Orrin Hatch

Mr. HATCH

Mr. HATCH. Mr. President, I will respond to my colleague from Massachusetts. Because of the unique situation in which we were able to add this spending provision to the tax bill, this is the way it is written.

Mr. HATCH. The original Hatch-Kennedy bill proposed a $20 billion health insurance program for children, plus it contributed $10 billion for deficit reduction. It was a 5-year authorization. Both of the sponsors assumed--and I believe properly so--that this program will work well, that children will benefit from it, and that it will be reauthorized at the end of 5 years. I have no doubt that is the case here as well. But the provision the Finance Committee adopted continues the tax beyond the 5-year period, and the revenues may be used for other purposes. To be clear, I assure my colleague from Massachusetts that, should this program work well, we will be revisiting it in 5 years. And there is an additional point I wish to make for those of my colleagues who believe the additional funding is not needed. It seems fairly clear that the $24 billion, as important a sum as it is, will not cover all of the 10 million children who lack insurance. If we are very, very lucky, or if the Congressional Budget Office is smiling on us that day, it will cover at most about 8 million children. These figures are obviously subject to the way the States craft their programs, their cost-sharing requirements, and whether the States choose block grants or Medicaid. For example, if all of the States chose Medicaid, which I do not believe would happen based on conversations I have had with Governors, I estimate that the most children we could cover with the $24 billion is around 5 million. The other point I feel compelled to raise is that the CBO estimates are coming in very meager. I am not sure why, but they have been consistently scoring the major children's health proposals as helping very few children. For example, I am told their preliminary estimate for the CHIPS proposal was that it would cover 2 million kids. Their initial estimate on the House-passed block grant was that it would help around 500,000 children, although that was later revised to 860,000. As a simple gauge, I use the figure of $1,000 per child to measure coverage. This is more than the Federal share of an average Medicaid child, and equal to or slightly less than the average high-quality group health plan. This is also the rough measure that Dr. Bruce Vladeck at HCFA uses. Based on that rough calculation, $24 billion over 5 years would cover just short of 5 million kids per year. That assumes that the funding were equal each year, and it assumes that there would be absolutely no inflation. But to those who express concern about the shelf-life of the $8 billion figure we are considering today, the bottom line is that we are going to see how this program works. I assure my friend and colleague and partner on this effort, a legislator who has been a tireless advocate for children for decades, that if this program works and it is benefiting children, we are going to reauthorize it five years from now. It is that simple. I give my assurances that I intend to do everything in my power to live up to that promise. And I hope that our colleagues will support that. This particular amendment has been brought up separately--not as part of the overall bill--because it is a spending amendment on the tax bill. Because a point of order has been lodged, we need 60 votes in order to retain my provision in the bill. I believe I am not overstating it--and I would like my colleagues to correct me if I am wrong--when I say that resolution of this issue as part of the total tax spending package was the critical juncture in bringing us together in the Finance Committee. That is a key reason why we have had so much support on both sides of the aisle. So, it is critical that we pass this as part of the overall plan. I hope our colleagues will take that into consideration. The tobacco tax is considerably less than that embodied in the Hatch- Kennedy bill, S. 526. But because of the $16 billion already in the spending bill we passed last night--which most would agree was placed there largely in response to the original Hatch-Kennedy filing--and because of the $8 billion we are adding today, we should have an adequate amount to take care of a substantial number of uninsured children in the foreseeable future. If we approve this proposal and then retain the full $24 billion in the final conference agreement that is signed by the President, it would be a terrific thing for our society. Adoption of this amendment can only help bring a larger bipartisan vote on the tax bill. And, in the end, I think we could all walk away feeling that we had accomplished the most significant advance in children's health for decades. I yield at this point. Mr. CHAFEE addressed the Chair.

Mr. HATCH. Mr. President, this morning we started the first of a series of hearings in the Judiciary Committee on the tobacco global settlement. I have to say that the funding for this $8 billion, as well as a number of other provisions that will be in the tax bill, happens to come from the 20-cent-per-pack tax on cigarettes. The reason that Senator Kennedy and I originally put into our original bill a 43-cent tax on cigarettes is because tobacco is the number one preventable cause of death in this country today. It is particularly important in this instance because of these 10 million children who are without health insurance, 5 million of them it is estimated will ultimately wind up smoking if we do not find some way to make smoking less attractive for them. It is also a proven fact that every time smoking goes up 10 percent in cost that 7 percent of these kids will never attempt to smoke, which is a very wise thing here. It is a spinoff benefit that we get in adding the cigarette tax. I might also add that 50 percent of all smokers began before the age of 14, and 90 percent began before the age of 18. So this particular amendment and this particular aspect of this particular bill has many, many good reasons for its adoption. I hope our colleagues will support this because I think it is critical, and I think my colleagues on both sides who are really familiar with this will say that it is critical in the overall binding together in a bipartisan way of Democrats and Republicans in the best interest of our country and in support of these major, major two pieces of reconciliation legislation. If you stop and think about it, this is one of the most just taxes that we have ever passed, and we have limited it to 20 cents rather than 43 cents. The advantage of that is that we will raise enough money to help not only children but help with some other serious problems on the committee. It was a very difficult discussion because we always have revenue- raising problems, we always have offset problems, and we always have problems of differences on the Finance Committee. But here basically everybody was brought together. Ultimately this side of the equation passed 18 to 2. The spending side passed 20 to zero. I hope our colleagues will support this amendment because it is critical to the overall passage of this matter. It is also critical to these children. I don't know of a better thing we can do. We spend an awful lot of time around here doing an awful lot of good for people who can't help themselves, and here is a case where we have children 90 percent of whom live in families with at least one parent who works who can't help themselves but would if they could. This is the way to solve that. It is a reasonable compromise. It is something that will work. It gets enough money out there in comparison to Hatch-Kennedy that I think it will work. It does it in a thrifty savings way. I want to personally compliment the chairman and the ranking member of this committee and other members of this committee for their willingness to see through the solution of these problems with this amendment. I hope my colleagues on our side will support this amendment. I hope our colleagues on the Democrat side will support it because in doing so we will be pushing this process greatly forward. I thank all of those who have participated and who will participate in helping us to do so. I yield the floor.

Mr. HATCH

Mr. HATCH. Mr. President, last year, I stated on the Senate floor that ``our country stands at a crossroads on the path it travels in relations among the different races and ethnic groups that make up the American people. Down one path is the way of mutual understanding and goodwill; the way of equal opportunity for individuals; the way of seriously and persistently addressing our various social problems as America's problems. * * * Down the other path is the way of mutual suspicion, fear, ill will, and indifference; the way of group rights and group preferences.'' I am proud to stand today with my colleagues in the House and the Senate, and others who have worked so hard for the cause of opportunity, to announce the introduction of the Civil Rights Act of 1997. The act represents our best efforts to recommit the nation to the ideal of equal opportunity for every American--to emphasize that we must resist the temptation to define the nation's problems in narrow racial terms, and rather must roll up our sleeves and begin the hard work of dealing with our problems as Americans, and as fellow human beings. Of course, our critics will imply that those of us who today reject divisive racial preferences and distinctions do so because we underestimate the social, economic, and discriminatory obstacles some Americans face. President Clinton, for example, told his audience in San Diego last week that ``[t]he vast majority of [Californians who supported that state's Proposition 209] did it with a conviction that discrimination and isolation are no longer barriers to achievement.'' But that is just plain wrong. To the contrary, last week in the Senate Judiciary Committee we heard from a panel of ordinary citizens who movingly told us of their experiences with discrimination in America. Among them was a Chinese- American mother from San Francisco, Charlene Loen, who told us how her young son Patrick was denied admission to an elite public magnet school, Lowell High School, because he is Chinese. The school district's efforts to ensure diversity among its students led it to employ a system of racial preference that had the effect of capping Chinese enrollment in many of its schools, forcing Chinese children to score much higher on entrance exams than children of other races. At virtually every public school Ms. Loen approached, she was first asked whether Patrick was Chinese, and when learning that he was, would inform Ms. Loen that Patrick need not apply. The Chinese quota was in effect full. Ladies and gentlemen, that is not the promise of America. There should be no question that discrimination indeed continues to deny opportunities to too many Americans. At the Judiciary Committee's recent hearing we heard from black Americans, white Americans, Asian Americans, and even a victim of an outrageous hate crime. But the question that we all must answer is whether one American's racial suffering should be valued above another's. It is a question that will only become more complicated and more urgent as our population grows ever more diverse. As we in the Judiciary Committee now know, when we prefer individuals of one race, we must by definition discriminate against individuals of another. But America's great social divide can never be crossed until we begin the work of building a bridge of racial reconciliation. By saying today, with the introduction of this act, that the Federal Government stands for the principle that racial discrimination in all its forms is wrong, we hope to take a small step forward on the path to healing the nation's racial wounds by recognizing that every American is equal before the law.

Mr. HATCH

Mr. HATCH. Mr. President, late last week the Senate Finance Committee completed work on one of the most significant and important pieces of legislation considered in the U.S. Congress in recent memory. By a vote of 18 to 2, the Committee approved its portion of the Budget Reconciliation Act of 1997, S. 947, the bill we are debating today. As a member of the Finance Committee, I can vouch for the hard work that went into the development of this historic legislation. It has not been an easy task by any stretch of the imagination. The bill is not perfect. But it is a good start. And I hope it will get even better as it moves forward in the legislative process. And, I want to take this opportunity to commend the chairman of the Finance Committee, Senator Roth, and the ranking minority member, Senator Moynihan, for their outstanding leadership in forging a consensus on what has been one of the most contentious issues presented to the committee since I have been a member. The committee was presented with budget reconciliation instructions earlier approved by both the House and Senate and tasked to provide for significant changes in federal spending and program authorizations principally in the Medicare and Medicaid programs. As my colleagues well know, these two entitlement programs are currently growing at unsustainable levels. Even the President's own handpicked members on the Medicare Board of Trustees reported as early as April 1995 that the ``Medicare program is clearly unsustainable in its present form'' and that Medicare Part A will be bankrupt in the year 2001 unless structural changes are implemented soon. The legislation currently before the Senate attempts to address the numerous and oftentimes conflicting issues associated with reducing the rate of growth in Medicare expenditures while preserving the level of services available to current and future beneficiaries. The one message that we must convey to our constituents is that we have preserved the needs of Medicare beneficiaries while addressing the fiscal imperative of bringing some discipline in Medicare spending. Both objectives are not mutually inconsistent. Not only have we restrained Medicare growth over the next five years to a point that preserves fiscal integrity for now and the future, but we have provided beneficiaries with greater choices of health care plans. ``Medicare Choice'' will now make it possible for beneficiaries to have greater options in how they want their health care provided. In fact, not only will this legislation provide more options for beneficiaries, it will offer them more information about those options. Better Information about Coverage Options: One provision of the bill requires that beneficiaries be provided with information about the extent to which they may select the provider of their choice, a concern of many elderly. The need for this provision was pointed out to me by the Utah Psychological Association. The measure was included in the 1995 Balanced Budget Act, and I am pleased that it was carried over to the bill we are considering today. Another information provision was suggested to me by Utah Governor Mike Leavitt, who correctly pointed out that states are making information on managed care available to beneficiaries of state-funded programs. Governor Leavitt suggested that the Federal government be required to coordinate the information it provides with state efforts; that amendment is included in the bill today at my request. The traditional fee for service systems, which all beneficiaries have come to know, will still be there for those who wish to choose that system of health care delivery. But we are also going to provide more managed care options such as Health Maintenance Organizations and Preferred Provider Organizations as well as Medical Savings Accounts to beneficiaries who desire to participate in those plans. No longer will America's seniors be limited to one or two choices in health care. They will now have greater choices which will lead to more competition, a greater diversity of services especially in rural areas, and increased savings to the federal government which is fundamental to the overall well-being of the Medicare program. Home Health and Skilled Nursing Facilities: I am particularly pleased with the provisions pertaining to home health care and skilled nursing facilities or SNFs. In fact, the legislation reported by the Finance Committee incorporates many of the important provisions contained in legislation I introduced, S. 913, the Home Health Care Prospective Payment Act, and S. 914, the Skilled Nursing Facility Prospective Payment Act. I have long supported efforts to enhance the quality and delivery of care provided by home health care agencies and skilled nursing facilities. These organizations perform extremely valuable services to our nation's elderly and disabled citizens. And, as our population increases in age, the role of these services in our society will become an even more critical component in the provision of health care. It was also apparent from our hearings that the costs associated with home health care and SNFs have been rising at a disproportionately higher level compared to other components of the Medicare program. Indeed, part of this increase can be attributable to the fact that most people prefer to be treated in the familiar surroundings of their home. Accordingly to the General Accounting Office, ``After relatively modest growth during the 1980's, Medicare's expenditures for SNFs and home health care have grown rapidly in the 1990's. SNF payments increased from $2.8 billion in 1989 to $11.3 billion in 1996, while home health care costs grew from $2.4 billion to $17.7 billion over the same period.'' Over that period, annual growth averaged 22 percent for SNFs and 33 percent for home health care, the fastest growing components in the Medicare program. Unquestionably, the rate of growth in home health care led to considerable discussion over the need for a new, minimal copayment for home health visits as a measure to reduce over utilization. The committee approved a capped $5.00 copayment per visit which will be billable on a monthly basis and limited at an amount equal to the annual hospital deductible under Part A. I am mindful that we do not want to impose additional costs particularly on the poor. But there was near universal agreement that some method was needed to curtail the seemingly unchecked utilization of these services. This is an issue we will have to monitor closely as the program is implemented recognizing the administrative difficulties in collecting these co-payments as well as the impact on beneficiaries. Home Health and Skilled Nursing Facilities Prospective Payment System: Perhaps the most significant reform that is included in both pieces of my legislation and which is now included in the Finance bill are the provisions for a prospective payment system for both home health and skilled nursing facilities. This provision will help create the proper and needed financial incentives for providers to behave in a more cost effective manner while protecting the quality and continuity of care for beneficiaries. We have learned a great deal about Medicare reimbursement since we passed the Prospective Payment System for hospitals in 1983. We know the value of a proper transition so providers can manage their agencies toward a permanent system. We also know that we can model a payment system that encourages providers to manage costs and utilization better. We also realize that moving to a new reimbursement system is a massive undertaking. I believe the Finance bill moves in the right direction to ensure cost-effective care for millions of beneficiaries today, and well into the next century. Rural Health Care: The issue of health care in our rural communities was also an item which received considerable attention. As we begin to provide Medicare beneficiaries with greater choice in the delivery of their health care, it is apparent the financial incentives to providers to development of these systems in rural communities simply do not exist. Accordingly, it was necessary to change the manner and level of reimbursement for managed care organizations that wish to provide services in nonurban areas. In 1983, Medicare began making payments to qualified ``risk- contract'' HMOs or similar entities that enrolled Medicare beneficiaries. The intent was to give Medicare beneficiaries the opportunity to enroll in HMOs as a more cost effective alternative to fee for service health care. In effect, Medicare makes a single monthly capitated payment for each of the organization's Medicare enrollees. This payment equals 95 percent of the estimated ``Adjusted Average Per Capita Cost [AAPCC] of providing Medicare services to a given beneficiary under a fee for service system. The committee legislation proposes to raise the Medicare payment for each year through 2002 which will have the effect of providing the necessary financial incentives for managed care organizations to develop and sell products to beneficiaries in rural communities. This will be particularly beneficial to residents of my state which has a strong managed care presence in our urban areas but, as yet, little penetration in rural locations. Debate on the AAPCC was extremely lively in Committee; it is a hard task for set payment levels at an amount that will provide incentives for managed care, but which will also encourage cost-efficiency with no diminution of services for the elderly and disabled. I want to comment on two issues associated with the AAPCC that will be before the conference committee. The first is the transition from a locally based payment rate to a rate that is decoupled from fee-for- service reimbursement. The Medicare Equity and Choice Enhancement Act authored by Senator Grassley establishes a five-year phase-in of a 50/ 50 blend of the input price-adjusted national average rate with an area-specific rate. I think this is a fair transition and one which I hope will be preserved in conference. The second issue associated with the AAPCC is removing from the calculation payments for graduate medical education and disproportionate share hospitals. That change, reflected in the Finance bill, will allow a more equitable calculation of the AAPCC, one which will help ensure that teaching hospitals receive the reimbursement they need. On the issue of reimbursement for managed care, I continue to remain disturbed about the bill's provision which, in essence, discounts by five percent payments for new beneficiaries. I fully appreciate the need to find a ``risk adjuster'' which will provide us with a better measure of the cost per beneficiary, but to me the 5 percent discount is arbitrary. It will penalize organizations that are doing exactly what we are urging them to do: enroll new beneficiaries in managed care. This is something at which I hope the conferees will take a closer look. Qualified Medicare Beneficiaries: Another payment issue, that of qualified Medicare beneficiaries (or ``QMBs'') is of great concern to me. Current law requires Medicaid to pay Medicare cost-sharing charges for individuals who are eligible for both Medicare and Medicaid assistance. These individuals are ``dual eligibles'' and QMBs who have incomes less than 100% of the federal poverty level (FPL) and meet other requirements. Medicaid frequently has lower payment rates for services than would be paid under Medicare. Medicaid program guidelines permit states the flexibility to pay either (a) the full Medicare deductible and coinsurance or (b) cost sharing only to the extent that the Medicare provider has not received the full Medicaid rate. Several federal courts, including the 2nd, 3rd, 4th and 11th Circuit Courts of Appeals, have interpreted current law as allowing providers to claim Medicare cost sharing for QMBs and dual eligibles in excess of Medicaid payment rates. Therefore, some state Medicaid programs are now reimbursing Medicare providers to the full allowable rates. With the exception of one trial court decision in California, the courts have overruled the HCFA policy that does not require the full Medicare payment. I strongly prefer the outcome of the appellate courts and oppose the particular provision of the Finance Committee version of the Reconciliation bill that acts to reverse the four Federal Courts of Appeals decisions and will allow lower reimbursement for QMBs and dual eligibles. My position is consistent with the first of the principles adopted by the Chairman in the Medicaid mark: ``Enhance the ability of the Federal and State government to meet the health care needs of vulnerable populations.'' QMBs and dual eligibles are poor, and mostly elderly, individuals that are dependent on both Medicare and Medicaid in order to receive quality health care. Dual eligibles and QMBs are the very elderly (greater than 85 years old) and the very sick. For example, about 40 percent of QMBs have a cognitive or mental impairment (including many with out difficult chronic conditions such as stroke and Alzheimer's). Minority group Medicare beneficiaries are more likely to be dual eligibles. Compared with the general Medicare population, dual eligibles are more likely to be women, living alone. The QMB/Dual Eligible population is financially dependent on Medicaid to provide the needed supplemental insurance coverage to Medicare. The bill, as reported by the Finance Committee, allows states to act in a fashion that would deny providers the full Medicare level of benefits for these particularly needy QMB and dual eligible beneficiaries, and will unintentionally fray the safety net precisely where it needs to be strengthened. For example, a recent study by the Physician Payment Review Commission reported that 43 state Medicaid programs identified serious problems in maintaining adequate levels of physician participation chiefly due to already low payment rates. In fact, the study found that, over a 15 year period, sate spending on physician services per Medicaid recipient failed to keep pace with Medicare by more than a threefold factor. The better policy is to adhere to the precedent of the great majority of courts that have considered this issue and continue to compel these payments for these beneficiaries. Frankly, it is difficult to see how the provision in the Finance bill to lower reimbursement for QMBs and dual eligibles will result in anything other than in undermining the willingness of providers to treat QMBs and dual eligibles. The Second Circuit, one of the several courts that have ruled in favor of the framework I find preferable, reviewed the relevant laws and legislative history in concluding: ``* * * Congress sought to avoid a wealth-based, two tiered system of health care for the elderly and certain disabled and indeed wanted to integrate all of those who were Medicare-eligible into the existing health care system.'' As the 11th circuit said in the Smith Case, 36 F.3d 1074: ``we reject * * * attempts to wring ambiguity from a statute where there is none.'' The bill as reported by the Finance Committee is ambiguous, but is unambiguously a poor policy and will certainly affect the care received by those many physically frail QMBs and dual eligibles negatively. I strongly prefer the House position on this particular issue because by not adopting the Senate Finance Committee policy it protects individuals whose health and income status place them in a precarious medical situation. As the Washington Post editorialized, on June 16, 1997, on the problem of the dual eligibles: ``* * * suddenly Medicare, which was set up to be a uniform, universal system for all the elderly and disabled, becomes a two-tier system, with different levels of payment and therefore, in the long run, quite different levels of care for the better and the less well-off.'' We should not act to decrease access to quality health care for poor, sick and predominantly old individuals. We should retain and enlarge, not reverse, a policy on QMB and dual eligible reimbursement that many, including four Federal appellate courts, have concluded is consistent with the letter and spirit of both Medicaid and Medicare. Chiropractic Care: Turning to another issue of great interest to me, that of chiropractic care for Medicare beneficiaries, I am hopeful that the conferees will be able to approve Representative Crane's provision, which I had hoped to offer in Committee. Chiropractic services are currently provided in the Medicare program; however, the coverage is extremely limited to treatment by means of manual manipulation of the spine. Moreover, current law requires chiropractors to obtain an x-ray before payment will be made even though Medicare will not pay chiropractors to take the x-ray. I had initially planned to offer an amendment identical to the language in the House Ways and Means Committee that would remove the requirement for x-rays as a condition of coverage and payment of chiropractic services. I would note that this provision also had the support of the Administration and was included in their budget proposal as well. Unfortunately, the Congressional Budget Office scored the provision as costing $600 million over a five-year period. And, although it was included in the Ways and Means bill as I previously mentioned, the Finance Committee spending parameters did not allow for its inclusion principally due to the cost estimate. Accordingly, I offered an amendment proposing a two-year demonstration project to study the cost effectiveness of removing the x-ray requirement as well as allowing doctors of chiropractic to order and perform x-rays in both a fee for service and managed care setting. I am grateful that Chairman Roth indicated he would conditionally accept my demonstration amendment on the basis that a final CBO would be de minimis. With that understanding, the committee unanimously approved my amendment. I was astonished to learn yesterday that, in fact, the CBO scored my amendment at $900 million--a third more than the entire provision in the House! I have asked for a complete justification of this figure, but pending that review, the Committee had no choice but to drop my amendment. I firmly believe that affording greater access to chiropractic services by beneficiaries will not only result in reduced Medicare expenditures but will also reduce the performance of needless surgery to correct back problems. I hope that as this issue is addressed in the conference committee, that the Ways and Means language will prevail, and will, therefore, bring a more pragmatic approach to the delivery of health care to our seniors. Durable Medical Equipment: On reimbursement for durable medical equipment (DME), I am happy to report that the committee agreed to include an amendment I proposed which would allow beneficiaries to buy more expensive equipment than that allowable under Medicare and pay the extra amount out-of-pocket. This is an amendment originally proposed by our former colleague, Senator Bob Dole, and I think it makes a good deal of sense. Since this provision was contained in the Balanced Budget Act of 1995, I am extremely optimistic it will become law this year. Orthotics and Prosthetics: On the topic of reimbursement for orthotics and prosthetics (O&P), I am grateful that the bill includes an annual update of at least one percent over the coming five years. O&P providers design, fit, and fabricate braces and limbs for persons with physical disabilities. As such, this small industry is distinct from DME. O&P suppliers have much less control over the costs of their program than DME suppliers, given that it is hard to imagine ``induced demand'' for O&P equipment. Consequently, I hope that any provisions undertaken to restrict the growth of DME, which I recognize is a concern, will not be attributed to O&P as well. Home Oxygen Services: One of the most contentious, and for me, most troubling, issues associated with this bill was how to set the appropriate reimbursement level for home oxygen services. None of us want to see quality diminished for this vital service. That is clear. But the Committee was presented with very compelling evidence that payment levels are too high. For example, the General Accounting Office report comparing oxygen services in the Veterans Administration to those under Medicare concluded that the Health Care Financing Administration is paying almost 40 percent too much for home oxygen. I will be the first to admit that I do not know what the exact number should be. Nor is there any statistical measure that can be reliably employed. I will say that there was virtual unanimity that the current payment levels are too high. However, given the need to ensure continuing high- quality services for beneficiaries, I am much more comfortable with the House provision. Serious questions have been raised about the severity of the Finance recommendation and the effect that it could have on small, rural providers such as many who operate in my home state of Utah. If we are to err, I would rather err on the side of quality. Fraud and abuse: I would also like to comment briefly regarding the new fraud and abuse provisions in the bill. The bill, as amended by Senator Graham, contains new, significant and, in some respects, untested anti-fraud and abuse penalties including additional Medicare exclusions and civil monetary penalty authority. I believe that we need effective fraud and abuse enforcement tools. I just want to be sure that these provisions do not have any unintended consequences or implications that would penalize innocent parties who are following the letter of the law. Many of these provisions found in the Finance bill as amended are actually based on provisions contained in the Administration's fraud and abuse legislation introduced earlier this year, and on which no hearings were held in the Senate. As a general rule, we in the Congress should not act without the full and open benefit of hearings so that all parties have an opportunity to comment, and so that legislation can be modified as appropriate. While I am not going to oppose these provisions, I do have reservations about some of them. And, I am encouraged to learn that the House intends to address some of these in conference. The expanded authority with respect to the imposition of civil monetary penalties was particularly troublesome. The two provisions at issue included (1) the addition of a new civil monetary penalty for cases in which a person contracts with an excluded provider for the provision of health care items or services, where that person knows or should know that the provider has been excluded from participation in a federal health care program; and, (2) the addition of a new civil monetary penalty for cases in which a person provides a service ordered or prescribed by an excluded provider, where that person knows or should know that the provider has been excluded from participation in a federal health care program. While, certainly, no provider should contract with or furnish services ordered or prescribed by another provider whom they know to be excluded, the provisions also would subject providers to civil monetary penalties where they ``should know'' that another provider is excluded. This ``should know'' standard has the potential to create anxiety among providers. What would rise to the level that a provider ``should know?'' In my view, these provisions target the wrong providers--they punish the provider who is serving the patient based on a legitimate and legal prescription, rather than the excluded provider who is at fault. For example, retail pharmacies fill thousands of prescriptions per month based upon prescriptions from numerous prescribers. It is not hard to imagine a situation in which a pharmacy would be unwilling to fill an emergency prescription for a sick child late at night in a rural community. The pharmacist might not have enough information about the prescribing doctor to risk a $10,000 fine. I think it is extremely important to clarify our expectations on this issue and others within the CMP section. Accordingly, I am pleased that Chairman Roth agreed to the inclusion of report language that, in effect, clarifies that the committee ``does not intend these two new civil monetary penalties--for arranging or contracting with an excluded provider, or for providing items or services ordered or prescribed by an excluded provider--to impose an affirmative burden on providers to find out if another provider has been excluded from a federal health care program. Rather, only in instances where a provider acts in deliberate or reckless disregard of another provider's excluded status may the government seek to impose civil monetary penalties under these provisions.'' Community Health Centers: Before turning to the final issue I wish to discuss, I just wanted to take a moment to mention my appreciation that Chairman Roth agreed to continue the current reimbursement system for Federally-Qualified Health Centers. FQHCs are the best way I know to deliver high-quality, low-cost care to underserved areas. They are increasingly being squeezed in today's managed care environment, in large part because they are providers of last resort and have no insurers on which to shift costs if they are underpaid. Studies have indicated that Community Health Centers, for example, are only receiving about half of their costs from managed care entities. Faced with that situations, CHCs have little recourse, and can only hope that their appropriated funds make up the difference. This is a situation that I intend to follow closely. No one likes to argue for cost-based reimbursement; that is not a particularly effective payment mechanism. But, to require CHCs and Rural Health Clinics (RHCs) to provide services at less than cost is also inefficient, and stifles the development of a cheaper alternative form of health care delivery which is proven to be high quality. There is no easy answer here, but let us not undercut these great little providers while we seek a solution. Children's Health Initiative: Finally, I want to close by commenting on what may be the most important provision of this bill: the children's health insurance initiatives. Let me just say that a lot of progress has been made on the issue of children's health in the 105th Congress. I believe that, when the history of this Congress is written, two of the most important chapters will address the balanced budget agreement and the children's health initiative. It seems only fitting that this budget reconciliation bill that brings the budget into balance includes the key funding and program provisions on children's health insurance. Our kids will have a healthier future in both of these important respects. Let us be clear why we take these major actions to include $24 billion in new spending over the next 5 years to pay for children's health insurance. An estimated 10 million American children are without health insurance. This amounts to about 25 percent of the nation's uninsured individuals. In my state of Utah, about 10 percent of our children lack health insurance. This amounts to about 55,0000 uninsured children in my state. Because the Medicaid program is targeted to provide health care to poorest of the poor, it is important to understand that many of the uninsured children in our nation come from working families with incomes just above the poverty level. In fact, about 88 percent of these uninsured children come from families where at least one parent works. What I have been trying to do over the last few months is to help these children from America's working families. That's why I teamed up with Senator Ted Kennedy to introduce the Children's Health Insurance and Lower Deficit Act (CHILD). In essence, this twin legislation, S. 525 and S. 526, calls for an increase in the federal tax on tobacco products in order to finance a voluntary program of state block grants for children's health insurance and to provide for deficit reduction. Because of our well-recognized divergent philosophies, Senator Kennedy and I had hoped that, by drafting compromise legislation, we would be able to attract support for our legislation across the political spectrum. By and large, we have been successful with working with advocacy groups like the Children's Defense Fund and the Child Welfare League to raise awareness of this issue. And, I believe we should give credit to these organizations--as well as to health care providers such as children's hospitals and American Academy of Pediatrics--for their tireless and long-standing efforts to highlight the health care needs of children in our country. And, although I do not see eye to eye with Senator Kennedy on all, or even most, matters, I must commend my friend from Massachusetts for all of his work and vision on this important issue. There is no more tenacious advocate in the United States Senate for a cause he feels strongly about than Senator Kennedy. The Senator from Massachusetts and I worked hard to arrive at a compromise that would be attractive for many. As an ardent anti-tax, anti-big government conservative, the critical tasks were to devise a program that did not centralize decisionmaking in Washington and that did not have the potential of growing out of control. It was also essential that it be paid for. While I am generally loathe to increase taxes, the adverse health effects of tobacco and their concomitant costs to society, not to mention the costs to public programs, made raising the tobacco tax a ``two-fer.'' Tobacco is a killer. I don't know of any other product that, when used as directed, will kill you. Tobacco accounts for an estimated 419,000 American deaths annually. In 1993, cigarettes killed more of our fellow citizens than AIDS, alcohol, car accidents, fire, cocaine, heroin, murders, and suicides combined. About 50 million Americans smoke. About 1 in 5 deaths are smoking related. 4 of 5 smokers begin by age 18. About half by age 14. Each day 3000 young Americans begin to smoke. Experts believe that tobacco costs society $100 billion annually, including $50 billion in direct health care costs. Of this $50 billion, there are $10 billion in annual costs to Medicare; $5 billion in Medicaid; $4.75 billion to other federal programs; and, $17 billion in increased insurance premiums. Not only does tobacco kill, it also results in a tremendous amount of unnecessary health care costs. When all is said and done, use of tobacco products comprises the number one preventable public health threat. A strong argument can be made that it is this unique public health threat posed by tobacco that forms the basis of the justification for raising the tobacco tax. The American public overwhelmingly approves of the idea of financing children's health programs through an increased tobacco tax. An April 26, Wall Street Journal/NBC poll asked the public its opinion of financing state block grants for children's health care through an increase in the tobacco tax. 72 percent of Americans agreed with this proposal. And this support cuts across almost every demographic category. For example, more than 50 percent of smokers agree with the idea of increasing tobacco taxes to pay for children's health insurance. So the case against tobacco and for a tobacco users tax increase is strong. Overall, I am pleased with the children's health provisions of the reconciliation bill as reported by the Finance Committee. Those involved in the efforts over the last few months to increase materially the funding for children's health insurance should take credit for the addition of $24 billion in new funding over the next five years. Few could have thought that we could have come so far so fast in this effort. I know that there are some that think we have, in fact, gone too far, too fast. But I think that these critics who deny that we can utilize this average $4.8 billion in funding wisely and prudently are just wrong. If all of the states, for example, exercised the Medicaid option of the block grant we know, applying the $860 per person average federal contribution for a Medicaid covered child, about 5.58 million children could be covered. This is barely half of our nation's uninsured children. There are a number of ways to look at such a statistic. But in this case, I think the glass is clearly half full. If we take care of more than half of the uninsured children in our nation we will have achieved a major accomplishment. It is also possible that if states chose to exercise the block grant option, we will be able to take care of more kids than possible under Medicaid. At this point, no one can know with certainty how many states will use Medicaid and how many will use the block grants. We do not know what eligibility criteria and financial requirements that states implementing the block grants will chose to adopt. All of these factors will affect how many children will be covered. But before we get too caught up in focusing on the number of children covered, we must not lose sight that it is also important to see what benefits that covered children are going to receive. The Finance Committee heard expert opinion from the Administrator of the Health Care Financing Administration, Dr. Bruce Vladeck, that it costs about $1000 per child for a quality children's health insurance plan. So even with the increased flexibility of the block grants, do not be misled to believe that $4.8 billion per year is somehow too much money. Even when we add in the required state matching rate and co-insurance and co-payment requirements, it is hard to project that even two-thirds of the nation's uninsured children will be taken care of by this $4.8 billion a year. Also, inflation in the health care sector will eat into the purchasing power of the average $4.8 billion per year allocation. As I argued last week in the Finance Committee, I would have preferred to get the entire $20 bill in children's health insurance funding over the $16 billion already set aside in the budget resolution. I pointed out that, taken together, these funds could have taken care of the projected 7 million of the nation's uninsured that live in families with incomes under 240 percent of the federal poverty level. This would represent about 70 percent of the uninsured children in this country. While I was not able to persuade the full Finance Committee to allocate the full Hatch-Kennedy legislation on top of the initial $16 billion set aside, I am pleased that the Committee did agree to the essence of the Hatch-Kennedy CHILD legislation by imposing an increased tobacco tax to finance children's health block grants to states. Frankly, I think that one of the great watershed events of the return of Republican majorities in both chambers of the Congress is that the days of tax and spend are over in favor of a more fiscally responsible climate in which new taxes are seldom proposed and, if proposed, scrutinized with the highest degree of skepticism. This is tough medicine but it is what we have to do to set our fiscal house back in order. We need to let working Americans keep more of their hard-earned money by looking for ways to tax and spend less of their income. So, would I have preferred more money for children's health in the Finance Committee bill? Yes. But, I would much more rather be in the position of having my colleagues on the Committee nearly unanimously support a tobacco tax that will generate, in part, an additional $8 billion over five years for children's health that I would like to be in an uphill, all but hopeless, battle to win a major floor amendment on a fast moving reconciliation bill. To me, the $8 billion in hand was more certain than the $20 billion in the bush--so to speak. Moreover, I believe that the positive, bipartisan support for the Finance Committee provisions bodes well for both the success for the provisions and the program itself. The last thing I want is to make children the subject of an acrimonious debate over concepts and details. This, of course, assumes that the Senate funding level and tobacco tax structure prevails in conference. I have told my colleagues on the Finance Committee, some of whom--it is a matter of public record--are very much opposed to this source of tax revenue and this funding level, that if the Senate tobacco tax and children's health funding levels are changed in conference then I will pursue, in every way that I know how, more funding. My goal is to get this done, not just put out a press release about it. Let me also say that it will be my firm position that any funds allocated toward children's health from the so-called ``global tobacco settlement'' should be considered as distinct from, and additive to, the funds earmarked for children's health in the Senate reconciliation bill. One of the major reasons that I decided to compromise on the amount of funds that I would seek from the Finance Committee in the reconciliation process is because I was aware of the possibility that additional funding may be available from the global settlement. But let's not kid ourselves here. The global settlement faces a tough road as it wends its way through the Administration, Congress, the Courts, and--perhaps most importantly--the court of American public opinion. Suffice it to say that I will strenuously resist any effort to reduce in conference or subsequently any of the children's health funding already secured. But, I also believe that my colleagues in both the House and Senate will see the merit in the provisions adopted by the Finance Committee. The need is compelling; the compromise program is reasonable; and it is paid for by taxing a commodity that not a single person can defend as worthwhile. While I did not get everything that I wanted in this legislation, it is seldom the case that any one legislator gets all that he or she wants. Since this is not a monarchy but a democracy, compromise and consensus building is what distinguishes our form of government. Given the original philosophical lines of scrimmage, I think the children's health provisions represent a good compromise. The bottom line is that we can all take pride in this provision. The advocates for children and public health should take credit for successfully raising the concern about the problem of uninsured American children to the level of concern that a major funding commitment--$24 billion over 5 years--was included in an otherwise very frugal budget balancing bill. That's a big achievement that will benefit literally millions of American children into the next century. The governors should take credit for the fact that the final package approved by the Finance Committee gives the states a great deal of flexibility in devising programs and eligibility criteria that will work best in their respective states. I am confident that the governors will use their creativity to establish programs that deliver high quality health care to the children of working families. Let me hasten to add that I recognize there are some provisions in the bill of which the children's advocates and the governors do not approve. I understand those concerns. We all want to provide the best possible health care to our kids. But we also want the money to go as far as possible. It is a balance, and we have endeavored to set the scales right. But politics is the art of the possible. Only because of the debate that we have engaged in over these last few months--a debate comprised of many perspectives and many heated moments--it will now be possible to help millions of American children to reach adulthood in good health. I see this as both good public health and evidence that Congress is capable of working constructively to address the nation's business. conclusion In closing, Mr. President, I count myself among those who have worked hard for a balanced budget. As much as each of us wished otherwise, balancing the budget is not some idle task. Indeed, it is the most difficult of endeavors. We are faced with hard choices, choices that have serious consequences for citizens everyday. Again, if I were the only senator writing this bill, I would have written some provisions differently. I would have more tax relief, for example. I would have spread spending reductions more evenly over the five-year period. And, if I can't have everything I want, President Clinton cannot have everything he wants. But, on balance, I think that this bill lives up to its goals. Senators on both sides of the aisle, but especially the Senator from New Mexico, deserve to be commended for developing this legislation. When we pass this bill, Congress will have passed another balanced budget bill. We will have preserved Medicare for the foreseeable future, and we have made a considerable downpayment on our children's health. And that is the most important legacy we can leave to our country's future. I urge President Clinton to give this bill his unequivocal support. medicare coverage of oral anti-cancer drugs

Mr. HATCH

Mr. HATCH. Mr. President, over the past several months, I have been developing legislation to dramatically reform the way Medicare pays for home health services. This effort builds on my work in the Finance Committee during 1995 where I strove to see a prospective payment system for home health services included in the Balanced Budget Act agreement. The culmination of this year's efforts is a bill I introduced on June 16, the Home Health Care Prospective Payment Act of 1997 (S. 913). The Home Health Care Prospective Payment Act is intended to achieve three primary goals: First, the bill will create incentives for providers to behave in a more cost effective manner. Second, it will help assure that the federal government achieves the necessary savings it seeks in order to ensure the solvency of the Medicare program well into the next century. And third, perhaps most importantly, my bill accomplishes these first two goals while protecting the quality and continuity of home health care services for beneficiaries. As my colleagues are aware, I have been a strong supporter of home health care services ever since I came to this body. I have applauded changes that have made it easier to treat Medicare patients in the most cost-effective setting. The changes we have made to the system have benefited many patients who would otherwise have not received care. In other cases, these individuals would have had to wait until their health deteriorated to the point of having to be admitted to a hospital. This outcome was neither cost effective nor good health care policy. We have learned a great deal about Medicare reimbursement since we passed the prospective payment system [PPS] for hospitals in 1983. We now know the value of a proper transition period so that providers will be able to manage their operations toward a permanent system. We also know that we can model a payment system that encourages providers to manage costs and utilization better. We realize that moving to a new reimbursement system is a massive undertaking. The amount of data, time, and expense is enormous. It is especially important not to unnecessarily burden health care providers, Government, or patients with administrative requests. My legislation proposes to begin a transition to a home health care PPS immediately, rather than waiting until fiscal year 2000. Instead of relying on cost limits, we can begin using predetermined rates in an initial PPS system during fiscal years 1998 and 1999. The principle behind prospective payment is to shift the risk from the Government to providers. This is done by rewarding providers for keeping their costs below the rates--or having them absorb the loss if their costs are over the rates. Therefore, I propose we incorporate a limited shared savings plan during the initial 2 years of the PPS to encourage more cost effective behavior by health care providers. In addition, there needs to be greater sensitivity to the data demands and consequences in our proposal. For example, there needs to be some discretion for the Secretary of the Department of Health and Human Services to designate a different base year for extraordinary situations that may arise in a particular case. There are other proposals that may be considered that might be good ideas in and of themselves. Some proposals, however, may impose data, time, or cost demands that are unnecessarily burdensome to providers, patients, or the Government--but may not be necessary for PPS implementation. The changes I am proposing in my legislation are not new to the Senate, but merely reflect the information and legislative history we have gained through our consideration of Medicare payment reforms. My legislation will make home health care reform consistent with that history. Mr. President, for the benefit of my colleagues I ask unanimous consent that a section-by-section analysis of S. 913 be printed in the Record.

Mr. HATCH

Mr. HATCH. Mr. President, on June 16, 1997, I introduced legislation, S. 914, proposing to revise the present system in which the Medicare Program pays for services provided by skilled nursing facilities [SNF's]. This legislation builds on my work in the Finance Committee in 1995 when the committee included a proposal I authored to implement a prospective payment system for nursing home payments. As currently structured under Medicare, seniors receive up to 100 days of skilled nursing facility services following a 3-day hospitalization stay. Currently, those services are reimbursed on a cost-plus basis. As Medicare has evolved, however, so have systems of cost-plus reimbursement. For many years, I have worked with my colleagues in the Senate to provide seniors with the services they need in a skilled nursing facility setting. I have worked to modify the Medicare reimbursement methodology in order to provide economic incentives to SNF providers to provide the highest quality of care at a reasonable and affordable price to the Medicare Program. My legislation will accomplish that goal. Congress initially began requiring prospective payments for skilled nursing facilities in the early 1980's. However, the Health Care Financing Administration [HCFA] has not been able to identify an appropriate payment methodology, and how best to define the services provided to seniors in a comprehensive way. Nevertheless, we have come a long way since the mid 1980's in understanding the proper structure of prospective payment systems. We are now on the verge of fundamentally revamping the current cost-plus payment system for these important services. Let me briefly describe the key parts of my legislation. First, during fiscal year 1998, the Health Care Financing Administration will begin phase one of a per diem, prospective payment system [PPS] for skilled nursing facilities. Such payment would be based on historical data regarding a particular facility's costs and services provided. While it is expected that the new rate is an all- inclusive rate, encompassing routine costs, ancillary services, and capital-related expenses, during the first year, HCFA is likely to adjust both the inclusion of ancillary services and capital costs only when they have sufficient data to adequately measure and quantify the level of those services. It would be unfortunate for HCFA to put into effect a system that did not adequately account for the medical services offered to residents within a skilled nursing home. I urge HCFA to implement and include all ancillaries only when the data and the information are adequate. Second, during the 4 four years the prospective payment system will evolve into a full PPS system where the services for an individual in a skilled nursing facility bed will be adjusted for their medical and nursing needs. This legislation calls on HCFA to develop a case-mix methodology that adequately reflects the medical needs of each patient. I have heard from many experts that the current case mix methodology does not adequately reflect certain medical needs of many skilled nursing home patients. It is my intention that the case-mix methodology be current and reflect all services provided. And third, once this system is in place, it will provide the right kind of economic incentives so that providers will seek all services medically necessary. The Medicare Program will not be in a situation of overpaying for such services; it will provide a competitive balance so that all skilled nursing services, regardless of whether they are hospital SNF beds or freestanding SNF beds, will have comparable incentives to provide high quality services to beneficiaries. It is extremely important that we change the existing and limited incentives in the Medicare system so that providers will offer services in the most cost-effective way. Hospitals are already under a PPS system; physicians are reimbursed on a predetermined rate as well. This approach is now the next important step in our continuing effort to ensure appropriate fiscal responsibility by the Federal Government while also ensuring that seniors have access to the important health benefits offered under the Medicare Program. Mr. President, for the benefit of my colleagues, I have prepared a section-by-section summary of my bill and I ask unanimous consent that it be printed in the Record.

Mr. HATCH

Mr. HATCH. Mr. President, last year, I stated on the Senate floor that ``our country stands at a crossroads on the path it travels in relations among the different races and ethnic groups that make up the American people. Down one path is the way of mutual understanding and goodwill; the way of equal opportunity for individuals; the way of seriously and persistently addressing our various social problems as America's problems. * * * Down the other path is the way of mutual suspicion, fear, ill will, and indifference; the way of group rights and group preferences.'' I am proud to stand today with my colleagues in the House and the Senate, and others who have worked so hard for the cause of equal opportunity, to announce the introduction of the Civil Rights Act of 1997. The act represents our best efforts to recommit the Nation to the ideal of equal opportunity for every American--to emphasize that we must resist the temptation to define the Nation's problems in narrow racial terms, and rather must roll up our sleeves and begin the hard work of dealing with our problems as Americans, and as fellow human beings. Of course, our critics will imply that those of us who today reject divisive racial preferences and distinctions do so because we underestimate the social, economic, and discriminatory obstacles some Americans face. President Clinton, for example, told his audience in San Diego last week that ``[t]he vast majority of [Californians who supported that state's Proposition 209] did it with a conviction that discrimination and isolation are no longer barriers to achievement.'' But that is just plain wrong. To the contrary, last week in the Senate Judiciary Committee we heard from a panel of ordinary citizens who movingly told us of their experiences with discrimination in America. Among them was a Chinese- American mother from San Francisco, Charlene Loen, who told us how her young son Patrick was denied admission to an elite public magnet school, Lowell High School, because he is Chinese. The school district's efforts to ensure diversity among its students led it to employ a system of racial preference that had the effect of capping Chinese enrollment in many of its schools, forcing Chinese children to score much higher on entrance exams than children of other races. At virtually every public school Ms. Loen approached, she was first asked whether Patrick was Chinese, and when learning that he was, would inform Ms. Loen that Patrick need not apply. The Chinese quota was in effect full. Ladies and gentlemen, that is not the promise of America. There should be no question that discrimination indeed continues to deny opportunities to too many Americans. At the Judiciary Committee's recent hearing we heard from black Americans, white Americans, Asian- Americans, and even a victim of an outrageous hate crime. But the question that we all must answer is whether one American's racial suffering should be valued above another's. It is a question that will only become more complicated and more urgent as our population grows ever more diverse. As we in the Judiciary Committee now know, when we prefer individuals of one race, we must by definition discriminate against individuals of another. But America's great social divide can never be crossed until we begin the work of building a bridge of racial reconciliation. By saying today, with the introduction of this act, that the Federal Government stands for the principle that racial discrimination in all its forms is wrong, we hope to take a small step forward on the path to healing the Nation's racial wounds by recognizing that every American is equal before the law.

Mr. HATCH

Mr. HATCH. Mr. President, last year, I stated on the Senate floor that ``our country stands at a crossroads on the path it travels in relations among the different races and ethnic groups that make up the American people. Down one path is the way of mutual understanding and goodwill; the way of equal opportunity for individuals; the way of seriously and persistently addressing our various social problems as America's problems. * * * Down the other path is the way of mutual suspicion, fear, ill will, and indifference; the way of group rights and group preferences.'' I am proud to stand today with my colleagues in the House and the Senate, and others who have worked so hard for the cause of equal opportunity, to announce the introduction of the Civil Rights Act of 1997. The act represents our best efforts to recommit the Nation to the ideal of equal opportunity for every American--to emphasize that we must resist the temptation to define the Nation's problems in narrow racial terms, and rather must roll up our sleeves and begin the hard work of dealing with our problems as Americans, and as fellow human beings. Of course, our critics will imply that those of us who today reject divisive racial preferences and distinctions do so because we underestimate the social, economic, and discriminatory obstacles some Americans face. President Clinton, for example, told his audience in San Diego last week that ``[t]he vast majority of [Californians who supported that state's Proposition 209] did it with a conviction that discrimination and isolation are no longer barriers to achievement.'' But that is just plain wrong. To the contrary, last week in the Senate Judiciary Committee we heard from a panel of ordinary citizens who movingly told us of their experiences with discrimination in America. Among them was a Chinese- American mother from San Francisco, Charlene Loen, who told us how her young son Patrick was denied admission to an elite public magnet school, Lowell High School, because he is Chinese. The school district's efforts to ensure diversity among its students led it to employ a system of racial preference that had the effect of capping Chinese enrollment in many of its schools, forcing Chinese children to score much higher on entrance exams than children of other races. At virtually every public school Ms. Loen approached, she was first asked whether Patrick was Chinese, and when learning that he was, would inform Ms. Loen that Patrick need not apply. The Chinese quota was in effect full. Ladies and gentlemen, that is not the promise of America. There should be no question that discrimination indeed continues to deny opportunities to too many Americans. At the Judiciary Committee's recent hearing we heard from black Americans, white Americans, Asian- Americans, and even a victim of an outrageous hate crime. But the question that we all must answer is whether one American's racial suffering should be valued above another's. It is a question that will only become more complicated and more urgent as our population grows ever more diverse. As we in the Judiciary Committee now know, when we prefer individuals of one race, we must by definition discriminate against individuals of another. But America's great social divide can never be crossed until we begin the work of building a bridge of racial reconciliation. By saying today, with the introduction of this act, that the Federal Government stands for the principle that racial discrimination in all its forms is wrong, we hope to take a small step forward on the path to healing the Nation's racial wounds by recognizing that every American is equal before the law.

Mr. HATCH

Mr. HATCH. Mr. President, I rise today to recognize the Utah Jazz, who just completed their most successful season in franchise history. After clinching the Western Conference Championship with a last-second, heart-stopping shot at the buzzer, they competed for the NBA title against the talented Chicago Bulls with grit and sheer determination. Throughout this season, our Utah Jazz have displayed tremendous skill, determination, strength, and character to forge ahead and accomplish what very few thought they could do. This team captured the hearts of basketball fans from coast to coast with their hard work, down-to-earth personalities, and belief in themselves. The Utah Jazz story has been filled with many years of strength building and even some challenges. In 1979, a struggling NBA basketball franchise pulled up its stakes and moved from New Orleans to what is the smallest market in the National Basketball Association, Salt Lake City, UT. The Jazz have built their program slowly but surely thanks to the big shoulders of some very good people. Jazz owner Larry H. Miller had the determination and the vision to know what it could mean for Utah to have its own NBA basketball team. Larry is more than an owner. His players are his family. His love and enthusiasm for his Utah Jazz team is infectious. Utah has been greatly rewarded through Larry's leadership and commitment. Former coach and current team president, Frank Laydenn has been the Utah Jazz' all-time best cheerleader. Frank has always believed in his team. He has won over many fans through his enthusiasm, humor, and love for the game. Coach Jerry Sloan is an example of leadership and fortitude. His motto to ``never give up,'' is evident in the guts and determination his players show on the basketball court. Jerry not only teaches his players good basketball skills, he also builds character. He has instilled his own hardwork ethic into every aspect of the Utah Jazz. John Stockton, the all-time NBA assist and steals leader, has displayed time and time again courage under pressure, and an absolute belief that ``we could win.'' The success he has enjoyed has not detracted from his thoughtful, unassuming manner. He is indeed a worthy role model for many young people today. And who else has displayed more utter conviction than league MVP, Karl Malone. Karl has provided the Utah Jazz with leadership and valor. Anyone who has followed the Utah Jazz knows how valuable Karl is to the team's overall scoring and rebounding capabilities. Aside from his on- court presence, Karl has been an outstanding ambassador for the NBA. His reputation of honesty and hard work has made him one of the greatest role models in professional sports. Not only am I proud of the Utah Jazz for winning the Western Conference Championship, I am even more proud of the high caliber of individuals that make up the Utah Jazz. Our team is willing to work hard, to believe in themselves, to reflect the values of the community in which they play, and to never give up. I am proud of the way they represent our State and its fans. I am sure that all Utahns would be happy to join with me in saying a big thank you to all of the players on the Jazz, as well as the coaches and management staff for all you have done for Utah--both on and off the court. The Utah Jazz united the people of our great State in a way that has not been equaled since Brigham Young led the covered wagons into the Salt Lake Valley. Citizens from all over our State, and from all walks of life, have united together behind one single entity--the Utah Jazz. This is an accomplishment all its own. The enthusiasm Utahns felt for their team was electric and awe-inspiring. Everyone who has ever felt like an underdog has embraced this team and gloried in its success. Mr. President, although we didn't bring home the ultimate trophy, our Utah Jazz gave us a season to remember. This team has done us all proud, and we are proud of them. So, here's thanks and best wishes to Karl, and John, Jeff, Greg, Bryon, Shandon, Howard, Greg, Antoine, Adams, Chris, Stephen, and Coach Sloan and his staff. And, as a word of warning to all the teams in the NBA--David slew plenty of Goliaths this year; watch out, we'll be back next year with a hand full of stones. Go, Jazz!

Mr. HATCH

Mr. HATCH. Mr. President on behalf of myself and Senators Baucus, Mack, and D'Amato, I rise today to introduce the Real Estate Investment Trust Tax Simplification Act of 1997. This legislation would simplify and reform the tax law concerning Real Estate Investment Trusts [REITs]. Similar legislation has been introduced in the House by Representative E. Clay Shaw, Jr. along with many of our House colleagues. REIT's were designed to allow small investors to invest in large real estate projects that they otherwise could not afford, including apartment buildings, office buildings, shopping centers, malls, warehouses, etc. Real Estate Investment Trusts have become a very popular form of investment as indicated by the fact that the market capitalization in the whole industry has risen from $9 billion in 1991 to over $100 billion today. Mr. President, if a REIT properly follows all of the rules, it is not normally taxed at the entity level, but passes through most items of income to the shareholders to report on their own individual tax returns. However, there are many minefields for the unwary that can inadvertently penalize investors and even the general public in some circumstances. This bill is designed to alleviate these complexities and uncertainties. Let me share with my colleagues an example of the difficulties facing small investors. Under the current rules, in order to gain the benefits of REIT taxation, the investment has to be passive in nature. Hence, the normal procedure is for the REIT to buy the underlying property and lease it out to tenants. However, the REIT must be careful not to provide directly to the tenants any services that are not customary in the real estate business. If this rule is violated, severe consequences can follow. For example, under a literal interpretation of the law, if a REIT that operates a retail mall provides wheelchairs to the customers of the retail tenants, or even assists the tenant in moving into its space, the entity's very status as a REIT could be placed in jeopardy. This is ridiculous and needs to be changed. Furthermore, current law imposes a tax on a REIT that retains capital gains and imposes a second level of tax on the REIT shareholders when they later receive the capital gain distribution. We need to make the changes necessary to help unsuspecting investors to avoid double taxation. This bill would adopt the corresponding mutual fund rules governing taxation of retained capital gains by passing through a credit to shareholders capital gains taxes paid at the corporate level. The bill would also conform a REIT's 95-percent annual distribution requirement to a mutual fund's 90-percent requirement. Mr. President, this bill also relaxes some of the current law's onerous penalties for failing to perform some recordkeeping requirements. Currently, a REIT could lose its favored tax status simply by failing to send out or receive back shareholder demand letters for the purpose of verifying the fact that no five or fewer parties own controlling interest in the REIT. So, even though the REIT in fact meets this test, Mr. President, simply by failing to have on file sufficient shareholder letters substantiating this fact, all of the REIT shareholders could face the extremely harsh penalty of REIT disqualification and double taxation. Rather than penalizing the REIT so severely for this oversight, Mr. President, this bill would impose a $25,000 penalty for failing to comply with this requirement, if the failure is inadvertent in nature. The penalty would rise to $50,000 in the case of willful noncompliance. I believe my colleagues would agree that this approach makes much more sense than the current rules. It serves as an adequate incentive to keep the appropriate records without causing the unsuspecting, innocent investors severe and unnecessary tax penalties. Mr. President, this bill also addresses other problems that are detailed in the summary of the bill that I ask unanimous consent to be included in the Record after my remarks. I do not believe this bill is controversial. And, according to the Joint Committee on Taxation, it will have a negligible effect on revenues. It is also important to note that this bill is endorsed by the National Association of Real Estate Investment Trusts, which represents a high percentage of the REIT industry. Whenever we can do things to simplify the Tax Code without causing substantial revenue loss or negative policy consequences we should do it. Mr. President, this is an opportunity for us to do just that in the area of real estate investment trusts. I urge my colleagues on both sides of the aisle to join me in reforming and simplifying the tax law regarding this very difficult and complex area of the law. Mr. President, I ask unanimous consent that the text of the bill and a detailed summary of its provisions be printed in the Record.

Mr. HATCH. Mr. President, I rise, along with Senator Bennett, to introduce the Dutch John Privatization Act. Dutch John, a city in Daggett County, UT, was established in 1958 by the Bureau of Reclamation to provide a community for the construction and operation of the Flaming Gorge Dam on the Green River. The dam was completed in 1964. This bill will remove the 2,400 acre township from Federal ownership by allowing for a buy-out of homes by existing lessees and permittees at fair market value and for a transition to local government ownership over 15 years. This legislation is the result of years of discussion among local, State, and Federal officials, including the Bureau of Reclamation, U.S. Forest Service, and Daggett County. During the construction of Flaming Gorge Dam, the population of Dutch John reached more than 2,000 people. Today this remote town has approximately 175 persons. As small as it is, the Federal Government still pays about $1 million each year to run the city. As the landlord for Dutch John, the Federal Government must provide the water infrastructure, the sewer system, city roads, and various other public goods and services. Privatizing Dutch John would release the Federal Government from the burden of the operation and maintenance of this town. The current mandate and budget constraints of the Bureau of Reclamation and the U.S. Forest Service act as disincentives for the Federal Government to invest in Dutch John. This legislation will allow Federal agencies to retain control and ownership of facilities they have identified as needed for continued Government operation. Homes and properties not retained by the Federal Government will be sold at fair market value to current renters. Holders of federally issued permits and leases would have the right to purchase their underlying leased or permitted land at fair market value. All other properties will be transferred to Daggett County, and the revenues from these sales would be used for costs related to Dutch John. Under this bill, Daggett County will receive a $300,000 annual grant for the next 15 years as it takes over responsibility for the town's governance and infrastructure. During this transition period, Daggett County would be able to create a local tax base to fund future maintenance, sanitary, and public safety services. Currently, an environmental assessment is underway that will analyze the need for additional commercial recreation services for national recreation area and Ashley National Forest visitors. We will certainly review these recommendations carefully. Nevertheless, this legislation reflects the work of many individuals who have worked hard to create a viable plan for the future of Dutch John and that will allow residents to become self-governed. Self- governance, after all, is the cornerstone of our federal system, and Dutch John has been, for all intents and purposes, a Federal colony. We urge our colleagues to join us in supporting independence for Dutch John.

Mr. HATCH

Mr. HATCH. Mr. President, I rise, along with Senator Bennett, to introduce the Dutch John Privatization Act. Dutch John, a city in Daggett County, UT, was established in 1958 by the Bureau of Reclamation to provide a community for the construction and operation of the Flaming Gorge Dam on the Green River. The dam was completed in 1964. This bill will remove the 2,400 acre township from Federal ownership by allowing for a buy-out of homes by existing lessees and permittees at fair market value and for a transition to local government ownership over 15 years. This legislation is the result of years of discussion among local, State, and Federal officials, including the Bureau of Reclamation, U.S. Forest Service, and Daggett County. During the construction of Flaming Gorge Dam, the population of Dutch John reached more than 2,000 people. Today this remote town has approximately 175 persons. As small as it is, the Federal Government still pays about $1 million each year to run the city. As the landlord for Dutch John, the Federal Government must provide the water infrastructure, the sewer system, city roads, and various other public goods and services. Privatizing Dutch John would release the Federal Government from the burden of the operation and maintenance of this town. The current mandate and budget constraints of the Bureau of Reclamation and the U.S. Forest Service act as disincentives for the Federal Government to invest in Dutch John. This legislation will allow Federal agencies to retain control and ownership of facilities they have identified as needed for continued Government operation. Homes and properties not retained by the Federal Government will be sold at fair market value to current renters. Holders of federally issued permits and leases would have the right to purchase their underlying leased or permitted land at fair market value. All other properties will be transferred to Daggett County, and the revenues from these sales would be used for costs related to Dutch John. Under this bill, Daggett County will receive a $300,000 annual grant for the next 15 years as it takes over responsibility for the town's governance and infrastructure. During this transition period, Daggett County would be able to create a local tax base to fund future maintenance, sanitary, and public safety services. Currently, an environmental assessment is underway that will analyze the need for additional commercial recreation services for national recreation area and Ashley National Forest visitors. We will certainly review these recommendations carefully. Nevertheless, this legislation reflects the work of many individuals who have worked hard to create a viable plan for the future of Dutch John and that will allow residents to become self-governed. Self- governance, after all, is the cornerstone of our federal system, and Dutch John has been, for all intents and purposes, a Federal colony. We urge our colleagues to join us in supporting independence for Dutch John.

Mr. HATCH

Mr. HATCH. Mr. President on behalf of myself and Senators Baucus, Mack, and D'Amato, I rise today to introduce the Real Estate Investment Trust Tax Simplification Act of 1997. This legislation would simplify and reform the tax law concerning Real Estate Investment Trusts [REITs]. Similar legislation has been introduced in the House by Representative E. Clay Shaw, Jr. along with many of our House colleagues. REIT's were designed to allow small investors to invest in large real estate projects that they otherwise could not afford, including apartment buildings, office buildings, shopping centers, malls, warehouses, etc. Real Estate Investment Trusts have become a very popular form of investment as indicated by the fact that the market capitalization in the whole industry has risen from $9 billion in 1991 to over $100 billion today. Mr. President, if a REIT properly follows all of the rules, it is not normally taxed at the entity level, but passes through most items of income to the shareholders to report on their own individual tax returns. However, there are many minefields for the unwary that can inadvertently penalize investors and even the general public in some circumstances. This bill is designed to alleviate these complexities and uncertainties. Let me share with my colleagues an example of the difficulties facing small investors. Under the current rules, in order to gain the benefits of REIT taxation, the investment has to be passive in nature. Hence, the normal procedure is for the REIT to buy the underlying property and lease it out to tenants. However, the REIT must be careful not to provide directly to the tenants any services that are not customary in the real estate business. If this rule is violated, severe consequences can follow. For example, under a literal interpretation of the law, if a REIT that operates a retail mall provides wheelchairs to the customers of the retail tenants, or even assists the tenant in moving into its space, the entity's very status as a REIT could be placed in jeopardy. This is ridiculous and needs to be changed. Furthermore, current law imposes a tax on a REIT that retains capital gains and imposes a second level of tax on the REIT shareholders when they later receive the capital gain distribution. We need to make the changes necessary to help unsuspecting investors to avoid double taxation. This bill would adopt the corresponding mutual fund rules governing taxation of retained capital gains by passing through a credit to shareholders capital gains taxes paid at the corporate level. The bill would also conform a REIT's 95-percent annual distribution requirement to a mutual fund's 90-percent requirement. Mr. President, this bill also relaxes some of the current law's onerous penalties for failing to perform some recordkeeping requirements. Currently, a REIT could lose its favored tax status simply by failing to send out or receive back shareholder demand letters for the purpose of verifying the fact that no five or fewer parties own controlling interest in the REIT. So, even though the REIT in fact meets this test, Mr. President, simply by failing to have on file sufficient shareholder letters substantiating this fact, all of the REIT shareholders could face the extremely harsh penalty of REIT disqualification and double taxation. Rather than penalizing the REIT so severely for this oversight, Mr. President, this bill would impose a $25,000 penalty for failing to comply with this requirement, if the failure is inadvertent in nature. The penalty would rise to $50,000 in the case of willful noncompliance. I believe my colleagues would agree that this approach makes much more sense than the current rules. It serves as an adequate incentive to keep the appropriate records without causing the unsuspecting, innocent investors severe and unnecessary tax penalties. Mr. President, this bill also addresses other problems that are detailed in the summary of the bill that I ask unanimous consent to be included in the Record after my remarks. I do not believe this bill is controversial. And, according to the Joint Committee on Taxation, it will have a negligible effect on revenues. It is also important to note that this bill is endorsed by the National Association of Real Estate Investment Trusts, which represents a high percentage of the REIT industry. Whenever we can do things to simplify the Tax Code without causing substantial revenue loss or negative policy consequences we should do it. Mr. President, this is an opportunity for us to do just that in the area of real estate investment trusts. I urge my colleagues on both sides of the aisle to join me in reforming and simplifying the tax law regarding this very difficult and complex area of the law. Mr. President, I ask unanimous consent that the text of the bill and a detailed summary of its provisions be printed in the Record.

Mr. HATCH

Mr. HATCH. Mr. President, 30 years ago a singular, unexpected and startling event reshaped the world. I am referring to the conclusion of the Six-Day War of 1967, when the young Jewish state was faced with the amassed forces of the Arab world, bent on its destruction, but prevailed against all odds and concluded the short but bloody war with the victorious forces of Israel reclaiming and reuniting the holy city of Jerusalem. It was the first time since the fall of Jerusalem in 70 C.E. that the city was entirely in Jewish hands. One of the accounts of the first paratroopers and soldiers to reach the wall spoke of Gen. Shlomo Goren, then the chief rabbi of the Israeli Army, who raced to join the first to reach the wall. Last week's Jerusalem Post recounted that he was armed only with a Bible and a shofar, and that as they ran through the narrow streets of Old Jerusalem Goren did not stop blowing the shofar and reciting prayers. His enthusiasm infected the soldiers, and from every direction came cries of ``Amen!'' The paratroopers burst out in song. The Jewish author Abraham Joshua Heschel wrote movingly of this pivotal event: In its solitude the Wall was forced into the role of an unreachable tombstone for the nameless dead. Suddenly the Wall, tired of tears and lamentations, became homesick for song. ``O Come, let us sing to the Lord, let us chant in joy to the rock of our salvation!'' (Psalm 95:1) It will be called the Rejoicing Wall. It was the first time since the partition of Jerusalem that Jews could pray at the Western Wall. In fact, after the Israeli paratroopers and soldiers liberated the city, many flocked to the wall even before the mines left by the Jordanians had been removed. A few days later, the headline of the Jerusalem Post read: ``200,000 at Western Wall in first pilgrimage since Dispersion''. Heschel wrote: July, 1967 * * * I have discovered a new land. Israel is not the same as before. There is great astonishment in the souls. It is as if the prophets had risen from their graves. Their words ring in a new way. Jerusalem is everywhere, she hovers over the whole country. There is a new radiance, a new awe. Mr. President, the conclusion of this war had profound geopolitical consequences--for the Mideast, and for the world, as the superpowers responded to the consequences of the defeat of the Arab armies. The Soviets increased their support to the Arab regimes intent on revenge, including the virulently anti-Israel governments of Saddam Hussein and Hafez Assad who came to power over the next couple of years. The United States, quick to recognize Israel's declaration of independence almost 20 years before, stood by our Democratic friend, as we would during the Yom Kippur War 6 years later, and as we have ever since. But there was consequences even more profound than the geopolitics. The city of David was in Jewish hands. Whereas the Jewish graves and synagogues had been desecrated since the partitioning in 1948, Israel opened the city to the faithful of the three monotheistic religions. The Muslim leaders retained control of al-Aqsa Mosque and the Dome of the Rock. Hundreds of thousands of Muslims and Christians have joined Jews since then in pilgrimages to holy Jerusalem. Jerusalem today is a city for all faithful. It is also, as so befits the sadness of this bloody 20th century, the center of unresolved political disputes. Mr. President, if you look back at the history of the 1967 war, you see that among the Israeli leadership, the possibility of exchanging land for a permanent peace was being considered within days after the Six-Day war. This was a radical notion in that part of the world--and the years it took before the Sinai was returned was a necessary period when facing hostile regimes on every border of a narrow state. But Israel has always demonstrated its willnessness--in fact, its insistence--on cohabiting in the region, and cooperating to do so--as long as its sovereignty and right to exist are recognized. These notions were at the heart of an unformulated peace process then as they are in a more formal peace process now. It is up to the democratically elected government of Israel to determine the direction and content of that process today, as it is up to Israel's Arab neighbors to accept the reality of the Jewish state. But one issue has been left more muddled than it should be: the status of Jerusalem. This issue has been debated on this floor for over a decade. I believe that Jerusalem is the capital of Israel, and I have joined many colleagues in expressing that it should be the policy of the United States to recognize Jerusalem as the undivided capital of Israel, and to cease the artificial posturing that has kept our Embassy in Tel Aviv. This is what we declared when we passed the Jerusalem Embassy Act of 1995, and what we reiterated in our recent resolution, Senate Concurrent Resolution 21, congratulating the residents of Jerusalem on the 30th anniversary of reunification. With these acts, Congress recognized a geopolitical reality. There are times when doing so can enhance the management of peace, by declaring, once and for all, what are the feasible parameters of a negotiated peace. These acts of Congress were such times. If the peace process continues, it will progress more certainly on solid ground. I continue to encourage the administration to join us in correcting a diplomatic anomaly that we have visited on our closest ally in the Middle East for too long. Mr. President, I offer my deepest congratulations to the residents of Jerusalem, to the citizens of Israel, and to all who appreciate the peace and openness that has reigned over that city since it was reunited 30 years ago.

Mr. HATCH

Mr. HATCH. Mr. President, I rise today to introduce a bill that would provide much-needed tax relief for American-owned companies that are attempting to compete in the world marketplace. I am joined by Senator Baucus in introducing the International Tax Simplification for American Competitiveness Act. Mr. President, our country's economy has entered into an environment like no other in our history. The success of the American economy is becoming more and more intertwined with the success of our businesses in the global marketplace. As the economic boundaries from country to country merge closer together, and competition begins to arise from previously lesser-developed nations, it is imperative that American owned businesses be able to compete from the most advantageous position possible. There are already barriers the U.S. economy must overcome to remain competitive that Congress cannot hurdle by itself. I know that we have international trade negotiators working hard to eliminate those obstacles, such as barriers to foreign markets, but we can do more than just open barriers. We can reform our Tax Code in such a way that would ensure continued success by American-owned companies in today's highly competitive international market. There is no need to further impede the economy by saddling it with an outdated and extremely complex Tax Code. If we pass on this opportunity, Mr. President, we run the risk of jeopardizing the international competitiveness of the U.S. economy, as American companies are lured to other countries with simple, more favorable tax treatment. The business world is changing at a more rapid pace than any other time in history. Tax laws, unfortunately, have failed to keep pace with the rapid changes in the world economy. The last time the international provisions of the Internal Revenue Code were substantially debated and revised was in 1986. Since that time, existing economies have changed, and new economies have been created, all while our tax policy regarding this changing market has remained the same. And in several cases, our foreign competitors operate under simpler, fairer, and more logical tax regimes. The continued use of a confusing, archaic tax code results in a mismatch with commercial reality and creates a structural bias against the international activities of U.S. companies. We cannot, and should not, continue to impede the progress of our economy. Mr. President, the bill that I am introducing today seeks to simplify and correct various areas in the Internal Revenue Code that are unnecessarily restraining American businesses competing in today's global market. Some of these provisions are similar to those contained in the President's recently released simplification package. Some changes come in areas that are in dire need of repair, and others are changes that take into consideration international business operations that exist today, but were either nonexistent, or limited to domestic soil in 1986, when the tax reform laws were put into place. An important correction to current rules relates to Foreign Sales Corporation [FSC] treatment for software. When the current FSC rules were implemented 11 years ago, the level of software exports was nowhere near the level it is today. Because the Tax Code was not modified with the evolution of the high-technology business world, American software exports are currently discriminated against. This proposal would clarify that computer software qualifies as export property eligible for FSC benefits. These benefits are currently available for films, records, and tapes, but not software. The United States is currently the global leader in software production and development and employs nearly 400,000 people in high- paying software development and servicing jobs. The industry has experienced a great deal of growth in the past decade, primarily due to increased exports. If the FSC benefits to software continue to be denied, we are creating another obstacle to the competitiveness of American manufactured software, ultimately harming the U.S. economy, and putting American jobs at risk. Another important change included in the bill would repeal the 10/50 tax credit rules. Currently, the code requires U.S. companies to calculate separate foreign tax credit limitations for each of its foreign joint venture businesses in which the U.S. owner owns at least 10 percent but no more than 50 percent. In addition to creating administrative headaches for American owned companies that may have hundreds of such foreign joint venture operations, these rules impede the ability of U.S. companies to compete in foreign markets. It is necessary for businesses in the United States to operate in joint ventures worldwide, particularly in emerging, previously closed markets such as the former Soviet Union and the People's Republic of China. Many times, the joint ventures are needed to assist the United States investor to overcome significant local country and political obstacles involved with taking a controlling interest in foreign companies. This applies particularly to regulated businesses, such as telecommunications companies. While this type of joint venture is necessary for companies to enter and compete in foreign markets, the current tax law in our country discourages such operations. The bill would permit U.S. owners to compute foreign tax credits with respect to dividends from such entities based on the underlying character of the income of these entities, or the so-called look- through treatment, provided that the necessary information is available. Moreover, the bill includes a provision that would eliminate the overlap in the rules between passive foreign investment companies [PFIC] and controlled foreign companies [CFC]. PFIC rules were never intended to apply to CFC's. In the Tax Act of 1993, changes were made that created unnecessary duplication in PFIC and CFC rules. Currently, there are several CFC's that are caught under both sets of rules. This proposal would eliminate these duplications. If a PFIC is also a CFC, the proposal generally would treat the foreign corporation as a non- PFIC with respect to certain 10-percent U.S. shareholders of the CFC. Mr. President, I ask that my colleagues take a close look at this bill. This is not partisan legislation. It is an attempt to give fair tax treatment to American companies who operate abroad, and that, I think, is an objective we all support. The bill is truly a technical correction and simplification, designed to correct the inequities in our Tax Code, and to help place U.S. companies on a level playing field with their competitors in the foreign market. If we do not step up and make these corrections, American companies will lose ground to their foreign counterparts, eventually losing their power to operate successfully at home and harm our Nation's economic potential. American workers are the most creative, competitive, and hard-working in the world. It is our duty, Mr. President, to release them from any unnecessary constraints at home. Their hard work and perseverance will enable us to maintain and strengthen our lead in the global marketplace, resulting in more quality, high-paying jobs on American soil, and an even stronger national economy. I ask unanimous consent that a section-by-section summary be printed in the Record.

Mr. HATCH

Mr. HATCH. Mr. President, I rise today to introduce a bill that would provide much-needed tax relief for American-owned companies that are attempting to compete in the world marketplace. I am joined by Senator Baucus in introducing the International Tax Simplification for American Competitiveness Act. Mr. President, our country's economy has entered into an environment like no other in our history. The success of the American economy is becoming more and more intertwined with the success of our businesses in the global marketplace. As the economic boundaries from country to country merge closer together, and competition begins to arise from previously lesser-developed nations, it is imperative that American owned businesses be able to compete from the most advantageous position possible. There are already barriers the U.S. economy must overcome to remain competitive that Congress cannot hurdle by itself. I know that we have international trade negotiators working hard to eliminate those obstacles, such as barriers to foreign markets, but we can do more than just open barriers. We can reform our Tax Code in such a way that would ensure continued success by American-owned companies in today's highly competitive international market. There is no need to further impede the economy by saddling it with an outdated and extremely complex Tax Code. If we pass on this opportunity, Mr. President, we run the risk of jeopardizing the international competitiveness of the U.S. economy, as American companies are lured to other countries with simple, more favorable tax treatment. The business world is changing at a more rapid pace than any other time in history. Tax laws, unfortunately, have failed to keep pace with the rapid changes in the world economy. The last time the international provisions of the Internal Revenue Code were substantially debated and revised was in 1986. Since that time, existing economies have changed, and new economies have been created, all while our tax policy regarding this changing market has remained the same. And in several cases, our foreign competitors operate under simpler, fairer, and more logical tax regimes. The continued use of a confusing, archaic tax code results in a mismatch with commercial reality and creates a structural bias against the international activities of U.S. companies. We cannot, and should not, continue to impede the progress of our economy. Mr. President, the bill that I am introducing today seeks to simplify and correct various areas in the Internal Revenue Code that are unnecessarily restraining American businesses competing in today's global market. Some of these provisions are similar to those contained in the President's recently released simplification package. Some changes come in areas that are in dire need of repair, and others are changes that take into consideration international business operations that exist today, but were either nonexistent, or limited to domestic soil in 1986, when the tax reform laws were put into place. An important correction to current rules relates to Foreign Sales Corporation [FSC] treatment for software. When the current FSC rules were implemented 11 years ago, the level of software exports was nowhere near the level it is today. Because the Tax Code was not modified with the evolution of the high-technology business world, American software exports are currently discriminated against. This proposal would clarify that computer software qualifies as export property eligible for FSC benefits. These benefits are currently available for films, records, and tapes, but not software. The United States is currently the global leader in software production and development and employs nearly 400,000 people in high- paying software development and servicing jobs. The industry has experienced a great deal of growth in the past decade, primarily due to increased exports. If the FSC benefits to software continue to be denied, we are creating another obstacle to the competitiveness of American manufactured software, ultimately harming the U.S. economy, and putting American jobs at risk. Another important change included in the bill would repeal the 10/50 tax credit rules. Currently, the code requires U.S. companies to calculate separate foreign tax credit limitations for each of its foreign joint venture businesses in which the U.S. owner owns at least 10 percent but no more than 50 percent. In addition to creating administrative headaches for American owned companies that may have hundreds of such foreign joint venture operations, these rules impede the ability of U.S. companies to compete in foreign markets. It is necessary for businesses in the United States to operate in joint ventures worldwide, particularly in emerging, previously closed markets such as the former Soviet Union and the People's Republic of China. Many times, the joint ventures are needed to assist the United States investor to overcome significant local country and political obstacles involved with taking a controlling interest in foreign companies. This applies particularly to regulated businesses, such as telecommunications companies. While this type of joint venture is necessary for companies to enter and compete in foreign markets, the current tax law in our country discourages such operations. The bill would permit U.S. owners to compute foreign tax credits with respect to dividends from such entities based on the underlying character of the income of these entities, or the so-called look- through treatment, provided that the necessary information is available. Moreover, the bill includes a provision that would eliminate the overlap in the rules between passive foreign investment companies [PFIC] and controlled foreign companies [CFC]. PFIC rules were never intended to apply to CFC's. In the Tax Act of 1993, changes were made that created unnecessary duplication in PFIC and CFC rules. Currently, there are several CFC's that are caught under both sets of rules. This proposal would eliminate these duplications. If a PFIC is also a CFC, the proposal generally would treat the foreign corporation as a non- PFIC with respect to certain 10-percent U.S. shareholders of the CFC. Mr. President, I ask that my colleagues take a close look at this bill. This is not partisan legislation. It is an attempt to give fair tax treatment to American companies who operate abroad, and that, I think, is an objective we all support. The bill is truly a technical correction and simplification, designed to correct the inequities in our Tax Code, and to help place U.S. companies on a level playing field with their competitors in the foreign market. If we do not step up and make these corrections, American companies will lose ground to their foreign counterparts, eventually losing their power to operate successfully at home and harm our Nation's economic potential. American workers are the most creative, competitive, and hard-working in the world. It is our duty, Mr. President, to release them from any unnecessary constraints at home. Their hard work and perseverance will enable us to maintain and strengthen our lead in the global marketplace, resulting in more quality, high-paying jobs on American soil, and an even stronger national economy. I ask unanimous consent that a section-by-section summary be printed in the Record.

Mr. HATCH

Mr. HATCH. Mr. President, I rise today to join in honoring a legend, a legend not just in the Senate but also throughout the United States of America. I have been privileged to serve with Senator Thurmond for 21 of the last nearly 42 years that he has represented the State of South Carolina as one of the premier U.S. Senators in this body. When I first arrived in January 1977, Senator Thurmond was my special mentor. As my senior on the Senate Judiciary Committee, he gave me my first lessons of the committee's processes. Ever since then, he has been a personal and very special friend to me. I have admired Senator Thurmond's strong commitment to federalism and his steadfast support of the prerogatives of both State and local governments. I have admired his toughness in the matters of criminal justice. I have admired his objectivity and fairness when it comes to matters concerning the judiciary. There can be no question that Senator Thurmond has left his mark on the Senate Judiciary Committee and the laws created by it. Nearly 42 years of distinguished service in the U.S. Senate would be a lifetime accomplishment for anybody--certainly for most people. But Senator Thurmond was just warming up when he arrived here for the first time in 1955. Before that he was county superintendent of schools, county attorney, circuit judge, D-day hero with the 82d Airborne, Governor of South Carolina, and Presidential candidate in 1948. The problem with using the word ``legend'' is that many times the exploits ascribed to a legendary figure are exaggerated or apocryphal. But it is entirely safe to say that Senator Thurmond is a legend. His accomplishments and contributions both for his beloved home State and his country are very well documented. And a lot of us are very familiar with them. I will never forget his trip to Utah in 1991 to keynote my Utah Seniors Conference. About 1,000 seniors from all over the State of Utah and the intermountain West gathered in Salt Lake City for a day of workshops and speakers on everything from retirement finances to travel bargains. Senator Thurmond is quite a role model. His enthusiasm for his work, his family, for his country, and for life itself was genuine and infectious. Our people in Utah were so impressed, that he gave them so much to live for, so much to strive for, so much to try to be, that I will never forget that appearance out there in Utah. We have been together on so many occasions and we have done so many things together that I think I am in a special position to say how much I care for this wonderful human being and how proud I am that he has reached this milestone in the U.S. Senate. I am not sure that it will ever be broken. Senator Thurmond is one who will leave a legacy not only of achievement but of honor and integrity to the Senate and the people of South Carolina. But, of course, it is premature to think that the latest milestone is the last milestone. I do not believe Strom Thurmond is finished yet. I have a lot of friends in the Senate, and I care for all of them. This is a wonderful body. It is a collegial body. It is an important body, the most important legislative body in the world today. But I have no greater friend than my good friend from South Carolina, Strom Thurmond. He has been my mentor. He has been my friend. He has been my supporter. He has been a person who has taken time to help me to know the ropes here. And he is a human being who you cannot help but respect. I am proud that he has not lost a step. This man is as effective today as when I got here in 1977, in fact, in some ways maybe even more effective because of the additional 21 years of experience that he has been able to accumulate. Senator Thurmond has been good to his staff. He is good to the people around the Senate. I have seen him shake hands with almost everybody who comes his way. He takes time with young people, children, older people, whoever. He stops and says hello and always has a cheery salutation for people as he serves in the Senate. I also know that there is nobody in the Senate who knows more about his State and the people therein than Strom Thurmond. I have seen him make phone calls to his State. I have seen him worry about funerals, about deaths, about graduations, about education, about so many things that really have been important for people in his State. I think it is probably true that he has basically touched the lives and the hearts of virtually everybody in the State of South Carolina. But it is also true that he has touched the hearts of many of us throughout the rest of the country. And I for one am a better person because of my relationship and the friendship and brotherhood that I have with Strom Thurmond of South Carolina. He is a great man. He is a legend. And I believe that he is going to make these next number of years the most important years of his life. And if anybody can do it, it is my buddy, my friend, my mentor, Strom Thurmond. So I would have felt badly if I had not gotten over here and at least said a few of the things that are on my mind. I could go on for hours. But this is a great man, one of the greatest that has ever lived in this country. He is a great patriot, somebody who really loves this country and has given blood for it. I want you to know, Senator Thurmond, I appreciate you. And I know I am not supposed to refer to you in the first person on the floor, but I am going to today. I appreciate you and appreciate the kindness and the friendship you have shown me all these years. And we are going to be friends forevermore. So I am grateful to you and I am happy to see you achieve this honor. And I wish you many, many more years in the U.S. Senate. And I know that as long as you will be here, that you will give it everything you have. Thank you, Mr. President. I yield the floor. Mr. President, I suggest the absence of a quorum.

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

Mr. HATCH

Mr. HATCH. Mr. President, let me say that the Senator from Vermont is a dear friend of mine. There is no question about that. We enjoy working together. But I think the points that I have made are very valid points. The administration has taken up to 618 days to name each nominee. That is really twice the time that historically it has taken in prior administrations in the White House. At an average of 618 days for each vacancy President Clinton has taken to fill, according to my calculations--I could be wrong--but it would take more than 125 years to fill all 74 vacancies. So, you can play this numbers game. All I am saying is I dedicate myself to try to do the best I can to get these judges through. I appreciate the help my colleague gives me in that regard. I think, as we get more of these nominees up here, we will get more of them to the floor. But I appreciate his remarks. I just do not quite agree with them, that is all. With that, I yield the floor.

Mr. HATCH. Mr. President, I wish to take just a few minutes on judges, because I want to make two basically important points on judges. At the outset, first, the current vacancy levels are not the product of some alleged Republican stall on judges. Second, the Senate's constitutional advise-and-consent responsibility should not be reduced to a mere numbers game. At the end of the last session, we had 65 judge vacancies. Last year, we had 21 judges nominated. We put through 17. We would have put through four more except for Democratic objections to their own judges--not to the judges, but to putting them forward, because one Democrat was not getting the judges that he wanted. Let me just elaborate for a minute or two on those two points. Mr. President, this is not a numbers game. Let me make an important point, which is this. Federal judges should not be confirmed as part of a numbers game or to reduce the vacancy rate to a particular level. While I plan to oversee a fair and principled confirmation process, as I always have, I want to emphasize that the primary criteria in this process is not how many vacancies need to be filled, but whether President Clinton's, or whoever the President is, whether their nominees are qualified to serve on the bench and will not, upon receiving their judicial commission, spend a lifetime, a career, rendering politically motivated activist decisions. The Senate has an obligation to the American people to thoroughly review the records of all nominees it receives to ensure that they are capable and qualified to serve as Federal judges. These are lifetime appointments with lifetime full benefits after they retire. Frankly, the record of activism demonstrated by so many of the Clinton judges and nominees calls for more vigilance in reviewing these nominees. The current vacancies are not the result of a Republican stall. I think that is another point that has been widely distorted in recent weeks. The argument is that the Republicans are somehow stalling these judges. The facts show rather clearly that the current vacancies are not the result of Republican stall tactics. First of all, at the end of the last Congress there were 65 vacancies. Today there are 100, 74 of which have not even had a recommended nominee. I have been here a long time, but I have never heard we had to confirm people who were not even nominated. There are 26; and we now have put through 5. We have four more that we put out of the committee yesterday, who I believe will go through quite soon. And we will have another markup of judges perhaps a week after we get back. Let me just make this point so that we can resolve some of these problems. These vacancies were caused by a record level of resignations in the past few months. During President Clinton's first 4 years, we confirmed 202 judges. That is a near record high and nearly one-quarter of the entire Federal bench. By the close of last Congress, there were only 65 vacancies. This is virtually identical to the number of vacancies under the Democratic chairman in the previous Congress. The Department of Justice itself stated that this level of vacancies represents virtual full employment in the Federal courts. So last Congress we were more than fair to President Clinton in his judicial nominees. We reduced the vacancy level to the level which the Justice Department itself considers virtual full employment. But since the election last fall, 35 judges have either resigned or taken senior status. That is a dramatic number in such a short period, which has led to the current level of 100 vacancies. Now, current vacancy rates are not an unprecedented crisis. Let me just point that out by saying there has only been a 5 percent increase in the vacancy rate. Keep in mind that 63 vacancies, a vacancy rate just over 7 percent, is considered virtual full employment, and 100 vacancies is a vacancy rate just over 12 percent. How can a 5 percent rise in the vacancy rate convert ``full employment'' into a ``crisis.'' The Democratic Senate left a much higher vacancy rate under President Bush. But compare today's 100 vacancies to that under a Democratic Senate during President Bush's Presidency. In May 1991--the same time we are at right now--there were 148 vacancies. That is during President Bush's tenure. In May of 1992, again in President Bush's tenure, there were 117 vacancies. So that 148 and 117, respectively, is more than we have right now. Now, I find it interesting that at that time I do not recall reading a single article or watching a single interview on judicial vacancies. So, in short, I think it is quite unfair and, frankly, inaccurate to report that the Republican Congress has created a vacancy crisis in the courts. Now, I might add that judicial emergencies simply mean that the seat has been unfilled for a certain period of time. In reality, though, many of them are far from emergencies. Indeed, of the 24 alleged judicial emergencies, the administration has not even put up a nominee for 11 of those seats. How do you blame the Congress for that? As for the others, I think you will find a number of the relevant districts do not, in fact, have an overburdensome caseload, and, in fact, some of the senior judges are suggesting that we reexamine the number of judges in their area and reduce them because they do not need them. It costs at least $1 million a year for every judge in this country, and there are well over 800. All of this being said, I feel very strongly we must do our best to reduce the vacancies in the Federal courts. Frankly, there are limits to what we can do, especially with what the administration has done so far. The fact of the matter is that, excluding two brand new nominees whose paperwork we have not yet received and cannot process because we have not yet received it, there are only 26 nominees for these 100 vacancies, meaning 74 vacancies are without nominees. Of these 26, 8 have already had hearings and are either on the Senate floor or about to be reported out of committee. So we are moving on nominees, and we will continue to move. The problem, however, is that many of the remaining 18 nominees who have not yet had committee action are in one way or another problematic or controversial. All but a few of them were carried over from the last Congress, and I can assure you that there is a reason why the Senate confirmed 202 other nominees but not them. If and when the administration sends us qualified, noncontroversial nominees, they will be processed fairly and promptly, and I am trying to process these controversial nominees to the extent that we can and certainly am trying to do so fairly and promptly. Take Mr. Alan Gold from Florida, for example. He was nominated in February of this year. We completed his paperwork and review in March and April. He had a hearing 2 weeks ago and was reported out of the committee yesterday, just to give an illustration. When the administration sends us problematic nominees, it takes much more time and it is much more difficult to process them, and the administration knows this. I think my colleagues on the other side know this. If all we are left with are judges whom we are not ready to move, I will not compromise our advise-and-consent constitutional function, I will not compromise it simply because the White House has not sent up qualified nominees. As I said at the outset, the Senate's advise-and- consent function should not be reduced to a mere numbers game. The confirmation of an individual to serve for life as a Federal judge is a very serious matter and it should be treated as such. Now, we have had a lot of complaining and yelling and screaming about this, but to be honest with you, we are much better than a number of prior Congresses where Democrats had control of the Judiciary Committee and when they had control of the floor as well. President Clinton has not been mistreated. He has not been treated unfairly, and his nominees have not been mistreated or treated unfairly. In fact, we have yet to have a nominee who has been rejected on the floor during the Clinton administration, although I felt that at least two of them should have been.

Mr. HATCH

Mr. HATCH. Mr. President, I also would like to take this occasion to thank Senators Helms, Lugar, Kyl, Leahy, and Biden for their work on the Chemical Weapons Convention. I think that went very well. We put it out through the Judiciary Committee yesterday, and we passed it here today. So I am very proud of that.

Mr. HATCH

Mr. HATCH. Mr. President, during the debate on ratification of the Chemical Weapons Convention, I said that I expected that both the President and the Congress must be wholly dedicated to implement this treaty in a way that advances U.S. national security interests and that protects the constitutional rights of American citizens. Today, we will consider a bill to implement the Chemical Weapons Convention. In my view, this bill accomplishes both of those objectives. The bill before us today is the product of negotiation with the administration and with my colleagues on the other side of the aisle. Although this bill differs, in several respects, from the version of S. 610 that was introduced in the Congress, I believe that we have achieved a bill that comprehensively implements the treaty, while also protecting the constitutional rights of Americans. Let me explain briefly why that is true: First, our bill provides for civil liability of the United States for the loss of property resulting from inspection procedures under the treaty. Second, the Chemical Weapons Convention authorizes a team of international officials to inspect the facilities of private American businesses. Our bill protects the constitutional rights of American citizens through the warrant requirement that must be satisfied for all inspections. Third, the bill protects confidential business information that, according to the treaty, must be reported to the U.S. National Authority. The bill also provides aggressive penalties for the person disclosing the information, as well as for those benefiting from the information. In sum, the Chemical Weapons Convention Implementation Act of 1997 is a reasonable effort to protect the constitutional rights of our citizens against unlawful inspections under the treaty. We have worked exceedingly hard with the Administration and with Members on the other side of the aisle to craft this bill. In particular, I want to thank Senators Lugar, Kyl, Leahy, and Biden, as well as their staff, for their tremendous efforts in this regard, done under serious time constraints. I want to thank, in particular, David Stephens, Randy Schueneman, Marshall Billingslea, Ken Meyers, Beryl Howell, Ed Levine, David Schanzer, Stephen Schlesinger, Jennifer Carrico, and Paul Larkin.

Mr. HATCH

Mr. HATCH. Mr. President, I am pleased today to once again introduce the Omnibus Property Rights Act. Many Members of the Senate have as a paramount concern the protection of individual rights protected by our Constitution. One particular right--the right to own and use private property free from arbitrary governmental action--is increasingly under attack from the regulatory state. Indeed, despite the constitutional requirement for the protection of property rights, the America of the late 20th century has witnessed an explosion of Federal regulation that has jeopardized the private ownership of property with the consequent loss of individual liberty. Under current Federal regulations, thousands of Americans have been denied the right to the quiet use and enjoyment of their private property. Arbitrary bureaucratic enforcement of Federal and State regulatory programs has prevented Americans from building homes and commercial buildings, plowing fields, repairing barns and fences, clearing brush and fire hazards, felling trees, and even removing refuse and pollutants, all on private property. Fairness and simple justice demand that Americans owning property be entitled to the full use of their property. Ensuring compensation for regulatory takings is the first step toward restoring the fundamental right to own and use private property guaranteed by the takings clause of the fifth amendment to our Constitution. That is why I am once again introducing legislation--the Omnibus Property Rights Act--to protect private property owners from overzealous regulators. This bill, similar in substance and procedure to the bills I introduced last Congress, represents the most comprehensive legislative mechanism to date to foster and protect the private ownership of property. The omnibus bill contains three different approaches contained in different titles. The first substantive title of the bill encompasses property rights litigation reform. This title establishes a distinct Federal fifth amendment ``takings'' claim against Federal agencies by aggrieved property owners, thus clarifying the sometimes incoherent and contradictory constitutional property rights case law. Property protected under this section includes real property, including fixtures on land, such as crops and timber, mining interests, and water rights. This title is triggered when a taking, as defined by the Supreme Court, occurs. Moreover, it allows for compensation when the property, or ``affected portion'' of property, is reduced in value by 33 percent or more. It has been alleged that this bill would impede government's ability to protect public health, safety, and the environment. This is not true. This first title contains a ``nuisance exception'' to compensation. It codifies that part of the 1992 Supreme Court decision in Lucas versus South Carolina Coastal Council, which held that restrictions on property use based on ``background principles of the state's law of property and nuisance'' need not be compensated. Thus, by adopting the Supreme Court's recent Lucas holding, the Omnibus Property Rights Act provides that only innocent property holders are to be compensated for government takings. Those that demonstrably misuse their property to pollute or to harm public health and safety are not entitled to compensation under the bill's nuisance provision. Finally, this title also resolves the jurisdictional dispute between the Federal district courts and the Court of Federal Claims over fifth amendment ``takings'' cases--sometimes called the Tucker Act shuffle-- by granting each court concurrent jurisdiction. A second title in essence codifies President Reagan's Executive Order 12630. Under this title, a Federal agency must conduct a private property taking impact analysis before issuing or promulgating any policy, regulation, or related agency action which is likely to result in a taking of private property. A third title provides for alternative dispute resolution in arbitration proceedings. The three titles of the Omnibus Property Rights Act together function to provide the property owner with mechanisms to vindicate the fundamental constitutional right of private ownership of property, while instituting powerful internal incentives for Federal agencies both to protect private property and include such protection in agency planning and regulating. It is very significant that the nonpartisan Congressional Budget Office, after a year of research, concluded in a study dated March 8, 1996, that the incentives built into the very similar bills I introduced last Congress would have encouraged agencies to act more responsibly, that the administrative cost of the bill would be quite small, and that compensation costs would be even smaller. Despite some critics' charges that these very similar bills would be too costly, CBO found that the costs of both the omnibus bills will diminish to an insignificant level over time. This is predicated on the CBO finding that each of the omnibus bills contain powerful incentives, which over time will reduce costs. These include: First, the bills' bright line legal standards, which better enable agencies to avoid takings disputes; second, the takings impact assessment requirement, which requires agencies to analyze the affect of proposed regulations on property rights; and third, the requirement that compensation be paid from the agency's budget, which inevitably will act as a deterrent to unconstitutional and unlawful takings. Based on extensive research, CBO estimated that each omnibus bill should cost no more than $30 or $40 million a year for the first 5 years of implementation, thereafter diminishing to insignificant amounts. The new bill will cost even less. Importance of Private Property The private ownership of property is essential to a free society and is an integral part of our Judeo-Christian culture and the Western tradition of liberty and limited government. Private ownership of property and the sanctity of property rights reflects the distinction in our culture between a preexisting civil society and the state that is consequently established to promote order. Private property creates the social and economic organizations that counterbalance the power of the state by providing an alternative source of power and prestige to the state itself. It is therefore a necessary condition of liberty and prosperity. While government is properly understood to be instituted to protect liberty within an orderly society and such liberty is commonly understood to include the right of free speech, assembly, religious exercise and other rights such as those enumerated in the Bill of Rights, it is all too often forgotten that the right of private ownership of property is also a critical component of liberty. To the 17th century English political philosopher, John Locke, who greatly influenced the Founders of our Republic, the very role of government is to protect property: ``The great and chief end therefore, on Men uniting into Commonwealths, and putting themselves under Government, is the preservation of their property.'' The Framers of our Constitution likewise viewed the function of government as one of fostering individual liberties through the protection of property interests. James Madison, termed the ``Father of the Constitution,'' unhesitantly endorsed this Lockean viewpoint when he wrote in The Federalist No. 54 that ``[government] is instituted no less for the protection of property, than of the persons of individuals.'' Indeed, to Madison, the private possession of property was viewed as a natural and individual right both to be protected against government encroachment and to be protected by government against others. To be sure, the private ownership of property was not considered absolute. Property owners could not exercise their rights as a nuisance that harmed their neighbors, and government could use, what was termed in the 18th century, its despotic power of eminent domain to seize property for public use. Justice, it became to be believed, required compensation for the property taken by government. The earliest example of a compensation requirement is found in chapter 28 of the Magna Carta of 1215, which reads, ``No constable or other bailiff of ours shall take corn or other provisions from anyone without immediately tendering money therefor, unless he can have postponement thereof by permission of the seller.'' But the record of English and colonial compensation for taken property was spotty at best. It has been argued by some historians and legal scholars that compensation for takings of property became recognized as customary practice during the American colonial period. Nevertheless, by the time of American independence, the compensation requirement was considered a necessary restraint on arbitrary governmental seizures of property. The Vermont Constitution of 1777, the Massachusetts Constitution of 1780, and the Northwest Ordinance of 1787, recognized that compensation must be paid whenever property was taken for general public use or for public exigencies. And although accounts of the 1791 congressional debate over the Bill of Rights provide no evidence over why a public use and just compensation requirement for takings of private property was eventually included in the fifth amendment, James Madison, the author of the fifth amendment, reflected the views of other supporters of the new Constitution who feared the example to the new Congress of uncompensated seizures of property for building of roads and forgiveness of debts by radical state legislatures. Consequently, the phrase ``[n]or shall private property be taken for public use, without just compensation'' was included within the fifth amendment to the Constitution. Current Protection of Property Rights Fall Short Judicial protection of property rights against the regulatory state has been both inconsistent and ineffective. Physical invasions and government seizures of property have been fairly easy for courts to analyze as a species of eminent domain, but not so for the effect of regulations which either diminish the value of the property or appropriate a property interest. This key problem to the regulatory takings dilemma was recognized by Justice Oliver Wendell Holmes in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922). How do courts determine when regulation amounts to a taking? Holmes' answer, ``if regulation goes too far it will be recognized as a taking,'' 260 U.S. at 415, is nothing more than an ipse dixit. In the 73 years since Mahon, the Court has eschewed any set formula for determining how far is too far, preferring to engage in ad hoc factual inquiries, such as the three-part test made famous by Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978), which balances the economic impact of the regulation on property and the character of the regulation against specific restrictions on investment-backed expectations of the property owner. Despite the valiant attempt by the Rehnquist Court to clarify regulatory takings analysis in Nollan v. California Coastal Comm'n, 483 U.S. 825 (1987), Lucas v. South Carolina Coastal Council, 112 S.Ct. 2886 (1992), and in its recent decision of Dolan v. City of Tigard, No. 93-518 (June 24, 1994), takings analysis is basically incoherent and confusing and applied by lower courts haphazardly. The incremental, fact-specific approach that courts now must employ in the absence of adequate statutory language to vindicate property rights under the fifth amendment thus has been ineffective and costly. There is, accordingly, a need for Congress to clarify the law by providing bright line standards and an effective remedy. As Chief Judge Loren A. Smith of the Court of Federal Claims, the court responsible for administering takings claims against the United States, opined in Bowles v. United States, 31 Fed. Cl. 37 (1994), ``[j]udicial decisions are far less sensitive to societal problems than the law and policy made by the political branches of our great constitutional system. At best courts sketch the outlines of individual rights, they cannot hope to fill in the portrait of wise and just social and economic policy.'' This incoherence and confusion over the substance of takings claims is matched by the muddle over jurisdiction of property rights claims. The Tucker Act, which waives the sovereign immunity of the United States by granting the Court of Federal Claims jurisdiction to entertain monetary claims against the United States, actually complicates the ability of a property owner to vindicate the right to just compensation for a Government action that has caused a taking. The law currently forces a property owner to elect between equitable relief in the Federal district court and monetary relief in the Court of Federal Claims. Further difficulty arises when the law is used by the Government to urge dismissal in the district court on the ground that the plaintiff should seek just compensation in the Court of Federal Claims, and is used to urge dismissal in the Court of Federal Claims on the ground that plaintiff should first seek equitable relief in the district court. This Tucker Act shuffle is aggravated by section 1500 of the Tucker Act, which denies the Court of Federal Claims jurisdiction to entertain a suit which is pending in another court and brought by the same plaintiff. Section 1500 is so poorly drafted and has brought so many hardships, that Justice Stevens, in Keene Corporation v. United States, 113 S.Ct. 2035, 2048 (1993), has called for its repeal or amendment. Title II of the Omnibus Property Rights Act addresses these problems. In terms of clarifying the substance of takings claims, it first clearly defines property interests that are subject to the act's takings analysis. In this way a floor definition of property is established by which the Federal Government may not eviscerate. This title also establishes the elements of a takings claim by codifying and clarifying the holdings of the Nollan, Lucas, and Dolan cases. For instance, Dolan's rough proportionality test is interpreted to apply to all exaction situations whereby an owner's otherwise lawful right to use property is exacted as a condition for granting a Federal permit. And a distinction is drawn between a noncompensable mere diminution of value of property as a result of Federal regulation and a compensable partial taking, which is defined as any agency action that diminishes the fair market value of the affected property by 33 percent or more. The result of drawing these bright lines will not be the end fact-specific litigation, which is endemic to all law suits, but it will ameliorate the ever increasing ad hoc and arbitrary nature of takings claims. Finally, I once again want to respond to any suggestion that may arise that this act will impede Government's ability to protect the environment or promote health and safety through regulation. This legislation does not, contrary to the assertions of some, emasculate the Government's ability to prevent individuals or businesses from polluting. It is well established that the Constitution only protects a right to reasonable use of property. All property owners are subject to prior restraints on the use of their property, such as nuisance laws which prevents owners from using their property in a manner that interferes with others. The Government has always been able to prevent harmful or noxious uses of property without being obligated to compensate the property owner, as long as the limitations on the use of property inhere in the title itself. In other words, the restrictions must be based on background principles of State property and nuisance law already extant. The Omnibus Property Rights Act codifies this principle in a nuisance exception to the requirement of the Government to pay compensation. Nor does the Omnibus Property Rights Act hinder the Government's ability to protect public health and safety. The act simply does not obstruct the Government from acting to prevent imminent harm to the public safety or health or diminish what would be considered a public nuisance. Again, this is made clear in the provision of the act that exempts nuisance from compensation. What the act does is force the Federal Government to pay compensation to those who are singled out to pay for regulation that benefits the entire public. In other words, it does not prevent regulation, but fulfills the promise of the fifth amendment, which the Supreme Court in Armstrong v. United States, 364 U.S. 40, 49 (1960), opined is ``to bar Government from forcing some people alone to bear public burdens, which in all fairness and justice, should be borne by the public as a whole.'' I hope that all Senators will join me in supporting this long overdue legislation.

Mr. HATCH

Mr. HATCH. Mr. President, I am pleased today to once again introduce the Omnibus Property Rights Act. Many Members of the Senate have as a paramount concern the protection of individual rights protected by our Constitution. One particular right--the right to own and use private property free from arbitrary governmental action--is increasingly under attack from the regulatory state. Indeed, despite the constitutional requirement for the protection of property rights, the America of the late 20th century has witnessed an explosion of Federal regulation that has jeopardized the private ownership of property with the consequent loss of individual liberty. Under current Federal regulations, thousands of Americans have been denied the right to the quiet use and enjoyment of their private property. Arbitrary bureaucratic enforcement of Federal and State regulatory programs has prevented Americans from building homes and commercial buildings, plowing fields, repairing barns and fences, clearing brush and fire hazards, felling trees, and even removing refuse and pollutants, all on private property. Fairness and simple justice demand that Americans owning property be entitled to the full use of their property. Ensuring compensation for regulatory takings is the first step toward restoring the fundamental right to own and use private property guaranteed by the takings clause of the fifth amendment to our Constitution. That is why I am once again introducing legislation--the Omnibus Property Rights Act--to protect private property owners from overzealous regulators. This bill, similar in substance and procedure to the bills I introduced last Congress, represents the most comprehensive legislative mechanism to date to foster and protect the private ownership of property. The omnibus bill contains three different approaches contained in different titles. The first substantive title of the bill encompasses property rights litigation reform. This title establishes a distinct Federal fifth amendment ``takings'' claim against Federal agencies by aggrieved property owners, thus clarifying the sometimes incoherent and contradictory constitutional property rights case law. Property protected under this section includes real property, including fixtures on land, such as crops and timber, mining interests, and water rights. This title is triggered when a taking, as defined by the Supreme Court, occurs. Moreover, it allows for compensation when the property, or ``affected portion'' of property, is reduced in value by 33 percent or more. It has been alleged that this bill would impede government's ability to protect public health, safety, and the environment. This is not true. This first title contains a ``nuisance exception'' to compensation. It codifies that part of the 1992 Supreme Court decision in Lucas versus South Carolina Coastal Council, which held that restrictions on property use based on ``background principles of the state's law of property and nuisance'' need not be compensated. Thus, by adopting the Supreme Court's recent Lucas holding, the Omnibus Property Rights Act provides that only innocent property holders are to be compensated for government takings. Those that demonstrably misuse their property to pollute or to harm public health and safety are not entitled to compensation under the bill's nuisance provision. Finally, this title also resolves the jurisdictional dispute between the Federal district courts and the Court of Federal Claims over fifth amendment ``takings'' cases--sometimes called the Tucker Act shuffle-- by granting each court concurrent jurisdiction. A second title in essence codifies President Reagan's Executive Order 12630. Under this title, a Federal agency must conduct a private property taking impact analysis before issuing or promulgating any policy, regulation, or related agency action which is likely to result in a taking of private property. A third title provides for alternative dispute resolution in arbitration proceedings. The three titles of the Omnibus Property Rights Act together function to provide the property owner with mechanisms to vindicate the fundamental constitutional right of private ownership of property, while instituting powerful internal incentives for Federal agencies both to protect private property and include such protection in agency planning and regulating. It is very significant that the nonpartisan Congressional Budget Office, after a year of research, concluded in a study dated March 8, 1996, that the incentives built into the very similar bills I introduced last Congress would have encouraged agencies to act more responsibly, that the administrative cost of the bill would be quite small, and that compensation costs would be even smaller. Despite some critics' charges that these very similar bills would be too costly, CBO found that the costs of both the omnibus bills will diminish to an insignificant level over time. This is predicated on the CBO finding that each of the omnibus bills contain powerful incentives, which over time will reduce costs. These include: First, the bills' bright line legal standards, which better enable agencies to avoid takings disputes; second, the takings impact assessment requirement, which requires agencies to analyze the affect of proposed regulations on property rights; and third, the requirement that compensation be paid from the agency's budget, which inevitably will act as a deterrent to unconstitutional and unlawful takings. Based on extensive research, CBO estimated that each omnibus bill should cost no more than $30 or $40 million a year for the first 5 years of implementation, thereafter diminishing to insignificant amounts. The new bill will cost even less. Importance of Private Property The private ownership of property is essential to a free society and is an integral part of our Judeo-Christian culture and the Western tradition of liberty and limited government. Private ownership of property and the sanctity of property rights reflects the distinction in our culture between a preexisting civil society and the state that is consequently established to promote order. Private property creates the social and economic organizations that counterbalance the power of the state by providing an alternative source of power and prestige to the state itself. It is therefore a necessary condition of liberty and prosperity. While government is properly understood to be instituted to protect liberty within an orderly society and such liberty is commonly understood to include the right of free speech, assembly, religious exercise and other rights such as those enumerated in the Bill of Rights, it is all too often forgotten that the right of private ownership of property is also a critical component of liberty. To the 17th century English political philosopher, John Locke, who greatly influenced the Founders of our Republic, the very role of government is to protect property: ``The great and chief end therefore, on Men uniting into Commonwealths, and putting themselves under Government, is the preservation of their property.'' The Framers of our Constitution likewise viewed the function of government as one of fostering individual liberties through the protection of property interests. James Madison, termed the ``Father of the Constitution,'' unhesitantly endorsed this Lockean viewpoint when he wrote in The Federalist No. 54 that ``[government] is instituted no less for the protection of property, than of the persons of individuals.'' Indeed, to Madison, the private possession of property was viewed as a natural and individual right both to be protected against government encroachment and to be protected by government against others. To be sure, the private ownership of property was not considered absolute. Property owners could not exercise their rights as a nuisance that harmed their neighbors, and government could use, what was termed in the 18th century, its despotic power of eminent domain to seize property for public use. Justice, it became to be believed, required compensation for the property taken by government. The earliest example of a compensation requirement is found in chapter 28 of the Magna Carta of 1215, which reads, ``No constable or other bailiff of ours shall take corn or other provisions from anyone without immediately tendering money therefor, unless he can have postponement thereof by permission of the seller.'' But the record of English and colonial compensation for taken property was spotty at best. It has been argued by some historians and legal scholars that compensation for takings of property became recognized as customary practice during the American colonial period. Nevertheless, by the time of American independence, the compensation requirement was considered a necessary restraint on arbitrary governmental seizures of property. The Vermont Constitution of 1777, the Massachusetts Constitution of 1780, and the Northwest Ordinance of 1787, recognized that compensation must be paid whenever property was taken for general public use or for public exigencies. And although accounts of the 1791 congressional debate over the Bill of Rights provide no evidence over why a public use and just compensation requirement for takings of private property was eventually included in the fifth amendment, James Madison, the author of the fifth amendment, reflected the views of other supporters of the new Constitution who feared the example to the new Congress of uncompensated seizures of property for building of roads and forgiveness of debts by radical state legislatures. Consequently, the phrase ``[n]or shall private property be taken for public use, without just compensation'' was included within the fifth amendment to the Constitution. Current Protection of Property Rights Fall Short Judicial protection of property rights against the regulatory state has been both inconsistent and ineffective. Physical invasions and government seizures of property have been fairly easy for courts to analyze as a species of eminent domain, but not so for the effect of regulations which either diminish the value of the property or appropriate a property interest. This key problem to the regulatory takings dilemma was recognized by Justice Oliver Wendell Holmes in Pennsylvania Coal Co. v. Mahon, 260 U.S. 393 (1922). How do courts determine when regulation amounts to a taking? Holmes' answer, ``if regulation goes too far it will be recognized as a taking,'' 260 U.S. at 415, is nothing more than an ipse dixit. In the 73 years since Mahon, the Court has eschewed any set formula for determining how far is too far, preferring to engage in ad hoc factual inquiries, such as the three-part test made famous by Penn Central Transportation Co. v. City of New York, 438 U.S. 104 (1978), which balances the economic impact of the regulation on property and the character of the regulation against specific restrictions on investment-backed expectations of the property owner. Despite the valiant attempt by the Rehnquist Court to clarify regulatory takings analysis in Nollan v. California Coastal Comm'n, 483 U.S. 825 (1987), Lucas v. South Carolina Coastal Council, 112 S.Ct. 2886 (1992), and in its recent decision of Dolan v. City of Tigard, No. 93-518 (June 24, 1994), takings analysis is basically incoherent and confusing and applied by lower courts haphazardly. The incremental, fact-specific approach that courts now must employ in the absence of adequate statutory language to vindicate property rights under the fifth amendment thus has been ineffective and costly. There is, accordingly, a need for Congress to clarify the law by providing bright line standards and an effective remedy. As Chief Judge Loren A. Smith of the Court of Federal Claims, the court responsible for administering takings claims against the United States, opined in Bowles v. United States, 31 Fed. Cl. 37 (1994), ``[j]udicial decisions are far less sensitive to societal problems than the law and policy made by the political branches of our great constitutional system. At best courts sketch the outlines of individual rights, they cannot hope to fill in the portrait of wise and just social and economic policy.'' This incoherence and confusion over the substance of takings claims is matched by the muddle over jurisdiction of property rights claims. The Tucker Act, which waives the sovereign immunity of the United States by granting the Court of Federal Claims jurisdiction to entertain monetary claims against the United States, actually complicates the ability of a property owner to vindicate the right to just compensation for a Government action that has caused a taking. The law currently forces a property owner to elect between equitable relief in the Federal district court and monetary relief in the Court of Federal Claims. Further difficulty arises when the law is used by the Government to urge dismissal in the district court on the ground that the plaintiff should seek just compensation in the Court of Federal Claims, and is used to urge dismissal in the Court of Federal Claims on the ground that plaintiff should first seek equitable relief in the district court. This Tucker Act shuffle is aggravated by section 1500 of the Tucker Act, which denies the Court of Federal Claims jurisdiction to entertain a suit which is pending in another court and brought by the same plaintiff. Section 1500 is so poorly drafted and has brought so many hardships, that Justice Stevens, in Keene Corporation v. United States, 113 S.Ct. 2035, 2048 (1993), has called for its repeal or amendment. Title II of the Omnibus Property Rights Act addresses these problems. In terms of clarifying the substance of takings claims, it first clearly defines property interests that are subject to the act's takings analysis. In this way a floor definition of property is established by which the Federal Government may not eviscerate. This title also establishes the elements of a takings claim by codifying and clarifying the holdings of the Nollan, Lucas, and Dolan cases. For instance, Dolan's rough proportionality test is interpreted to apply to all exaction situations whereby an owner's otherwise lawful right to use property is exacted as a condition for granting a Federal permit. And a distinction is drawn between a noncompensable mere diminution of value of property as a result of Federal regulation and a compensable partial taking, which is defined as any agency action that diminishes the fair market value of the affected property by 33 percent or more. The result of drawing these bright lines will not be the end fact-specific litigation, which is endemic to all law suits, but it will ameliorate the ever increasing ad hoc and arbitrary nature of takings claims. Finally, I once again want to respond to any suggestion that may arise that this act will impede Government's ability to protect the environment or promote health and safety through regulation. This legislation does not, contrary to the assertions of some, emasculate the Government's ability to prevent individuals or businesses from polluting. It is well established that the Constitution only protects a right to reasonable use of property. All property owners are subject to prior restraints on the use of their property, such as nuisance laws which prevents owners from using their property in a manner that interferes with others. The Government has always been able to prevent harmful or noxious uses of property without being obligated to compensate the property owner, as long as the limitations on the use of property inhere in the title itself. In other words, the restrictions must be based on background principles of State property and nuisance law already extant. The Omnibus Property Rights Act codifies this principle in a nuisance exception to the requirement of the Government to pay compensation. Nor does the Omnibus Property Rights Act hinder the Government's ability to protect public health and safety. The act simply does not obstruct the Government from acting to prevent imminent harm to the public safety or health or diminish what would be considered a public nuisance. Again, this is made clear in the provision of the act that exempts nuisance from compensation. What the act does is force the Federal Government to pay compensation to those who are singled out to pay for regulation that benefits the entire public. In other words, it does not prevent regulation, but fulfills the promise of the fifth amendment, which the Supreme Court in Armstrong v. United States, 364 U.S. 40, 49 (1960), opined is ``to bar Government from forcing some people alone to bear public burdens, which in all fairness and justice, should be borne by the public as a whole.'' I hope that all Senators will join me in supporting this long overdue legislation.