternative minimum tax ballooning Federal revenues to historically high levels if something is not done. This chart which I used a couple of days ago shows how revenues are projected to exceed the 30-year historical average. This historical average is actually about a 50-year historical average, somewhere between 17 percent and 19 percent. We are at the historical average right now. Even though we were a little bit below after the income tax cut of 2001, we are back up to 18.4 or 18.6 of GNP. If we do not do something about this alternative tax and we also continue to collect it from people who were never intended to pay it, this is where we end up--with income coming into the Federal Treasury way above the historical average. I emphasize historical average, not that it is sacrosanct, but I come to the conclusion that over a period of 50 years, if we have a tax policy falling between 17 percent and 19 percent--and this is whether there were 93 percent marginal tax rates that President Kennedy did away with or as low as 28 percent marginal tax rates that we had in the tax year of 1986 under Reagan--if we overlap all of the marginal tax rates on top of the GNP portion the Federal Government takes, we still average 17 percent to 19 percent, which shows that it does not matter how wealthy you are, some people come to the conclusion that they will only work so hard and pay so much tax regardless of how high the marginal tax rate is, and you get the same amount of money coming in. So try to tax the wealthy, raise the marginal tax rate, you get less revenue. If you want to soak the rich, lower the marginal tax rate because they are people who will take their money out of leisure, they will take it out of nonproductive investments such as antique and gold and put it into productive investments because probably they are greedy and they want to make more if it is worth working to make more. Regardless of where we set it, 17 percent to 19 percent seems to work because, at least in my judgment, a very commonsense judgment, it is a level of taxation that there has not been a revolt against. It is a level of taxation that 50 years of our country shows has increased the standard of living for the American people very dramatically. If we consider the AMT to be fundamentally an unfair tax, any tax that would replace it would be equally unfair. Anyone who wants equity to be a fundamental value represented by our Tax Code or who wants fair treatment for this country's taxpayers must support complete repeal of the alternative minimum tax and should support the Baucus-Grassley bill, which is the Individual Alternative Minimum Tax Repeal Act of 2007, a bipartisan bill. I yield the floor, and I suggest the absence of a quorum.

Mr. GRASSLEY. Madam President, you and other Senators have seen me on the floor in the last few days in order to bring some clarity to our discussion we have every year about what to do with the alternative minimum tax. When I say ``every year,'' for at least the last 3 years we have had some discussion about the alternative minimum tax. I would remind people that in 1999 we passed a repeal of the alternative minimum tax, but President Clinton vetoed it and we haven't been able to repeal it since. Now, this alternative minimum tax was originally created in 1969 targeting wealthy taxpayers who were able to legally eliminate their entire income tax liabilities. The AMT has turned into a monster that has threatened to hurt the middle class and maybe eventually touch lower income taxpayers if we don't do something about it. Obviously, if it is a monster, that ought to indicate to my colleagues that I think it ought to be repealed. The reason for this, as I have explained, is the failure a long time ago to index the alternative minimum tax for inflation. Thirty-eight years of inflation has allowed the alternative minimum tax to spread to literally millions of taxpayers who were never intended to pay it in the first place. Although more middle and lower income taxpayers will be hit by the alternative minimum tax, it has not decreased the percentage of high-income taxpayers who have no tax liability. So here we have the anomaly of a tax that was supposed to hit just the very wealthy. In the year 1969, we were talking about a study which showed 155 people. Now it is hitting millions of people. This year, if we don't act, it is going to hit another 9 million or 10 million. And the anomaly is, there are people who have figured a way to even not pay the alternative minimum tax, and those people obviously are the wealthy whom it was supposed to hit in the first place. The alternative minimum tax also takes more than the taxpayers' money; it takes an awful lot of time to figure through this when you are doing your taxes. I think it was on Tuesday of this week or Monday of this week when I said the IRS estimates that the taxpayers spend an average of 63 hours computing the alternative minimum tax liability. The alternative minimum tax is truly a very cruel way of raising revenue. While there seems to be general agreement that the AMT is a problem, there has been less agreement on the solution for that problem. Perhaps I shouldn't be surprised that there are more problems than there are solutions, but I am surprised by some of the obstacles preventing a solution to the alternative minimum tax. There are some who make the argument that any revenue not collected in the future as a result of the alternative minimum tax repeal, or reform, ought to be offset. I explained this before, but you can't say it too many times around here: The alternative minimum tax is a phony revenue source and should not be offset. Since the alternative minimum tax collects revenues, it was never intended to collect from people who were never intended to pay it in the first place. Although the alternative minimum tax is still with us, it is not because solutions have not been considered and proposed. Right now I will walk through some of those solutions that have been suggested. Before I begin, I wish to emphasize a point I made a couple days ago. With surprising regularity over the past 38 years, Congress has been meddling with the AMT, including the year I said we passed legislation to repeal it and President Clinton vetoed it. Since 1969, more than 20 bills have made changes to the alternative minimum tax. Sometimes the rate was adjusted. Sometimes the exemption amounts were modified. More than once, graduated rates were introduced. My point is that for 38 years, Congress has hoped to tinker with the alternative minimum tax in just the right, very right way, very perfect way, to finally get it right but not succeeded. Unless we truly believe we are the smartest Congress in 38 years, anything short of complete repeal of the AMT will probably require yet further action down the road in a few years. I would also like to draw attention to the revenue estimates done by the Joint Committee on Taxation in 2005 that is reproduced on this chart, and these numbers are so small I am only going to talk around them and not specifically to those numbers. I ask unanimous consent that this estimate be printed in the Record.

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, I think it was 48 hours ago I opened a discussion with my fellow Senators on the alternative minimum tax. As I pointed out at that time, it is generally recognized that the alternative minimum tax is a policy failure. Created in 1969, in response to the discovery that 155 wealthy taxpayers--and let me emphasize that I am talking about 155 wealthy taxpayers--were able to eliminate their entire tax liabilities through legal means, the AMT has now evolved into a place where, because it wasn't indexed, it has captured more than 3 million middle-class Americans as of 2004. The AMT was never supposed to affect anyone except the very wealthy people. I am using 2004 numbers because 2004 is the most recent year we have completed data. Three million people in that year were hit by AMT, even though since 2001 we have had in place a tax policy that no additional people should be hit by the alternative minimum tax. At the time I was visiting with my colleagues 2 days ago, I cited the widespread observation that the most significant structural flaw afflicting the AMT is the failure to index its rates and exemptions for inflation. This failure, then--and I alluded to this a minute ago--has resulted in the gradual encroachment of the alternative minimum tax to hit middle-class taxpayers who were never intended to pay this tax. Despite the widespread agreement that something needs to be done with the alternative minimum tax, agreement on what exactly to do is not so widespread. A major factor in the disagreement relates to the massive amount of money the alternative minimum tax brings to the Federal Government. In 2004, from these 3 million taxpayers hit by this tax, more than $12.8 billion was paid into the Federal Treasury. If we don't extend the most recent alternative minimum tax hold-harmless that actually expired at the end of 2006, the amount paid by those 3 million taxpayers is expected to balloon to a much greater amount. And, of course, when you go beyond that, into the long-term budget forecast, it is going to continue to grow and grow, with middle-class taxpayers paying a tax that was meant to be for 155 wealthy people. When forecasters put their projections together, they are working under the assumption that the hold-harmless that was extended in last year's tax bill will not be extended because they base their assumptions on current law. This means the hold-harmless provisions ended December 31, 2006, and money being earned right now is going to hit millions more people. People who guesstimate how much money comes into the Federal Treasury--and we have people both in the executive branch and the legislative branch who have that as their responsibility, so we can make good tax policy--take into consideration what is current law, and they are planning on these millions of middle-class taxpayers paying this alternative minimum tax, even though they were never intended to pay it. Because of this, budget planners make the assumption that revenues will be much higher than everyone who is frustrated with the AMT thinks that amount of money ought to be, as well as the number of people who are going to be paying it. The reason for that is the alternative minimum tax tremendously balloons the revenue base, as it is projected to increase revenues as a percentage of gross domestic product. There is a great deal of evidence to support this. On a side note, a senior, well-respected tax lawyer on the other side of the aisle in the other body took exception to my use of the term ``ballooning.'' The staffer wrote an article and criticized me for that term. Well, I am not used to staff writing articles criticizing Members of Congress, so I happened to respond to that staffer's criticism through my own staff. The essence of the senior staffer's criticism was that the term ``ballooning'' ignored the accounting for the interaction of bipartisan tax relief with AMT costs. As we pointed out, ballooning revenue from the AMT occurs in the outyears, whether the bipartisan tax relief is extended or made permanent. I will talk more about that in a few minutes. The nonpartisan Congressional Budget Office has consistently forecast this ballooning year after year. This chart which I have before me now for you to look at, reproduced from the Congressional Budget Office's long-term budget outlook, was published in December 2005 and shows how Federal revenues are expected to push through the 30-year historical average and then keep going up. You can take that historical average back 30 or 40 years for sure, and maybe longer than that, but the historical average is here and current law is actually going to bring in this much revenue, and that includes the ballooning of the alternative minimum tax. I want to note that although the Tax Increase Prevention and Reconciliation Act of 2005 was signed into law after this analysis was published, the 2006 tax bill extended the AMT hold-harmless through December 31 last year, and this chart shows Federal revenues all the way through to the year 2050. It is important to note the long-term effects then of the alternative minimum tax on the revenue base. There may be some doubters who hesitate to attribute this ballooning of revenues to the alternative minimum tax, but this chart illustrates the drastic expansion of the AMT under current law over the next 43 years. Over the next 43 years. This is also from the nonpartisan Congressional Budget Office. You can clearly see that the share of households subjected to the alternative minimum tax is alarmingly around 65 percent. Let's go through that again. You can see from the new chart which I have put up here that the share of households subjected to the alternative minimum tax increases by the year 2050 to about 65 percent of taxpayers. The reason why this 65 percent--or even going back to here, or even back to here--is significant is because, as I told you 48 hours ago, and as I tell my colleagues now, this alternative minimum tax was put in the tax law to hit wealthy taxpayers, 155 at that year, who didn't pay any tax whatsoever. It was felt that everybody, particularly wealthy people living in this country and who benefit from this country, ought to pay some sort of a tax. It was never intended to hit this percentage of taxpayers, or this percentage of taxpayers, and surely not this percentage of taxpayers. And if we do nothing, it is going to be 65 percent. I don't know what the population of this country is going to be in 43 years, but I know that 65 percent of the population in 2050 will be more, quite obviously more than the 155 taxpayers the AMT was intended to target. This chart also shows how the AMT will consume a greater and greater share of the total individual income tax liability. The Congressional Budget Office report states: By 2050, roughly 15 percent of the individual income tax liability would be generated by the alternative minimum tax compared with about 2 percent today. This is what will happen if we don't do anything. This is going to happen. The analysis done by the Congressional Budget Office clearly shows an upcoming ballooning of Federal revenues, accompanied by a corresponding bloating of the share of households and the share of total liability attributed to a tax that was only intended to hit 155 people 39 years ago. A particularly wrongheaded argument that has been advocated is that the Bush tax cuts are responsible for increases in the number of people hit by the alternative minimum tax. Some think the Bush tax cuts are increasing some people's income so much that they are subject to the alternative minimum tax and that making the tax cuts permanent will only make those problems worse. This sort of reasoning is deceptive and could not be more wrong. First, the analysis that I presented--done by the Congressional Budget Office--looks forward all the way to 2050, and the Bush tax cuts under current law sunset in 2010. As I previously said, the AMT's greatest flaw is that it is not indexed for inflation, and inflation is going to continue whether the Bush tax cuts are extended or not. Inflation is going to be there. This next chart from the Congressional Budget Office illustrates how the alternative minimum tax will continue to be a money machine, regardless of any other factors. The bottom line illustrates individual income tax liabilities if the Bush tax cuts are made permanent and the AMT is modified, the middle line illustrates current law with the permanence of the Bush tax cuts, and the very top line--current law. If the Bush tax cuts are allowed to sunset and the AMT is allowed to grow and consume our middle class, the AMT will still balloon revenues anyway. Any argument that making the Bush tax cuts permanent will worsen our AMT problem is completely false, and this chart proves that. The AMT is a problem all by itself. As I said earlier, the problem with all of the projections showing the AMT ballooning revenues is that these projections are used to put together budgets. This means the central problem in dealing with the AMT is money. There are some people who say we can only solve the AMT problem if offsetting revenue can be found to replace the money that the AMT is currently forecast to collect. Anyone who says this sees the forecasts showing revenue being pushed up as a percentage of GDP--and they are high-tax people and yet higher tax people to satisfy them--and they want to keep it there. These arguments are especially ridiculous when one considers that the alternative minimum tax was never meant to collect so much revenue and collect it from the people who are going to end up paying it, the middle class people, if we don't do something about it. As a policy instrument, the alternative minimum tax has been and continues to be a complete failure, as I discussed 48 hours ago. The alternative minimum tax was originally conceived as a means to ensure that extremely wealthy taxpayers were not able to game the system and to avoid their entire tax liability. In 1969, the alternative minimum tax was calculated to hit only one out of a half a million people. There is absolutely no way anyone can call the AMT anything close to a success. The alternative minimum tax has even failed in its objective: to ensure that no citizen, regardless of how wealthy, was able to completely avoid paying at least a little bit of Federal income tax because we have this anomaly. In 2004, the Commissioner of the Internal Revenue Service, Mark Everson, informed the Finance Committee that the same number of taxpayers, as a percentage of the tax-filing population at large, continues to pay no Federal income tax. So even to hit the people who were supposed to be hit, there are people in a tax situation, legally, able to avoid not only the regular income tax but to avoid the alternative minimum tax. So it is a failure by its own reason for existence. According to an IRS analysis of the tax year 2003 data, we had 2,366 taxpayers with incomes above $200,000 or more who did not use the medical or dental expense deduction and had no income tax. The AMT has failed in every way except for the ability to raise very large sums of money, and it was never intended to be a tax-producing machine. It was only intended to hit people who were not going to pay any income tax and ought to pay a little bit for the privilege of living in America. While it may be hard for some to turn down taxpayers' money, whether we are supposed to collect it or not, no one seems to have trouble spending it. This means that some want the taxpayer to pay the price for a tax that was designed poorly and through the comedy of errors was allowed to flourish. It is simply unfair to expect taxpayers to pay a tax they were never intended to pay--and that means middle class America. And it is even more unfair to expect them to continue paying for that tax once we get rid of it. The reform or repeal of the AMT should not be offset because it is money we were never supposed to collect in the first place. The way to solve this problem is to look on the other side of the ledger, the spending side. Budget planners need to take off their rose- colored glasses when looking at long-term revenue projections that include a tax by middle class people who were never intended to pay that tax, the alternative minimum tax, and to read the fine print. In general, it is a good idea to spend money within your means. That is true in this case as well. If we start trying to spend revenues we expect to collect in the future because of the AMT, from people who were never expected to pay it, it was never supposed to come in the first place, we will be living beyond our means. We need to stop assuming that record levels of revenue are available to be spent and to recognize that the AMT is a phony revenue source. As we consider how to deal with the AMT, we must first remember that we do not have the option of not dealing with it unless we want to kill the middle class. The problems will only get worse every year and make any solutions more difficult. We must also be clear that the revenue the AMT would not collect as a result of repeal or reform should not be offset as a condition for repeal or reform. We should not call it lost revenue because it is revenue that the middle class was never expected to pay. Making the offsetting of the AMT's ill-gotten gains a condition of the AMT fix is to punish the American taxpayers for an ill-conceived and poorly executed policy that has been a total failure. Aside from not increasing the proportion of wealthy taxpayers who pay income taxes, the AMT is projected to balloon Federal revenues over historical averages and to become a greater source of revenue than even the regular income tax. Budget forecasters need to recognize that the AMT is not a legitimate source of revenue, and Congress needs to be disciplined enough to show restraint on spending so that an AMT solution doesn't boil down to the replacement of one misguided policy by another misguided policy. I yield the floor.

Mr. GRASSLEY

Mr. GRASSLEY. I think the Senator from North Dakota wanted to be recognized.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, lately we have heard a lot about the alternative minimum tax and the difficulties involved in fixing it. Right now is tax time so a lot of people are going through the process of determining whether they owe the alternative minimum tax. I will visit with taxpayers about that. At another time I will go into greater detail regarding some of these problems and what we need to do to fix the alternative minimum tax. Right now I want to explain how we got into this situation. Of course, as with anything, it would be foolish to go forward on this issue without looking back to see how we got to where we are now, after 40 years of the alternative minimum tax. The alternative minimum tax, then, obviously has been with us for that long a period of time. The individual minimum tax was the original name of the alternative minimum tax and was enacted first in 1969. This chart I am displaying highlights a few of the important and most recent milestones in the evolution of the AMT. I will not go into each of those milestones in detail, but by looking at the chart you can see the AMT has not been a constant. There has been an alternative minimum tax, but it has had some changes in the last 38 years. First, the history of the AMT. In the 1960s, Congress discovered only 155 taxpayers--all people with incomes greater than $200,000 a year-- were not paying any taxes whatever. These taxpayers were able to use legitimate deductions and exemptions to eliminate their entire tax liabilities--all legally. To emphasize, what they were doing was not illegal, but Congress could not justify this at that time and it determined at that time that wealthy Americans ought to pay ``some'' amount of tax to the Federal Government regardless of the amount of legal ways of not paying tax. When Congress decided to do this, it was calculated only 1 in 500,000 taxpayers would ever be hit by the alternative minimum tax. According to the Bureau of Census, we had at that time about 203 million people compared to 300 million today. Making the assumption that every single American was a taxpayer, the individual minimum tax was originally calculated to affect only 406 people. We get that by dividing 203 million by 500,000. In 1969 Congress was motivated by the situations of the 155 taxpayers to enact a tax calculated to impact about 406 people. Clearly, the situation has changed dramatically in the last 30 years because this year the AMT is going to hit several million taxpayers. Although not its only flaw, the most significant defect of the alternative minimum tax is that it was not indexed for inflation. If it had been indexed for inflation, we would not be dealing with this tax problem and millions of people this year would not have to figure out if they owed the alternative minimum tax. The failure to index the exemptions and the rate brackets, the parameters of the AMT, is a bipartisan problem. Perhaps a most notable opportunity to index the AMT for inflation was the passage of the Tax Reform Act in 1986. That law was passed by a Democratic House, a Republican Senate, and signed by a Republican President. It is worth pointing out at that time, because of the bipartisan cooperation, indexing was a relatively new concept, and even though they had a bipartisan opportunity, they did not take advantage of it. One can argue that indexing of the AMT should have received more attention, but the fact is it did not then or any time since then, so we have the problems I am discussing today. Today it is impossible for anyone to use the excuse that indexing is a new concept. Maybe it could be used in 1986. In a regular tax system, the personal exemptions, the standard deduction, the rate brackets are indexed for inflation. Government payments such as Social Security benefits are indexed for inflation and people would be hard pressed to go into most schools and find a student who does not at least know that inflation was something to be avoided or at least to be compensated for through indexing. Despite what must be a nearly universal awareness of inflation, though, the alternative minimum tax, the Internal Revenue Code equivalent of a time capsule, remains the same year after year as the world changes around it. It must be obvious to everyone that the value of a buck has changed a lot in the last 38 years, and all here are experienced enough to have witnessed that change. More than anything else, the problem posed by the alternative minimum tax exists because of a failure to index that portion of the Tax Code for inflation. Although $200,000 was an incredible amount of money in 1969, the situation is different today. I am not saying that $200,000 is not a lot of money--because it is, obviously, to most middle-income people a lot of money--but $200,000 is certainly going to buy less today than it did in 1969. I also emphasize that I am not the only one saying the failure to index the alternative minimum tax for inflation is what is causing it to consume more and more of the middle-income taxpayers. On May 23, 2005, the Subcommittee on Taxation and IRS Oversight, the Committee on Finance, held a hearing entitled ``Blowing the Cover on the Stealth Tax: Exposing the Individual AMT.'' At that hearing, the national taxpayers advocate Nina Olson said: [t]he absence of an AMT indexing provision is largely responsible for increasing the numbers of middle-class taxpayers who are subject to the AMT regime. Robert Carroll, who is now Deputy Assistant Treasury Secretary for tax analysis and then was in the acting position, same title, testified: [t]he major reason the AMT has become such a growing problem is that, unlike the regular tax, the parallel tax system is not indexed for inflation. We also had at that hearing Douglas Holtz-Eakin, who at that time was director of the nonpartisan Congressional Budget Office: If the 2005 [increased AMT] exemptions were made permanent and, along with other AMT parameters, indexed for inflation after 2006, most of the increase over the coming decade in the number of taxpayers with AMT liability would disappear. Clearly, there is a consensus among knowledgeable people that the failure to index the AMT for inflation has been and continues to be a serious problem and, in fact, for the most part, would be a solution to the problem if you want to maintain the AMT. If you want to argue for doing away with the AMT, that is another ball game. What makes the failure to index the AMT in 1986 and other years more disastrous is repeated failure to deal with the problem in additional legislation that has actually compounded the problem posed by the alternative minimum tax. Before I continue, I will catalog the evolution of the alternative minimum tax rate for a moment. The 1969 bill gave birth to the alternative minimum tax which established a minimum income tax rate of 10 percent in excess of the exemption of $30,000. In 1976, the rate was increased to 15 percent. In 1978, graduated rates of 10, 20, and 25 were introduced. In 1982, the alternative minimum tax rate was set at a flat rate of 20 percent and was increased to 21 percent in 1986. This is not a complete list of legislative changes and fixes, and I am sure no one wants me to recite a full list but, very importantly, I want to make sure that everyone realizes Congress has a long history of trying to fiddle with the AMT in various ways but without doing anything permanent to it. Hence, we are here again this year considering what to do. Now, a great detail on recent bills impacting the AMT. In 1990, the Omnibus Budget Reconciliation Act is a result of the famous Andrews Air Force summit between President Bush and Democratic leaders on Capitol Hill. Probably Republicans were involved, as well. That legislation raised the alternative minimum tax rate from 21 percent to 24 percent and did not adjust the exemption levels. That means every person who had been hit by the AMT would continue to be hit by the AMT but be hit harder. Then we had the same title, but in 1993 we had the Omnibus Budget Reconciliation Act. The exemption level was increased to $33,750 for individuals and $45,000 for joint returns, but that was accompanied by yet an additional rate increase. In 1993, the tax increase passed this Senate with just Democratic votes for it. No Republican voted for it. Once again, graduated rates were introduced, except this time they were 26 percent and 28 percent. By tinkering with the rate and exemption levels of the alternative minimum tax, these bills were only doing what Congress has been doing on a bipartisan basis for almost 40 years, which is to undertake a wholly inadequate approach to a problem that keeps getting bigger and bigger and bigger. Aside from this futile tinkering that has been done every few years, Congress has, in other circumstances, completely ignored the impact of the tax legislation on taxpayers caught by the alternative minimum tax. In the 1990s, a series of tax credits, such as the child tax credit and lifetime learning credit, were adopted without any regard to the alternative minimum tax. The alternative minimum tax limited the use of nonrefundable credits, and that did not change. In other words, because of the AMT, we did not accomplish the good we wanted to with those credits for lower middle-income and lower income people. Congress quickly realized the ridiculousness of this situation and waived the alternative minimum tax disallowance of nonrefundable personal credits, but it only did it through the year 1998. In 1999, the issue again had to be dealt with. The Congress passed the Taxpayer Refund and Relief Act of 1999. In the Senate, only Republicans voted for that bill. That bill included a provision to do what I would advocate we ought to do right now: repeal the alternative minimum tax. If President Clinton had not vetoed that bill, we would not be here today. But we are here today with a worse problem. Later, in 1999, an extenders bill, including the fix, to fix it good through 2001, was enacted to hold the AMT back for a little longer; in other words, not hitting more middle-income people. In 2001, we departed from these temporary piecemeal solutions a little bit--at least a little bit--for 4 years with the Economic Growth and Tax Relief Reconciliation Act of 2001. That 2001 bill permanently allows the child tax credit, the adoption tax credit, and the individual retirement account contribution credit to be claimed against a taxpayer's alternative minimum tax. While this certainly was not a complete solution, it was a step in the right direction. More importantly, the 2001 bill was a bipartisan effort to stop the further intrusion of the alternative minimum tax into the middle class. The package Senator Baucus and I put together that year effectively prevented inflation from pulling anybody else into the alternative minimum tax through the end of 2005. Mr. President, I ask unanimous consent for 3 more minutes.

Mr. GRASSLEY. Our friends in the House originally wanted to enact a hold harmless only through the end of 2001, while Senator Baucus and I were trying to do it through 2005. We got the final bill the way Senator Baucus and I wanted it. So it was not a problem then until the year 2005. Since the 2001 tax relief bill, the Finance Committee has produced bipartisan packages to continue to increase exemption amounts to keep taxpayers ahead of inflation, with the most recent being the Tax Increase Prevention and Reconciliation Act of 2005, which increased the AMT exemption to $62,550 for joint returns and $42,500 for individuals through the end of 2006. These packages put together since 2001 are unique in that they are the first sustained attempt undertaken by Congress to stem the spread of the AMT through inflation and hitting more middle-income taxpayers. Admittedly, these are all short-term fixes, but they illustrate a comprehension of the AMT inflation problem and what needs to be done to solve it. So this leads us to the present day and the situation we currently face. In 2004, the most recent year for which the IRS has complete tax data, more than 3 million families and individuals were hit by the AMT. And those figures for each State are shown on this chart behind me. You can see a breakdown by State of families and individuals who paid the alternative minimum tax, even with our hold-harmless provisions in place. This does not even begin to hint at what will happen if we do not continue to protect taxpayers from the alternative minimum tax. Barring an extension in the hold harmless contained in the 2006 tax bill, AMT exemptions will return to their pre-2001 levels. At the end of 2006, provisions allowing nonrefundable personal tax credits to offset AMT tax liability expired. If further action is not taken, it is estimated that the AMT could claim 35 million families and individuals by the end of this decade. That is just 3 years away. Think of it: a tax originally conceived to counter the actions of 155 taxpayers in 1969 could hit 35 million filers by the year 2010--a well-intentioned idea 40 years later with unintended consequences. Some analyses show that in the next decade, it may be less costly to repeal the regular income tax than the alternative minimum tax. Aside from considering the increased financial burden the AMT puts on families, we also should consider the opportunity cost. Because the average taxpayer spends about 63 hours annually complying with the requirements of the alternative minimum tax, that is an awful lot of time that could be more productively used elsewhere. As I have illustrated, the AMT is a problem that has been developing for a while. Thirty-eight years down the road are we now. On numerous occasions, Congress has made adjustments to the exemptions and rates, though not as part of a sustained effort to keep the alternative minimum tax from further absorbing our Nation's middle class. Despite these temporary measures, the AMT is still a very real threat to millions of middle-income taxpayers who were never supposed to be subjected to a minimum tax. That the alternative minimum tax has grown grossly beyond its original purpose--which was to ensure the wealthy were not exempt from an income tax--is indisputable and that the AMT is inherently flawed would seem to be common sense. Despite a widespread sense that something needs to be done, there is still disagreement on what needs to be done. Over the course of a few more remarks on this floor, in days to come, I will address some of those things we ought to do. But this is a case where well-intended legislation not being paid attention to has turned out to be a major tax problem in this country. Mr. President, I yield the floor.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I am introducing the Pigford Claims Remedy Act of 2007. This bill establishes a new cause of action for those African-American farmers who filed late claim petitions as required by the Pigford v. Glickman Consent Decree, but whose petitions were rejected. These rejections have effectively barred African-American farmers from the one process that was established to bring closure to the claims of discrimination by African-American farmers, many of which have been pending for decades. My bill attempts to remedy what appears to be a lack of sufficient notice, indicated by the late applicants. It helps bring justice for farmers who have historically been discriminated against while being mindful of the constitutional constraints on Congress's authority. This bill will provide a new cause of action that will assist those putative claimants whose claims have never been evaluated on the merits. Studies conducted by the USDA revealed the depth and impact of this disparate treatment. In 1994, the Department of Agriculture commissioned a study to analyze the treatment of minorities and women in farm programs and payments. In 1997, Secretary Glickman commissioned the Civil Rights Action Task Force to look into allegations of racial discrimination in the agency's loan program. In conjunction with this the Inspector General conducted its own investigation into the allegations of disparate treatment. Each report confirmed what African-American farmers already experienced first hand. USDA failed to act to adequately address these past wrongs. It took a class action lawsuit filed by African-American farmers in 1997 to get USDA to respond. The resulting Pigford v. Glickman Consent Decree was believed to be a turning point in this unfortunate history. Hopes were high that African-American farmers would finally be compensated for the history of injustice. The consent decree was intended to provide a swift resolution for the claims of discrimination that had gone unaddressed for decades. Yet, in a sad twist, the process that was created to provide a forum for those whose claims had been shut out, has itself shut out more than 75,000 African American farmers who wish to have their claims of discrimination heard. Hearings before the House Subcommittee on the Constitution revealed that almost 76,000 farmers who submitted late claim petitions were denied entry because they could not show that extraordinary circumstances prevented them from filing a timely complaint. Despite the lack of knowledge about the consent decree, which was cited by more than half of these petitioners, lack of notice was not deemed an extraordinary circumstance under the consent decree. So these petitioners are left without any recourse to have their claims of discrimination heard on the merits. These people should be allowed to have their case heard. I urge my colleagues to support this important legislation.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I am introducing the Pigford Claims Remedy Act of 2007. This bill establishes a new cause of action for those African-American farmers who filed late claim petitions as required by the Pigford v. Glickman Consent Decree, but whose petitions were rejected. These rejections have effectively barred African-American farmers from the one process that was established to bring closure to the claims of discrimination by African-American farmers, many of which have been pending for decades. My bill attempts to remedy what appears to be a lack of sufficient notice, indicated by the late applicants. It helps bring justice for farmers who have historically been discriminated against while being mindful of the constitutional constraints on Congress's authority. This bill will provide a new cause of action that will assist those putative claimants whose claims have never been evaluated on the merits. Studies conducted by the USDA revealed the depth and impact of this disparate treatment. In 1994, the Department of Agriculture commissioned a study to analyze the treatment of minorities and women in farm programs and payments. In 1997, Secretary Glickman commissioned the Civil Rights Action Task Force to look into allegations of racial discrimination in the agency's loan program. In conjunction with this the Inspector General conducted its own investigation into the allegations of disparate treatment. Each report confirmed what African-American farmers already experienced first hand. USDA failed to act to adequately address these past wrongs. It took a class action lawsuit filed by African-American farmers in 1997 to get USDA to respond. The resulting Pigford v. Glickman Consent Decree was believed to be a turning point in this unfortunate history. Hopes were high that African-American farmers would finally be compensated for the history of injustice. The consent decree was intended to provide a swift resolution for the claims of discrimination that had gone unaddressed for decades. Yet, in a sad twist, the process that was created to provide a forum for those whose claims had been shut out, has itself shut out more than 75,000 African American farmers who wish to have their claims of discrimination heard. Hearings before the House Subcommittee on the Constitution revealed that almost 76,000 farmers who submitted late claim petitions were denied entry because they could not show that extraordinary circumstances prevented them from filing a timely complaint. Despite the lack of knowledge about the consent decree, which was cited by more than half of these petitioners, lack of notice was not deemed an extraordinary circumstance under the consent decree. So these petitioners are left without any recourse to have their claims of discrimination heard on the merits. These people should be allowed to have their case heard. I urge my colleagues to support this important legislation.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I rise to reintroduce the Congressional Whistleblower Protection Act of 2007, which will extend whistleblower protections currently available to certain executive branch employees to legislative branch employees. Presently, executive branch employees are shielded from retaliation for exposing waste, fraud, or abuse by the Whistleblower Protection Act. The bill I'm introducing today simply extends those same protections to legislative branch employees. A theme that has dominated this new Congress, as well as the elections this past November, is accountability and responsibility in Washington. I have fought hard for whistleblowers over the years because they are key in our efforts to ensure government accountability to the people we are sent here to serve. In most instances, the only reason we discover waste or fraud is because employees are brave enough to stand up to the wrongdoers and expose their offenses. Without these whistleblowers, the American taxpayer would continue to foot the bill. The Office of Compliance has called for these changes on numerous occasions in recent years, and they are very supportive of this bill. We have already taken the steps to protect whistleblowers in the executive branch. It doesn't make sense not to extend these same protections to whistleblowers in our own backyard. My bill will, very simply, give congressional employees the same protections that workers in the other branches of government already possess. I hope my colleagues will join me in supporting this bill to ensure that those who help us in the fight to hold government accountable are not punished for their efforts. I ask unanimous consent that the text of this bill be printed in the Record.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, every time a President gives a State of the Union message, there are a lot of people who praise it, there are a lot of people who disagree with it. One of the areas where there was some agreement--but also a lot of disagreement--was on the energy package the President suggested in his State of the Union message. Since I come from a State that is No. 1 in almost all of the alternative energies such as biodiesel, such as wind--we are third in wind energy, we are first in biodiesel, we are first in ethanol production--I would like to set the record straight and encourage people to see that a lot of good has been accomplished over the last several years and that we ought to forget a lot of disagreeing rhetoric and move on and even enhance what we have already done. So I am here to address an issue President Bush mentioned in his State of the Union message and an issue that those particularly on the other side of the aisle have been quick to criticize. In the President's speech to the Nation, he once again highlighted the need for the United States to reduce our dependence upon foreign oil. This has been something that Presidents have been stating on a very regular basis, both Republican and Democratic, going back to 1973, when President Nixon gave a speech, during the first energy crisis, speaking about energy independence. Of course, President Nixon was saying we can do it by 1980. I don't know why he picked that date, but actually we are much more dependent upon foreign sources now than we were even in 1980 because of the consumption of the United States and the standard of living we have. People want to be free to drive their car wherever they want to drive it as long as they want to. Whether it is a big car or little car, it is freedom in America to do it, so we become more dependent. But also along the lines of alternative energy, we have made tremendous progress. So President Bush did not do anything that Presidents probably haven't been doing for the last 34 years, in saying we need to move toward energy independence, but what they mean is less dependence upon foreign sources and less dependence upon petroleum. Because I would be misleading my colleagues, I would be misleading my constituents if I said we have the capability--at least I don't know that we have the capability--of being totally independent of foreign sources of energy, but we surely have the capability of being less dependent upon foreign sources of energy, and we have the capability of being less dependent upon petroleum as a basis of our energy. So the critics, though, it seems, have been quick to point out that the President has mentioned our dangerous dependence on foreign oil in seven straight addresses to the Congress. That is why I pointed out that every President since President Nixon has been talking about this issue. So it is not just President Bush who has been mentioning it and, presumably and impliedly, not doing anything about it. I wish to remind my colleagues he has also talked about the value of domestic, homegrown, renewable sources. But at the same time, there has been criticism that he has done little to actually support the growth of alternative energy. I say my colleagues are wrong. I am going to quote Senators, but I am not going to mention their names because I am not here to embarrass anybody; I am here to try to get people to be responsible. I do wish to refer to these as all Members of the Democratic Party, but I am not going to mention their names. One Democratic Senator stated after the President's speech last week: The President acknowledged the need to develop alternative energy, but he did not offer a real plan to put us on the path to energy independence. Now, I am going to show my colleagues how the President has been very much involved in this. Another Democratic Senator stated: So many of us believe that though the President continues to refer to the problem-- Meaning the problem of not being energy independent enough-- he has never quite moved us-- Never quite moved us-- as we would like in the direction of a solution. We did little or nothing in Washington to address the addiction. Maybe he hasn't addressed the addiction, but because there is an addiction, he has tried to make us less dependent upon a petroleum addiction, as opposed to an energy addiction. Finally--and I could go on and quote many more, but I will stop at the third one--one more Democratic Senator commented: We have waited 6 long years for the aggressive new incentives needed to really get our biofuels industries off the ground and break America's oil addiction. Of all the statements I have quoted, it seems to me that is the one that is flatout intellectually dishonest, as I am going to give some facts here. The facts would suggest otherwise. The fact is the ethanol industry is growing at the fastest pace in its history. There are over 110 ethanol facilities operated across the country. These plants have the capacity to produce 5.3 billion gallons of ethanol annually. I said 110--110 ethanol facilities. We only have 170 petroleum refineries to make gasoline and fuel oil in this country. So I think we are developing an industry. Here my colleagues can see the States that are darker, where the ethanol industry is being located. Iowa is No. 1, my State is No. 1 in the production of ethanol, but it is rapidly expanding. I still remember 3 or 4 years ago, or maybe it has only been 2 years ago now, when we had Members from this State and Members from this State who would stand up here and offer amendments against ethanol, and it wasn't long that once we got into the point where everybody realized they had to use ethanol, we had Members from this State and we had Members from this State saying to Senator Harkin and me: Why don't you get us more ethanol, as an example. So people are becoming more ethanol friendly, but it seems you have to take them dragging and screaming into the new world of alternative energy. So we have a developing industry. Twenty-three States currently have ethanol plants in operation or under construction. Today, there is some level of ethanol blended in more than 46 percent of our Nation's fuel. In my State, that would be about 80 percent. In Minnesota, I will bet it is more because Minnesota has a State mandate. I have been embarrassed because when the Republicans controlled the State legislature and I went to them and said we ought to be doing what Minnesota is smart enough to do, I had Republican legislators tell me: Grassley, go back to Washington and stick to your own business. But I told them how I fought for the ethanol industry and alternative fuel and for the agricultural industry because that is where the source of the energy comes from, from the family farmers of America, and I told them it was embarrassing to me to fight big oil here while they were kowtowing to big oil back in Des Moines. Well, anyway, I think things are going to be moving along. We have a Democratic Governor who wants to do more with the biofuel industry in my State, and I think we are going to make some progress. We may not have a mandate, but we may not need a mandate now. I wish to talk about where we are located. Now, according to the Renewable Fuels Association, the ethanol produced in 2006 resulted in the reduction of oil imports by 170 million barrels of oil, with a value of $11.2 billion. Remember, $11.2 billion being spent on ethanol that is not going to the Middle East to produce a profit for the oil barons over there who shoot bullets at our soldiers as we are trying to take on the war on terrorism. Now, I say to the critics on the other side--the other side chooses, as evidenced by the earlier statements I quoted of Democratic Senators--to ignore this data when they discuss the energy track record of President Bush and the Republican-controlled Congress in past years. I was cynical when there was a Governor Bush running for President and coming to Iowa to campaign saying he would be for anything but big oil. So I had the opportunity in January of 2000, when we have our caucuses in the coldest time of the year, to be in a minivan with President Bush, as a candidate for the Republican caucuses at that time, to ride with him for 2 or 3 days. I thought, what a wonderful opportunity to be in a small car with a Governor who might be President of the United States, to teach him about the facts of ethanol. It didn't take me very long because he came back--and you never remember the exact quotes because I didn't write this stuff down. But I remember him saying something along the effect of: Well, it is just common sense. We only have so much petroleum. We have to start relying on ethanol to a greater extent. I guess I believed him then, but maybe I had some question marks. So we went on for 2 or 3 days, and there wasn't anything in those 2 or 3 days to change my mind. But you wonder: you say one thing as a candidate; you might perform another thing as an officeholder. But I found back in 2000 that the President was a friend of ethanol when he told me about it, and he has performed that way in office. So I am satisfied that this President is coming from where he started and albeit from a State where oil is big business and where you wouldn't expect him to be for it, but he has been a friend, as he indicated to me privately he was going to be. I think this President has done well for alternative fuel. So I don't think the criticism of him is legitimate. The fact is that when President Clinton left office in 2000, our farmers were only producing 1.6 billions of gallons of ethanol. Now, I am not saying President Clinton was not friendly to ethanol. He was friendly to ethanol. But I think there are degrees of friendliness. But for the people on the other side of the aisle who tend to be criticizing this President, I want them to see where we have come since this President took office. During the 8 years of the Clinton presidency, domestic ethanol production grew 33 percent, as my colleagues can see here. Now, when we compare that to what it is since President Bush came to office in January 2001, the domestic ethanol industry is producing 1.7 billion gallons annually. That grew to 4.9 gallons last year. When President Bush leaves office--this chart is somewhat of an estimate, but we think it is on target because the plants are coming online and ethanol is catching on and the need for ethanol is very real--we think this will grow to 10 billion gallons. That is a 488-percent increase during this period of time compared to a 33-percent increase. I am not belittling President Clinton's efforts, but I think people on the other side of the aisle ought to take into consideration when they are raising a question about whether we have done enough in recent years about alternative energy these facts and this growth and not belittle this growth that seems to me is going on. This growth is no accident. In fact, a key turning point took place in March of 2001 when President Bush took a courageous step that President Clinton should have taken but did not take during the last year of his Presidency. In 1999, the big State of California, with a tremendous consumption of fuel for automobiles and energy--generally, the State of California, at that time, was deciding to ban the competitor to ethanol as an octane enhancer that is known by the acronym MTBE. It stands for methyl tertiary-butyl ether. It was found to contaminate ground water. Obviously, California had to quit using it, but they did not want to substitute ethanol. According to the 1990 Clean Air Act, they had to substitute ethanol without a waiver by the President or Congress. They were asking for that waiver. It did not happen, so we did not know where the ethanol industry sat versus the MTBE, so ethanol did not benefit the way it could have if President Clinton had made a decision. California Governor Gray Davis did not want his citizens to have to use ethanol--which the 1990 law required--and he petitioned Clinton for that waiver. While many of my colleagues and I lobbied President Clinton to deny the waiver, he took no action. When President Clinton had the opportunity to demonstrate his confidence in our Nation's farmers and ranchers to produce this clean renewable alternative energy, President Clinton was nowhere to be found. That changed when Governor George Bush was elected President. Less than 90 days into his term as President, George Bush denied the waiver which put the ethanol industry firmly on a path to growth because California uses so much energy. Along the way, Congress considered and enacted a number of incentives and supportive policies to foster the development of this important industry. In August 2005, President Bush signed into law the Energy Policy Act which included the renewable fuels standard, or RFS, for short. This provision was a culmination of the work of dozens of Senators during a period that spanned three Congresses. It has also been key to the growth of the domestic ethanol industry. The effort to enact a strong renewable fuels standard was bipartisan, but it was approved by the majority Republican Congress with the help of President Bush. During the consideration of the Energy Policy Act, President Bush asked Congress for a bill that would help diversify the U.S. away from crude oil. He put his public support behind the renewable fuels standard to require the use of ethanol and/or biodiesel. The President supported our efforts toward a renewable fuels standard because he recognized that increasing our use of ethanol and biodiesel would create new markets for farm products and increase our energy security. During the consideration by the Senate during this period of time-- and I referred to this a little bit before--no fewer than 11 amendments were offered by Members of the other side of the aisle to delay, reduce, or render useless the renewable fuels standard which had broad bipartisan support, particularly from those from the Midwest. It was not the Republicans offering these amendments to kill the growth of the domestic renewable fuels market. It was members of the other side, some of whom are the same ones who may be criticizing the President today for not doing enough to decrease dependence upon foreign oil. Perhaps more ironic is that a strong renewable fuels standard could have been enacted earlier than 2005. In November 2003, an Energy bill conference report came to the Senate with a renewable fuels standard but ran into a filibuster in the Senate. Had there not been a Democratic-led filibuster, what the President signed in August of 2005 would have been signed in November 2003. We would have been 2 years ahead of the game. In addition to the renewable fuels standard, other provisions enacted in the past 6 years have perhaps done even more to spur the growth of the renewable fuels, particularly ethanol and particularly biodiesel. In 2004, Congress enacted the American Jobs Creation Act. This legislation included modification and extension of the ethanol tax incentive. While improving the incentive, it also extended it through 2010. In the Energy Policy Act, which the President signed in August of 2005, Congress expanded the incentive for small ethanol producers and created a new credit for small producers of biodiesel. Most recently, Congress extended the tariff on imported ethanol through the year 2008. The tariff ensures that U.S. taxpayers are not subsidizing foreign ethanol and that we continue to grow our domestic production of ethanol. As a result of the tax incentives, the ethanol import tariff and the renewable fuels standard, the domestic renewable fuels industry, is growing faster than anyone could have ever imagined. The policies put in place by the Congress when Republicans controlled it, with the support and assistance of President Bush, have put this industry on a path of extraordinary growth. We have recognized that renewable fuels, such as ethanol and biodiesel, improve air quality, strengthen national security, reduce the trade deficit, decrease dependence upon the volatile Middle East for oil, expand markets for agricultural products, increase income for farmers, and create good-paying jobs in rural America. In other words, it is as the Campbell's soup advertisement of 25 years ago: everything about ethanol is good, good, good. The fact is, President Bush has been the most prorenewable fuels President our country has ever had. I stated earlier when he was a candidate for President coming from big oil Texas and being Governor of that State, would I expect him to be a renewable fuels person in the future? No, because I have been dealing with big oil and fighting them versus ethanol for a long period of time. It is only within the last 3 or 4 years that we had the freedom of not having to fight big oil. Who knows, maybe today we will have to fight big oil again when it comes to some ethanol products for the future, but there has been a lull. I thank President Bush for keeping his word to the people when he promised to be prorenewable fuels. Getting back to those who claim the renewable fuels industry has lacked attention from President Bush and previous Republican Congresses, I leave with one final point. In the year 2000, the final year of the Clinton administration, we produced 1.6 billion gallons of ethanol. That is nothing negative about President Clinton. He seemed to be, for the most part, very ethanol friendly. But you cannot criticize this President when we have this figure: By the time he leaves office in 2008, we will be producing 10 billion gallons. The policy supported by the Republican Congress led to this growth. I have proven that I don't want to sit by quietly while the other side tries to say otherwise. I yield the floor.