Judd Gregg

Mr. GREGG

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

Mr. GREGG. You have made a strong argument on behalf of the program. And I will do my best to adjust existing programs to provide funding for the United States-German exchange program.

Mr. GREGG. I would like very much to restore funding for this program--and for other exchanges as well. Unfortunately we are operating under tight budgetary constraints. As the senior Senator from Indiana knows, the number of international exchange programs have grown over the years and that is a reflection of their popularity and importance. Overall appropriations have not kept pace with the growth in the number of programs. The regrettable result of this shrinkage of funds and growth in demand for them means that some programs must be reduced. But, I very much appreciate the Senator's strong argument in support of the Congress-Bundestag Youth Exchange program, particularly the foreign policy role it plays in strengthening our ties with an important European ally, Germany. I will keep your arguments very much before me when we negotiate with our House counterparts in conference.

Mr. GREGG. I appreciate the Senator's concerns on this subject. The committee believes that the full range of aircraft options, including airships, should be examined by the Border Patrol to assist our efforts to ensure the most cost-effective and efficient ways to protect our borders from both illegal immigration and the flow of drugs.

Mr. GREGG

Mr. GREGG. I object to further consideration of the bill at this time.

Mr. GREGG. The Senate will be in session late tomorrow in an effort to conclude the pending bill by the close of business tomorrow. Therefore, votes will occur throughout the day and into the evening on Wednesday.

Mr. GREGG

Mr. GREGG. Mr. President, I want to bring to the attention of the body an issue which is percolating under the surface as we move toward the end of this week; that is, the question of the financing of the Teamsters Union elections which were financed by tax dollars, and which elections may be held again for which there has been a request to finance them again with tax dollars. The last time we went down this road, the Teamsters Union ran an election which was overseen by the U.S. attorney in New York with the assistance of the Justice Department. And the U.S. Marshals I believe were also involved in it. The taxpayers of this country spent $17 million to oversee this election. The election was then reviewed. It was determined that the election had been fraudulently run, that it had corruptly proceeded, and that it was basically an election which had to be voided by the Federal judge who was overseeing the election. So for the $17 million of tax money which we invested in order to get a fair and honest election in the Teamsters Union, the taxpayers got a dishonest, corrupt, and fraudulent election. That is bad enough. What is even worse is that the taxpayers had to pay in the first place to oversee a union election. This is the largest union in the United States, I believe, relative to membership. It is a very wealthy union. It is obviously a union which has had some significant problems over the years, both with its leadership and with the management, and especially with its pension funds for its rank and file. But it clearly is a union which has the financial strength to pay the cost of oversight of its elections to assure that the rank-and-file membership of the union get a fair and honest election. I personally felt sorry for the membership of the Teamsters Union which has been put through this election which has been so fraudulently managed. But I also think that the taxpayers have to be concerned. We have to be concerned about the taxpayers. Why should the taxpayers of this country be asked to pay for the cost of overseeing a union election for a union which is so wealthy? Clearly, for any oversight that occurs, the cost should be borne by the union itself. I should think it would want to in order to obtain an honest and fair election. But no, that didn't happen. In the last election, the taxpayers came up with $17 million, which was clearly wasted. Have we been reimbursed for that? Have the taxpayers been reimbursed for that $17 million? No, we haven't. I realize that in Washington $17 million seems like a meager sum, but I have to tell you, it is a lot of money. There are a lot of people in New Hampshire both who are union members and who are nonunion members, who work very hard and who work all year long to pay their taxes. And if you were to add up their taxes, you would find it didn't meet $17 million. I suspect that is probably for 5,000 or 6,000 people in the State of New Hampshire the tax burden for a year. I am not sure. That is a guess. But I suspect it is a large number of people who work all year paying their taxes so they can be put into this union election, which is then fraudulently run. And we didn't get the money back. Now they come to us again. They say, ``We need another--we don't know what the final figure might be.'' But initially they need another $8 million of tax money in order to run this second election. Fool me once, and it is your fault. Fool me twice, and it is my fault. Clearly, it is the taxpayer who is being taken down the road. If the Congress allows this to happen again, it is the Congress that is being taken down the road, and as a result we are not carrying out our obligation to support the taxpayers. So for us to pay another $8 million--it may end up being much more than that. It may be $20 million in order to support another union election after we haven't been reimbursed for the $17 million we spent in the last election, which was basically totally mismanaged. It is inconceivable. It is inappropriate. It makes no sense. Fortunately, that is my view. Unfortunately, there are a number of people around here who have a different view. The White House wants us to spend this money. The Justice Department wants us to spend this money. The Speaker of the House wants to spend, I guess, this money. A number of Members of our own body want to spend this money. But to get this money, they have to, at least in theory, come to the committee that I chair and get me to authorize and reprogram to do it. I want to go on record as to why I am not doing it. I am not going to reauthorize that reprogram because I am not going to go back to New Hampshire and be walking through a factory somewhere, or on a farm somewhere, or in a small software company somewhere, and have one of my constituents come up to me and say, ``You know, last year I paid X dollars in taxes, and you just sent it to run a corrupt election for the Teamsters. What are you doing with my money? Aren't you supposed to be taking care of that money down there? Aren't you supposed to be my fiduciary? Aren't you supposed to be overseeing it so it doesn't get wasted?'' If I approve this transfer, my answer to them would have to be, I am not doing my job, that I am not fulfilling my obligation to protect the taxpayers from the fraudulent misuse of their funds. The Teamsters Union has the financial wherewithal to pay the cost of overseeing its own elections. The last election was such an abysmal failure from the standpoint of integrity, from the standpoint of appropriateness of an election process, that it is absolutely inexcusable that the Court, that the Justice Department, that the White House, or that anyone else would come to us again and say, Taxpayers, we are going to go down this road one more time. We are going to take you on this ride one more time. We are going to spend your money one more time to run another election for a union which has proven itself to be so corrupt in the manner in which it runs elections.'' It is just beyond my comprehension how we can pursue that course of action. But that seems to be the desire of a number of members in this body and a number of members of the other body, of the White House and of the leadership of the Justice Department. However, if they are going to do it, they are going to do it without my support, and I will do everything I can in this body to make sure that those tax dollars are not spent in this way. Mr. President, I yield the floor. Mr. President I suggest the absence of a quorum.

Mr. GREGG

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

Mr. GREGG. Mr. President, I ask unanimous consent to proceed as if in morning business for 5 minutes.

Mr. GREGG

Mr. GREGG. Mr. President, today I introduce--I believe I can say without exaggeration--a landmark piece of legislation, the Twenty- First Century Retirement Act. Joining me as principal co-sponsor of this legislation is Senator John Breaux, with whom I served as co-chair of the National Commission on Retirement Policy during the last year. Also this week, the same legislation will be introduced by our House colleagues, Congressmen Jim Kolbe and Charles Stenholm. With many pieces of legislation, naming the cosponsors upon introduction is merely a perfunctory exercise. With this one, it is significant. Also as original cosponsors of this legislation, we have Senators Fred Thompson, Chuck Robb, Craig Thomas, and Dan Coats. Several cosponsors from both sides of the aisle are also joining on the House bill. This in and of itself is almost an unprecedented accomplishment. This simply does not happen with Social Security, long considered the ``third rail'' of American politics. We are turning this ``third rail'' into a passenger train--a bipartisan, bicameral process for reform. Two months ago, the National Commission on Retirement Policy voted 24-0 to approve the recommendations that this legislation would implement. Today we are introducing it with several cosponsors from both sides of the aisle. Given the difficulty that most experts see with restoring the Social Security system to balance, our proposal has set a modern record for the most support attracted to any proposal to place Social Security on sound long-term footing. For several years, we have seen numerous Commissions divide among themselves, breaking into factions, issuing separate minority opinions instead of coming to agreement. We have seen various--many of them visionary and constructive--individual legislators introduce reform proposals that could attract little support beyond the original co- sponsors. But today we stand here with a proposal that has received endorsements that have not been given to other Social Security proposals in recent years. What have we done that has enabled us to build such support? The first thing we did was to take careful note of what Social Security has meant to Americans, and what they insist that it mean in the future. Social Security has long been the principal government program lifting senior citizens out of poverty. In addition to providing a basic level of protection against poverty, the program has also been sold to Americans as not a welfare program, but rather a program under which benefits paid will bear a reasonable relationship to the contributions that people have put in. So we set about to ensure that this remained the case. We wanted to have a system that, in the end, would do an even better job of lifting Americans out of poverty--and would, at the same time, ensure that people received a fair deal for the investment that they made in the program. Let me step back a bit, Mr. President, and review why action is necessary to achieve this purpose. This requires me to review the projections for Social Security under current law. It is often said that Social Security faces an actuarial problem. It is said that the program is solvent only through the year 2032. That is true. But it does not begin to describe all of the problems with the program. Even an actuarially sound Social Security program would face enormous financing problems under its current structure. It is a ``pay as you go'' system. Any surplus assets it holds are invested in the federal government--which then has to pay it back at some date in the future. So, even if the books were balanced--and they are trillions of dollars out of balance--the general taxpayer would still face the problem of paying off more than $4 trillion in Trust Fund assets. This would be needed above and beyond payroll taxes (!) in order to pay the benefits that have been promised to the baby boom generation of retirees. So what would that mean? It would mean raising taxes on future generations of Americans. The payroll tax would ultimately have to go up by almost 50%! That is because the net cost of the system would ultimately top 18% of payroll, as opposed to today's 12.4% tax rate. Raising the FICA tax today, immediately, by 2.2% of payroll, would not solve this problem. It would just mean that future taxpayers would have a larger Trust Fund to pay off later on, and that the 50% payroll tax increase would be borne indirectly, through general taxation. But there would be another dire effect of such a change. Under current law, rates of return under Social Security are dropping. If you are a single male, the chances are very good that you will never get back the value of the contributions that you put in. The situation is comparably grim for single females--and for two-earner couples. If we were to raise taxes to restore the system to solvency--or, for that matter, if we simply and mindlessly cut benefits--that situation would grow far worse. More and more Americans would be losing money through the program. Ultimately, its political support would be imperiled. The basic societal consensus in favor of Social Security-- based on the premise that it treats everyone fairly--would be undermined. So we must find another way to restore Social Security to health--and to enable it to provide the kind of retirement income that Americans have a right to expect from the program. I believe that it is imperative that we begin to ``pre-fund'' the future liabilities of Social Security. A ``pay as you go'' system is not built for a demographic shift on the order of the baby boom generation. A ``pay as you go'' system assumes that there is always a demographic pyramid--that each generation coming through at the bottom is more numerous than the generation that they are supporting above them. But with the baby boomers coming through in such great numbers--and having comparatively fewer kids--the pyramid looks more like a rectangle. And the individuals at the bottom will bear a crushing burden unless we reduce some of it by putting additional funding aside now. Fortunately, we have an opportunity to do this. We have projections of near-term budget surpluses--and we already have short-term Social Security surpluses. We are collecting money that the government does not need to meet current operations, and we are collecting it through the Social Security system. The very first thing we should do is to give this extra money directly back to taxpayers, allow them to own it once again, and to fund a portion of their future retirement benefits through those personally-owned retirement accounts. Our legislation would do that. It would refund 2% of the current payroll tax back to individual Americans, to be used to directly finance some of their future Social Security benefits. We will move that portion of the benefit--and of future unfunded liabilities--off of the federal ledger. We would set up these personal accounts on the model of the Thrift Savings Plan currently provided to federal employees. We do this because it is an obvious way to reduce administrative costs. We also do it to avoid new mandates on employers. Employers would continue to pay the payroll tax just as they do now, and individuals would decide in which fund they want 2% of the current 12.4% payroll tax to be invested. The Thrift Savings Plan is a tested, workable way of generating investment wealth for beneficiaries. It strikes a reasonable balance between providing good investment opportunities and limiting individual risk. Perhaps most importantly, all Americans would have the opportunity to save for retirement on a payroll deduction basis--not just those who have pension plans, or who have gone through the trouble of setting up IRAs. This will do a tremendous amount to provide investment wealth to the millions of Americans who have not thus far had the opportunity to share in that wealth. Our legislation would also permit individuals to make $2,000 in extra voluntary contributions--above the 2% automatically redirected for them--to these personal savings accounts. This means that we have created a vehicle through which net national savings should increase. The more that individuals contribute to their personal accounts--the more retirement income they will have--and the greater the chances that they will be able to retire early, just as is the case with other retirement saving. This proposal is the most comprehensive one developed to date. It has been scored by the Social Security actuaries as achieving solvency through the next century. Perhaps even more importantly, it eliminates the enormous financing gap under current law. If we enact this legislation, we will remove the need for taxpayers to pony up hundreds of billions of dollars, above payroll taxes, in order to pay current benefits. Each year, the cash flow for the system will be smooth and manageable, and there will be a much closer balance between payroll tax revenue and the benefits that must be paid from it. Moreover, we have compared the results of our plan with a plan that would simply balance the current system within the existing 12.4% tax rate. In general, beneficiaries will receive much more income from our plan than they would from a plan that simply balanced the old system without personal accounts. We have also compared the benefits that our plan would provide to beneficiaries relative to current law, presuming that current benefits were made whole with tax increases. A 2.2% payroll tax hike to make the current system actuarially sound was compared with the income that individuals would receive if they made 2.2% voluntary contributions to our personal accounts. Virtually across the board, individuals would do much, much better under our plan. These are among the reasons why a personal account system is so vital for Social Security reform. Not only will they remove some of the unfunded liabilities of the federal government, but they will provide greater income to individual beneficiaries. We have also carefully thought through the relationship between personal account income and income through the traditional Social Security system. I would like to comment about some of what our legislation would accomplish in this regard. Personal accounts, by their nature, are not progressive. There is a direct relationship between money put in and benefits received. It is not redistributed from wealthy beneficiaries to needier ones. Accordingly, if we move towards a system that includes personal accounts, benefits on the traditional side must be made more progressive if we are ultimately to have a system that is just as progressive, as a whole, as is our current one. We have done this with our plan. Our plan includes a new ``minimum benefit'' poverty protection that would strengthen the safety net for low-income beneficiaries. If an individual works for a full 40 years, we would guarantee that they will not retire in poverty. An individual becomes eligible for some of the protection after 20 years of work, and receives increased protection for every quarter of work after that. Thus, for low-income beneficiaries, our plan would provide additional income security, even without the personal accounts. The personal account income would be a pure bonus for them. Even if they invest badly, their basic protections will be secure--not only secure, but strengthened. In the short term, because of these protections, the Social Security system would become more progressive than it is now. Ultimately, when the personal accounts have built up to be much larger, in the year 2050 or 2060, the progressivity of the system would be essentially what is now--the main difference being that individuals would have much more income. We also did much to correct the flawed incentives of the current system. We eliminate the earnings test above the normal retirement age--a disincentive for continued work. We would also increase the delayed retirement credit, and restore the proper relationship between normal retirement and early retirement benefits. Under current law, an individual has little incentive to wait until normal retirement age, because the extra payroll taxes he pays during those years will never fully be received back in benefits. We would change this, so that for each year an individual works, benefits would increase more sharply, and work would be rewarded. We also would credit an individual for every year of earnings in the benefit formula. Right now, the Social Security system only calculates a benefit based on the average of the highest 35 years of earnings. Many reform proposals would increase this number of years, effectively reducing benefits. Our proposal also recognizes the necessity of increasing the number of computation years in the denominator of this formula--but on the other hand, we would credit an individual in the numerator for every year of earnings, no matter how small. I am certain that my colleagues have received letters from senior citizens who say, ``I am working part-time at the age of 64, but it is not among my highest years of lifetime earnings. I won't get any credit for this in my Social Security benefits. Why not?'' We believe that we should reward all work, and this proposal would. We even would have the minimum benefit guarantee also depend on the total number of years worked. If we enact this proposal, rewards for continued work would be greatly strengthened, and our country will benefit as a result. At this point, I feel compelled to point out that there is no ``free lunch'' in Social Security reform. It is essential that we enact personal accounts, but we must enact them in the right way. Our proposal would explicitly replace unfunded benefits with funded benefits. We move part of the current payroll tax into personal accounts, to fund future benefits. This only makes policy sense if we use such a change to reduce federal liabilities. If we set up personal accounts--but leave all of the old, traditional liabilities in place-- we have not achieved anything. Indeed, we could make the financing problem worse. So we gradually replace unfunded benefits with funded ones. Every responsible proposal to move towards pre-funded benefits will be vulnerable to the attack that it is ``cutting'' benefits, even though in sum, total benefits would be higher than under a ``traditional fix.'' It is imperative that Congress and the public not buy into such misrepresentations as we undertake Social Security reform. If we leave in place all of the unfunded liabilities, and all of the old unfunded benefit promises, then we will leave in place all of the projected tax increases as well. For example. Our proposal would, in order to prevent the traditional system from posing an ever-increasing burden on taxpayers, gradually raise the age of eligibility for full benefits to 70 in the year 2037 (for individuals turning 62 in the year 2029.) No one over the age of 31 would be affected by the full phase-in of this change. At the same time, it must be noted--we do not set an age for access to the personal retirement accounts. Our proposal would allow people to retire on these accounts once they are capable of providing a poverty- level annual benefit--even if this earlier than early retirement age. This is an incentive for individuals to put more money into these accounts, and it provides them with flexibility on their age of retirement that they do not have under current law. We would also require additional reforms to the Consumer Price Index, and adjust the bend points in the Social Security benefit formula in a progressive manner, to gradually phase down the liabilities on the traditional side as we move those benefits over into funded accounts. I would repeat: Personal accounts are an indispensable component of a Social Security reform program that delivers more retirement income than merely balancing an unreformed system can possibly provide. But they will not solve our long-term financing problems unless we use them to phase down the unfunded liabilities of the old system. This means directly addressing the growth of the unfunded benefits we are promising to pay out, at the same time that we are replacing them with funded benefits. As a result, we believe our plan is the most fiscally responsible proposal yet devised. The net liabilities upon the federal government in any year during the baby boom retirement period--whether you pick 2020, 2025, 2030, or beyond--would be significantly less than under almost any other proposal. We have avoided any and all tax increases-- while at the same time avoided unseen financing costs above and beyond the explicit tax rates. We have also produced a proposal that will give beneficiaries the opportunity to generate more retirement income through self-directed investments, provide a Social Security system that the economy can sustain, and at the same time enhance protections against the risk of poverty. I want to thank my co-sponsors--especially Senator John Breaux, Congressman Kolbe, and Congressman Stenholm--and their staffs, who have worked so closely with me and with my staff throughout a long and difficult process. I also want to thank all others who are constructively participating in the Social Security reform debate. We have made it this far without turning this critical issue into a partisan shooting match. I am pleased that the President has remained open to various proposals for reform, and we have been reaching out to him to explain our ideas. I am also appreciative that Senators Moynihan and Kerrey have also produced an actuarially sound proposal, and that discussions of the differences between our proposals have been made on a constructive basis. I would extend a similar appreciation for a number of other Senators who are exploring this issue seriously--everyone from Congressmen Mark Sanford and Nick Smith, to Senators Roth, Santorum and Phil Gramm in our own chamber.

Mr. GREGG

Mr. GREGG. Mr. President, today I introduce--I believe I can say without exaggeration--a landmark piece of legislation, the Twenty- First Century Retirement Act. Joining me as principal co-sponsor of this legislation is Senator John Breaux, with whom I served as co-chair of the National Commission on Retirement Policy during the last year. Also this week, the same legislation will be introduced by our House colleagues, Congressmen Jim Kolbe and Charles Stenholm. With many pieces of legislation, naming the cosponsors upon introduction is merely a perfunctory exercise. With this one, it is significant. Also as original cosponsors of this legislation, we have Senators Fred Thompson, Chuck Robb, Craig Thomas, and Dan Coats. Several cosponsors from both sides of the aisle are also joining on the House bill. This in and of itself is almost an unprecedented accomplishment. This simply does not happen with Social Security, long considered the ``third rail'' of American politics. We are turning this ``third rail'' into a passenger train--a bipartisan, bicameral process for reform. Two months ago, the National Commission on Retirement Policy voted 24-0 to approve the recommendations that this legislation would implement. Today we are introducing it with several cosponsors from both sides of the aisle. Given the difficulty that most experts see with restoring the Social Security system to balance, our proposal has set a modern record for the most support attracted to any proposal to place Social Security on sound long-term footing. For several years, we have seen numerous Commissions divide among themselves, breaking into factions, issuing separate minority opinions instead of coming to agreement. We have seen various--many of them visionary and constructive--individual legislators introduce reform proposals that could attract little support beyond the original co- sponsors. But today we stand here with a proposal that has received endorsements that have not been given to other Social Security proposals in recent years. What have we done that has enabled us to build such support? The first thing we did was to take careful note of what Social Security has meant to Americans, and what they insist that it mean in the future. Social Security has long been the principal government program lifting senior citizens out of poverty. In addition to providing a basic level of protection against poverty, the program has also been sold to Americans as not a welfare program, but rather a program under which benefits paid will bear a reasonable relationship to the contributions that people have put in. So we set about to ensure that this remained the case. We wanted to have a system that, in the end, would do an even better job of lifting Americans out of poverty--and would, at the same time, ensure that people received a fair deal for the investment that they made in the program. Let me step back a bit, Mr. President, and review why action is necessary to achieve this purpose. This requires me to review the projections for Social Security under current law. It is often said that Social Security faces an actuarial problem. It is said that the program is solvent only through the year 2032. That is true. But it does not begin to describe all of the problems with the program. Even an actuarially sound Social Security program would face enormous financing problems under its current structure. It is a ``pay as you go'' system. Any surplus assets it holds are invested in the federal government--which then has to pay it back at some date in the future. So, even if the books were balanced--and they are trillions of dollars out of balance--the general taxpayer would still face the problem of paying off more than $4 trillion in Trust Fund assets. This would be needed above and beyond payroll taxes (!) in order to pay the benefits that have been promised to the baby boom generation of retirees. So what would that mean? It would mean raising taxes on future generations of Americans. The payroll tax would ultimately have to go up by almost 50%! That is because the net cost of the system would ultimately top 18% of payroll, as opposed to today's 12.4% tax rate. Raising the FICA tax today, immediately, by 2.2% of payroll, would not solve this problem. It would just mean that future taxpayers would have a larger Trust Fund to pay off later on, and that the 50% payroll tax increase would be borne indirectly, through general taxation. But there would be another dire effect of such a change. Under current law, rates of return under Social Security are dropping. If you are a single male, the chances are very good that you will never get back the value of the contributions that you put in. The situation is comparably grim for single females--and for two-earner couples. If we were to raise taxes to restore the system to solvency--or, for that matter, if we simply and mindlessly cut benefits--that situation would grow far worse. More and more Americans would be losing money through the program. Ultimately, its political support would be imperiled. The basic societal consensus in favor of Social Security-- based on the premise that it treats everyone fairly--would be undermined. So we must find another way to restore Social Security to health--and to enable it to provide the kind of retirement income that Americans have a right to expect from the program. I believe that it is imperative that we begin to ``pre-fund'' the future liabilities of Social Security. A ``pay as you go'' system is not built for a demographic shift on the order of the baby boom generation. A ``pay as you go'' system assumes that there is always a demographic pyramid--that each generation coming through at the bottom is more numerous than the generation that they are supporting above them. But with the baby boomers coming through in such great numbers--and having comparatively fewer kids--the pyramid looks more like a rectangle. And the individuals at the bottom will bear a crushing burden unless we reduce some of it by putting additional funding aside now. Fortunately, we have an opportunity to do this. We have projections of near-term budget surpluses--and we already have short-term Social Security surpluses. We are collecting money that the government does not need to meet current operations, and we are collecting it through the Social Security system. The very first thing we should do is to give this extra money directly back to taxpayers, allow them to own it once again, and to fund a portion of their future retirement benefits through those personally-owned retirement accounts. Our legislation would do that. It would refund 2% of the current payroll tax back to individual Americans, to be used to directly finance some of their future Social Security benefits. We will move that portion of the benefit--and of future unfunded liabilities--off of the federal ledger. We would set up these personal accounts on the model of the Thrift Savings Plan currently provided to federal employees. We do this because it is an obvious way to reduce administrative costs. We also do it to avoid new mandates on employers. Employers would continue to pay the payroll tax just as they do now, and individuals would decide in which fund they want 2% of the current 12.4% payroll tax to be invested. The Thrift Savings Plan is a tested, workable way of generating investment wealth for beneficiaries. It strikes a reasonable balance between providing good investment opportunities and limiting individual risk. Perhaps most importantly, all Americans would have the opportunity to save for retirement on a payroll deduction basis--not just those who have pension plans, or who have gone through the trouble of setting up IRAs. This will do a tremendous amount to provide investment wealth to the millions of Americans who have not thus far had the opportunity to share in that wealth. Our legislation would also permit individuals to make $2,000 in extra voluntary contributions--above the 2% automatically redirected for them--to these personal savings accounts. This means that we have created a vehicle through which net national savings should increase. The more that individuals contribute to their personal accounts--the more retirement income they will have--and the greater the chances that they will be able to retire early, just as is the case with other retirement saving. This proposal is the most comprehensive one developed to date. It has been scored by the Social Security actuaries as achieving solvency through the next century. Perhaps even more importantly, it eliminates the enormous financing gap under current law. If we enact this legislation, we will remove the need for taxpayers to pony up hundreds of billions of dollars, above payroll taxes, in order to pay current benefits. Each year, the cash flow for the system will be smooth and manageable, and there will be a much closer balance between payroll tax revenue and the benefits that must be paid from it. Moreover, we have compared the results of our plan with a plan that would simply balance the current system within the existing 12.4% tax rate. In general, beneficiaries will receive much more income from our plan than they would from a plan that simply balanced the old system without personal accounts. We have also compared the benefits that our plan would provide to beneficiaries relative to current law, presuming that current benefits were made whole with tax increases. A 2.2% payroll tax hike to make the current system actuarially sound was compared with the income that individuals would receive if they made 2.2% voluntary contributions to our personal accounts. Virtually across the board, individuals would do much, much better under our plan. These are among the reasons why a personal account system is so vital for Social Security reform. Not only will they remove some of the unfunded liabilities of the federal government, but they will provide greater income to individual beneficiaries. We have also carefully thought through the relationship between personal account income and income through the traditional Social Security system. I would like to comment about some of what our legislation would accomplish in this regard. Personal accounts, by their nature, are not progressive. There is a direct relationship between money put in and benefits received. It is not redistributed from wealthy beneficiaries to needier ones. Accordingly, if we move towards a system that includes personal accounts, benefits on the traditional side must be made more progressive if we are ultimately to have a system that is just as progressive, as a whole, as is our current one. We have done this with our plan. Our plan includes a new ``minimum benefit'' poverty protection that would strengthen the safety net for low-income beneficiaries. If an individual works for a full 40 years, we would guarantee that they will not retire in poverty. An individual becomes eligible for some of the protection after 20 years of work, and receives increased protection for every quarter of work after that. Thus, for low-income beneficiaries, our plan would provide additional income security, even without the personal accounts. The personal account income would be a pure bonus for them. Even if they invest badly, their basic protections will be secure--not only secure, but strengthened. In the short term, because of these protections, the Social Security system would become more progressive than it is now. Ultimately, when the personal accounts have built up to be much larger, in the year 2050 or 2060, the progressivity of the system would be essentially what is now--the main difference being that individuals would have much more income. We also did much to correct the flawed incentives of the current system. We eliminate the earnings test above the normal retirement age--a disincentive for continued work. We would also increase the delayed retirement credit, and restore the proper relationship between normal retirement and early retirement benefits. Under current law, an individual has little incentive to wait until normal retirement age, because the extra payroll taxes he pays during those years will never fully be received back in benefits. We would change this, so that for each year an individual works, benefits would increase more sharply, and work would be rewarded. We also would credit an individual for every year of earnings in the benefit formula. Right now, the Social Security system only calculates a benefit based on the average of the highest 35 years of earnings. Many reform proposals would increase this number of years, effectively reducing benefits. Our proposal also recognizes the necessity of increasing the number of computation years in the denominator of this formula--but on the other hand, we would credit an individual in the numerator for every year of earnings, no matter how small. I am certain that my colleagues have received letters from senior citizens who say, ``I am working part-time at the age of 64, but it is not among my highest years of lifetime earnings. I won't get any credit for this in my Social Security benefits. Why not?'' We believe that we should reward all work, and this proposal would. We even would have the minimum benefit guarantee also depend on the total number of years worked. If we enact this proposal, rewards for continued work would be greatly strengthened, and our country will benefit as a result. At this point, I feel compelled to point out that there is no ``free lunch'' in Social Security reform. It is essential that we enact personal accounts, but we must enact them in the right way. Our proposal would explicitly replace unfunded benefits with funded benefits. We move part of the current payroll tax into personal accounts, to fund future benefits. This only makes policy sense if we use such a change to reduce federal liabilities. If we set up personal accounts--but leave all of the old, traditional liabilities in place-- we have not achieved anything. Indeed, we could make the financing problem worse. So we gradually replace unfunded benefits with funded ones. Every responsible proposal to move towards pre-funded benefits will be vulnerable to the attack that it is ``cutting'' benefits, even though in sum, total benefits would be higher than under a ``traditional fix.'' It is imperative that Congress and the public not buy into such misrepresentations as we undertake Social Security reform. If we leave in place all of the unfunded liabilities, and all of the old unfunded benefit promises, then we will leave in place all of the projected tax increases as well. For example. Our proposal would, in order to prevent the traditional system from posing an ever-increasing burden on taxpayers, gradually raise the age of eligibility for full benefits to 70 in the year 2037 (for individuals turning 62 in the year 2029.) No one over the age of 31 would be affected by the full phase-in of this change. At the same time, it must be noted--we do not set an age for access to the personal retirement accounts. Our proposal would allow people to retire on these accounts once they are capable of providing a poverty- level annual benefit--even if this earlier than early retirement age. This is an incentive for individuals to put more money into these accounts, and it provides them with flexibility on their age of retirement that they do not have under current law. We would also require additional reforms to the Consumer Price Index, and adjust the bend points in the Social Security benefit formula in a progressive manner, to gradually phase down the liabilities on the traditional side as we move those benefits over into funded accounts. I would repeat: Personal accounts are an indispensable component of a Social Security reform program that delivers more retirement income than merely balancing an unreformed system can possibly provide. But they will not solve our long-term financing problems unless we use them to phase down the unfunded liabilities of the old system. This means directly addressing the growth of the unfunded benefits we are promising to pay out, at the same time that we are replacing them with funded benefits. As a result, we believe our plan is the most fiscally responsible proposal yet devised. The net liabilities upon the federal government in any year during the baby boom retirement period--whether you pick 2020, 2025, 2030, or beyond--would be significantly less than under almost any other proposal. We have avoided any and all tax increases-- while at the same time avoided unseen financing costs above and beyond the explicit tax rates. We have also produced a proposal that will give beneficiaries the opportunity to generate more retirement income through self-directed investments, provide a Social Security system that the economy can sustain, and at the same time enhance protections against the risk of poverty. I want to thank my co-sponsors--especially Senator John Breaux, Congressman Kolbe, and Congressman Stenholm--and their staffs, who have worked so closely with me and with my staff throughout a long and difficult process. I also want to thank all others who are constructively participating in the Social Security reform debate. We have made it this far without turning this critical issue into a partisan shooting match. I am pleased that the President has remained open to various proposals for reform, and we have been reaching out to him to explain our ideas. I am also appreciative that Senators Moynihan and Kerrey have also produced an actuarially sound proposal, and that discussions of the differences between our proposals have been made on a constructive basis. I would extend a similar appreciation for a number of other Senators who are exploring this issue seriously--everyone from Congressmen Mark Sanford and Nick Smith, to Senators Roth, Santorum and Phil Gramm in our own chamber.

Mr. GREGG

Mr. GREGG. I would just like to commend the Senator from Mississippi for his hard work and dedication on this bill, and would like to thank him for his particular attention to FDA matters. It is important that the regulatory programs be adequately funded, and of particular importance to me and a number of my colleagues is the important regulatory program for cosmetics in the Office of Cosmetics and Color within the FDA's Center for Food Safety and Applied Nutrition. As the Senator from Mississippi knows too well, the FDA recently announced cutbacks in this program, and I just wanted to thank him for the report language accompanying this bill and its encouragement for restoring this program to previous years levels. It is my understanding that our colleagues in the House have provided a $2.5 million increase to restore this program to that level, and I would hope that we can work to ensure that the final version of this bill contains that increase.

Mr. GREGG

Mr. GREGG. I will yield to the Senator from Florida to make a unanimous consent request.

Mr. GREGG. Mr. President, I rise in support of this bill and also to express my appreciation and respect for the leaders of this committee in developing this bill. I know Senator Jeffords, Senator Kennedy, Senator Coats and Senator Dodd have spent an immense amount of time on this and have done an extraordinarily good job of pulling together a strong bill which will ensure we continue a major commitment--a very significant commitment--to those people in our Nation who are attending school and use Federal resources to assist them in attending school. We understand rather well that our Nation, especially in the New England region, depends, for our energy and our productivity, on basically people's creativity and their brain power. In New Hampshire, for example, we don't have any natural resources that produce great wealth, such as oil or large farmlands or mineral deposits. Our great natural resource in our State, and much of this country, is the wonderful minds of the people who work in our State and who produce products and, as a result of producing those products, which are competitive around the world, create prosperity, jobs and a good lifestyle. The key to that, of course, is quality education, and first-class education depends on having students who have the ability to pick and choose among colleges and are able to afford the college of their choice to attend. In order to accomplish that, they have to have support, in many instances. As the Senator from Connecticut so precisely outlined, the cost of quality education is going up dramatically, much faster than the price of most products in this country; in fact, almost 100 percent faster than the cost-of-living index over the last few years. What is driving that cost, we are not absolutely sure. There are many of us who have opinions on it, but we are not sure. One thing we know is because those costs are going up quickly, it is becoming harder and harder to pay for college education. This bill is an attempt to address that and make sure students have available to them the resources necessary for a first-class college education. As has been alluded to--this bill is filled with a lot of excellent ideas and many have already been outlined--but as has been alluded to, the core issue, the most important provision in this bill is the change in the student loan interest rates. Students who want to receive a higher education but must take out loans to do so will have a better chance in succeeding when they get out of school because the cost of paying back those loans will be less because the interest rates will have been cut, and that is a major step, a positive step in the right direction. In addition to cutting the rates, we also cut the amount the Federal Government pays to support the lenders who supply the loans. As you know, lenders currently make very little money on student loans--many people know this, anyway--and the high cost of administration, however, that is tied to student loans has been reduced in this bill and, as a result, we not only cut the rate that it costs students to borrow money to go to college but we also cut the actual amount that lenders are going to make. The big debate was whether or not we would cut it even further. The issue really wasn't whether or not these costs of administration should be cut further, the issue really came down to a question of whether or not we were going to shift from a system which had two competing arenas in which you could get a loan--a direct loan from the Federal Government or private loan from a private lender, to a single provider of loans--basically the Government. For those of us who have seen the Government function under the Direct Student Loan Program, we have seen a dramatic and considerable risk to the entire loan portfolio, the ability of students to get loans if they were only given the option of going to the Federal Government. We wanted to make sure that this adjustment in loan rate was done in a way that maintained the viable private market. In New Hampshire, for example, 96 percent--96 percent--of all the students go through a private loan process rather than through the direct loan process. So you can see that if a direct loan is their only avenue, it will actually create chaos. We know that to be a fact. Just last year when the Direct Loan Program was gearing up and was supposed to be ready and able to take care of the amount of activity that was being applied under the Direct Loan Program, we in the Congress had to pass an emergency bill to basically bail out the Direct Loan Program of the Federal Government which was already in chaos even though it hadn't even gotten up to, I think, much more than 25, 30 percent at that point in student loans, which is approximately where it is right now. We know for a fact that the Direct Loan Program has some serious, serious problems. Not only that, but we are seeing that some of these problems, independent of the fact that they simply can't handle the volume of loans that will occur were the private sector driven out of the market, part of these problems are tied to their administrative activity. The cost of the administration in the Direct Loan Program has gone up dramatically. By ``administration,'' I am talking about compensation, travel and operational costs. It has gone up almost 143 percent, I believe is the number, even though the number of loans have only gone up by something around 35 percent during this same period. The increase in the administrative overhead is a classic example of what happens, of course, when you have a Federal agency involved, when there is very little accountability in the area of administrative overhead and you have a huge bureaucracy which is dominated not by a desire to be efficient, but by a desire basically to create work, in many instances, and to be an agency which covers itself on every issue and creates bureaucrats for purposes of watching bureaucrats. The whole issue in this bill, or the core issue in this bill was how we were going to balance private loan programs with the Direct Loan Program. We did finally reach an understanding on that, and it is a reasonable understanding. It is going to cost us money, but, in the end, it will allow us to give to students the most important item, which is a lower interest rate, and at the same time maintain a competitive marketplace where there will be pressure on the Federal Government's program, the direct lending program, to be more efficient because it will be competing with the private sector programs which have to be efficient in order to survive. That is a very big plus that that decision was made in this way. There are a couple of other issues that were put into this bill I was actively involved in, and I want to address also one the Senator from Minnesota brought to our attention. That was the violence on campuses, especially directed at women. He had an amendment in committee that addressed this and created a program authorizing, under the Violence Against Women Act, $10 million to be set aside for the purposes of looking at the problem we now have on colleges. Unfortunately, it is a serious problem. It has been seen here in the Capital region and the University of Maryland. I doubt there is a major college in this country that has not experienced a series of violent acts relative to women on campuses. So not only did the Senator from Minnesota bring the idea forward, but it seemed to me to be such a good idea in the appropriations bill which I fund, we are going to be funding the idea. This may be the fastest funded authorization that has happened around here in a long time. But there will be $10 million spent relative to violence against women on campuses. Another issue which is in this bill that I think deserves some mention is the fact that it addresses the issue of the use of drugs by students. The Senator from Connecticut was accurate. He said, in polling parents, the concern of the cost of education was listed as their No. 2 concern relative to how they are going to handle their children when they are growing up. He also mentioned that the No. 1 concern is if their children will become involved with drugs, and illegal drugs specifically. This bill reflects that concern. It says that taxpayers should not be carrying the burden of supporting a student who has taken the irresponsible activity of using and being found to be guilty of using an illegal drug. Basically, it says that if you are caught using an illegal drug, and you are convicted of using an illegal drug, then you lose your eligibility for a student loan--on a first offense for 1 year; on a second offense for 2 years; and on a third offense indefinitely. You can avoid this if you, as a student, go through a properly approved, satisfactory drug rehabilitation program. And the Secretary has the capacity to set up the regulations as to what will be a satisfactory drug rehabilitation program. So you can mute the effect of this, but essentially it sends a very clear message to students that if they are going to obtain the benefit--having the taxpayers of this country support them when they are in college through giving them basically a subsidized loan--then they are going to have to be responsible in the manner in which they pursue their academic careers and not use illegal drugs. This is, I think, a major step forward in delivering the correct philosophical position on the question of using drugs. So this, on balance, is a good bill. It moves in the right direction. It confirms and energizes and reinforces programs which have proven to be extraordinarily successful. Again, I congratulate the leadership of the committee for bringing it forward. I yield the floor. Mrs. FEINSTEIN addressed the Chair.

Mr. GREGG. I yield to the Senators who are managing the bill for purposes of addressing this issue, but I note I am aware the Senator from Indiana also wishes to speak.

Mr. GREGG. I yield for purposes of propounding a unanimous consent request.

Mr. GREGG. Solely for the purpose of asking consent.

Mr. GREGG. Mr. President, I appreciate the courtesy of the Senator in allowing me to proceed. Mr. President, I rise in support of the amendment of the Senator from Florida and to talk a little bit about the payment process on this amendment--how we pay for this idea, which is an excellent idea, to make sure that the people benefiting from the GI bill don't end up being penalized for having participated in our military. Ironically, as has been mentioned, we treat people who participate in the AmeriCorps better than we treat the people who participate in the military. The Senator from Florida corrects this problem. In order to pay for this, he suggested that we reduce the overhead administrative costs within the 458 account of the direct lending program, and there is great justification for doing this--great justification for doing this. One of the concerns I think many of us had when the Federal Government got into the business of lending money for education was that we would end up with a bureaucracy that would end up spending a lot of money and maybe not be as efficient as the private marketplaces are. That is just inherent in government; government at all levels does not have a profit motive, and therefore efficiency is always questionable, and in many instances efficiency is poor. There are few exceptions to that, but for the most part you can say almost as a Black rule of law that a government program is going to be less efficient than a private program that is subject to competition. In the instances of direct lending, we are seeing that that appears to have been borne out again. We know that the workload, casework load, is up from 1992 by about 29 percent. But we see that the administrative overhead is up by 143 percent, which is an increase of 120 points more, or 115 points more than the workload going up. And we are not talking here about things which are directly student related; we are talking more about things which are tied to inefficiency, in my opinion. We see that, for example, in the data processing area, the cost has gone up about 222 percent; in the payroll roll area, the cost has gone up 351 percent; in the training area, the cost has gone up 480 percent; in the staffing area, the cost has gone up 429 percent--this in comparison, again, to a workload which has only gone up 29 percent. So clearly there is a great deal of expansion in overhead costs here which is questionable on its face and on a statistical evaluation. So the Senator from Florida has included within his amendment an attempt to address this by reducing in the outyears the amount of increase which will be allowed in the area of administrative costs. I congratulate him for that because I do think that is the right approach, and I think it is the way that this amendment should be paid for. I believe it is going to end up benefiting not only the GIs and the members of the service who benefit from the underlying amendment, but I think it is going to benefit the taxpayers generally, because we will be saving money out of administrative costs which are very questionable and applying it to getting people educated, which is the key. So I congratulate the Senator from Florida for his amendment.

Mr. GREGG. Without losing the floor, I will yield to the Senator from Massachusetts.

Mr. GREGG

Mr. GREGG. Does the Senator from Nebraska wish to speak?

Mr. GREGG. I am going to speak about 10 minutes. Will that be an inconvenience to the Senator, or does he have to get somewhere?

Mr. GREGG. Mr. President, I wish to join with what I am sure will be numerous Senators in congratulating the Senator from Delaware and the Senator from New York and the Committee on Finance for bringing forward this exceptionally good bill which is truly timely. Many of us, as we have tried to help folks out in our States, have run into situations where people have been treated in ways which can only be described as abusive by the Internal Revenue Service, where the Internal Revenue Service has gone way beyond the appropriate action for the purposes of collecting the revenues of the country and has treated American citizens in a way that you might expect were they to be living in a police state instead of in a democracy. In my experience, probably one of the worst cases I have ever seen of Government excesses involves a family known as Barron in New Hampshire. That family, unfortunately, got into some tax trouble, failed to pay its taxes, and the IRS, in an appropriate way, attempted to collect those taxes--at least appropriately at the beginning. But then it got carried away. And as a result of getting carried away, it put that family through an extraordinary trauma, to a point where Mr. Barron ended up committing suicide. And his wife, Shirley Barron, who is now responsible for the family, found herself in a situation which was beyond all reason, which was untenable and which was horrible. A lien had been put on her house. Her children's bank accounts had been taken. Her bank accounts had been taken. The IRS was even making it impossible for her to pay her electric fee, her utility fees. This all occurred after a time period when they thought they had reached an agreement with the Internal Revenue Service. They thought an understanding had been reached, and, in fact, an understanding had been reached. Then the IRS, in a manner which can only be called bait and switch, backed out of that agreement and assessed them with even more penalties and interest. And on an original tax bill which was, I believe, somewhere in the vicinity of $20,000 or $40,000, they ended up with an obligation, according to the Internal Revenue Service, of multiple hundreds of thousands of dollars. It was a situation which was so horrendously handled that it literally drove Mr. Barron to commit suicide, destroyed the lives of this family. And it has become a cause celebre in New Hampshire, and to some degree nationally. It would be terrible in and of itself, because there is really nothing we can do as a Government to correct what happened to Mrs. Barron and the treatment she received. Her life has been irreparably harmed, and her family will always suffer as a result of this. It would be terrible enough if it were the only instance of this type of situation occurring, but as we saw from the hearings which the Senate Finance Committee held under Chairman Roth, it was not the only instance. Regrettably, on too many occasions the Internal Revenue Service has acted in this almost malicious but certainly abusive way. This does not mean that the Internal Revenue Service is populated with people who wish to treat American citizens, taxpayers, in a manner that is totally inappropriate. No. In fact, just the opposite. The Internal Revenue Service is filled with good and conscientious people, in my opinion; but there are bad apples. More importantly than that, the Service has created an atmosphere, a way of management, a culture, which has allowed the excesses to proceed in the actions against taxpayers which are beyond the pale of reasonableness to become commonplace, through the lack of management and, in my opinion, due to lack of structure, both legal and managerial. So this bill attempts to correct that. The most important thing it does, or one of the most important things it does, is it shifts the burden of proof, gets us back to where we should have been to begin with, which is to presume that the taxpayer is innocent rather than presuming that the taxpayer is guilty until the taxpayer has proven himself or herself innocent. That is very important, so that the taxpayer goes in at least on some level of a playing field which has some levelness to it versus a playing field which was radically tilted against the taxpayer under the present structure. In addition, the bill protects the innocent spouse. In so many instances, the spouse is a part of the familial activity as being part of a family; signs the return without a great deal of knowledge of what is in that return, sometimes without any great knowledge of what is in that return, but signs it and then finds out later on, as was the case in Mrs. Barron's situation, that action has been taken that was inappropriate and liability exists. And when the spouse who is responsible disappears, as a result of divorce, or in this case as a result of death, the innocent spouse ends up with an obligation which is totally inappropriate. So the protection of the innocent spouse is absolutely critical and a very, very good part of this bill. In addition, the bill takes what I think is a critical step in the area of managing the Internal Revenue Service's procedures because it limits the ability of the Internal Revenue Service to assess interest and penalties in a manner which uses the interest and penalties to basically force settlements on the taxpayer, even when the taxpayer feels they did not owe the obligation. There is no question but that the basic collection process at the Internal Revenue Service proceeds with, in many instances, running up the interest and penalty obligations so when they get into negotiations with the taxpayer, even if the taxpayer knows they do not owe the taxes, the utility of proceeding becomes so expensive, it becomes so impossible to ever want to proceed in a manner which would put you at risk for the interest and penalties which have been run up that you end up paying the underlying tax and negotiating out the interest and penalties. That is a collection process which, regrettably, has become the modus operandi of the Internal Revenue Service. This bill puts some limitation on that by limiting the ability of the Internal Revenue Service to run those interest and penalties up if they have not notified the taxpayer within a timely manner--18 months initially, 12 months as time goes out--that an obligation is due or they perceive that an obligation is due. This is an extremely important change in the collection process. In addition, the bill provides much better services to the taxpayer, which is critical. Thus, I am extremely supportive of this effort. I say this. It does not resolve the problem. The problem goes to the basic law. The fact is that we have created a tax law which is so complex, so convoluted, such a mishmash of regulations and cross-purpose legislation, that it becomes basically unenforceable because it is not comprehendible. After finishing law school, I went back to school for 3 years and got a graduate degree in tax policy with an LL.M. I have to say, I do not fill out my own tax return because it is simply too complex. Now, if I cannot do it, how can somebody who is just working every day and trying to make ends meet be able to do it? Obviously, they cannot. And what we see in the collection atmosphere is that the Internal Revenue agents, regrettably, because of the complexity in many instances, do not understand it because it is not understandable. So the law itself is a basic problem here, and we simply have to reform the law if we really want to correct this problem. We have to go to a much simpler law, a fairer law, something that can be managed in a way that is comprehendible to people who are working every day and trying to fill out their return, who don't happen to be specialists. As an interim step, as an effort to try to correct what is basically a law that is not enforceable effectively but is being enforced in a manner which in many cases is abusive--as an interim step, this bill makes great progress. Thus, I congratulate the committee for their efforts. I hope it will not be looked at as the end of the process but will be looked at as a step in the process to reforming our tax laws so that they can be administered in a way which will regain the confidence of the American people that they are fair and that they are reasonable. I yield the floor.

Mr. GREGG

Mr. GREGG. Mr. President, I ask unanimous consent that the Subcommittee on Forests and Public Land Management of the Committee on Energy and Natural Resources be granted permission to meet during the session of the Senate on Wednesday, June 17, for purposes of conducting a subcommittee hearing which is scheduled to begin at 2 p.m. The purpose of this hearing is to receive testimony on S. 1253, the Public Land Management Act of 1997.

Mr. GREGG. Mr. President, I ask unanimous consent that the Select Committee on Intelligence be authorized to meet during the session of the Senate on Wednesday, June 17, 1998, at 2:30 p.m. to hold a closed hearing on Intelligence Matters.

Mr. GREGG

Mr. GREGG. Mr. President, I ask unanimous consent that the Senate now resume consideration of the tobacco legislation, S. 1415, for debate only until the hour of 2 p.m. today.