Judd Gregg

Mr. GREGG

Mr. GREGG. Mr. President, I ask unanimous consent that at 2:15----

Mr. GREGG. I am sorry. I apologize. I ask if the Senator from Florida will yield to me for purposes of making a unanimous consent request.

Mr. GREGG. I renew the unanimous consent request which I propounded a few minutes ago.

Mr. GREGG. Mr. President, let me take a few minutes to try to reframe the issues which are before us because a lot has been said by the other side that has gone unrebutted, and I think it needs to be responded to because some of it, I believe, is bad policy and some is just inaccurate. The representation that the Senator from Colorado was inaccurate in his statement relative to what has happened to taxes is also inaccurate. The statement of the Senator from Colorado was correct. Since the tax cut was put in place, yes, there was a falling off of tax revenues during that period. It was primarily driven by a recession, which would have been a much more severe recession. And there would have been a much deeper drop in revenues had the tax cuts not occurred. That recession was driven by two primary elements. The first was the breaking of the bubble of the late 1990s, the largest bubble in the history of the world, the Internet expansion bubble. The second was the attack of 9/11, which was a terrorist attack, which contracted the economy as a result of America adjusting to that. And, of course, we had to spend a lot of money to get ready to deal with this terrorist event, and that was money we had not expected to spend. But since those tax cuts have been put in place something very significant has happened. There has been an increase of revenues. The recession was shallower than we expected. As a result of the tax cut being put in place, people, therefore, received more of an incentive to go out and work harder and to invest more of their money. Rather than having the Government make the decision as to where money was being spent, people were making decisions where their dollars were going to be spent. As a result, we had a more efficient economy and jobs have been created. In fact, we have seen the largest expansion of the economy since the early 1990s in the last quarter. Today we are at a historic low in unemployment. Today revenues are going up, and they have gone up for a number of years. This chart points it out. Last year revenues went up by 9.4 percent at the Federal level. That is a pretty big jump. The next year--this year--it is expected to go up by 7.6 percent. Next year it is projected to go up by 6.5 percent; then, 6 percent; 6 percent; 5.5 percent. These are very significant increases in Federal revenues, and they are a function of the fact that we have in place a tax law today which gives people the incentive to go out and be productive. Two specific revenues which have jumped dramatically are revenues from dividend income and revenues from capital gains income, both of which the rates were cut--dividends to 15 percent, capital gains to 15 percent. What was the practical effect of that? If you listened to the other side, you would say the wealthy in America got a huge tax cut. What actually happened was the Government of America got a huge tax windfall. Items which were not being taxed before, such as capital gains assets--assets which had appreciated and which people were refusing to sell or convert or trade because they did not want to have to pay taxes--suddenly people were saying: Well, let's sell that stock. Let's sell that piece of real estate. Let's sell our small business because today we will pay less in tax. So assets which had been locked down from which the Federal Government was getting no revenue suddenly were being sold. As a result, we had a huge spike in revenues from capital gains. Not only did we get the spike in revenues, we saw those revenues reinvested in a much more efficient way because the dollars that came out of those assets which had been sitting there were now cash in people's hands, and they had been put back in the economy in a more productive way because that is the way a market economy works. So we got a double benefit. We got more tax revenues as a result of that tax cut, and we got a more efficient marketplace. As a result, we have gotten more jobs and more productivity as a nation. That is all a big plus. Now, the 1930s economics that the other side subscribes to--which is that you can simply tax your way to prosperity, that Americans really should not own their own assets, that the Government owns your assets, that we here in the Senate have a better way of spending your money than you have--that philosophy has been proven to be not only unconscionable but counterproductive to a strong economy in this day and age. Yet we see it restated here over and over again with amendment after amendment from the other side of the aisle which simply says: Let's tax people more. Let's spend more. We know how to spend your money better than you do. We're just going to raise your taxes and then put it on our special little project. And we are going to put it here or put it there so we can put out a good press release. Well, the effect of that, of course, is to stifle the economy, to stifle productivity, to reduce the creation of the job atmosphere in this country. What this President understood--as we headed into a recession, which was not of his making, which came out of the 1990s bubble, which came out of the fact that we were attacked on 9/11--what this President understood in this timeframe is, if you reduce taxes, you create an incentive for people to be more productive. If you say to people, you spend your money rather than having the Federal Government take it out of your pocket and have some Senator here in Washington tell you how to spend your money, that dollar is going to be spent more efficiently and create more jobs. That is exactly what has happened. Not only has that happened, but the Federal revenues are going up as a result of it, and they are headed back toward what the historic level of revenues is in this country, somewhere around 17.9 percent of gross national product. We do not have as a nation a problem that the American people are undertaxed. Show me an American who is working today who is earning income who feels they are not paying enough in taxes. There are very few who fall into that category. Most Americans pay a fairly heavy load in taxes and a fairly reasonable load in taxes. They do not need to be hit with more taxes. Yet as we go through this budget, the only solution we hear from the other side is: Raise taxes and spend more money. Raise taxes and spend. The first amendment out of the box--a tax-and-spend amendment. We have a list of tax-and-spend amendments that came out of the Budget Committee that added up to $220 billion in new spending that the American people were going to be stuck with and $240 billion of new taxes they were going to be stuck with. Tax-and-spend--oh, that is a wonderful policy. The only problem is, it creates a fairly significant burden on the American people after you raise the taxes. Americans would rather spend their own money than have us spend it for them, quite honestly. We already spend enough money. This budget will spend $2.6 trillion. Now, even in the hallways of the Democratic caucus that has to qualify as serious money. That is a lot of dollars to be spending. And where does it come from? Well, it comes from Americans, Americans who are working. This budget will spend $100 billion more this year than we spent last year. Even in the hallways of the Democratic caucus that should be serious money. You can run the State of New Hampshire for 20 years with $100 billion--20 years. You can take all the revenues from all the people in the State of New Hampshire and wipe them out for the next 10 years in order to pay for this year's increase in the Federal Government. That is a lot of money, but it is not enough for the other side of the aisle. No, no, no. They have to raise taxes. They have to increase spending because they have to put out their press releases to say that they were concerned about this group or they were concerned about that group. Well, I have to tell you, a $2.6 trillion budget shows a lot of concern for a lot of different groups. What we should be concerned about is the American taxpayer. So to make the representation that somehow the American people are undertaxed and we need to raise taxes or that somehow we are not generating significant revenue increases in this economy as a result of having cut taxes is simply inaccurate, in my opinion. Now, to move on to this specific amendment which raises the issue of Social Security, the practical effect of this amendment would be to essentially say the Federal Government can do nothing until it solves the question of Social Security--that is the practical effect of this amendment--unless we had 60 votes, which around here is pretty hard to get for anything. We can't even get judges through. I can imagine what we would do trying to get the Government to run. We can't even get judges appointed without using 60 votes. So it is pretty obvious that 60 votes is a very high threshold and essentially saying we are going to stop the Federal Government's progress in the area of giving tax relief. Interestingly enough, it does not say that the Federal Government will not continue to spend dramatic amounts of money. It is basically pointed at tax activity. It says new entitlements, but we all know it is not the new entitlements that are the issue. The expansion of the old entitlements is the issue. So it has a little bit of a disingenuousness to it in that it treats tax policy and then spending policy as dramatically different by essentially saying spending policy is OK, that is exempt, as long as it is on the book, but if it is tax policy and it is on the book and comes to an end, as it does under our rules, we will treat it differently. But independent of that, the practical effect of this amendment would be to bring the activity in a number of areas of governance to a halt until Social Security is determined to be solvent. This would be philosophically maybe a nice approach to take, but the problem with it is, from the other side of the aisle we have had no proposals--no proposals--to make Social Security solvent--none, zero, zippo. In fact, the other side of the aisle continues to refuse to engage in discussions about whether Social Security should be made solvent, which the President has initiated. They have essentially said: I'm sorry. You are alleging there is a problem. There is no problem. And we are not going to allow you to move forward even if there is a problem. So it is a little disingenuous, again, to take the position we should solve Social Security's problems before we do anything else as a Government and at the same time not be willing to put on the table any proposals to address Social Security's problems or even admit that Social Security has a problem, which would be the implication of the Senator from North Dakota in that he said that the scoring of the problem in Social Security was inappropriately arrived at because it used too conservative a number. I presume that means if a more aggressive number had been used, he would deem there was less of a problem with Social Security and maybe there was not a problem. Maybe that would solve the amendment if--maybe we could score ourselves out from underneath this amendment, actually, as I think about it. But independent of that, it does set up a conundrum that it essentially demands a solution to a problem which the other side claims is not a problem and will not allow us to move forward to a solution on, which in the parlance of American politics I think is called catch- 22. You cannot solve the problem because the problem is denied to exist, but you do not move forward until the problem is solved. It is an amendment that I believe has serious questions on that score. But independent of that, moving on to the question of how Social Security is structured and the problems which Social Security faces, this representation that the Social Security system is solvent through the year 2040, 2036, 2052--whatever the number is that people arrive at, depending on what assumptions are made--is theoretically correct but practically unsustainable because Social Security has no assets. The assumption that Social Security is solvent through that period assumes that Social Security has assets which are physical, but the only asset that the Social Security Administration has is an ability to call, to make a put, to be more accurate, to the American taxpayer to cover bonds which have been put into the fund. So once the cash that is being paid into the Social Security system falls below the benefits which are being paid out--and that begins to happen in about the year 2018--once that occurs, then there are no assets which the Social Security Administration can call down from like a stock in General Motors or a bond in--I don't know--some county in America. They do not have anything they are going to be able to convert, any asset they are going to be able to convert to cash to cover the difference. All they have at the Social Security Administration is the ability to say to the American people-- specifically, our children and our children's children because those of us in the baby boom generation will be retired at that time and getting the benefit; we will not be paying the taxes--to say to them: You are going to have to pay more taxes. That is the only asset they have, the ability to say to the American people--working Americans--that you have to pay more taxes in order to pay for the obligations that were incurred years ago by Social Security. So, yes, theoretically, they are solvent because there is this theoretical obligation that has been committed. But as a practical matter, the effect of that obligation is you are going to demand a much higher tax burden on working Americans. What does it work out to? We had testimony in committee that that works out to a doubling of the payroll tax on working young Americans. That is what that burden would cost in order to maintain the alleged solvency. You can get there, yes, but to get there, you have to double taxes on working Americans. That is what you have to do. Nobody will admit to that. That is what we are going to do to our kids--stick them with this huge tax bill on the allegation that that is an asset they have to cover that is in the Social Security trust fund and allegedly makes it solvent. The practical effect of that is it will cause our children and our children's children to have much less of a quality of life than we have had, because they are going to have to pay twice as much in payroll taxes. They are not going to be able to send their kids to college with as much ease as we have been able to, although it has been difficult for many. They are not going to be able to buy that first house. They are not going to be able to increase their education or do a lot of things with the ability we have had as a generation, because they are going to be paying so much higher a tax rate in order to support our retired generation. It is so intuitively obvious by looking at this fact that you have to wonder why everybody on the other side of the aisle is burying their head under this issue. The people who are going to create this huge tax burden for our kids are all around this room. It is everybody over 50 years old, and it is the largest generation in American history. It takes the American system and turns it on its head, because for years we had a pyramid system where more people paid more into Social Security than was taken out. By the time the baby boom generation--my generation--retires, that is not going to be a pyramid; it will be a rectangle. We are such a huge generation and so many will be retired that we are going to overwhelm the ability of the young people in this country to support us, unless we address this issue today. It is like that advertisement you used to see on TV for an oil filter that said: You can either pay me now or pay me later. When you pay me later, you are going to replace the entire engine; today you can just put in a new oil filter. That is the way the Social Security system is. You can ``pay me now or pay later'' when the baby boom generation retires, which will fundamentally undermine the quality of life of younger workers. It will affect their benefits so much. You are going to have to raise younger people's taxes so much. The unwillingness of the other side of the aisle to face up to this issue is, in my opinion, a failure on their part to address their responsibilities to people who are governing this country today. Yet we see amendment after amendment such as this one, which is an attempt to basically gain political cover on the issue. What we don't see from the other side is a willingness to step up and address the issue. Show us your plan. You have castigated and vilified and basically attempted to destroy the capacity of the President to address this issue time and time again. You have said he has been dishonest in his presentation and that his positions are going to harm America and older people in this country, when he specifically said, of course, it will not affect anybody over 55 and that it is voluntary. Yet have you come forth with a plan, proposed a plan, or suggested any remedy at all? No, you have not. You put out these amendments, which are for the purpose of political protection. You should be ashamed of yourselves. I yield the floor.

Mr. GREGG

Mr. GREGG. Mr. President, the executive branch agencies have many programs to recognize performance and talent. In the legislative branch, we too often take personal effort and hard work for granted. Unfortunately, the Senate does not possess many ways to recognize excellence, and too often we recognize outstanding people only at their farewell parties when they leave to assume a high-level position downtown. Today, I would like to take a little time off the debate clock to mention something that is not debatable. I think this is simply stating something that all members, on both sides of the aisle, know only too well. I want to recognize three members of our Senate Budget committee staff who exemplify the highest standards of public service--Jim Hearn, Cheri Reidy, and Dave Pappone. During the recent transition, I was very fortunate to have three of the very best in the Senate, and the U.S. Government, elect to stay with the committee. Jim, Cheri, and Dave Pappone are among the best I have seen. They serve as the institutional knowledge and conscience of the committee. I have benefited greatly from the advice and counsel of these professionals who have served the committee under former Chairmen Pete Domenici and Don Nickles. I am proud to say now they are part of my team. When I announced in November that I intended to assume the chairmanship of the Budget Committee, I began to sit through ``budget school'' tutorials with these three to go over the intricacies of the budget process and the Budget Act. Since then, they provide outstanding staff work and recommendations. The resolution before the Senate is here on time and out of committee in not small measure based on their hard work. Jim Hearn joined the budget committee in 1995. He holds a Master of Public Policy degree with a concentration in Economics and Forecasting from the University of California at Berkeley. Jim served with the Congressional Budget Office, or CBO, from 1984 until 1995. He serves as our director for Federal Programs and Budget Process. He also is author of our committee's Budget Bulletin, which distills and explains the latest budget developments on the Hill, and seeks to explain complex budgetary concepts. Jim is one of those people in Washington who fully understands the Budget Act and the budgetary process. The technical accuracy of the budget, and the drive to bring ``good government solutions'' to the budget process are Jim's constant passion. He is respected by CBO, OMB, and budget experts everywhere--inside and outside Government. Countless Senate committees know they can count on Jim to give them an honest evaluation of budgetary proposals and scoring. Cheri Reidy joined the Budget Committee in 1982. She holds a Master of Public Policy Analysis from the University of Rochester with an emphasis in statistical and economic analysis and program evaluation. Her undergraduate degree is in Psychology which, no doubt, serves her well in understanding the budget process. Cheri serves as our director for Revenues and Budget Review. Cheri understands all sides of the PAYGO ledger as well as anyone--she especially knows revenues and tax policy. I sometimes think she is the anchor, the core of our professional staff. She is tireless and remains cool under pressure. She spends time with our new committee staff teaching them the ins and outs of budget review and the type of products required to be able to draft a chairman's mark within several days of getting the CBO reestimate of the President's Budget. Cheri is brilliant, a team player, and a pleasure to work with. David Pappone joined the Budget Committee 3 years ago, when he started as the functional analyst for education and space/science. David holds a Master of Public Administration with a concentration in Budget and Public Finance from George Washington University. There was a television ad years ago for Digital Computers that said, ``If you can make the numbers work--it's the big time.'' Well, Dave Pappone is a genius with spreadsheets and managing information from OMB, CBO, and a number of functional analysts on our staff. David makes the numbers work and produces a number of complex, funding tables and charts in a fashion that seems seamless and almost effortless. He is a one man CBO for our committee and gives us 110 percent day in and day out. Mr. President, the Budget Committee has an extraordinary staff. On a daily basis I am impressed with their tireless energy, professionalism, and teamwork. At the core are Jim, Cheri, and Dave, and I just wanted to recognize them and say thanks. Mr. President, today I want to also recognize the achievements of Don Dempsy of my staff, as he moves from the staff of the Budget Committee to serve as the legislative director for the Senator from North Carolina, Mr. Burr. Don is one of those rare persons who combines unusual academic and intellectual achievements with a keen, practical, and effective role in public policy. Well educated as an economist, he has applied this expertise to health care policy and other public policy areas for over 10 years. He began his work on the Hill in 1996 and his talents were quickly recognized by a number of Senators. He was promoted over the next few years to positions of increasing responsibility in the offices of the incomparable Senator Gramm and upon his retirement, in the office of Senator Kyl. His accomplishments and expertise with those Finance Committee members are well known. Early last year he joined the Budget Committee under the chairmanship of my predecessor Senator Nickles. We were fortunate enough to benefit from his understanding of the budget and two crucial entitlement programs, Medicaid and Medicare, as well as his intensive knowledge of the full range of health programs. Don, characteristically, has put his work and his loyalty to the Senate first, and left our office Friday and begins work today with Senator Burr without a break. The Senate and the country thank him for his service. I yield the floor, and suggest the absence of a quorum.

Mr. GREGG. Mr. President, I suggest the absence of a quorum.

Mr. GREGG. Mr. President, I ask unanimous consent that the time between now and when Senator Durbin arrives, up to 15 minutes, be divided equally between the two sides. If Senator Durbin arrives before then, his time will begin, obviously, when he starts to speak. Then the time from when Senator Durbin starts to speak until 8:45 p.m. be charged to the Democratic side, and at 8:45 p.m. the time will be charged to our side when Senator Stevens controls the time.

Mr. GREGG. I thank the Presiding Officer.

Mr. GREGG. That is correct, except for wrap-up by the leader.

Mr. GREGG. Mr. President, after consulting with the Democratic leader of the committee, Senator Conrad, we reached the following agreement. I ask unanimous consent that Senator Bennett be recognized after the vote for half an hour; Senator Conrad will control the time until 8:45 p.m. At 8:45 p.m., Senator Stevens will be recognized for an hour, and the time running on the vote will be charged to both sides and come off the time of the bill.

Mr. GREGG. Mr. President, I move to reconsider the vote.

Mr. GREGG. Mr. President, for the information of Members, we will now have a number of speakers, but there will be no additional votes this evening. Senator Conrad and I are working on an agreement, hopefully, so we can line up votes for tomorrow and debate for tomorrow morning, and hopefully on those amendments which will be related to Social Security, assuming agreement is reached. At this time, I believe the unanimous consent agreement calls for Senator Bennett to be recognized for half an hour, followed by Senator Conrad having the time until 8:45, at which time Senator Stevens will be recognized.

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

Mr. GREGG. We yield to Senator Alexander such time as he may use off our side of the bill and then we go over to Senator Sarbanes.

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

Mr. GREGG. Mr. President, I want to speak briefly about the Bingaman amendment. As I understand this amendment, it would increase spending by $4.7 billion, approximately, it would increase taxes by approximately $8 billion, and it would break the caps set in this resolution. The purpose of those caps is to try to control spending. The first amendment out of the box breaks the caps--spends more money, raises more taxes. I think it can be justly characterized as a tax-and- spend amendment. It is in an area where this President has done an extraordinary job of making a commitment of resources. In comparison to the prior President, for example, the numbers are quite staggering. This President has increased educational funding overall by almost 33.3 percent since coming to office. He has increased funding for No Child Left Behind by almost 46 percent since it started. He has increased title I spending by 52 percent over the Clinton administration and IDEA funding by 75 percent over the Clinton administration. In fact, compared to the Clinton administration, which asked for no increases in title I and no increases of any significance in special education until the last year of his Presidency, this President has every year asked for over a half a billion dollars in special education and over a billion dollars of increase in title I. As a result, there has been a dramatic increase of resources flowing into those four core programs of Federal education at the elementary school level. In addition, in the Pell grant level, this administration has also made a huge commitment, increasing funding over the last year of the Clinton administration by almost 56 percent and adding literally millions of more young students to the Pell grant program. And the budget resolution goes even further. Right now you can get a $4,050 Pell grant. This budget resolution will immediately move that up to $4,150 which costs about a half a billion dollars to do that, and we put in a special account to accomplish that. In addition, we have structured this budget so that there is a capacity to accelerate the forgiveness of loans to students and move those loans over from the loan side to the grant side, the Pell side, so that a student under this budget will actually be able to get $5,100 in what amounts to Pell grants, if they go to school for 4 years, complete their education within 4 years, whether they to go a regular 4-year college or a community college for 2 years and then transfer into a 4-year college. That is a huge commitment to students who are working to get their degrees in college and using Pell grants to assist them. It is dramatic. In addition, this budget sets up a $5.5 billion reserve fund to allow the education committee, chaired by Senator Enzi, to pass out the Higher Education Act reauthorization. That is new money for the Higher Education Act. And so this budget focuses a lot of energy on education. This President has dramatically increased funding for education. So what happened? Well, the President suggested that the way you get this money for education, or part of it, is you look at all these different programs that are filtered around the Federal Government. They got there for well-intentioned purposes but mostly because somebody had an idea, and they decided the Federal Government should have a program here or a program there, and they are not major in the sense of money compared to title I or special education or Pell. They are not big pools of money. They are targeted initiatives. The President said in his proposal: Let's look at those targeted initiatives, see if they are still essential in comparison to what is critical, which is that we make a strong commitment to special education, a strong commitment to title I, a strong commitment to No Child Left Behind, and a strong commitment to Pell grants. That is a reasonable approach. It is called prioritization. That is what we should do as a government because we are supposed to be conservators of our people's money--otherwise known as tax dollars--not simply throw it at every program that comes down the road, but actually try to pick out the ones that are successful and put the money behind what is legitimately the Federal role, not what is necessarily a State role or a community role, which is what many of these individual smaller programs are. They are programs that the States or the communities could decide to pursue, but we have decided to try to federalize some small section of them because they make a good press release or in some instances they have strong constituencies. So the President said: Let's look at this and try to prioritize. As a result, we have come up with a budget which dramatically increases over the last year of the Clinton administration the funding for title I, special education, No Child Left Behind, and Pell grants, and sets up a fund to be able to take care of higher education. It is not appropriate, in light of this, that we should throw away fiscal constraint and essentially say we are no longer going to be concerned about managing the dollars that are spent here at the Federal level on education; we are simply going to raise taxes and pay for all sorts of additional programs. This amendment breaches the cap by almost $5 billion, raises taxes by over $8 billion, and it is nothing more than a tax-and-spend amendment. It should also be pointed out--and I will make this point on every one of these targeted amendments--that there is nothing in this amendment that will require the Appropriations Committee or the authorizing committee to spend this money on education. This money could be spent on roads, national defense, or homeland security. When you break the cap, when you raise these taxes, you do nothing more than put a number in the budget resolution that says we are going to break the cap by $5 billion. We are going to raise taxes by over $8 billion--I believe it is $8 billion. It is $9.5 billion. They are raising the taxes by $9.5 billion. I underestimated them. In any event, all you are going to do is increase the cap--increase spending and increase taxes--and there is absolutely no guarantee, or even a likelihood, that this money will flow as the sponsor of the amendment wants it to because, for whatever reason, the Appropriations Committee does not take seriously suggestions from the Budget Committee. The Appropriations Committee does whatever it wants to do. Under the rules of the Senate and under the law and under the Budget Act, that is the way it is supposed to work. We give them a top-line number, which happens to be $843 billion. If this amendment were to pass, it would be $447 billion or $848 billion. We give them a top-line number, and they can spend it any way they want. So the representation that this is going to take care of some education program that happened to be passed, one of these specific little programs that has been listed here is just that--a representation--and it has very little viability or probability when it gets into the contest of other demands for spending within the appropriating process. So this amendment, which raises taxes by $9.5 billion and raises spending by $5 billion, or approximately that--$4.75 billion-- accomplishes nothing more than to show that we are not a fiscally disciplined exercise here, and the first amendment out of the box from the other side of the aisle reinforces once again that fiscal discipline is not high on the agenda when it comes to this budget and when it comes to some Members of this body. I hope people will oppose this amendment. I yield the floor.

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

Mr. GREGG. Mr. President, I yield 15 minutes to the Senator from Arizona.

Mr. GREGG. Mr. President, I will briefly respond to a couple of points raised by two of the prior speakers, the Senator from Oregon and the Senator from Massachusetts, relative to the Medicaid issue. It is critical to understand this issue in the context of Medicaid spending generally and more importantly in the context of the type of reform being proposed here by the President and through the President's lead counsel and promoter on this, Governor Leavitt, the former Governor of Utah, now head of HHS. One would think from listening to the other side, especially the Senator from Oregon and the Senator from Massachusetts, that we were creating a scorched-earth policy against all poor children in America by initiating some sort of Medicaid reform. The hyperbole is rather excessive and does not comport with the numbers or with the actual proposal. This chart reflects the rate of growth of Medicaid over the next few years on an annualized basis. Today we spend $191 billion in Medicaid. Under the proposal being put forward, we will spend $256 billion on Medicaid in the year 2007. That compares with the projected rate of growth of Medicaid of $260 billion for Medicaid. In other words, over a 5-year period, the actual reduction in rate of growth will be almost negligible by the terms of what the Federal Government looks at relative to numbers. It is obviously a big number, but it is still not, compared to the overall number, a large number. In fact, it is about 1 percent in the reduction of the rate of growth. To cite the numbers again, over the next 5 years we will spend $1.12 trillion on Medicaid. The President has suggested we try to find $14 billion, that we restrain that rate of growth by $14 billion, which means a 1-percent reduction in the rate of growth, which is hardly dramatic and certainly not scorched earth, to say the least. Members can only accept that type of hyperbole if you are not willing to accept the facts of what has actually occurred. That rate of growth will therefore be a 39-percent rate of growth over this period of time compared with what would have been a 40-percent rate of growth had we not made this reduction in the rate of growth. Hardly dramatic in terms of the overall context of either the program or the Federal budget, but anyone would think it was devastating. To make this type of an adjustment, are we going to have to impact programs for children? No. Are we going to have to impact programs for senior citizens who want to go in nursing homes and who are poor? No, we do not have to impact either of those. There are at least seven or eight elements of the Medicaid Program that, working with the Governors, we could change which would significantly improve the delivery of service and, at the same time, reduce the rate of growth of Medicaid to come up with these numbers. Right at the top--everyone is familiar with it--is intergovernmental transfer taxes. Basically, what has happened for the last 12 years is that States have used Medicaid money through an intergovernmental transfer tax where they essentially spend money on the nursing home, they send Federal money to the nursing home, tax the nursing home, take the money from the nursing home, leave the nursing homes with a small percentage of what they were actually paid under the Federal program, take the balance off--sometimes 90 percent of it--put it into the general funds operation of the State and then run back to the nursing home another small percentage so that in the end the State government uses 80 or 90 percent of these funds for general operation accounts, for running the State government, but not for helping people who are on the Medicaid system. That is a game that has been played. Every Governor knew 5 years ago this process was going to come to an end. And, in fact, there was a glidepath set up under the Clinton administration because the Clinton administration had about the same frustrations with this approach as the Bush administration did, a glidepath for basically weaning the States from this process of using Medicaid money for general operations accounts. That glidepath was supposed to end about 2 years ago, maybe 3 years ago now. It did not. It has continued to bump along this process of taking money from Medicaid to fund general operations. This administration is suggesting we put an end to it. It may not be the approach the administration takes, but if it were to take that approach, that would be $5.5 billion potentially of the $14 billion number. One of the other approaches which might be considered would be to limit the Medicaid pharmaceutical reimbursement to the average sales price plus some percent, say 6 percent. That is a reasonable approach, basically saying you cannot pay more for pharmaceuticals than the average price being paid out there plus some percentage. That would save $5.2 billion. So you already have over $10.2 billion worth of savings if you took those two. And you don't have to take those two because there are about six more. You can close the loophole that permits managed care organizations to avoid Medicaid rules. That is about a $1.2 billion number. That is not going to hurt anybody out there other than the folks who have been gaming the system, again, the insurers in this case, through managed care systems. You could permit States to require additional copays. That is also a reasonable approach, quite honestly, because there are a lot of folks out there who could afford additional copays. It would be up to the States to set that policy. That would save significant amounts, probably $2, $3 billion. You could give States greater flexibility to allow them to use SCHIP to apply their benefit structure around. This issue of flexibility could actually, in this case, end up expanding coverage to many more kids while still probably saving the States money, depending on how the States manage this. That could be a significant savings. There are literally, as I mentioned, 7, 8, maybe 10 different proposals out there which would get you the $14 billion without having any impact at all--any impact at all--on the number of kids covered by Medicaid or the number of people going into nursing homes, other than maybe expanding the numbers, because you have given Governors more flexibility with the dollars they will presently have. And most Governors will use it more efficiently and create more money. One other issue I think Governors would like to address and could address is this whole situation of gaming the system. A lot of people are spending down. You can go on a Web site, especially in Florida, and you can see where they will tell you how to get rid of your assets so you can become a ward of the Federal Government and your assets are passed on to somebody else who happens to be a friend or family member, which is hardly fair to the rest of the taxpayers in this country who are then going to have to take care of you because you have decided to game the system with a spend-down proposal. So the programmatic activity is clearly available. And how is this going to be approached? Well, essentially, we have suggested this $14 billion number. To put it in context, here is a chart that shows the $1.1 trillion that is going to be spent over the next 5 years. Here is the $14 billion. You can't see it on the chart because it is a very small line, but that number would be what we would ask the Finance Committee to reduce in the rate of growth of spending in the Federal Medicaid account. So they drop from 40 percent to 39 percent over the next 5 years. To reach that number, how are they going to do it? I don't know how they are going to do it. But in meeting with Governors and in meeting with Governor Leavitt, it became very clear that there is, I believe, a willingness to develop a consensus as to how to approach this issue, and there is a genuine desire to do it. There is a genuine desire to accomplish this. I suspect that before the Finance Committee marks up--and we actually put some flexibility on timing here relative to reconciliation so the Finance Committee will have time to work with the Governors--there will be a consensus position amongst many of the Governors, hopefully bipartisan--I suspect it might be bipartisan--as to how to set up this programmatic activity necessary to restrain the rate of growth in Medicaid and still deliver more services to more kids and more elderly who are moving into nursing homes. This will mean that although this bill states a number, it does not set the policy, but the policy will instead be set working in conjunction with the Governors, with Governor Leavitt leading the effort, and then working with the Finance Committee. But why is the number so important? Why is it so important to have a reconciliation instruction rather than virtually saying to the Finance Committee, go ahead, you take care of this, you can do it on your own? Well, it is so important because without a number to drive the process, without a reconciliation instruction driving the process, nothing is going to happen. That is the nature of the beast. That is what happens. If we do not have some forcing mechanism, some catalyst to get everybody in a room together to say, well, we better do something because we have to act, nothing is going to happen. Equally important, obviously, anything such as Medicaid reform is going to be very hard to get 60 votes on because there are a lot of folks around here who tend to be scared of their own shadow and don't want to vote on something that is going to put them in a position where they would actually have to make a reduction in the rate of growth of spending of anything, especially Medicaid. So it is critical to get to where we need to go. It will first be the catalyst which energizes the Governors coming together--they already are coming together, but it actually energizes an agreement, I believe. And it will give the Finance Committee the necessary guidance. Why is this so important? Well, I return to the chart that is the essence of the argument around this debate of this budget, which is, what are we going to do about the outyear crises which we are facing as a nation? What are we going to do about the fact that our generation, when it retires, is going to have placed such a huge demand on our children that they simply are not going to be able to afford the decent lifestyle we have? This chart puts it in stark terms. The Senator from North Dakota has a lot of charts that appear to be stark, but this is a truly stark chart because it makes it very clear that these three elements of the Federal Government--Medicaid, Medicare, and Social Security, the three retirement elements--will be unaffordable and will make the Federal Government inoperable within about 20 years from now unless we start to address it. I wish Medicare were on the table. It is not. And maybe next year we can do that. But we are transitioning into a new Medicare system with the Part D drug program and people did not want to take on that issue right at this time. And I hope Social Security will be discussed at some point by the Senate and we will act on that. But that cannot be done by the budget because the budget does not have that authority. That leaves us one more option, one place where we can actually make a conscientious effort to try to get something going in the area of addressing the outyear costs of this Nation, and that is Medicaid. That is why every time somebody comes to this floor and talks about how this Medicaid number is inappropriate and is going to have a dastardly effect on some poor and suffering population, I am going to rise and point out that is a lot of baloney, that the simple fact is the numbers point out just the opposite. This is a very small restraint in the rate of growth of one of the three most critical programs we have in the area of entitlements. All the restraint which is proposed in this reconciliation instruction can be accomplished by addressing the provider groups and addressing better management of the system and addressing the fact that States have been gaming the system. Amendment No. 142 Mr. President, I have a unanimous consent request. I send a technical amendment to the desk. This has been agreed to on both sides. I ask that the amendment be agreed to by unanimous consent.

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

Mr. GREGG. I yield the floor.

Mr. GREGG. Mr. President, I want to make one point. The Senator from North Dakota continues to return to the concept that this budget does not account for the war. It is important to note that this budget accounts for the war in the year of the budget. This budget is a 2006 budget. There is $50 billion of money put into a reserve fund for the purpose of paying for the war in the 2006 budget. The President's budget didn't do that, but this budget does. In my opening statement I explained why we decided not to go to the 2007 number or the 2008 number, both of which are very difficult numbers to reach, because this war is hopefully going to be winding down by then and we can reduce the number significantly, and why we didn't put it in the base, which would have been a mistake, because we don't want to inflate the defense budget by an amount which should be a one-time item which is the need to fight the war.

Mr. GREGG. Mr. President, I suggest the absence of a quorum and ask unanimous consent that the time be equally divided.

Mr. GREGG. I also ask, after the vote is completed at 5:30 on the Bingaman amendment, if we could recognize Senator Bennett at that time.

Mr. GREGG

Mr. GREGG. Mr. President, I rise today to recognize and congratulate a great Granite Stater, Bode Miller. On Saturday Bode became the first American in 22 years to ski his way to the overall World Cup title. An Easton, NH native, Bode perfected his talents on the slopes of Cannon Mountain and now serves as the Director of Skiing at Bretton Woods. His style may not be conventional. It has been said that, like a good many New Hampshire natives, he has a mind of his own and enjoys doing things his own way. That independent spirit helped him do something else his own way this past Saturday--win the overall World Cup trophy. The American World Cup drought has been in place since 1983 and, as Bode said on Saturday, had grown into ``curse'' proportions. In New England, we don't take kindly to sports ``curses.'' Since the turn of the century, New Hampshire's sporting faith has been rewarded with three Super Bowl trophies from the New England Patriots and, of course, the much talked about World Series title in October by the Boston Red Sox. Bode's extraordinary feats on the ski slopes of Europe have gained him worldwide recognition and has an extra special importance for those from New Hampshire who enjoy some of best skiing in the world in the White Mountains. We are proud that the slopes we enjoy skiing each winter, albeit at speeds much slower than Bode, have been the training ground for the world's best skier. Bode donned his first pair of skis at the age of 3 and spent much of his early skiing life on the slopes of Cannon Mountain. He entered his first race when he was 11 and attended the Carrabassett Valley Academy in Maine and went on to the Junior Olympics in 1996, where he first made a name for himself. Bode competed in the 1998 and 2002 Winter Olympics, and he has collected eighteen World Cup wins over his career. At 27 years of age, Bode Miller has accomplished the most sought- after spot of every skier, and has done so with his own style, determination, physical stamina and personality. Today we congratulate Bode Miller on this tremendous accomplishment, and we look forward to continuing to follow the eventful progress of the world's greatest skier.