Chuck Grassley

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I want to address my fellow Senators, in cooperation with my friend, Senator Baucus from Montana, on an issue that our respective staffs have been working on together for a long time. As chairman of the Finance Committee and as ranking member, we are releasing today a report. We come to the floor with our duties in mind to our constituents, to Medicaid and Medicare beneficiaries, and to all Americans, to speak of urgent matters that should concern all of us. For more than 2 years, I have followed, with increasing concern, the performance of the Food and Drug Administration. It seems as though every week, if not every day, some new danger or risk is brought to light about an FDA-approved drug or device. As chairman and ranking member of the committee, Senator Baucus and I have a responsibility to American taxpayers to ensure that Medicare and Medicaid programs pay for medical products that have been appropriately approved in accordance with all laws and regulations. Whether a product is safe, whether a product is effective is not only a major public safety concern; it also has important financial concerns. We understand there is a human element to the Food and Drug Administration's approval process. As a society, we recognize the anguish of families who must rely on the development of innovative, experimental, new medical products and treatments that may or may not save the life of a loved one. Our Nation is lucky to have a private marketplace that is incredibly resourceful and prolific in the field of medicine. An integral role of the Food and Drug Administration is to get these potentially lifesaving products to the market without undue delay. We also have a Government-regulated system where patients have the option to receive potentially lifesaving but unproven products by participating voluntarily in clinical trials. In the end, however, our Nation's well-founded medical system, despite its weaknesses, must always rest on sound science. The report we are releasing today focuses on the FDA's approval process for medical devices. It is indisputable that all medical devices carry risks, but Food and Drug Administration approval is still considered the gold standard for safety and effectiveness. However, our committee staff report raises legitimate questions about the FDA's decision to approve a specific medical device. Last February, a number of concerns were raised to our committee about an implantable device called the vegus nerve stimulator or VNS, as I will refer to it. This product, VNS, is manufactured by a company called Cyberonics. Senator Baucus and I asked our committee staff to review the concerns that were given to us and report their findings. This report has three major findings which I will summarize briefly. First, the Food and Drug Administration approved VNS for treatment- resistant depression, a new indication for this surgically implanted device. That was based upon a senior manager overruling more than 20 Food and Drug Administration scientists, medical, and safety officers, as well as managers, who reviewed the data on VNS. The high-level official approved the device despite a resolute conclusion by many at the FDA that the device did not demonstrate a reasonable assurance of safety and effectiveness. Second, the Food and Drug Administration has not made public the level of internal dissent involved in this device approval, despite the fact that the FDA has publicized differences of scientific opinion within the agency when it has announced other controversial regulatory decisions. Third, the Food and Drug Administration has not ensured that the public has all the accurate, science-based information on the safety and effectiveness of the VNS for treatment-resistant depression. So health care providers, relying on the FDA's information about this device, may not be able to convey complete risk information to each patient. In the end, this senior Food and Drug Administration official not only overruled more than 20 Food and Drug Administration employees, but he stated to our committee staff that the public would not be made aware of the scientific dissent over whether the device is reasonably safe and effective. Until today, this official's detailed conclusions remain confidential and unavailable to the public. We are releasing these confidential conclusions in the appendix to the report. Some of his own conclusions raise serious questions in our minds. For example, I quote from his override memorandum: I think it needs to be stated clearly and unambiguously that [certain VNS data] failed to reach, or even come close to reaching, statistical significance with respect to its primary endpoint. I think that one has to conclude that, based on [that] data, either the device has no effect, or, if it does have an effect, that in order to measure that effect a longer period of follow-up is required. The events and circumstances surrounding the Food and Drug Administration's review and approval of VNS for treatment-resistant depression, which you will find detailed in this report we are releasing, raises critical questions about the Food and Drug Administration's so-called ``authoritative'' approval process. I am greatly concerned that the Food and Drug Administration standard for approval may not have been met here. If that is the case, it raises further difficult questions, including whether Medicare and Medicaid dollars should be used to pay for this device now. Accordingly, we are forwarding the report to Secretary Leavitt, Administrator McClellan, and Acting Commissioner von Eschenbach for their consideration and comment. These are difficult matters that deserve their full attention. Before I close, I commend the commitment and dedication of the more than 20 FDA scientists who tried to do the right thing in this case, as they probably do in every case, and not stray from evidence-based science. I applaud their effort on behalf of the American people. I ask unanimous consent that the executive summary of the report be printed in the Record.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, yesterday and a few weeks ago, I invoked the movie ``Groundhog Day'' starring Bill Murray to provide a perspective on consideration of our tax reconciliation package. For the edification of my esteemed colleagues and other interested parties, I ask unanimous consent that an article originally published in the February 14, 2005, issue of ``National Review'' titled, ``A Movie for All Time,'' be printed in the Record. This article provides some information on the film and its enduring popularity.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, 16 million additional American families could find themselves subject to the alternative minimum tax if we do not act quickly. Failure to pass a minimum level of alternative minimum tax relief, as was provided in the Senate-passed reconciliation bill, is not an option. In fact, I support full AMT repeal. Some of my colleagues are creating a false choice when they suggest that in order to provide AMT relief we need to remove incentives that encourage economic growth. We can design a tax package which will include dividends, capital gains, AMT, and a 1-year extension for all expiring tax relief, all within that $70 billion limit. I encourage my colleagues to vote for this motion which provides relief for alternative minimum tax and capital gains and dividends as well. I yield.

Mr. GRASSLEY. I have 1 minute?

Mr. GRASSLEY. Mr. President, I would like to inform the Senator from New Jersey that his motion would increase taxes on people in New Jersey through dividends of $838,000 and capital gains of $270,000. If we don't do something about AMT, 600,000 people from New Jersey suffer; if we don't have the college tuition tax deduction, 121,000; and teacher deduction, 127,000. I don't know how anybody would want to increase taxes on people in their States by that amount of money. If you take the approach of the Senator from New Jersey and have to offset all of these things, there are not enough offsets to go around to take care of the 100 ideas we have of where taxes ought to be reduced. We now have taxes of 18 percent coming into the country into the Gross National Product for a 60-year high. How high do taxes have to be to satisfy the Senator from New Jersey that taxes are high enough?

Mr. GRASSLEY. Mr. President, I appreciate Senator Reed's attention to the issue of funding for our military. Proper funding for those serving our country should not be controversial. The method of providing this funding should not be made into a controversial issue, and that is where the controversy is. My colleague suggests that in order to provide funding for our military, we need to eliminate a tax benefit that doesn't even arise until 2009. Look at how ridiculous this motion is. How can you provide funds that are so badly needed today to ensure that we meet the operational needs of our courageous military service personnel when it won't be funded until 2009? I remind you that last night all of us voted for my amendment to support the operational needs of our military that provides the same benefits but doesn't raise taxes. I urge my colleagues to vote against the Reed motion. In addition, I remind my friend from Rhode Island that there are 79,000 families in his State that benefit from not having the tax on dividends at 15 percent.

Mr. GRASSLEY. Mr. President, would it be in order to call up my motion on the AMT and the capital gains dividend?

Mr. GRASSLEY. Mr. President, this vote has nothing to do with Medicare or Medicaid. This motion by Senator Kennedy calls for a tax increase in 2008 on millions of Americans. Critics of lower rates always want to persecute millionaires and at the same time punish everyone else trying to save money. The lower rates on capital gains have benefited low- and middle-income families in a very meaningful way and reduced the tax burden on citizens. They have contributed to our economic recovery and continue to help our economy grow. They have made capital investment in America more competitive so we can be competitive with global competition. They have helped impose transparency and discipline on corporate managers which is critical to protecting investors and workers. Business investors need certainty. We need to act now. For these reasons, I encourage my colleagues to vote against this motion. I point out something that directly involves the State of Massachusetts. We have heard the same old charge, that capital gains and dividends are only for rich folks. These charts behind me assert the opposite. According to Internal Revenue Service statistics on income for the State of Massachusetts, there are 589,000 individuals and families who benefit from the reduced tax on dividends, and 212,000 individuals and families benefit from the reduced tax on capital gains. There are not that many millionaires in that State regardless of how rich that State is. Not all of these folks are superrich. They are people like the average American benefiting from this. I don't know why anyone wants to persecute a few millionaires and punish everyone else.

Mr. GRASSLEY. I am only going to use 10 seconds. I hope my friend from Montana will agree with me on this, that we do have differences on this one part, the capital gains part of this bill, but I think we agree on everything else in the bill. I hope people listening to Senator Baucus and I maybe differing on this one point will remember that on most everything that goes on in our committee, we agree. I do not want them to get a distorted view of our friendship and our working together on this legislation. I yield back my time, and I ask for the yeas and nays.

Mr. GRASSLEY. Mr. President, if I have 10 seconds----

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent the Senate stand in recess until 2:15 today for weekly policy luncheons.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Committee on Foreign Relations be authorized to meet during the session of the Senate on Tuesday, February 14, 2006, at 10 a.m. to hold a hearing on the President's budget for foreign affairs, and a business meeting.

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Committee on Commerce, Science, and Transportation be authorized to meet on Tuesday, February 14, 2006, at 10 a.m., on State and local issues and municipal networks.

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Committee on Banking, Housing, and Urban Affairs be authorized to meet during the session of the Senate on February 14, 2006, at 10 a.m., to conduct a hearing on the nomination of Mr. Randall S. Kroszner, of New Jersey, to be a member of the Board of Governors of the Federal Reserve System; Mr. Edward P. Lazear, of California, to be a member of the Council of Economic Advisers; Mr. Kevin M. Warsh, of New York, to be a member of the Board of Governors of the Federal Reserve System.

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Committee on Energy and Natural Resources be authorized to meet during the session of the Senate on Tuesday, February 14 at 10 a.m. The purpose of this hearings is to discuss the Energy Information Administration's 2006 annual energy outlook on trends and issues affecting the United States Energy Market.

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Subcommittee on Retirement Security and Aging, be authorized to hold a hearing during the session of the Senate on Tuesday, February 14th at 2:30 a.m. in SD-430.

Mr. GRASSLEY. Mr. President. I ask unanimous consent that the Subcommittee on Trade, Tourism, and Economic Development be authorized to meet on Tuesday, February 14, 2006, at 2:30 p.m., on Canadian softwood lumber.

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Committee on Veterans' Affairs be authorized to meet during the session of the Senate on Tuesday, February 14, 2006, for a committee hearing on the Administration's proposed fiscal year 2007 Department of Veterans Affairs budget. The hearing will take place in room 418 of the Russell Senate Office Building at 10 a.m.

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Committee on Indian Affairs be authorized to meet on Tuesday, February 14, 2006, at 2:30 p.m. in Room 485 of the Russell Senate Office Building to conduct an oversight hearing on the President's Fiscal Year 2007 Budget Request for Indian Programs. Those wishing additional information may contact the Indian Affairs Committee at 224-2251.

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Committee on Homeland Security and Governmental Affairs be authorized to meet on Tuesday, February 14, 2006, at 10 a.m. for a hearing titled, ``Hurricane Katrina: The Homeland Security Department's Preparation and Response.

Mr. GRASSLEY. Mr. President, I ask unanimous consent that the Subcommittee on Readiness and Management Support be authorized to meet during the session of the Senate on February 14, 2006, at 2:30 p.m., in open session to receive testimony on improving contractor incentives in review of the defense authorization request for fiscal year 2007.

Mr. GRASSLEY

Mr. GRASSLEY. Mr. President, as I said, I am doing that for Senator Lott of Mississippi. I think it is self explanatory. Just to reiterate, this motion, on behalf of Senator Lott, calls for full and permanent repeal of the alternative minimum tax. Motion to Instruct Conferees

Mr. GRASSLEY. I send the first motion to the desk and ask for its consideration.

Mr. GRASSLEY. Mr. President, I rise for the purpose of offering some motions to instruct for myself and my colleagues. Motion To Instruct Conferees

Mr. GRASSLEY. Mr. President, Senator Kennedy repeats the old demagogic saw about capital gains and dividends being only tax benefits for the wealthy. The facts are very different. I have two charts here which will show how wrong he is. One of these charts deals with capital gains. The other one deals with dividends. Dividends is the first one to which I make reference because, in the State of Massachusetts, you can't have all these wealthy people benefiting from the 15-percent dividend tax instead of what he would prefer, the 20-percent dividend tax. Don't forget, again, as I referred in my opening remarks, these are year 2003 figures, so it could be a lot more than that right now, but these are the most up-to-date Internal Revenue Service figures we have. In Massachusetts, we have 589,897 taxpayers who benefit from the 15- percent capital gains dividend. Don't tell me that all 589,000 of those are millionaires. Massachusetts may be a very wealthy State, but it doesn't have that many millionaires in it. So somewhere along the line, Senator Kennedy ought to wake up to the fact that there are a lot of middle-income and common folks in his State who are benefiting from the 15-percent tax on dividends instead of having a 33-percent increase in that tax and having it go back to 20 percent. My friend from Montana did make a correct judgment that this is not running out right now. But the point is that when you are asking people to invest to create jobs in America, they have to have the long-term view of that investment. If you want to encourage investment to create jobs, people have to know what the tax law is for the long term, not for the short term. The point is, in order to persecute a few millionaires, Senator Kennedy wants to punish the many. And the many are the 589,000 people in his State who benefit from the 15-percent tax on dividends. Let's go to the number of people in that State who benefit from the 15-percent capital gains tax. There are 212,000 people in Massachusetts--again, I remind you these are 2003 tax year figures because that is the most up-to-date we have from the IRS. There are more today, probably. But there are 212,000 people in Massachusetts, taxpaying families and individuals, benefiting from the 15-percent capital gains tax. Those are not wealthy people. Again, you get back to the point of whether we ought to persecute the few, the few millionaires he is talking about, persecute them and at the same time punish 212,000 people in the State of Massachusetts. I don't think so. I don't think it is good policy. I hope this Congress is able to have a sensible tax policy that not only includes sensible levels of taxation, but if you look at all the dividends that are being paid out today that wouldn't have otherwise been paid out, you think you would come to a conclusion that is a sensible policy because we have tens of millions of taxpayers deciding how the profits of a corporation are going to be spent instead of a few thousand chief executive officers of those same corporations deciding how it is going to be spent. When millions of taxpayers are making those decisions, it is going to respond to the dynamics of our economic system and create more jobs and important prosperity than when a few corporation executives keep all those profits internal in a corporation making those decisions. I don't think we ought to be persecuting a few to punish the many. When it comes to these motions to instruct, we may have some motions to instruct on this side of the aisle that will set the record straight on what we are trying to accomplish and give people opportunities to vote on good economic policy and good tax policy as well as bad economic policy and bad tax policy that we are getting from some on the other side of the aisle. In 2003, a bipartisan Congress lowered the top tax rate on dividends and capital gains to 15 percent through December 31, 2008, and for low- and middle-income taxpayers to 5 percent through 2007 and zero percent through 2008. I filed six motions to instruct conferees to report back a conference report that includes the extension of these tax rates through 2009 and through 2010, the same as the House of Representatives has. Critics of this policy claim these are tax cuts for the rich that make a budget deficit worse because they want to persecute the few and in the process punish the many. But I filed these motions that are going to tell the other side of the story; that when you have sound tax policy which encourages the economy to grow, we are also going to reduce the deficit. Besides, let me suggest to you that I don't know how it is in other States, but I don't run into very many in my State who are saying I am undertaxed, tax me more. But I run into people day after day in almost every one of my town meetings where they are complaining about the overspending of the Congress of the United States. In regard to the other side of the story and the motions to instruct that I filed, the lower rates of capital gains and dividends have produced several positive effects. They benefited low- and middle- income families in a meaningful way. Can't you see that when you have a very low tax rate for certain low- income people, as one example? For low- and middle-income taxpayers, it will be 5 percent through 2007 and zero percent through 2008. This is going to encourage people to save to a greater extent, particularly people who have a lower income and don't have the ability to save. These lower tax rates have reduced the tax burden on senior citizens who rely on their investment incomes during retirement. They have contributed to our economic recovery and continue to help the economy grow. They have made capital investments in America more competitive with the capital investment in other countries. With the globalization of the economy, that is something we always have to be cognizant of in this Congress, that you can't have a tax policy that makes our corporations, particularly in manufacturing, uncompetitive with manufacturing overseas. Finally, these tax rates have helped impose transparency and discipline on corporate managers which is critical to protecting investments and workers. I may or may not seek a vote on these motions to instruct, but I want to go through each one of these points which I made so that when Members come over to vote tonight, they will know some of the rationale behind Republican motions. The lower rates on dividends and capital gains have benefited low- and middle-income families in a meaningful way. That is the third time I have said that in the last 5 minutes. But we have to get away from this attitude of persecuting a few and in the process punishing the many. I don't know whether they on the other side of the aisle realize it, but when they want to persecute a few millionaires, they are punishing hundreds of thousands of people--I guess it is millions of people, if you take all 50 States, but I was making reference to the State of Massachusetts. According to the Internal Revenue Service estimates for 2003 tax return data, about 10 million low- and middle-income taxpayers have $34 billion of income taxed at the 5-percent rate and saved at least $1.7 billion, or about $170 per taxpayer on average. I know what I am going to hear from the other side. Well, $170 is nothing. Why don't we let the taxpayers of this country decide whether they would rather spend that $170 or that we ought to spend it for them? I can guarantee if they invest it, or if they spend it, it is going to do more economic good than if I spend it for them as a Member of Congress. That is the way the dynamics are and the way society works. Money spent by the Government doesn't turn over as many times in the economy as it does if it is spent in the private sector. At these 2003 levels, these taxpayers I have referred to save a heck of a lot of money. Don't forget, in 2008 that rate drops to zero percent. My motion would instruct the conferees to ensure that Congress won't raise the annual tax bill on low- and middle-income taxpayers at the 2003 levels. That tax increase would be at least $3.4 billion. That is an average of $340 per taxpayer. Senior citizens benefit from lower tax rates on dividends and capital gains. They have reduced the tax burden for senior citizens who rely more than working people do on investment income, and they need this particularly during retirement. According to IRS estimates for 2003 tax return data, about 57 percent of the tax returns for taxpayers age 65 and older had taxable dividends income. That is over 6.5 million tax returns. These taxpayers rely on investment income, and particularly dividend income in their retirement. Low- and middle-income seniors pay tax on this dividend income at the 5-percent rate instead of 20 percent or 15 percent. That rate for these low-income seniors is going to drop to zero in 2008. Other taxpaying citizens, those with higher incomes, paid at the 15- percent rate, but that was instead of paying at the 35-percent rate. We need to instruct the conferees that Congress won't impose a new tax on low- and middle-income seniors and more than double the tax on other taxpaying seniors in 2009 and 2010. In other words, we need to tell the other side to quit persecuting a few because in the process you punish the many. In this particular case, why would they be crying about what we might be doing to senior citizens in one of the recent speeches and then stand there and want to increase the tax rates from zero percent to 35 percent for some of these people who are senior citizens? Also these reduced tax rates on dividends and capital gains have contributed tremendously to our economic recovery and continue to help our economy grow. They reduce the cost of capital for American businesses and increase return on investment, enhancing economic growth, creating more jobs, and expanding the tax base. Companies are responding to shareholder demand created by the lower 15-percent rate on dividends by paying record levels of dividends. According to the Congressional Budget Office, capital gains realizations increased significantly in 2003, 2004, and 2005, causing capital gains tax revenues to be $62 billion higher over those years than were projected before we changed this law. Don't tell me that $62 billion more coming in, according to the CBO-- not a partisan like me; they are nonpartisan--$62 billion more didn't benefit the Treasury and reduce the deficit by reducing taxes. You know what you get out of this--a growing economy. That means more jobs, and 44.7 million jobs have been created since this tax policy has been in effect. The unemployment rate has dropped during the same period of time from 6.1 percent to 4.7 percent. I feel very strongly, just as the other side wants to persecute the few to punish the many by going after what they call millionaires, that we ought to state the reality: that is, my motion to instruct the reality of keeping these tax rates so the economy continues to grow. The progrowth policy will not expire at the end of 2008 or at the end of 2009 because investors who need the long-term view of investing know what the law is going to be and are going to make decisions. The lower rates have done another thing--they have made our businesses more competitive with the global economy. And other countries around the world, having lower tax rates than we have, have jumped ahead of our businesses. Even with the United States at 50.8 percent, we still have the eighth highest tax rate on corporate income among the 30 nations in the OECD. For every dollar an American corporation makes on its U.S. investments, more than half of it ends up in Federal and State governments. Without the lower dividend tax rate, it would have been nearly 63 cents of every dollar, ranking second only behind Japan. High taxes on capital investment make the United States less attractive compared within investment opportunities in other countries. That costs us jobs. In today's global economy, we should do everything we can to ensure the competitiveness of our businesses. In this process of persecuting a few, the few millionaires, punishing everybody, you are punishing the people who need jobs, and who lose jobs because our businesses can't be competitive because our cost of capital is higher than global competition. Also, there is a benefit to a motion to instruct for transparency of how a corporation works. The lower rates have helped impose transparency and discipline on corporate managers. That is very important to protecting investors and, particularly, jobs for our workers. The high tax on dividends causes corporations to favor debt financing over equity financing, leaving more highly leveraged businesses vulnerable to economic downturns. High dividend taxes reduce the demand to receive and thus the incentive to pay dividends, leading corporate managers to invest in wasteful and unprofitable projects and to hide the results from their investors and their workers. On the other hand, the reduced tax rate on dividends lessens the disparity between debt and equity financing, thus heightening demand for dividends, thus contributing to more transparency and more accountability of corporate managers for their decisions. It seems to me in this post-Enron era, we need to instruct the conferees to ensure that the transparency and the discipline imposed on corporate managers by lower dividend taxes and critical to protecting investors and workers is not threatened by this expiration date in 2009 and 2010. I yield the floor.