Chuck Hagel

Mr. HAGEL

Mr. HAGEL. Mr. President, I advise my colleagues to support Senator Reed's amendment. I rise to support the Reed amendment because, in fact, everything he has said about why it is important to enhance and enlarge our force structure is exactly right. Force structures are not developed over a year, 2, 3, or 4. Force structures are developed over a long period of time. When we are looking at 125,000 activated National Guard and Army Reserve units now, and probably more to be activated, we cannot sustain that kind of activity for the long term. That means we are going to have to face up to reality--what the Senator from Rhode Island is talking about--and that is enlarge that force structure. Currently in Afghanistan, Iraq, and the Balkans, almost in the entire military police force, our civil affairs force is made up of National Guard and Army Reserves. We cannot sustain that situation. We need more light infantry; we need more special forces; and we cannot do this on the cheap. As the President of the United States has said, this is a long-term commitment, not just in Afghanistan and Iraq, but the challenges that face us in the 21st century are new challenges, different kinds of challenges that will require different force structures. That means we cannot use just laser-guided munitions. Someone has to govern--nation building--exactly what we are doing in Afghanistan and Iraq. I know this is imperfect. This maybe is not the exact way to do this, but it is something this body, this Congress, this Nation needs to face up to, and they need to face up to it now. I hope my colleagues take a serious look at this amendment. As my colleague from Rhode Island said, this does not come out of the President's $87 billion package. I yield the floor.

Mr. HAGEL

Mr. HAGEL. Mr. President, I rise to express my sympathy over the loss of Christopher Swisher, a fellow Nebraskan and staff sergeant in the United States Army. Sergeant Swisher was killed last week when his squadron was attacked while on a mission in Baghdad, Iraq. He was 26 years old. Sergeant Swisher was one of thousands of brave American servicemen and women fighting in Iraq. Our soldiers confront danger everday--their tremendous risks and sacrifices must never be taken for granted. A Lincoln native, Sergeant Swisher was a dedicated soldier who was committed to his family and country. His life-long interest in the military led him to overcome a learning disability and embark on a successful career in the Army. On the frontlines of the war in Iraq, Sergeant Swisher demonstrated the courage of a leader and an American hero. Before his deployment, Sergeant Swisher told his mother, Sharon; ``I'm doing what I want to be doing because I'm protecting my family, my home, and my country.'' In addition to his mother, Sergeant Swisher leaves behind a wife, Kristen; daughter, Alexandria; brother, Terry; and sister, Lisa. Our thoughts and prayers are with them all at this difficult time. For his service, bravery, and sacrifice, I ask my colleagues to join me and all Americans in honoring SGT Christopher Swisher.

Mr. HAGEL

Mr. HAGEL. Mr. President, today is a day for remembrance and reflection. The attacks of September 11, 2001, affected all Americans as individuals, as families, and as a Nation. On that day, 2 years ago, I told the Omaha World Herald: ``America is forever changed.'' We remember today those who died 2 years ago in New York, at the Pentagon, and in Pennsylvania, as well as those who have since lost their lives to terrorism in Iraq, Afghanistan, Indonesia, Saudi Arabia, Israel, Jordan, Pakistan, the Philippines, Yemen, and elsewhere. Their sacrifices and service should reinforce our commitment to defeating this new scourge of mankind. History has allowed America no quarter from the heavy burdens of leadership. The post-cold-war era of the 1990s now seems like an interlude between two epoch challenges: the cold war and the war on terrorism. Just as previous American generations defeated Nazi tyranny and contained Soviet expansion, today's war on terrorism requires new thinking, commitments, sacrifices, and responsibilities by a new generation of Americans. Americans can take pride in the courage and determination we have shown over the last 2 years. Our young men and women have participated in the liberation of Iraq and Afghanistan from brutal tyrannies, and we continue to kill and capture al-Qaida leaders and terrorists and disrupt their cells and networks worldwide. Our Foreign Service officers, policemen, firefighters, and health and immigration professionals are on the front lines, at home and abroad, in keeping our homeland safe. Their roles have been redefined, along with our understandings of personal and collective security. These are battles joined but not yet won. Two years is but a blip in the span of generations. America is still finding its way, seeking a new center of gravity and balance between power and purpose in world affairs. America must approach its foreign policy with a principled realism that reflects our values, acknowledges the realities and challenges we face worldwide, and conveys an awareness of the costs and consequences of our actions. Decisions made today will have global implications for years to come, at a time when there is very little margin for error. America is playing for the next generation around the world. The battle against terrorism cannot be considered in a vacuum from the breeding grounds of poverty and despair in the Islamic world. We need to turn the tide in our favor. Our military power and policies must be balanced with a nobility of purpose that conveys America's commitment to helping make a better world for all people. The perception of American power will either enhance or diminish our influence, trust, and respect in the world. America's success will be determined not only by the extent of its power but by a judicious and wise use of it. America must enhance its relationships, not just its power. And America should not meet those world challenges alone. At these historic junctures, international alliances and institutions will change and be redefined, as events unfold and realities demand. America must lead in reshaping these alliances, institutions, and relationships that have helped support peace and prosperity since World War II. America's interests are not mutually exclusive from the interests of our friends and partners. Our actions abroad cannot be separated from our priorities at home. I have spoken across the country and to many Nebraskans about their concerns of the costs of the war on terrorism and building Iraq and Afghanistan at the expense of America's economy, health care, agriculture, and environment. But we have to understand all of this is connected. Our commitments abroad will require resources and sacrifices. But America cannot prosper at home in the absence of security and stability abroad. Issues critical to Nebraskans, to America, such as trade and economic growth, do not flourish in conflict; they wither and die. In thinking of the post-9/11 world, I think of my children and the world that they and all of our children will inherit. The stakes could not be higher. Today America looks upon a world of danger, of risk, but yet opportunity. The world looks upon an America that stands astride the globe as no other nation in history. How will the future of the world play out? That is up to us. The world is made up of 190 nations. These 6.2 billion people represent many religions, cultures, traditions, histories, and ideas. But there is a fundamental common denominator among all people--the desire to be free. America's course in the world will be guided by the hallmarks of our national character: courage, compassion, humility, and respect for others. The memory of September 11, 2001, will focus our prayers, lift our spirits, and renew our purpose. That is the way those Americans who gave their lives on that day would have wanted it. Mr. President, I yield the floor and suggest the absence of a quorum.

Mr. HAGEL

Mr. HAGEL. I request 4 minutes.

Mr. HAGEL. Mr. President, I rise tonight in support of an amendment I have offered, along with my colleagues, Senators Dodd and Jeffords and others, to increase funding for the Individuals with Disabilities Act, IDEA, part B, by an additional $1.2 billion in fiscal year 2004. This amendment would bring the total IDEA fiscal year 2004 increase to $2.2 billion, which was the level approved by the Senate in the fiscal year 2004 budget resolution earlier this year. For the past 3 years, I have worked with Senators Harkin, Dodd, Jeffords, and many of my Republican colleagues to increase funding for IDEA. I have argued that no education funding priority is as important or will do more for States in this time of budget crisis than meeting our Federal commitment to IDEA. As we all know, in 1975 Congress guaranteed children with disabilities the right to free and appropriate education. This meant that, whatever the cost, States and local school districts would be mandated by Federal law to provide the necessary services to educate a child with a disability. Congress understood that this Federal mandate would be costly. As a result, they agreed to provide States with 40 percent of the cost of educating these children. That was almost 30 years ago. Unfortunately, Congress has not kept its end of the deal. While our schools continue to meet the necessary requirements under IDEA year after year, they also bear more than their fair share of the costs for complying with this law. Today, the Federal Government's commitment to IDEA is only 18 percent. As in years past, I offered legislation with Senator Harkin and others to ensure that the Federal Government provides for special education by making funding increases for this program mandatory. But we will have this discussion on mandatory versus discretionary funding for this program when we take up the IDEA reauthorization legislation later this year. We are here today because, again, as years in the past, this appropriations bill has failed. We failed to keep our funding proposition. That is why we need this amendment. The fiscal year 2004 budget resolution approved by this body allowed for a $2.2 billion increase for IDEA, part B funding. Unfortunately, the Senate Appropriations Committee underfunded this program, only providing an increase of $1 billion. The Dodd-Hagel-Jeffords amendment provides an additional $1.2 billion for IDEA, meeting the approved budget increase of $2.2 billion already approved this year. Additionally, the amendment would put us on a realistic path to reaching our obligation to provide States and local school districts with 40 percent of the cost of educating children with disabilities. This is the responsible thing to do. I ask my colleagues to support this amendment when it comes up for a vote tomorrow morning. Mr. President, I thank you and yield the floor.

Mr. HAGEL

Mr. HAGEL. Mr. President, I rise today to introduce, along with my colleagues Senator Sununu and Senator Dole, the Federal Enterprise Regulatory Reform Act of 2003. This is needed regulatory reform at a critical time for the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). There is no doubt that our housing government sponsored enterprises (GSEs) have been successful in carrying out their mission of creating a secondary market for home mortgages. The housing market has remained strong through tough economic times, and homeownership in this country is at an all-time high. The housing GSEs, however, are uncommon institutions with a unique set of responsibilities and stakeholders. Fannie and Freddie are chartered by Congress, limited in scope, and are subject to Congressional mandates, yet they are publicly traded companies with all the earnings pressure that Wall Street demands. Additionally, Fannie and Freddie enjoy an implicit guarantee by the Federal Government that has aided them in developing substantial clout on Wall Street. With their influence in the markets, their ability to raise capital at near- Treasury Bill rates, and their use of the most sophisticated portfolio management tools, Fannie and Freddie today are no longer simply secondary market facilitators for mortgages. Freddie Mac's recent disclosure of management failures and accounting deficiencies resulting in upwards of $4.5 billion in understated earnings precipitated the need for Congress to exercise its oversight of the GSEs. The Senate Banking Committee has held one hearing already and more are planned after our August recess. If we are to continue to provide GSEs with the framework to operate under an implied government backing, I believe that they should be held to a higher standard than private organizations and subject to more scrutiny than the private sector. Furthermore, I believe it is possible to realign oversight and operating rules for Fannie and Freddie without jeopardizing the strong housing market that America enjoys today. It is my view that the Office of Federal Housing Enterprise Oversight (OFHEO) has not been given the tools needed to effectively regulate Fannie Mae and Freddie Mac. Our legislation would create a new, stronger regulator in the Department of the Treasury. Treasury regulates banks and other financial institutions through the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS), and it has the experience and expertise needed to supervise Fannie Mae and Freddie Mac. Our bill also would provide the new regulator with enhanced regulatory flexibility and enforcement tools like those afforded to OCC and OTS. Furthermore, the bill would: give OFES oversight of Fannie Mae and Freddie Mac's ``mission'' as well as safety and soundness; give OFES authority to regulate the type and amount of non-mission related assets Fannie Mae and Freddie Mac can hold; give OFES enhanced enforcement powers much like those of other financial regulators; fund OFES through assessments instead of through Congressional appropriations; require several government studies, including one on the risk implications of GSEs purchasing their own mortgage backed securities, one on the feasibility of merging OFES with the Federal Housing Finance Board (FHFB), and one on the feasibility of consolidating OFES with the Office of Thrift Supervision (OTS). This reform is important to restoring and maintaining the confidence that investors and the markets require. In light of the recent problems at Freddie Mac, it is even more important. I urge my colleagues to support this reform effort and invite them to cosponsor our bill. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. HAGEL

Mr. HAGEL. Mr. President, I rise today to introduce, along with my colleagues Senator Sununu and Senator Dole, the Federal Enterprise Regulatory Reform Act of 2003. This is needed regulatory reform at a critical time for the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). There is no doubt that our housing government sponsored enterprises (GSEs) have been successful in carrying out their mission of creating a secondary market for home mortgages. The housing market has remained strong through tough economic times, and homeownership in this country is at an all-time high. The housing GSEs, however, are uncommon institutions with a unique set of responsibilities and stakeholders. Fannie and Freddie are chartered by Congress, limited in scope, and are subject to Congressional mandates, yet they are publicly traded companies with all the earnings pressure that Wall Street demands. Additionally, Fannie and Freddie enjoy an implicit guarantee by the Federal Government that has aided them in developing substantial clout on Wall Street. With their influence in the markets, their ability to raise capital at near- Treasury Bill rates, and their use of the most sophisticated portfolio management tools, Fannie and Freddie today are no longer simply secondary market facilitators for mortgages. Freddie Mac's recent disclosure of management failures and accounting deficiencies resulting in upwards of $4.5 billion in understated earnings precipitated the need for Congress to exercise its oversight of the GSEs. The Senate Banking Committee has held one hearing already and more are planned after our August recess. If we are to continue to provide GSEs with the framework to operate under an implied government backing, I believe that they should be held to a higher standard than private organizations and subject to more scrutiny than the private sector. Furthermore, I believe it is possible to realign oversight and operating rules for Fannie and Freddie without jeopardizing the strong housing market that America enjoys today. It is my view that the Office of Federal Housing Enterprise Oversight (OFHEO) has not been given the tools needed to effectively regulate Fannie Mae and Freddie Mac. Our legislation would create a new, stronger regulator in the Department of the Treasury. Treasury regulates banks and other financial institutions through the Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS), and it has the experience and expertise needed to supervise Fannie Mae and Freddie Mac. Our bill also would provide the new regulator with enhanced regulatory flexibility and enforcement tools like those afforded to OCC and OTS. Furthermore, the bill would: give OFES oversight of Fannie Mae and Freddie Mac's ``mission'' as well as safety and soundness; give OFES authority to regulate the type and amount of non-mission related assets Fannie Mae and Freddie Mac can hold; give OFES enhanced enforcement powers much like those of other financial regulators; fund OFES through assessments instead of through Congressional appropriations; require several government studies, including one on the risk implications of GSEs purchasing their own mortgage backed securities, one on the feasibility of merging OFES with the Federal Housing Finance Board (FHFB), and one on the feasibility of consolidating OFES with the Office of Thrift Supervision (OTS). This reform is important to restoring and maintaining the confidence that investors and the markets require. In light of the recent problems at Freddie Mac, it is even more important. I urge my colleagues to support this reform effort and invite them to cosponsor our bill. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. HAGEL

Mr. HAGEL. Mr. President, I rise today to discuss S. 1464, legislation I recently introduced with Senator Dorgan to provide a capital gains tax incentive to agricultural producers on the sale of their farm or ranch land. Agriculture is a vital engine that helps drive this Nation's economy. But this engine is only as powerful as the next generation of producers. The relentless financial problems facing the agricultural sector, particularly for beginning farmers, are daunting. It is often difficult for beginning farmers to compete for land with large capital- based operations. S. 1464 helps level the playing field by easing the transfer of land between the old and new generations of farmers and ranchers. S. 1464, the Beginning Farmers and Ranchers Tax Incentive Act, would provide all agricultural producers selling their property to a beginning farmer or rancher a 100-percent reduction of their capital gains tax rate. Producers selling their land to someone who pledges to keep the land in agricultural production would receive a 50-percent reduction of their capital gains taxes. All producers selling their land would receive an automatic 25-percent reduction of their capital gains taxes. These incentives would encourage repopulation of the rural landscape with a new generation of young, energetic agricultural producers. Family farmers and ranchers often do not benefit from some tax incentives already in place for other Americans. In 1997, Congress enacted a $500,000 capital gains tax exclusion for home sales. Unfortunately, this provision often does not benefit family farmers since their homes are typically included as part of the larger farmstead. S. 1464 would correct this inequity by extending the $500,000 exclusion to farmers and ranchers. It is imperative that we do more to ensure that beginning farmers and ranchers are given opportunities to succeed in strengthening rural communities. S. 1464 helps do this by reducing the tax burden on retiring farmers and ranchers, so that the continuity of agricultural production remains unbroken from one generation to the next.

Mr. HAGEL

Mr. HAGEL. Mr. President, I rise today to support the U.S.-Chile and U.S.-Singapore Free Trade Agreements, which are now before the Senate. These agreements are the first to be considered under the expedited Trade Promotion Authority, TPA, procedure that Congress passed last year. Ratification of these agreements will provide significant benefits to agricultural producers and the U.S. economy. Strong bipartisan votes will send an important message that the U.S. Congress is strongly committed to growing the U.S. economy and helping American farmers and workers succeed in an ever-growing competitive global marketplace. Both the U.S.-Singapore and U.S.-Chile free trade agreements will level the playing field for U.S. products and farm goods. Specifically, both agreements will eliminate the use of subsidies on agricultural exports, a major step forward for U.S. agriculture in WTO negotiations. There is a clear link between a healthy agricultural sector and trade. More than 43,000 Nebraskans hold jobs related to agriculture exports. Nebraska ranks fourth nationally in exports of agricultural products-- an estimated $3.14 billion in 2002. In 2002, Nebraska farmers and ranchers saw increased international sales of corn, soybeans, and wheat, and depend on the ability to export their products to the rest of the world for continued growth. The U.S.-Singapore free trade agreement will strengthen an important relationship and serve as our first free trade agreement with an Asian nation. Singapore is a critical ally in Southeast Asia in the global war on terrorism. Singapore is also an important economic ally. It is our 12th largest trading partner. This free trade agreement will provide expanded opportunities for trade and investment and will increase job opportunities here at home. It will benefit American firms in many sectors, including those in the banking/financial industry and in professional services. Under the agreement, 100 percent of U.S. goods and 92 percent of Singaporean goods will have duty-free status immediately. The free trade agreement further ensures that Singapore cannot increase its duties on any U.S. product. The U.S.-Chile Free Trade agreement will be the first between the U.S. and a South American nation. Under this agreement, American farmers, workers, and businesses will benefit from improved and expanded access to the Chilean market. More than 75 percent of U.S. farm goods will enter Chile tariff-free within 4 years, with all tariffs being phased out within 12 years. This agreement will eliminate tariffs on corn and most distilled spirits in 2 years. It will immediately eliminate tariffs on pork and pork products, soybeans, and many other agricultural products. Access for beef on both sides will be completely liberalized over 4 years. Overall, this agreement will immediately remove tariffs on more than 85 percent of U.S. exports. The U.S.-Chile agreement will provide momentum to the ongoing negotiations in the Free Trade of the Americas and global trade talks. Bilateral agreements, such as this agreement with Chile, are essential because they provide benefits immediately and help the U.S. keep pace with the 16 global competitors, including the EU and Canada, who already have preferential trade agreements with Chile. Free trade provides the basis for economic growth and democratic governance in developing countries. Free trade promotes American values around the world. It underpins a global economic order that is essential to our own economic security. Agreements like those before us today will help the U.S. to reap the benefits of free trade and gain access to emerging markets, creating new jobs and higher incomes for Americans. Ninety-six percents of the world's consumers are outside of U.S. borders. Foreign market access is essential for the continued growth and viability of the U.S. economy. International trade is an essential component of growth and opportunity in our global economy. The U.S. must be a leader, not a follower, in the global marketplace. I urge my colleagues to vote in favor of the Chile and Singapore Free Trade Agreements.

Mr. HAGEL

Mr. HAGEL. Mr. President, the death of Bob Hope is a great loss for all Americans. At 100 years old, Hope was truly a legend in his own time. His famous wit and generous spirit endeared him to generations of Americans. For more than 50 years, Bob Hope headlined USO tours, performing for America's Armed Forces around the world in times of war and peace. While serving on board of directors of the World USO and as president of the USO, I was privileged to have worked with Bob Hope. His selfless commitment to entertaining the men and women of our Armed Forces was unmatched. In 1997, Congress voted to recognize Bob Hope as an honorary veteran. Hope is the only person to ever receive this honor. For decades, Bob Hope brought American troops laughter and warmth around the globe. We are all grateful for his tireless service and spirited humor. Bob Hope will remembered not only as a gifted comedian and patriot, but as a humanitarian who used his tremendous talents to lift the spirits of millions of men and women. There will be another like him.

Mr. HAGEL

Mr. HAGEL. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. HAGEL

Mr. HAGEL. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. HAGEL

Mr. HAGEL. Madam President, I ask unanimous consent the order for the quorum call be rescinded.

Mr. HAGEL. Madam President, I ask unanimous consent I be allowed to speak for not more than 10 minutes on the pending legislation, to be followed by the distinguished Senator from Wisconsin for 20 minutes.

Mr. HAGEL. Madam President, I thank my friend and colleague from Wisconsin. I rise this afternoon to support the legislation that the chairman of the Senate Foreign Relations Committee has brought to the Senate floor today. I also wish to acknowledge his strong leadership, along with that of the distinguished ranking minority member, Senator Biden. They have done a particularly effective job at a historic time in the history of this country and the world. This country, the world, and this body will continue to look to their leadership as we go forward into the next challenging year. I also rise this afternoon to support the Lugar-Hagel compromise regarding authorization for expanded development assistance through President Bush's initiative to establish the Millennium Challenge Account--MCA, as the distinguished Chairman mentioned, as part of the substitute to the Foreign Relations Authorization bill which is now before the Senate. America faces no greater challenge in the world today than assisting global development and helping eliminate poverty. The security and prosperity of America and our allies cannot be disconnected from stability in the developing world. There are approximately 6.3 billion people in the world and roughly half of them live on less than $2 per day. An estimated 2.4 billion of them are 19 years old or younger. The next generation hangs in the balance. Global threats and connections to terrorism, weapons of mass destruction, poverty, despair, oppression and infectious disease are not always apparent, but this combination of threats presents complex challenges for America and her allies. Global economic development is a shared interest and must be a shared responsibility. The Millennium Challenge Account represents a significant new direction in economic development. Linking American development assistance to good governance, democracy, human rights, transparency, and rule of law, will help support the transition to more stable and democratic political systems in the developing world. The Lugar-Hagel compromise on Millennium Challenge assistance addresses the concerns of myself, Senator Biden, and some of my colleagues on the Senate Foreign Relations Committee regarding the organization and management of the Millennium Challenge Corporation, the new agency that will be established to administer this program. There was unanimous support in the committee for the goals of the President's program--the innovative evaluations and indicators that will be used to assess a country's eligibility for assistance, and the need for more funding for economic development. But I shared the concern of Senator Biden and other colleagues that this initiative should complement and expand, not constrain or complicate, the authority of the Secretary of State to manage foreign assistance. This is a particularly critical time in the history of our Country and the world. Given the many challenges we face in the world, the secretary's role as America's chief diplomat must not be undercut or compromised. The Lugar-Hagel compromise places the management of the MCA directly under the authority of the Secretary of Sate, who chairs the board of the corporation. We have the potential to bring a new dynamic to American government interagency cooperation and coordination on economic development on a large scale. The board of the Millennium Challenge Corporation, chaired by the Secretary of State, would also include the Secretary of the Treasury, the USAID Administrator, and the U.S. Trade Representative, as well as the CEO of the corporation, who will report directly to the Secretary of State. This type of coordination, if managed properly, will bring new energy and creativity to our development programs. America remains the world's indispensable leader in working with others to help promote global stability and prosperity and help eradicate poverty and disease. We need to do more. We will do more. And we need to do it better, smarter and wiser in meeting the challenges of global poverty. That means our programs and the management of those programs must be more efficient and accountable. Establishing the Millennium Challenge Account is clearly in the interest of the United States. Millennium challenge assistance can play a creative and important role in helping shape a new approach to development policy. Global development is not a zero-sum game. As economies stabilize and grow, the citizens of those countries prosper, as well as citizens from all countries. Trade-based growth is the most effective approach to long-term economic stability and prosperity. America's development policies should reflect these economic development fundamentals. America's credibility will much depend on our ability to continue to assist the developing world. Our power and influence is not defined solely by our military might. President Bush's Global AIDS initiative, his trip to Africa, and the MCA proposal all reflect dynamic and new commitments to security and development. September 11, 2001 reminded Americans that we face a dangerous world with complex connections and enormous responsibilities for U.S. leadership. The world is inter-connected. Global development, prosperity and stability are directly connected to America's future. I urge my colleagues to join Senator Lugar, myself, and others in supporting this compromise management approach to the Millennium Challenge Assistance program. As the chairman of the Senate Foreign Relations Committee indicated, this approach, this amendment, this compromise, is also being supported by the White House and the State Department. I thank the Chair. I yield the floor.

Mr. HAGEL

Mr. HAGEL. Mr. President, rapid increases in the cost of medical liability insurance are forcing many physicians to stop performing high-risk procedures, limiting the kind of patients they will see, moving to another State where the liability climate is more favorable, or, simply, they take the option of early retirement. When this occurs, who wins? Who benefits? No one. Everyone loses. Twenty-six States, including my State of Nebraska, have instituted some sort of cap on noneconomic damages. However, some States have had their caps overturned by the courts and other States are barred by their State constitutions from enacting a cap. Medical liability and access to quality health care are national problems. Medical liability reform is needed to help preserve the ability of health care providers to obtain affordable malpractice insurance so we can remain in practice and deal with the health care needs of America. At the same time, we must ensure that victims of medical malpractice continue to have access to the courts and jury awards. This is not an either/or issue. S. 11, the Patients first Act of 2003, is a responsible solution. It is a balanced approach to maintaining access to quality care while preserving the rights of both patients and providers. S. 11 does not cap actual damages. S. 11 caps non-economic damages but defers to current or future state caps. It limits punitive damages to two times actual damages, or $250,000, whichever is greater, but does not preempt existing state caps. It does not preempt State law with respect to compensatory or punitive damages, regardless of the limit. S. 11 limits attorney contingency fees so that awards go to victims, not to trial lawyers. No provisions in the House-passed bill or in S. 11 would limit awards for actual damages. This legislation is important to ensuring access to quality health care for our citizens, and retaining our healthcare workforce. As an example of what providers face and the impact on patients, consider the fact that annual medical liability insurance premiums for OB-GYNS range from a low of $12,000 a year in Nebraska, to a high of $208,000 in certain areas of Dade and Broward Counties in Florida. Women in rural areas have historically been particularly hard hit by the loss of obstetric providers. Practicing obstetrics is already economically marginal in rural areas due to sparse population, low insurance reimbursement for pregnancy services and growing managed care constraints. An increase in liability insurance rates will force rural physicians to stop delivering babies. This is happening now. With fewer obstetric providers, women's access to early prenatal care will be reduced. This is happening now. Greater availability of prenatal care over the last several decades has resulted in this country's lowest infant mortality rates ever. Providers' ability to maintain this standard will be threatened because the cost of insurance places a major additional strain on our maternal health care system. Dr. Daniel Rosenquist, family practitioner in Columbus, NE who has been in practice 16 years, has delivered babies across Nebraska. However, if Nebraska's medical liability cap is overturned, he may have to give up that part of his practice. In the months before the cap was finally upheld, Dr. Rosenquist had to tell his patients that he wasn't sure if he would be able to continue seeing them. Dr. Rosenquist is not alone. The Harris Interactive for Common Good Poll of April 11, 2002 states that 432 percent of physicians said they have considered leaving the medical profession because of changes brought about by the threat of malpractice liability. Because of a liability cap, Nebraska is able to recruit physicians into rural areas by keeping medical malpractice insurance premiums at the fifth lowest in the Nation. It is important to note that even with a cap in place, medical liability premiums in Nebraska rose 36 percent in 2002. Dr. Christopher Kent, one of four neurosurgeons in Lincoln, NE, who has come to view Nebraska as a great place to practice medicine, initially came to Nebraska to practice because of its reasonable medical liability structure. If Nebraska's cap were to be overturned, he says he would have to leave the State, probably within a year. One of his partners would also leave Nebraska and another would retire. This is equivalent to losing 75 percent of the neurosurgeons in Lincoln, and 15 percent of the neurosurgeons statewide. Dr. Kent and his colleagues have already begun restricting their practice, and worry that they will have to restrict care further if the cap is overturned. According to a study by the Department of Health and Human Services' Agency for Healthcare Research and Quality, States that have enacted limits on non-economic damages in medical lawsuits have about 12 percent more physicians per capita than states without such caps. Medical liability reform is about quality of care and access to care. Caps on non-economic damages help keep premiums down, and keep doctors in practice all over our State. S. 11 will provide security to States like Nebraska facing the uncertainty of legal challenges to existing caps, and will result in a faster, fairer, simpler medical liability system that protects both patients and doctors. The economic benefits of medical lability reform are substantial. CBO estimates that if legislation such as S. 11 is signed into law, Medicare, Medicaid and the Federal Employees Health Benefits Programs would save $14.9 billion in Federal spending over the next 10 years. State and local governments would save about $8.5 billion. State spending for Medicaid would decrease by $2.5 billion over that period-- again putting that money where we need it the most, where health care is most urgent. The Joint Economic Committee in a May, 2003 report, estimates an additional $16.7 billion will be saved over 10 years due to reductions in the practice of defensive medicine. According to a July 2002 Health and Human Services report, States with reasonable caps on noneconomic damages saw premium increases of 12 to 15 percent in 2002 compared to 44 percent in States without caps on noneconomic damages. Dr. Daniel Kessler, a professor at the Stanford Business School, and Dr. Mark McClellan, a former Stanford University economist who is currently FDA Commissioner, in a February 2000 study, looked at spending cuts after tort reform, beyond claim payouts and insurer expenses. They concluded that States adopting direct reforms exhibited reductions in hospital expenditures of 5 percent to 9 percent, but this did not result in higher patient mortality rates or an increase in serious medical complications. If these savings were generalized to all medical spending, a $50 billion reduction in national health spending could be achieved through such reforms, in addition to that sense of confidence that would be increased across America because these dollars would be focused in areas that need the health care the most--productive uses for $50 billion. I am proud to be an original cosponsor of this responsible legislation, S. 11, the Patients First Act of 2003. I urge my colleagues to give it serious consideration and support S. 11. Thank you and I yield the floor.

Mr. HAGEL. Mr. President, I ask unanimous consent that I be allowed to address the underlying bill for no more than 10 minutes.

Mr. HAGEL

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

Mr. HAGEL. Mr. President, in the last 2 weeks the Senate has engaged in an historic effort to reform and strengthen Medicare. When we opened this debate 2 weeks ago, I said that what we would do here debating this bill would affect every American and future generations. Health care is a defining issue for our Nation and future generations. Just a reminder: When Medicare was enacted in 1965, the Federal Government's lead actuary at that time projected that the hospital program, Medicare Part A, would grow to $9 billion by 1990. In fact, the program, in 1990, had then cost the taxpayers $66 billion. So we have some sense of how these programs can get out of hand if not defined clearly at the front end. In addition to the internal problems of the changing realities of health care, Medicare is facing a looming external problem. The largest generation in American history, the baby boomers, are aging. These Americans--over 75 million of them--will be added to the Medicare rolls over the next few years. The baby boom generation has changed and shaped every market it has ever entered. Medicare will be no exception. We have a responsibility to address this demographic pressure now or risk the system collapsing under its own weight in the future. Senator Ensign and I have come to the floor to offer an amendment to substitute only title I of the Finance Committee's bill, providing a prescription drug benefit for seniors. We believe any Medicare drug benefit must be sustainable for future generations. The benefit must deal with the realities that people are living longer and better and have higher health care expectations than ever before. We believe we can do better with our amendment. Our amendment is a simple amendment. Seniors will be able to understand it clearly. Unlike the underlying bill, our amendment contains no premiums, no deductibles, and no gaps in coverage. Our modified amendment addresses three of the major issues we have tried to deal with in constructing this plan. First, it helps low-income seniors, those who need it the most. Two, it protects seniors from high out-of-pocket expenses, and it eases the burden prescription drug costs have placed on the States. Our modified amendment would replace the prescription drug benefit in the Finance Committee plan with, No. 1, a prescription drug discount card for all seniors on Medicare with $30 billion in added funds for low-income seniors; No. 2, catastrophic coverage for all seniors; No. 3, $35 billion in cost-sharing for catastrophic drug costs with the States for the lowest income seniors eligible for both Medicare and Medicaid. We give the Secretary of Health and Human Services the discretion to divide $65 billion for seniors and for help with drug costs at the State level. With our amendment, the Secretary will provide low-income seniors with money on a drug discount card to help defray their drug expenses. States would also benefit under our amendment, and $35 billion is available to help States cover the catastrophic drug expenses for the dual eligibles. These are the very poorest of seniors. These modifications to the amendment make it stronger by targeting aid to those who need it the most. This bill has been scored. We fall within the $400 billion budget number that is required. This is a commonsense plan that is workable and responsible, and it addresses prescription drug concerns in the right way. Amendment No. 1026, As Modified

Mr. HAGEL. Mr. President, I have a modification at the desk to amendment No. 1026. I ask unanimous consent that the amendment be modified.

Mr. HAGEL. Mr. President, I understand I have 4 minutes 20 seconds.

Mr. HAGEL. I yield to my colleague whatever time he requires from my time.

Mr. HAGEL. Mr. President, to summarize our amendment is simple: It helps those who need it most. It helps the States provide a discount drug card. It is affordable, with no monthly premiums, no deductibles, catastrophic coverage, and accountable market-based tools. It is a complete, affordable, discount drug plan that the next generation of this country can support. We can be proud of what we are doing for our seniors. I yield the floor.

Mr. HAGEL. Mr. President, I now ask for the yeas and nays.

Mr. HAGEL. I thank the Chair and yield the floor.