Orrin Hatch

Mr. HATCH

Mr. HATCH. Mr. President, I understand the concerns of my colleague from Arkansas, and also hope that we will be able to resolve these and other critical issues in conference. I will be working closely with Senator Pryor in the coming weeks on these very important legislative objectives.

Mr. HATCH. Mr. President, I, too, share the concerns of my colleague from Arkansas and see S corporation reform as an important step in helping this nation's S corporations stay competive and grow. I firmly believe that S corporation reform is long overdue, and hope that we can work through the conference process and during the rest of this legislative session, not simply to adopt the key S corporation simplification provisions that have already been included in the House bill, but also to address and include several additional provisions that are critical components of S. 758.

Mr. HATCH. Mr. President, I rise in support of the capital gains tax cut provisions in the budget reconciliation bill that lies before us today. I would like to focus my remarks on the economic effects that these provisions will have on our country. Mr. President, what often seems to get lost in all of the debate about capital gains is economics. Opponents of the capital gains tax cut seem content to promote class warfare while ignoring the economic effects of such a change. It seems to me, however, that instead of worrying about whether the so-called rich will pay less in taxes under this bill, the most important thing to focus on is how to sustain and boost economic growth so we can balance the budget and create the jobs needed by the next generation. The respected economic forecasting firm of DRI/McGraw Hill has studied our capital gains tax provisions very carefully. Their findings appear on this chart 1 following this statement. First, we should note that between now and 1999, DRI projects that about 600,000 new jobs will be created as a direct result of the capital gains provisions contained in this bill. Of paramount concern to all of us is the need to expand the job base so that no matter where one is on the ladder of success, there is opportunity to move up economically. As this chart 2 shows, most of the new job creation taking place in this country is provided by new companies and those that are in the early phases of their growth cycles. Look at the figures--while large companies are in the down-sizing mode, small and medium companies are expanding. The expanding companies are not the long established blue chippers. There is more risk involved investing in these emerging enterprises than in mature companies. By lowering the effective capital gains tax rates, the risk threshold for all investors will decrease and this will cause more equity funds to become available to companies that are in the growth stage. To illustrate this dynamic, Mr. President, consider the following facts. From 1969 to 1971, there were on average 510 new public offerings in this country per year. From 1972 to 1976, when the effective capital gains rates jumped to just over 49 percent, only 145 new public offerings occurred on average each year. When the effective capital gains rate fell to 20 percent between 1981 and 1986, the average annual new public offerings figure jumped to 577. Between 1987 and 1992, when the capital gains tax rate jumped up again to 28 percent, the number of public offerings dropped to only 431. While some growth in new company formations can be attributed to the fact that our economy was growing during those years, one wonders how much more it might have benefited if we had not increased the capital gains tax rate. Obviously, there is a relationship between the capital gains tax rate and the rate at which new companies start and grow. And, because these new and expanding companies are fueling most of our job growth--more than 70 percent of all new jobs are in small business--we can see that lowering the capital gains tax rate will increase the number of jobs in this country. Mr. President, DRI has made three other projections on chart 1. Because of the capital gains provisions in this bill, we should experience a 4.1 percent increase in our capital stock, a 5.1 percent increase in fixed investments and a 1.2 percent increase in labor productivity. What does capital stock refer to? It refers to our investment in plant, equipment, and technology. Even a ditch digger needs a shovel. While hundreds of millions of laborers around the world work for mere pennies per hour, how is it that most of our American jobs have not already been exported outside of our country? The answer is capital stock. We have one of the highest ratios in the world of capital stock per labor hour worked. In other words, for each hour a laborer works, we have more capital invested to support that worker in his or her job than most of our competitors around the world. As a result, on a per capita basis, American workers are the most productive in the world. This explains how our country grew from a predominantly agricultural economy to a predominantly manufacturing and services economy without reducing our agricultural output. It has been estimated that at the turn of the century, about two- thirds of the American work force were in farming. Today, only about 3 percent of Americans work in farming. Yet, our grocery stores and storage facilities are filled to overflowing even though the number of mouths to feed has gone up and the number of agricultural workers has gone down dramatically. But for this tremendous infusion of capital stock into the equation, our American farmers would probably be about as productive and well paid as their counterparts in China. Because of the capital investment supporting our workers, we have made their services more valuable which, in turn, has prompted higher real wage rates here than most other countries in the world. Mr. President, the critical relationship between capital stock and real wage rates is illustrated by chart 3. Note that as our capital stock grows, real wages increase almost in lock-step. Thus, it is critical that we maintain growth in both capital stock, fixed asset investment, and worker productivity. And, as the DRI projections show, the capital gains provisions of this bill will do just that. Please note, Mr. President, the DRI projection in chart 1 that our collective cost of capital will drop by 8 percent as a result of the capital gains tax reductions in our bill. Many believe that our relatively high cost of capital is a critical area of U.S. weakness when competing in the international marketplace. Thus, in passing a capital gains tax reduction, we can take a meaningful step today toward narrowing this critical competitive gap and helping all Americans in the process. It should go without saying that growth in our collective standard of living depends upon growth in our gross domestic product. Mr. President, a 1.4 percent increase in GDP in the DRI projections contained in chart 1 might not seem like very much, but when applied to a $7 trillion economy, we are talking about an additional $100 billion of growth. As can be seen from this chart 4, Mr. President, we treat capital gains more punitively than most of our major international competitors. We can also see why the competitors in the Far East are gaining on us. We need to respond to this challenge in order to enhance our international competitive position. Mr. President, much has been said about the wisdom of lowering capital gains taxes at a time when we are trying to balance the budget. In my opinion, tax cuts and balancing the budget are not mutually exclusive, especially in the area of capital gains. Before the Hatch-Lieberman capital gains proposal underwent minor changes in the Senate Finance Committee, the Joint Committee on Taxation projected that it would result in about $89 billion in lost Federal revenues over 10 years. I very much doubt that this projection will be accurate, for a couple of reasons. First, both the CBO and the Joint Committee on Taxation have a poor track record in estimating the revenue effects of capital gains tax rate changes, as can be seen from this chart. In connection with estimated capital gains realizations for 1991, CBO originally projected realizations of $269 billion while the Joint Committee on Taxation projected realizations of $285 billion. In reality, there were only about $108 billion worth of realizations for that year. In other words, the CBO was off by 60 percent and the Joint Committee on Taxation was off by 62 percent. Estimating errors of a similar magnitude were made for 1990. In this case, the Bush Treasury Department projected capital gains revenues of $48 billion, while CBO projected $53 billion for that same year. In reality, the revenue only amounted to $28 billion. The cumulative gap from 1989 to 1992 between the Bush Treasury's revenue estimates and what actually was realized totaled $85 billion. The CBO was $118 billion off the mark over the same period. The problem is that the economic models used by CBO, the Joint Committee on Taxation, and the Treasury do not adequately take into account the macroeconomic feedback effects caused by changes in the capital gains tax rates. This explains the wide divergence between their projections and reality. It is a fundamental law of economics that people respond to incentives. If we tax a good or service more, people buy or produce less of it. If we tax capital more, we get less. If we lower the tax on capital, we will create more of it. For years, the revenue estimating agencies of the Federal Government have failed to adequately account for the feedback effects of taxation. DRI has included these feedback effects in its estimate. As the DRI study indicates in chart 1, rather than the loss projected by the Joint Committee on Taxation, we should actually experience at least a $12 billion increase in Federal revenues over the next 10 years. Personally, I believe this estimate to be on the conservative side. I believe a 50-percent capital gains deduction will unlock the floodgates of capital gains realizations. There is an estimated $8 trillion in unrealized capital gains in this country. Even if this bill only unlocks a small percentage of this vast mountain of capital, we will have unleashed a tremendous force for growth in our economy. With the benefit of hindsight, it is easy to see that we made a serious mistake in raising the effective tax rates on capital gains after 1986. Chart 5 shows the foregone realizations that we missed by the 1986 capital gains tax increase. The lighter bars indicate actual realizations. Notice, Mr. President, how they drop off and stagnate after 1986 while the Standard and Poors stock index [S & P Index] continued to rise. The dark bars represent what taxable capital gains realizations would likely have occurred if they had kept pace with the S&P Index, as they did before the capital gains tax increase. This helps explain why our capital gains tax revenues have been so anemic since 1986. After jacking up the top effective capital gains tax rate by 40 percent, from 20 to 28 percent, some might have expected a similar 40 percent increase in capital gains tax revenues. However, we have only managed to generate an average of about 64 percent per year of the capital gains revenue received in 1986; 28 percent is clearly higher than the tax rate that maximizes capital gains revenues to the Treasury. Mr. President, recent history has made it clear that there is a direct relationship between capital gains tax rates and the amount of revenue from capital gains realizations received by the Treasury. Experience shows that reducing the capital gains tax rate actually increases government revenues. Consider the period from 1978 to 1985. On November 1, 1978, the top capital gains rate dropped from an effective 49 percent to 28 percent. It fell again in the middle of 1981 to 20 percent. Rather than experiencing a similar reduction in capital gains revenue, as some might predict, we saw the sharpest increase in such revenues since World War II. Annual capital gains tax receipts grew from $9.1 billion in 1978 to $26.5 billion in 1985. In other words, at the same time we experienced a 59 percent decrease in the top capital gains tax rate, our annual capital gains tax revenues increased by 191 percent. Mr. President, some of my colleagues on the other side of the aisle are, in effect, saying that no tax benefits should go to the so-called wealthy. This is ludicrous. How do we expect to attain the economic objectives that we all are seeking if the wealthy stay on the sidelines as mere spectators, rather than as active participants? Some of my colleagues seem to hold that no matter how beneficial a certain course of action is to the economy and to average Americans, that action is totally unacceptable if the rich get any benefit from it. Abraham Lincoln once observed that you cannot help the weak by weakening the strong. Likewise, we cannot help all Americans by punitively taxing wealth. Our progressive income tax already does a good job of that. Trying to craft a set of incentives that exempts from coverage the very people whose conduct is critical to the attainment of our economic goals just will not work. By giving an across-the-board capital gains tax deduction to everyone alike, we will encourage an efficient reallocation of resources in such a way as to stimulate economic growth for all Americans. As I mentioned earlier, at stake in all of this is about $8 trillion of locked-in capital gains, which if unlocked, would produce substantial revenue gains to the Treasury, as well as create more jobs and economic growth for all Americans. Let me close Mr. President, with a real-life example that indicates that all of the economic principles I have talked about actually work and are not just theories that sound good. As a division of a major parent company, Sungard Data Systems had $30 million in annual sales but was losing money. The parent company decided to sell this division. Venture capitalists believed that they could turn things around and return Sungard to profitability. The new buyers were correct. After the sale, the new management generated over $440 million in revenues and about $70 million in operating income. What used to be a 400-employee division before the sale turned into a 2,400-employee company after the sale. This represents a 500-percent increase in jobs. Did the rich venture capitalists get richer from all of this? Of course they did. But most importantly, 2,000 people had good jobs that did not exist before. This is the way our economy has always worked. This is America, where it is possible to create wealth for oneself by investing one's sweat, one's brains, and taking a risk. By so doing, the risk taker creates wealth and opportunity for those around him or her. Now is not time to abandon the economic principles that made this country the greatest economic powerhouse the world has ever known. Mr. President, I urge all of my colleagues to vote in favor of the tax package reported out of the Finance Committee. Mr. President, I ask unanimous consent that items referred to above be included in the Record.

Mr. HATCH

Mr. HATCH. Mr. President, we need to consider some very important facts concerning the fairness of the capital gains tax rate reduction in the reconciliation bill before us. We have heard some statements here on the Senate floor over the past few days by some of our colleagues who believe that a broad-based capital gains tax rate reduction somehow favors the rich at the expense of middle- and lower-income taxpayers. I want to set the record straight on this issue. Who pays capital gains taxes? First, Mr. President, let us start by examining who pays capital gains taxes in this country. The fact of the matter is that most of the tax returns reporting capital gains come from taxpayers in the lower- and middle-income categories. Since there are varying views as to where the middle-income category begins and ends, I have prepared two pie charts contained within chart 1 to illustrate who these taxpayers are. The pie on the left shows that, on average, from 1985 to 1992, 62 percent of all returns reporting capital gains came from those reporting $50,000 or less of adjusted gross income [AGI]. I repeat, 62 percent. This amounted to more than 5\1/2\ million taxpayers per year. The pie on the right, Mr. President, shows the same information for taxpayers with higher incomes, but still within what most would consider as the middle-income category. As you can see, 79 percent of all returns reporting capital gains came from those reporting $75,000 or less of AGI. On average, this was over 7 million taxpayers per year. Capital gains realization is hardly the exclusive domain of the rich. Actually, these figures dramatically understate the number of people in the lower- and middle-income categories who will benefit from the capital gains deduction. It is estimated that about 44 percent of all people reporting capital gains recognize such gains in only 1 out of 5 years, on average. In 1986 alone, of the 7.6 million returns reporting capital gains, 3.1 million of these taxpayers reported no capital gains in the previous year. The ``Occasional Recognition Phenomenon'' Since many taxpayers do not have capital gains each year, it is obvious that there are millions more of lower- and middle-income taxpayers than this chart indicates who will benefit from a lower capital gains tax rate. This occasional recognition phenomenon also illustrates why the numbers cited for the rich are consistently overstated by capital gains tax cut opponents. By only looking at 1-year segments, capital gains tax cut opponents erroneously conclude that once a taxpayer experiences an unusually large capital gains recognition in a particular year, he or she will stay in the rich category forever. Such is simply not the case. Take, for example, a typical farming couple in Cache County, UT, who has struggled over the years to make ends meet and finally decides to sell the farm and move to the warmer climate of southern Utah. Even though this couple may never have reported more than $30,000 of farming income in any given year, in that 1 year of sale they will be lumped in with the rich because they reported a $250,000 of gain on the sale of their farm. To conclude that this couple is rich because they realized a large capital gain in only 1 year of their life is ridiculous. Yet, this is exactly the basis for many of the statistics given by my friends on the other side of this issue. One study looked at those reporting over $200,000 of income per year from 1981 to 1984. Taking just single-year snapshots of the realizations, such taxpayers accounted for almost 40 percent of all capital gains reported. However, when the entire 4-year period was considered as a whole and the occasional nature of recognitions was taken into account, their proportional share dropped to just 22 percent. Thus, the more years that are included in the comparison, the smaller the share of gains going to the so-called rich. Let me repeat, Mr. President, studies that show lower- and middle- income taxpayers who receive an occasional larger capital gain as being rich are misleading. Opponents ignore benefit to lower- and middle-class taxpayers Now, I am the first to admit that some who are truly wealthy will benefit from a lower capital gains tax rate, and rightly so, as I will discuss in a few moments. However, the impact of the benefits of a capital gains tax cut to the wealthy are greatly overstated, while the positive benefits to lower- and middle-income taxpayers are mostly ignored by those who oppose this change. For example, a Treasury Department study estimates that nearly half of the dollar value of all capital gains are reported by taxpayers reporting wage and salary income of $50,000 or less. Moreover, the same study estimates that three-fourths of all tax returns with capital gains are filed by taxpayers with wage and salary income of less than $50,000. Yet, to listen to capital gains tax opponents, one could conclude that only the rich would be affected by a lower rate. Mr. President, to get a better feel for how many lower- and middle- income taxpayers will actually benefit from the capital gains deduction in this bill, consider the following. It is estimated that about 12 million lower- and middle-income workers participate in some sort of stock equity plans with their employers--12 million. Moreover, many millions of Americans own investments in stocks, bonds, and mutual funds. In fact, as of September 1994, there were 93.6 million mutual fund accounts in America. It is interesting to note that 52 percent of the 30.2 million families owning mutual funds report incomes of $50,000 or below and that 80 percent of those families report incomes of $75,000 or below. This is middle America. This is the teacher who married the police officer planning for their future. In addition, millions of people in the lower- and middle-income categories own homes and rental properties that could be subject to capital gains taxes upon sale. This bill will benefit all of these taxpayers. Capital gains tax rate differentials Mr. President, it is well known that in 1986, Congress raised the capital gains tax rates on the rich, from a 20-percent top rate to a 28-percent top rate. What is lesser known, however, is that we raised capital gains taxes on middle-income taxpayers as well. For example, a family of four earning the median income saw a 50- percent increase in their capital gains tax rate. A family of four earning twice the median income--and these would be the upper middle class rather than the rich--saw a 47 percent increase in their capital gains tax rate. In 1990, Congress once again created a differential between the top tax rate on capital gains income and the top tax rate for ordinary income. By putting in a new 31 percent bracket, but keeping the top rate on capital gains income at 28 percent, we once again began to favor capital gains income--for some. The differential was further increased in 1993 when Congress created the 36 and 39.6 percent tax brackets and again capped the capital gains tax rate at 28 percent. The result is that taxpayers in the highest brackets currently enjoy a lower rate on capital gains, but those in the 15 percent and 28 percent brackets do not. As you can see from chart 2, Mr. President, this bill remedies this situation by giving those in the lowest tax brackets the largest percentage reductions in their effective capital gains tax rates. Note that the wealthiest Americans will get only a 25-percent decrease in their effective capital gains tax rates, while those in the lowest tax brackets will enjoy a full 50-percent reduction. Not only will large investors receive incentives to create jobs, but this relief will now be enjoyed by smaller investors as well. It is high time that lower- and middle-income families get some meaningful capital gains tax relief. For the first time in years, lower-income taxpayers will enjoy single digit rates of taxation on their capital gains. Inflation One of the best reasons for a cut in the capital gains tax rate is that a sizeable portion of all capital gains reported are caused by inflation. In fact, economists estimate that on average, about half of all capital gains are inflationary in nature. Mr. President, I have never heard anyone try to argue that taxing inflationary gains is fair--either for the rich or for anyone else. There is simply nothing fair about having to pay tax on inflationary gains. In fact, a tax on inflationary capital gains is not a tax on income at all or even on the increase in the real value of the asset. It is purely a tax on capital, very much like the property tax, but assessed only when the property is sold. This bill helps to ameliorate inflationary gains by providing a 50- percent capital gains deduction. In most cases, this should effectively nullify the tax on the inflation element. This is fair tax treatment-- for everyone. Tax distribution Many of my colleagues on the other side of the aisle have expressed concern that the dollar amounts of a capital gains tax cut will go disproportionately to those in the highest tax brackets. Let me make three points about this, Mr. President. First, despite the continual rantings and ravings by liberals about tax breaks for the rich, our tax system has gotten more and more progressive over the past years, as illustrated by chart 3. Note that in 1993, the top 1 percent of all taxpayers paid almost 29 percent of all income taxes while the bottom 50 percent of all taxpayers paid less that 5 percent. Since 1980, our income tax system has gotten much more progressive. If capital gains tax cut opponents think our system is so drastically unfair, I want to ask them a question: If these percentages do not satisfy you, what percentages will? Second, many millions of American families currently pay no Federal income taxes at all. It makes little sense to talk about these people in terms of tax relief. A hundred percent of zero is still zero. By definition, it is impossible to give income tax relief to those who pay no income taxes in the first place. If we want to talk about taking from higher-income taxpayers and giving to lower-income taxpayers, let us call it what it really is--welfare. Third, opponents of capital gains tax relief must assume that wealthier taxpayers who realize capital gains take the money and bury it in the back yard or stuff it into a mattress. Opponents ignore the fact that this money is almost always immediately put back into the economy, where it goes to work creating jobs and adding to investment capital available for business creation or expansion. The ultimate fairness of the cut in the capital gains tax is that economic and job opportunities will be enhanced for all Americans because of this bill. In conclusion, Mr. President, for the reasons cited in chart 4, I firmly believe that the capital gains tax cut provisions in this bill are fair. They are fair for all American families because all American families will derive a great deal of benefit from them. I sincerely hope that my colleagues will take the time to consider the points I have made and vote in favor of this much-needed reform to our tax law. The bottom line, as I see it, is that our current capital gains tax rates are an effective tax on initiative, investment, and planning ahead--all things that we say we should encourage people to do. It is time for our tax policy to reflect our national values. Mr. President, I ask unanimous consent that the two tables referred to in my statement be printed in the Record.

Mr. HATCH

Mr. HATCH. Mr. President, could I yield to the distinguished Senator from Kentucky?

Mr. HATCH. I do. Is the Senator intending to offer it on this?

Mr. HATCH. I would like the Senator to withhold. We are looking into adding additional judgeships. I believe before long, in the next year, we will probably pass a bill to add additional judgeships.

Mr. HATCH. I appreciate that. I understand. I hope the Senator will withhold because I will certainly give every consideration to this and solving it in an expeditious manner.

Mr. HATCH. Let us chat about it. Let us see what we can do.

Mr. HATCH. Mr. President, reserving the right to object. It is one thing to ask for the yeas and nays. We are not prepared to vote on this amendment. So I object.

Mr. HATCH. I move to lay that motion on the table. The motion to lay on the table was agreed to. amendment no. 2943, as modified

Mr. HATCH. Will the Senator yield?

Mr. HATCH. If I can make a suggestion, I suggest we have a vote up or down on the Senator's amendment. I intend to support him. I think we should do that right now. I notice the distinguished Senator from Iowa is ready to speak on the underlying bill. The distinguished Senator from Kentucky, the minority whip, has an amendment he would like to bring up. So I am prepared to go to a vote if we can. Several Senators addressed the Chair.

Mr. HATCH. Mr. President, I also suggest we have this vote up or down, and I agree this amendment should be defeated. We should not be voting for the President's budget, which has $200 billion in deficits, ad infinitum. It is not realistic about getting spending under control, and I think, once and for all, that we can vote on this issue.

Mr. HATCH. Mr. President, I suggest that we are prepared to vote.

Mr. HATCH. Have the yeas and nays been ordered?

Mr. HATCH. I would be happy to.

Mr. HATCH. Mr. President, I am pleased that the Senate is taking up S. 1328, a bill that amends the commencement dates of certain temporary judgeships that were created under section 203(c) of the Judicial Improvements Act of 1990 [Public Law 101-650, 104 Stat. 5101]. The minor adjustment embodied in this bill should improve the efficiency of the courts involved. This is not a controversial change, but it is a necessary one. I am pleased to have Senators Biden, Grassley, Heflin, Specter, Simon, DeWine, Feinstein, and Abraham as original cosponsors of this bill. I also want to thank the Administrative Office of the U.S. Courts and the fine Federal judges, particularly Chief Judge Gilbert of the southern district of Illinois, who called to my attention the need for this legislative fix--and the need for it to be passed before December 1, 1995. The Judicial Improvements Act of 1990 created the temporary judgeships at issue in two steps. First, the 1990 act provided that a new district judge would be appointed to each of 13 specified districts. Second, the act then provided that the first vacancy in the office of a district judge that occurred in those districts after December 1, 1995 would not be filled. That two-step arrangement, which is typical in temporary judgeship bills, is required in order to ensure that the judge filling a temporary judgeship is still a full-fledged, permanent, article III judge in accordance with the Constitution. Thus, although a new judgeship in a given district has only a temporary effect, the individual judge appointed serves on a permanent basis in the same manner as any other article III judge. It is the time between the appointment of a judge to a temporary judgeship and the point at which a vacant permanent judgeship is left unfilled that is key. That overlap is what effectively adds another judge to the district for a temporary period of time. The 1990 act created the temporary judgeships in the following 13 districts: the northern district of Alabama, the eastern district of California, the district of Hawaii, the central district of Illinois, the southern district of Illinois, the district of Kansas, the western district of Michigan, the eastern district of Missouri, the district of Nebraska, the northern district of New York, the northern district of Ohio, the eastern district of Pennsylvania, and the eastern district of Virginia. However, due to delays in the nomination and confirmation of many of the judges filling those temporary judgeships, many districts have had only a relatively brief period of time in which to take advantage of their temporary judgeship. In the district of Hawaii and the southern district of Illinois, for example, new judges were not confirmed until October 1994. Other districts have faced similar delays. Those delays mean that many of the temporary judgeships will be unable to fulfill congressional intent to alleviate the backlog of cases in those districts. Many of the districts faced a particularly heavy load of drug enforcement and related matters. Those cases will not be absorbed adequately if the first judicial vacancy that occurs in those districts after December 1, 1995 must go unfilled. This bill solves the problem by changing the second part of the temporary judgeship calculus. The bill provides that the first district judge vacancy occurring 5 years or more after the confirmation date of the judge appointed to fill the temporary judgeship would not be filled. In that way, each district would benefit from an extra active judge for at least 5 years, regardless of how long the appointment process took. This will help alleviate the extra burden faced in those districts. The only district excluded from this treatment is the western district of Michigan. That district requested to be excluded because its needs will be met under the current scheme. I also note that the judges from the affected districts have requested that this bill be enacted before December 1, 1995. After that date, some vacant judgeships will be unable to be filled under current law. That is why this bill has some urgency. And that explains why the bill [[Page S 15539]] has not gone to the Judiciary Committee, but was placed directly on the calendar. I wish to clarify that for the benefit of my colleagues, who may not be so familiar with this measure, and who may have wondered why that was done. As the list of original cosponsors shows, the Judiciary Committee supports the substance of this bill. I also note that there was no opposition from any Senator on the Judiciary Committee to placing S. 1328 on the calendar directly. I see no reason for a prolonged debate on this noncontroversial measure, and I commend my colleagues on both sides of the aisle who have cooperated in moving this measure along. I should also note that no one should confuse this bill with the Judicial Conference's request to Congress for additional judgeships. No one has yet to introduce that bill, and its merits have yet to be considered by the Judiciary Committee. Finally, although this bill is needed because Congress in 1990 underestimated the timeframes involved in the confirmation process, the need for this bill is in no way a reflection on the speed with which Senator Biden, when he was chairman of the Judiciary Committee, or I as the current chairman, have proceeded with the judicial confirmation process. This bill would have been necessary regardless of who was chairman of the Judiciary Committee. The nomination and confirmation process is a deliberate undertaking. It has been my aim to have the Judiciary Committee process judicial nominees in a manner that is thorough, but also fair and expeditious. Since January 1995, 8 circuit judges, 28 district court judges and 2 judges of the Court of International Trade have been confirmed. Of the judicial nominees confirmed this Congress, it has taken only 70.85 days from the date a judge is nominated to the date he or she is confirmed by the full Senate. That amounts to a speedier confirmation process in the Senate than occurred even when the Democratic Senate was charged with confirming Clinton nominees. The committee has carried out what is arguably its most important task fairly and diligently in this session of Congress. The upshot of this is that the courts are currently operating at nearly optimal levels. For example, there are only 11 unfilled circuit court seats in the Nation out of 179 permanent circuit court judgeships. Adding both circuit and district court vacancies, there are only 57 vacancies unfilled out of the 828 judges of the Federal judiciary. This means that only 7 percent of all seats on the Federal bench are vacant. When pending nominees are excluded, only 33 seats are open--just 5 percent of all seats. While we intend to be very thorough in our consideration of nominees for lifetime judicial appointments, we recognize the priority of this constitutional mandate on the Senate. I wish to thank my colleagues on the Judiciary Committee and in the Senate as a whole for their cooperation in the confirmation process, and I commend them for their accomplishments in this regard this Congress.

Mr. HATCH. Perhaps we may be able to do something before then.

Mr. HATCH. Will the Senator yield? [[Page S 15547]]

Mr. HATCH. I move the bill.

Mr. HATCH. If the Senator will yield, we understand the Senator's problem and we are concerned about it. As of right now, there is a real question as to whether we can justify another judge in that State. But I am willing to talk with the Senator and try to work this out, if we can, over the immediate future and see if there is some possible way we can solve it. If there is not, we will be straight up with the Senator and let him know, but I am willing to try to see what we can do. We would like to pass this bill because it is a temporary judgeship bill that, really, nobody has any objections to, and that literally will solve a lot of very important problems for the courts. We would like to do it without amendment if we can.

Mr. HATCH

Mr. HATCH. Mr. President, I ask unanimous consent that the Subcommittee on the Administrative Oversight and the Courts of the Committee on the Judiciary, be authorized to meet during the session of the Senate on Tuesday, October 24, 1995, at 10 a.m., in the Senate Dirksen Building room 226 to hold a hearing on S1101, Federal Courts Improvement Act.

Mr. HATCH. Mr. President, I ask unanimous consent that the Select Committee on Intelligence be authorized to meet during the session of the Senate on Tuesday, October 24, 1995, at 5 p.m. to hold a closed conference with the House Permanent Select Committee on Intelligence on the fiscal year 1996 intelligence authorization bill (H.R. 1655).

Mr. HATCH

Mr. HATCH. Madam President, I stand here today to strongly support S. 1322, the Jerusalem Embassy Relocation Act of 1995. I wish to commend the majority leader for his efforts in introducing this bill. I also wish to commend the efforts of Senator Kyl and a number of my Democratic colleagues for ensuring that we possess a bill that will have, I hope, unanimous support here in the Senate. The issue of Jerusalem has been debated on this floor for over a decade. I have always believed that Jerusalem is the capital of Israel, and I believe that now is the time for the United States Congress to recognize this reality. That is why I signed the letter to Secretary Christopher on March 20, 1995--along with 92 of our colleagues--that declared that ``we believe that the United States Embassy belongs in Jerusalem.'' I understand that this legislation has been modified to address concerns that we may be restricting the President's foreign policymaking powers. With these modifications, I 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: Of the diplomatic relations we hold with over 180 nations around the world, Israel is the only country in which our Embassy is not in the capital. I have been and remain a strong supporter of the Middle East peace process. But through the years of my support, I have always maintained that the policy process must be driven by the participants, and that the United States' role is to support, not dictate, the terms of the negotiations. Israel has made some courageous concessions over these negotiations. It has waged a fight for peace that has been, on some days, as bloody as its previous wars. Next year will begin the ``Final Status'' negotiations. There has been much positioning by certain parties over the future of Jerusalem. But Israeli governments have not vacillated over this issue, and their position has always been clear: Jerusalem is the seat of the Israeli Government, and Jerusalem shall remain the united capital of Israel. This is the conviction of the Israeli Government, the only democratic state and our most valuable ally in the region. This should be our conviction now. Our ambivalence beyond this point will only muddle, and I believe frustrate, the final status negotiations. The parties must set the terms, and we must not confound expectations by perpetuating the anomaly of the U.S. Embassy in Tel Aviv. If we wish to continue supporting the peace process, and I firmly believe we should, then we must make clear that it is the policy of the U.S. Government to have its Embassy in Jerusalem by the conclusion of the peace negotiations at the end of this century. Jerusalem just celebrated its 3,000th anniversary. Let us now declare that the U.S. Embassy will reside in that holy city by the end of this troubled 20th century. Let us now pass resoundingly S. 1322.