J. Kerrey

Mr. KERREY

Mr. KERREY. In response to my friend from Washington, let me say that I do believe the President started off this year with a budget as everybody knows that he submitted, and I do not think there was a single vote for it when it came out. He understood he had to change and came on with a 10-year plan and, 10 or 14 days ago, agreed now to support a plan to balance the budget in 7 years. What I was trying to do and am trying to do is not just persuade Democrats, but Republicans as well that we have, as we go into these negotiations, which is what we are doing now--I am part of a group that the Democratic Leader Daschle has put together to discuss and come up with a proposal so that we have something that we can try to reach agreement with Republicans over. I am trying to say to Democrats as we do that, that yes, we should defend those things we think are important, make sure that Medicare has a sufficient amount of resources, for example, so that we do not have to unnecessarily punish particularly rural hospitals, and look for ways--I think block granting Medicaid is not a good thing, and rejected that. We should object to things we do not like in the proposal, but in addition to looking for a way to bridge the gap, which if I was going to predict I think likely will knock the CPI back by half a point and shave the tax thing back by x amount of dollars and put more money in Medicare and Medicaid and go home and say we have a deal. That is lying there to be done. I do not know if we will have the capacity to get it done, but we will now have a move toward balancing the budget in the year 2002. The only impact we have with our vote is on this year's budget. The difficult thing I have is that according to the Congressional Budget Office, the proposal that was passed with all Republican votes actually increases the deficit next year and increases the deficit the year after. Why? Because the tax cuts are front-end loaded. Again, if you examine the Congressional Budget Office's analysis of the tax cut, it produces less economic growth. The CBO is saying that the status quo produces more growth than what we have with the $245 billion tax cut. Even if you could find a way to bridge the gap and say, ``Use the CPI to eliminate the cuts in Medicare and figure out some way to bridge the gap,'' we are left with a tax cut proposal that does not promote economic growth, which I think ought to be mission No. 1 as we analyze our tax system. I am merely saying that I am prepared and am in the negotiations as we meet on the Democratic side, and I find myself with an unusual opportunity with so much morning business--we have had very little of that lately. As I find myself with an opportunity to come to the floor and talk about this, I just want to waste no moment to stand up and say that not only do we need to balance the budget, but we need to change these mandatory programs, the laws that govern. Democrats who say, ``Gee, I want to spend more money on education; I want to put more money in child care; I want to put more money in rural health clinics; I think we ought to do more in research and science.'' Republicans who say, ``I think we need more law enforcement,'' or Democrats the same way--once we decide, and there is a lot of agreement. This whole diatribe started with praise from the Senator from Rhode Island and the Senator from Idaho for their work on the Safe Drinking Water Act and I pause to note that the distinguished senior Senator from Missouri said quite accurately that we have authorized more than we will be able to appropriate for the infrastructure to keep our drinking water safe; that a dominant reason we are not likely to have the money for those kinds of investments is that we are seeing an increase year after year after year of money going to mandated programs. Mr. President, 34 percent of the budget this year goes to appropriated accounts; 64 percent of the budget this year is mandatory programs and interest; 36 percent is left over for appropriated accounts. At the end of this 10-year cycle we have lost another nine points; another nine-point increase in mandatory and interest. For all the rhetoric on both sides of the aisle about taxes, the one thing I say to taxpayers that has remained constant as a result of general success in keeping the economy growing, keeping the environment such that investors create the jobs like I mentioned with Steve Jones and Jim Clark earlier with Netscape and so forth, the companies that are creating wealth and creating more economic activity, that growth has enabled us even though we spend more money, the percent of the Federal budget of our economy has remained about 19 percent. Unless somebody is proposing to increase that beyond 19 percent--that is your given--and what is happening is more and more money is going, a larger and larger share of that 19 percent, is going for mandated programs, leaving less for everything else. I hope I persuade Republicans that there is an alternative course here for us, to vote to do something that will revolutionize our future. And I hope to persuade Democrats, as well, who want to collectively invest in education and so forth, that the only way we will be able to do that is to get our arms around these mandated programs in some more aggressive fashion than is even in the Republican budget proposal. I appreciate the very kind remarks of the distinguished Senator from Washington, and I hope that the kindness begets kindness. I hope we end up into the day voting in a bipartisan fashion for something that does revolutionize our future, that does move us in a radically different direction than the one we are heading right now because, folks, we are heading in a direction we do not want to go. We will end up in the future saying, why did we not do that when it was easy? It is easier today than next year. And it will be easier next year than the year after. This is not one where time is on our side. As tough as adjusting the CPI by a point looks, as tough as it might seem to phase in over a 15- or 20-year period adjustment in the eligibility age from 65 to 70, as tough as those things look today, every year you wait it gets tougher to do it. Every year you wait we will have to impose changes that are more difficult for those Americans who have planned on those programs being there for them. I yield the floor.

Mr. KERREY

Mr. KERREY. Be pleased to.

Mr. KERREY. The Senator is quite right. As a matter of fact, in the language last year, we had a Justice Department role, and we replaced it this year. The committee decided to replace it this year with a 10- part competitive checklist. The real test of competition is a very simple test. One of the reasons I am of the belief that you have to have a Department of Justice role of some kind--I am willing to drop down to Clayton; I am willing to look at alternative standards--is that the 10-part checklist does not really satisfy the consumer. I know when I have choice. If I have choice, the person who is trying to sell me something knows that if they do not get the price and the quality in the range I think I am willing to pay for, I will shop someplace else. I will go someplace else. If I have that kind of choice and that kind of alternative, then I have competition. If I do not have it, I do not have competition. If I have one company supplying all my news and one company supplying all my newspaper and one company that says here is your phone service and one company says here is your cable service, there is no choice. All I have basically is a question: Do I want it? Yes or no. I do not have any impact upon the quality and I do not have any impact upon the price. Mr. President, I hope that colleagues do not suffer under the illusion that the Senator from North Dakota and I--I certainly do not want to create the impression that I am not willing to embrace the future and indeed make a bet. I think we have to risk here. I think we are talking about moving in a rather dramatically different direction. I noted with considerable interest on the front page of the New York Times this morning--I think that is an old picture--Steve Jobs, cofounder of Apple, started a new company called Pixar--what is it? Hold on a minute here. Pixar Animation Studios is the name of the company, and he invested $68 million in it. They did a public offering yesterday, I believe, and thought it would go for about $22 a share. It turned out the market bid it up to close to $40, and all of a sudden he has $1.2 billion. His company created $1 billion worth of wealth yesterday. The United States of America is $1 billion wealthier as a consequence of this individual's decision to start a company that provides animation, in this case to Disney that put out a movie--what is it called? The Toys or something like that. I have not seen it, but it had $38 million worth of revenue over the weekend, which is pretty darned good. In the article as well there is mention of a company I am familiar with. James Clarke started a company called Netscape. He also created $1 billion worth of wealth. This is important for us. This country is a wealthy country as a consequence of somebody getting an idea and putting it out in the marketplace, and all of a sudden you have value, you have something that is worth something. It is important that these men generate wealth. It is important that we continue to create ways that create wealth so we know the market is doing some extraordinary things. What I see, both with Netscape and Pixar Animation, is that this old computer that we saw sitting around our kids' bedrooms, and so forth, over the years is being converted into a communications tool. It used to just calculate, and increasingly we are using it to communicate. Indeed, I am working with the University of Nebraska trying to figure out a way to leverage intellectual property because they are pricing themselves out of the market. As the demand for college goes up and the demand for an educated person goes up, we are getting a doubling and tripling and quadrupling of what that university has to do. Our taxpayers do not have enough money to continue building and hiring more and more people. We have to leverage more intellectual property, and we are looking for a way to do it through computers. We know to get that done we essentially have to pass a three-part test. Test No. 1 is, Are you willing to embrace the future? Because if you are not, it is not going to work. If you want to hold on to the old way of teaching, say so. Because if you hold on to the old way of teaching, you are not going to be able to get your costs down. And, secondly, you have to be willing to place a bet, which means not only more money in these areas, which unquestionably is the case, but you are going to risk your reputation a little bit. You are going to take a chance on a roll. So I understand that at some point we cannot really be sure what this legislation is going to do. And I am an advocate of changing the law; I wish to break down the regulatory barriers so that consumers in their homes can make a single choice. What we have done is we have set up a system of regulation that says over here we have television, over here we have radio, over here we have dial tone, and over here we have print. That is what we have done. What has happened is the technology has obliterated those distinctions, and our regulatory structure still maintains them. So instead of being able to go to a single provider and buy it all packaged together--which, in my judgment, is the only way 100 million people in residences are going to see a decline in price and an increase in quality--you still have to buy them separately. As a result, costs are higher. So I hope that colleagues do not suffer under the illusion that I somehow want to hold down the status quo. I am willing to embrace the future and willing to place a bet, but I want to see real vigorous competition and choice at the local level. I want to see that. I want to vote for this bill. I want it to come back out of conference and to probably vote for it. I do not want to just stand over here and say ``no,'' and hold my breath and try to hold it up. But unless we get vigorous competition at the local level--and I do not want to hold up the RBOC's. I want to be able for them to go out and compete. I am uncomfortable watching their top-end customers whittle away while they do not compete in long distance itself. I would like to be able to liberate them, but I want them to be liberated at the moment when I am sure that we have very vigorous competition at that local level. So I hope that conferees understand that the Senator from North Dakota and I are not sitting here saying that we do not realize the law needs to be changed. We know the law needs to be changed. We know there is an exciting and important opportunity for wealth generation, for job generation, for education, for improving the way that our own Government operates, trying to make it more efficient, trying to improve the quality of life for our citizens. This piece of legislation, this law is extremely important, but it is important that we have in our own mind some kind of vision for what the world is going to look like. Otherwise, all we are doing is trying to fashion some sort of compromise between the various corporate entities, and I think at the end of the day it will not create the kinds of change that in fact are already occurring out there in the market. Mr. DORGAN addressed the Chair.

Mr. KERREY. Mr. President, so people wonder what the impact of this is going to be, and 94 percent of American homes have telephones, 60 percent have cable--I believe those are the numbers--and nearly 100 percent have television sets, and more people have telephones and television sets than have running water. It is a substantial success story we have that kind of penetration into American households. Every single household in America is going to be affected by this, and we are talking about trying to describe a significant change in the way they are going to be coming into contact with their providers. I think, as a consequence, it is very important for us to decide in our own minds what kind of an environment are we trying to create. One of the pieces that is in here that seems a little contrary to my own desire for competition--in fact, a little more than just a little contrary, it is contrary, but it is necessary to build a bridge in that competitive environment--is the Snowe-Rockefeller-Exon-Kerrey provisions having to do with education. I am very pleased, and I ask unanimous consent that a letter written by the chairman of the conference committee, Senator Pressler, indicating that he intends to hold and support the Senate's view on that provision, be printed in the Record at this time.

Mr. KERREY. Mr. President, this idea of technology being a constructive force in our lives is sometimes a difficult sell to make to people, particularly with software, because they have experienced the joy of downsizing as we get more efficient. They sometimes wonder what good this is all going to be, or particularly in an educational environment, people, like myself, remember the old ``talking head'' environment that was there with the television sets coming into the classroom. I really want to emphasize that I think the only way that we are going to be able to increase the amount of learning that goes on, whether it is in the home, which I think is the first line of defense in education--if we can increase the amount of learning that goes on in the home, it is going to be an awful lot easier to make an educational form work inside the school, since the homes were there before the schools were--it will make it an awful lot easier for any of our institutional efforts to succeed. This technology gives us the opportunity to provide continuous learning inside of the home environment. It is going to be very difficult for us to do the sorts of things we want unless we embrace a future that changes the way we teach and changes the way we use technology unless we are willing to bet not only to change the law but also change the allocation of resources. It is going to be very difficult to make this work unless we, as adults, with the responsibility to make these decisions, say that this is going to become part of our core competency, whether that is a school or that is in a university or whether that is a government agency that is trying to operate in some kind of an efficient fashion. So I am here this afternoon to say that I want to embrace change. I do embrace change. I am working on it all the time, particularly in the environment of our schools. But we can put change in place that makes things worse. I say to the men and women who are on the conference committee, my colleagues and Members of the House that are on this conference committee, I urge you to put a meaningful role in there for Justice, some kind of role in there for Justice or, in my judgment, you are going to regret that you did not. You will regret that you did not because we are not going to have the kind of competitive environment that we need to have at that local level to enjoy the benefits that we all promise at least when we talk about supporting change in the law.

Mr. KERREY. I really quite agree with the Senator from North Dakota. I think the legislation passed here was well intended. People who voted for it understand there is a lot of change going on out there, and we need to embrace that future and try to change our regulatory structure. But it is possible for us to change it in a fashion that reduces competition. In fact, without some kind of meaningful role for the Department of Justice as we move from a monopoly to a market situation, as we move from a situation where the Government is making all the decisions to a situation where it is the marketplace making the decisions, if we do not have the agency that in fact has demonstrated the ability in this area as it did with AT&T to manage that kind of situation, I think we will end up with less, not more, competition. I bring a story told at church Sunday by Father Jim Schultz from Omaha, NE. He told the story that kind of describes what happens out there right now in the marketplace when you are dealing with a monopoly. The story is about a man who dies and goes to the pearly gates, and St. Peter says, ``Well, you are right on the edge. We can't decide whether you are going to go to Heaven or Hell, so you get to decide.'' There are two doors. One goes to Heaven and one goes to Hell. St. Peter opens up one door and there is a big party going on with a band and everything, everybody is happy and great looking people inside there. St. Peter says, ``Well, this is Hell.'' The man says, ``That's odd.'' So St. Peter looks at the next door. He opens up the door and goes inside, and there are a bunch of people sitting around in chairs, real sad and angry. He says, ``That's Heaven.'' He says, ``Take an hour and decide and let me know.'' An hour later the man comes back and says to St. Peter, ``I think I'll do Hell.'' He opens up the door. The people are dead. The smell is stale, trash all over. He goes to St. Peter and he says, ``What happened? An hour ago there was a great party, looked like a lot of fun, looked like the place to go.'' St. Peter says, ``An hour ago, you were a prospect. Now you are a customer.'' In a monopoly, that is the situation. I had a recent example of that in Nebraska where a school trying to get enhanced services was told by the telephone company: ``You do not need it. You really do not need that enhanced service. We are not going to provide it to you because we do not think you really need it. We do not think you really should have this kind of service.'' When you have a situation where the company can say to you, ``We are not going to satisfy your needs,'' you do not have competition. When you have that kind of a situation going on, you really do have two choices--take it or leave it. That is the only thing you can do. We have built a tremendous telecommunications system in this country by using a combination of Government regulation and market forces, and as a consequence we not only have a tremendous telecommunications system but in any community in the country you get high quality service. You can go to Alliance, NE, or Ainsworth, NE, or a rural community in Nebraska and find your telephone service is going to be as good as it is in Omaha because you have the same kind of service and same high quality of service as a consequence of the law of the land saying that is what universal service is to mean, that is what our customers as citizens ought to be able to have.

Mr. KERREY

Mr. KERREY. Mr. President, I respectfully say, just the opposite is the case. There is unanimous desire on the part of the Democrats to come up with a change in our law so as to get to a point where our budget is balanced, but we have a different vision. We have competing visions and competing ideas on how to do that. I appreciate, for example, the willingness of Republicans to say that they want to preserve and protect Medicare. It is a very important change. At least I hear it as a change. One of the things that must be understood with Medicare as a fundamental principle is that we said in 1965, when people hit the age of 65, they are going to have difficulty purchasing health insurance, so we are going to create a change in the Federal law under the Social Security Act to provide a mechanism for Americans over the age of 65 to get insured. The question is, has it worked? Ask your Representative or Senator, ``Has this worked?'' Is that an example of something that has accomplished the job? In 1965, 43 percent of people over 65 were uninsured. Today, it is less than 1 percent. The answer is unquestionably yes. Mr. President, 100 percent of the people over the age of 65 are today insured. It has worked surprisingly well. However, there is a problem, and the problem is, first, we allowed customary and usual reimbursement, so we had no cost controls to begin with and the costs have blown completely off the chart. We came back in the eighties and implemented a system called perspective payment system and started to reimburse according to diagnostic groups and, unfortunately, that tended to shift costs over into the physician services and costs continued to escalate. Today, they are growing, I guess, 10, 11, or 12 percent, somewhere in that area. We are facing a tremendous increase in costs. I completely agree with the Republicans who say that we have to control those costs. We do not need to cut Medicare, but we have to slow the growth of the program. There is no question that that needs to be done. However, the point of departure that I have, and I have made it a number of times--I feel like I am running a broken record here in saying it--there is a short-term problem and a long-term problem with Medicare, and it is the long-term problem that is enormous. The long-term problem with Medicare begins about the year 2008 when, as I indicated earlier, the largest population group, the largest generation in the history of this country, the baby boomers, begin to retire. We cannot meet the promises with the current rate of taxes. We do not even come close. We are either going to have a tremendous tax increase out there or a very quick cut, not in the growth of the program, we are going to have real cuts in the program itself. So we have to slow the growth, not just in the short term, we have to slow the growth in the long term for Medicare. I hope as we move through these deliberations, the Democrats, in addition to coming to the floor and saying we want to protect Medicare and preserve Medicare and we want to make sure the cuts there and in Medicaid do not fall in a disproportionate or unnecessarily harsh fashion, I hope we also come to the floor and say, as I have done now two or three times, I think we should drop the tax cut. I am for reforming our Tax Code so as to promote economic growth, but one of the odd anomalies in this whole debate is that a $245 billion tax cut, according to CBO, actually decreases growth. It does not increase growth, it decreases. I am for having a debate about how do you relieve, in a fair fashion, particularly not just on working Americans, but families from some of the penalties that they currently face. But if we drop the tax cut--I ask unanimous consent for 2 minutes.

Mr. KERREY. Mr. President, before I yield the floor and suggest the absence of a quorum, I noted earlier there were a number of Republican colleagues that came down and talked about the budget. There were some statements made that I feel compelled to respond to. Some came down and said the Democrats are not really serious. They do not have a plan. There is no attempt here, no willingness here to, in fact, address these budgetary difficulties. (Mr. GORTON assumed the chair.)

Mr. KERREY. I will be pleased to yield.

Mr. KERREY. Mr. President, again, I will not go on this little diatribe about entitlements, but I will summarize what I was saying earlier. I hope we do not get a continuation of visitations to the floor asserting that Democrats do not want to balance the budget or we do not have a plan or, conversely, that Republicans are all heartless and do not care about the poor and have no desire--it may score relatively well, but it will not enable us to solve this problem. The problem, to be clear, is, not only is the budget out of balance, but the growth of entitlements are continuing at an unsustainable pace, not only eroding our ability to pay for appropriations but also, Mr. President, eroding our long-term ability to be able to do anything. We will, by the year 2012, convert the entire Federal Government into an ATM machine if we continue. That is all we are going to be doing, is transferring money: collect it and transfer it. Everything else is going to be shut down. To solve that problem, if you really want to create a revolutionary change, indeed, if you want to vote for something that is tough as heck this year, but every year afterward is going to get easy, as opposed to this budget--this budget is relatively easy to vote for because the cuts occur later--next year's vote is going to be tougher and the year after that is going to be tougher. It gets tougher every single year, because we are squeezing these appropriations accounts, and we have not tackled the entitlements as we ought to. I will give you some things you have to do. Can we get it out of the farm program, cut defense? The answer is no, there is not much room in those things. Here is something you have to be willing to vote for: You have to be willing to vote to reduce the CPI, I would say at least by half a point. I would vote for a full point. The full point pushes the insolvency rate of Social Security back 30 years. That is the kind of revolutionary change which produces change not only in the short term, that enables us to put more money back into Medicare, Medicaid, and education, if that is what you want to do, which I think would be a reasonable thing, but in the long term the impact is tremendous. Second, we ought to think about an affluence test not just on part B, not just on COLA's, but on the whole shebang. If you have a contract with a retiree where they paid in, that is fine; do not break a contract we have in place. But if it is merely a transfer of payment being made because we presume somebody needs it, when their income goes up, they do not need it; when their income goes back down, let them have it again. Do not take it away from them, but adjust it according to income. It produces tremendous savings, both in the short term and in the long term. Lastly, if you want to produce some real change out there in the future that will enable us to look at beneficiaries under the age of 40 and say there is going to be a Medicare Program for you and a Social Security Program for you, let us adjust the eligibility age both for Medicare and Social Security to 70. That is what the entitlement commission recommended. The Kerrey-Simpson proposal on Social Security does that. I say to all those who are listening, what will typically happen is I make a statement like that and somebody will interview a 70 year old: What do you think of that proposal to have the eligibility age changed? That is a terrible idea. It would hurt me. It does not affect anybody over the age of 50. We can phase it in. But the longer we wait, the quicker the change has to occur. The longer you wait, the more painful the decision is. Those are the kinds of things the Democrats need to come down and say to Republicans, as we look for a way not only to balance the budget but balance the growth of entitlements and enable us to have a Federal Government that can, when we agree what it ought to do--this whole thing started with me in a discussion of the Safe Drinking Water Act. Senator Bond, chairman of the committee, pointed out accurately that we are authorizing more than we have. We have a certain amount of infrastructure just for safe drinking water over the next several years, and we are going to struggle to come up with the money, as a consequence of being unwilling or unable, whatever, to vote a change in the law that will produce the changes in the outlays on those mandatory programs. That is a tough vote. But if you had a bipartisan vote on something like that, I think we can take a lot of political rhetoric out of it and it would still be tough. But every year after that it gets easier. Whereas, whether it is the Republican proposal, by the way, or the Democratic alternative, either one, the easiest vote is this year. Next year is tougher, and it gets tougher and tougher and tougher. And these mandatory programs continue to grow. So I hope that as we come to the floor and talk about our own ideas for solving this problem, we do not say that one party is insincere, or the other party is heartless; I hope we will actually come to the floor and suggest things that might not only balance the budget in 7 years, but put us on a track where we are able to say to every single beneficiary that there is going to be something there for you, and we are able to say to our people that once Republicans and Democrats have decided what we ought to be doing in research, education, space, defense, or law enforcement--once we have decided what it is we ought to do--and the disagreements are typically a lot more at the margin than meets the eye--once we have made a decision, I hope we have the money to do it. I would like to see that happen. I do not have a lot of optimism given the current lay of the land. But I would like to see sooner, rather than later, us making those kinds of changes because it is inevitable to me. I challenge any staff that happens to be listening--I assume Members would not listen to all this stuff--to try to figure out what I am talking about. Take the number $445 billion and then go to the 13 appropriations accounts and add up what we are currently spending, because $445 billion is what we are allocating in 2002 under the Democratic budget and under the Republican budget. You cannot do it. Take $260 billion out for defense--and very often people say, ``I know how to save the money, we will cut defense.'' Well, you cannot cut it enough. You cannot cut waste, fraud, and abuse enough to be able to get it done. You can take our salaries to zero and it would not impact the sort of choices we are going to have to make. Constructive budget, defense and nondefense, was $445 billion. Then you begin to see the dilemma if we do not vote for the changes in our mandatory programs that will enable us to have the Federal Government do those things that I believe the American people want us to do. I yield the floor. Mr. GORTON addressed the Chair.

Mr. KERREY

Mr. KERREY. Mr. President, I ask unanimous consent for another 5 minutes.

Mr. KERREY. Mr. President, yesterday the Senate passed S. 1316, the Safe Drinking Water Act. I did not have the opportunity to speak on it while it was under consideration and I want to point out some things in that bill that I believe are very constructive. I will call to the attention of my colleagues that I think we passed a piece of legislation that will enhance voters' confidence, citizens' confidence, that we can, in fact, take a law that has accomplished a great deal. The Safe Drinking Water Act has improved the quality of life in America considerably, and has been a great success story, but it needed to be changed. There was an urgent need to change the legislation. We passed it last year in this body. The House was unable to pass a piece of legislation, and as a consequence it died. I want to thank Chairman John Chafee. He was very instrumental. Without his leadership this bill would not have passed. Chairman Kempthorne, as well, was very diligent and determined to pass the legislation. Senator Baucus, Senator Reid, both from rural States, understand the importance of changing this legislation. They, like me, have heard from local communities talking about if we are going to maintain the consent to regulate safe drinking water that we have to change the current law. I will talk about a few issues, Mr. President. I will go through them real quickly. First is the issue of radon in the drinking water. Under the current law, the EPA was required to promulgate a standard for radon by a court-ordered deadline. Unfortunately, that standard was a much higher standard than any scientist said was necessary to protect the people. There is no dispute here. This is not a situation where we have anybody coming forward and saying that the standard that was required under this rule was too low. This standard was set so high that it was going to cost rural communities, in some cases, $5,000 per user to implement. We had withheld the appropriations for several years to promulgate this rule, and this piece of legislation now will take the appropriators off the hook. It changes the law. It gives EPA the authority to promulgate a rule of 3,000 picocuries per liter, which is what all science is saying is needed. It will save rural providers of water in Nebraska nearly $1 billion over a 7- to 10-year period. It is a substantial amount of money that is at stake. The second issue is the current law, that is the issue of sound science and using sound science in evaluating both the risk and what we do. In the 1986 amendments, we decided we were going to regulate 25 contaminants every 3 years whether those contaminants needed to be regulated or not. This strict method of establishing standards caused some contaminants to be regulated without a sound scientific basis. It is an issue that is very irritating when you are, again, at a local level and are required to spend money looking for a contaminant that has never been there. It has never been in the water. Nobody expects it to be in the water. Nobody has any reasonable basis to believe it is going to be in the water. But because of this strict standard, we were required to regulate it anyway. The new law authorizes EPA to use $10 million from the State revolving fund on health effects research. EPA is to establish a priority risk of unregulated contaminants and gather health effects and occurrence information on the listed contaminants. The Administrator of EPA must consult with the Centers for Disease Control as it does this analysis. In other words, it cannot just come to a regulatory conclusion without some reference to what our scientists, particularly our health scientists, are telling us about what is going on with drinking water. The States are to monitor for up to 20 unregulated contaminants to collect information for future standards. The next issue is the standard setting itself. Under current law, EPA has established standards for more than 80 drinking water contaminants. The 1986 amendments required EPA to promulgate 25 new standards every 3 years. The cost to small communities, again, are not considered at all when these standards are set. This legislation, this change in the law, repeals the ``25 every 3 years'' rule and establishes a new mechanism to identify contaminants for future regulation by consulting with the Centers for Disease Control. Again, if we are trying to have safe drinking water, it seems to be reasonable to reference those individuals who have the responsibility for telling us what is causing Americans to get sick from drinking our water. EPA is to conduct a benefit-cost analysis for each new standard before it is promulgated, and if EPA determines the benefits of a standard issued under current law would not justify the cost of the systems that must comply with the standard, EPA must issue a less stringent standard that maximizes health risk reduction at a cost that is justified. I have heard people come and say we are weakening standards. We unquestionably are not. This is a change that will allow us, again with reference to what is causing Americans to get sick, if there is a health problem that the Centers for Disease Control--Mr. President, is there a limitation on time?

Mr. KERREY. Mr. President, this was a particularly difficult and important issue. The Nebraska League of Cities sent me a petition with 60 signatures, which specifically asked the Senate to ``include provisions that changed the current process for setting standards to include public health benefits and costs as factors in determining new requirements.'' I will guarantee these local community leaders are not going to send me a letter asking me to do that if they did not have the support of their community to get it done. Many people have said I am selling out, weakening standards. You are not weakening the standards if the people at the local level say, ``This is what we want done.'' As I said at the beginning, I think there is safe drinking water legislation that has been a great success. But we keep getting example after example after example of citizens saying, ``Change the law to give us the flexibility so we can make more of our own decisions. We want to reference science. We want to reference the health people. We do not want to make our people sick. We want them to be able to drink the water and know that water is safe. But we have to have some flexibility to be able to do that because we are paying for this with property taxes.'' Most of these smaller communities are up against imposed lids and they have a tough time getting that job done. The next issue was the issue of monitoring. One of the largest costs of compliance with the Safe Drinking Water Act is monitoring. Again, it comes out of the local property tax base, typically, to get this done. All Nebraska communities have asked that the current system be revised to let them test for contaminants that exist in Nebraska. Again, all. This is not one where there is any dissent. Every single community is asking that they be allowed to test for contaminants that exist in Nebraska. We may have some contaminants that Missouri does not have, and you may have some we do not have. You do not want to test for ours, and we do not want to test for yours, because it costs money. If we require them to test for contaminants that do not exist, again, it just undercuts the citizens' confidence you could ever get into an environment where Government can regulate, where we can collectively regulate for the purpose of improving the capacity of our lives. Let me go through this a bit. Under current law, States go through a waiver process to get some monitoring requirements changed. But this process is very expensive, it is very time consuming and it has been very frustrating for people at the local level. The benefits accrue to the local system while the costs are incurred by the States. The States that do have waivers have seen huge decreases in monitoring costs. These potential savings should be spread to all States, according to the example that has been set by those who have been granted the waivers. The bill says we revise the current monitoring rules for at least 12 contaminants within 2 years. It allows the States to establish their own alternative monitoring requirements that may be less stringent than Federal monitoring requirements, provided they ensure compliance and enforcement of Federal health standards. There are other changes in this legislation having to do with ground water disinfection. The current law requires the promulgation of a mandatory ground water disinfection rule, requiring all systems to treat their water. This bill delays the enactment date of this rule to occur at the same time the States do a rulemaking as established for disinfectants and disinfection products. This legislation also helps us by authorizing some additional new programs: $1 billion for State revolving funds for safe drinking water; States provide 20 percent match. It authorizes $53 million for health effects research. It has been brought to my attention at the State level that in Nebraska there is $717 million worth of infrastructure needs that will have to be put in place over the next 20 years. The chairman of the committee, quite appropriately--I am on the VA- HUD Committee--the chairman of the committee quite appropriately pointed out one of the weaknesses of this bill is that you are sort of promising money that is going to be there and it may not be there. We are authorizing more than we have. I take this opportunity to point out that the problem here is that we still have a growing cost of entitlements that erode our ability to make these kinds of investments. I heard yesterday the chairman of the Appropriations Committee, Senator Hatfield, indicates that he thinks it is likely that we are going to come up with a way to satisfy the requirements of the continuing resolution by the 14th of December--not by cutting defense, now that we are going to Bosnia. Nobody seems to be inclined to do that. But we are going to get $4 billion of savings out of entitlements to get the job done. And we are going to get it--and the biggest entitlements are going to be in health care, they are going to be in retirement--we are not likely to touch retirement. We should, to get the job done. I know the Senator from North Dakota wants to speak, and I will wrap up with this one statement having to do with a pet issue of mine. The cost of entitlements under the Republican budget and under the Democratic alternative--a group of 20 of us or so that have an alternative that balances the budget in 7 years as well--in either case, the cost of entitlements, health care and retirement, continue to grow and displace all other expenditures. If you think it is not a problem, imagine what it would be like to pass 13 appropriations bills if all we had was $445 billion. You say, oh, $445 billion is a lot of money. But $445 billion is what we would have in the year 2002 if you adjust for inflation. Gosh, the most liberal Member of this body, in the House or the Senate, probably would not spend less than $250 billion on defense, $260 billion, leaving you with $170 or $180 billion for all nondefense spending. I urge colleagues to look at that number because it is going to get tougher and tougher and tougher for us to get the job done. I, for one, hope, as we look for a compromise on reconciliation, not only will we consider adjusting the CPI down--I would go a full point--but I hope we look at some other adjustments that produce savings. I think it is reasonable to put an affluence test on all entitlements, including farm payments, to say, basically, we are going to adjust it as income goes up. I think it is reasonable for us to say now we have to adjust the eligibility age, both for Medicare and Social Security. We can hold harmless everybody over the age of 50, if that is what we choose to do. I think it is reasonable to phase it in. It is reasonable to phase those changes in. Nobody listening to this who is over 65, or 60, or 55, ought to think we are talking about them. But, unless we make that kind of a change, this baby boom generation is going to rank out about 2008. When we start retiring, our kids are not going to be willing to have their payroll taxes increased by the amount that is going to be necessary to pay for our Medicare and Social Security. We are not going to be able, I say to my colleagues--we are not going to be able to adjust rapidly enough to come up with the $717 billion that Nebraska is going to need for its infrastructure investments or for any other thing in the appropriated accounts. So, Mr. President, I appreciate the additional time. I yield the floor. Mr. DORGAN addressed the Chair.

Mr. KERREY

Mr. KERREY. That we need a different reconciliation bill than the one that was passed by this body by 52 votes yesterday. Again, I would urge colleagues to look as well at the growth of entitlement programs. These are not programs for the poor. These are middle-class entitlements and most difficult of all. Almost half of the growth of all spending in here is Social Security, which is not even on the table in this discussion. So, look at the growth and then ask yourself, if you had $435 billion this year for defense and nondefense appropriations--which is what you have in the year 2002--construct the budget, build a budget with $435 billion, go home and tell your citizens, OK, we are going to use $263 billion for defense, and that gives me $174 billion for all other spending, you cannot do it, Mr. President. You are not going to be just closing down odds and ends; you are going to be shutting down NASA and shutting down the courts and significant functions of Government. You cannot get there from here, Mr. President, unless we come as Democrats and Republicans and say we are willing to do something, drop the tax cut, adjust the CPI, phase in changes in the eligibility age, consider an affluence test, do something with part B premiums. Those kinds of changes, Mr. President, would not only enable us to balance the budget in 7 years, but do it in a fair fashion, do it in a way that enables us to build a new safety net and a vibrant market economy, and I think restore the confidence of the American people, who rightly have concluded, by the way, even if this is enacted, that we are not going to be balancing our budget. Mr. President, I yield the floor. Mr. REID addressed the Chair.

Mr. KERREY. Mr. President, the Senator asks a question that I think is very relevant. I voted against the continuing revolution for precisely that reason. This Congress should not bind the President to use numbers that are developed by the Congress, just like I do not think we should be bound to accept carte blanche the numbers that are used by OMB. Indeed, when I came into office in 1983, there was a great political controversy that occurred as a result of nobody trusted the numbers. We actually created a statute, an independent agency, to produce the numbers that both sides trust. And a lot of the politics now has been taken out of it. I think the Senator raises what I consider to be a fundamental defect in the continuing resolution that was passed and the President vetoed. This body should not bind the President to use congressional numbers, just as this body should not write into statute that we are always going to use OMB numbers.

Mr. KERREY. Mr. President, I ask unanimous consent for 2 additional minutes.

Mr. KERREY. As you can see, Mr. President, it is from June O'Neill, Director of the Congressional Budget Office. The CBO has been cited a lot as we go through this continuing resolution debate. This is written to Chairman Pete Domenici, November 16, 1995, with copies sent to the ranking member, Senator Exon of Nebraska, along with the chairman and ranking member of the House Budget Committee, John Kasich and Congressman Sabo. It is a remarkable document, Mr. President, and shows the folly of the tax cut. But it also shows that we really are postponing most of the difficult choices. No American should believe that because if we enact this reconciliation bill--let us say by some miracle the President changes his mind, which I do not believe he is going to do; I believe he is going to veto it. Let us say we enact this thing. All it does is commit it for a single year. Next year we come back and vote again. The year after that we have to vote again. I say to Americans, examine the [[Page S 17443]] document. For gosh sakes, the deficit this year is $164 billion. It has been going down every year for the last 4 years. Next year the deficit goes to $178 billion, and the year after that it goes to $189 billion. I mean, this proposal increases the deficit next year and increases the deficit the year after that. This does not reduce deficits; it increases deficits. And to exclude Social Security--there is another letter coming from June O'Neill that says that because you include Social Security income, you are actually reducing the size of the deficit by some $60 to $100 billion, depending on the year that you take. So we get an increase in the deficit, Mr. President, and we are postponing most of the difficult cuts. In the year 2002 this Congress is going to be expected to cut $70 billion in a single year. Unlikely, Mr. President. If you look at the backdating of the difficult decisions, I think the American people begin to understand why this so-called revolution is a lot less than meets the eye, a lot less, and why they should insist, if they want to balance the budget and they want to do it in a fair way and in a fashion that enables us to have some kind of a reasonable safety net and vibrant market economy----

Mr. KERREY. Mr. President, as to the Deficit Reduction Act, I would like to make a few comments. First, we need to sort of check our own rhetoric and ask ourselves why. A lot of people come down and say we have unprecedented debt mounting on top of record debt. We do not have record debt. Our percentage of debt to GDP is going down. A lot of people say we have to do what we did in the cold war. During World War II, we accumulated almost 130 GDP of debt and won the war as a consequence, did the Marshall plan after that, rebuilt our own country as a consequence of a willingness to go into debt, no matter how we used that debt. I will get to that later. I am very much concerned that a growing portion of our outlays is going not to investments but going to current consumption. I think it is a significant problem. It is not a problem, by the way, caused by the poor. I voted against this proposal for a number of reasons. I do not think it is fair. I do not believe it asks people like myself with higher income to participate in deficit reduction, which I think is terribly important. I receive very little in the way of Government services. People with lower incomes do receive more in Government service. I am asking them to shoulder a disproportionate share of eliminating this deficit. Second, not only does it rend the social safety net, but it does not start us on the road to evaluating what kind of safety net do we need. I think most of us in this body now believe that we have to have economic growth, that our tax policies, which I do not think encourage savings and investment, need to be written so that we get the kind of investment and economic growth the country needs; that we have regulatory policies that are mindful of the risks that people take when they invest money. Most of us understand that we have to have an economy that is growing, but if you are going to have a vibrant market economy where people are making business and bottom line decisions, you also have to have some kind of safety net out there. We ought to be [[Page S 17442]] thinking about how do we take the next step of how do we get it universal rather than moving away as I see this proposal doing. We ought to ask ourselves, as Senator Simpson and I did, how do we reform the Federal retirement program so that there is more flexibility, individuals get a higher rate of return, they have something they own and they can acquire wealth during the course of a working life that might not generate much opportunity for savings. We need to be asking ourselves how do we construct the safety net that enables us to have a vibrant market economy instead. As I see it, we rend the social safety net and then we really do not acknowledge that there is an importance and value to having it there in place. Again, perhaps as a result of our own orientation, the higher your income gets, there is a tendency to presume that everybody is living like you are and a presumption that, gee, everything is OK. Everything is not OK. You talk to people 50 years of age out there, men or women who tell you what it is like to get a pink slip in a downsizing operation after working 30 years on the job. They have a tough time getting health insurance. They have a tough time adjusting to not just the downsizing but the reduction in income that they face. If you want to have a vibrant economy, not only do we need to change our tax and our regulatory structure, we also need to change the safety net, and this proposal moves us in the wrong direction. Third, I talked at length about how it really does not solve the problem of growing entitlements at all. It postpones them. It says, well, we can deal with Social Security later. We can deal with Medicare later. Really, the long-term problems, we deal with them later. Mr. President, time is not on our side. Every year you wait you really deepen the cut or increase the possibility that working people are going to have to pay more taxes as a consequence of our unwillingness to face the problem. The next thing I did yesterday was go through a few things that I as a Democrat would be willing to support that would enable us, I think, to produce the savings needed to have more fairness in the proposal, to begin to consider what kind of safety net should we construct and would have us moving in the direction of controlling entitlements. On my list is I think we should drop the tax cut. I will describe a little bit later a rather remarkable letter from the Congressional Budget Office Director, June O'Neill. We should drop the $245 billion tax cut, commit ourselves to set a course so that at the end of 1996 we can enact fundamental tax reform that does encourage savings and investment; we understand that the current income tax system needs to be adjusted; that working families are having trouble saving money. Let us not do it piecemeal. Let us do it bigger. This tax cut proposal should be dropped because it enlarges the deficit in the short term. Again, I will discuss that later. I would be willing to vote to reduce the Consumer Price Index by half a point. The adjustment would save hundreds of billions of dollars. I would even go further than half a point, but half a point seems to be about where we are. I am just alerting my Republican colleagues there are ways for us to come up with additional savings that are needed to balance the budget but to do it in a fair way and the way that has us holding onto a safety net that we need in the market economy. I would be prepared to vote to phase in an increase in the eligibility ages both for Social Security and Medicare. It would not affect current beneficiaries at all. In fact, it does not have to affect beneficiaries over the age of 50. But to phase that in gives everybody under 50 time to plan and produces tremendous future savings. I would be prepared to vote for an affluence test on all Federal entitlement programs, including farm program payments, if it is fair. It generates tremendous savings in the short term. It seems to me easy for us to sell, and I consider it to be an attractive way again to preserve that safety net and keep fairness in this proposal. Mr. President, I would like to just sort of insert one other objection that I have that I failed to note earlier in my discussion. There is a so-called Freedom to Farm Act proposal that is tucked away in this reconciliation bill. You can imagine what the American people are going to say when they find out that somebody out there with a half section of land that they are not farming now--let us say they use it for pasture and they have a hobby farm going on out there. Maybe they raise horses, for all I know. Under this proposal, they are going to be encouraged to enroll. They are going to get paid whether they farm or not. They are going to get income whether they are producing any agriculture product or not. It converts a market based system to a welfare system I do not think the American taxpayers are going to like and I know American farmers are not going to like as well. Mr. President, there is a document I would urge colleagues to read. I will put in the first two pages. I ask unanimous consent that the first two pages be printed in the Record.

Mr. KERREY

Mr. KERREY. Mr. President, with additional time, I would love to discuss this situation with the Senator from Indiana. It is a very difficult situation. I was in the Krajina Valley a couple days after the Croatian Army had driven back the Croatian Serbs and several hundred thousand estimated, a couple hundred thousand civilians left that valley, and a day later 120 millimeter rockets came into a market in Sarajevo and killed another 40 civilians. And not long after that a President Clinton-led NATO engaged in airstrikes, and it was not long before you could fly into Sarajevo. We see the makings of peace in the region. It is an unprecedented event with the United States leading in a diplomatic effort, Ambassador Holbrooke going around the clock with unimaginable stamina to try to negotiate a settlement. I listened to the House debate last night on this subject, and I must say I hope our own words do not make it more difficult to get an agreement and we do not find ourselves right back in the soup. I think it is a long shot to get a peace agreement. No question it is going to be difficult to get, but I think in any evaluation of what has gone on in Bosnia in the last 60 days you almost have to begin and end with praise for President Clinton's ability to lead NATO and to lead to where we are today, which is a significant reduction of violence in that part of the world.

Mr. KERREY

Mr. KERREY. I thank the Chair. Mr. President, this reconciliation bill conference report is going to pass. It is going to be sent to the President and he is going to veto it. The question will be, in the aftermath, can Republicans and Democrats get together, can we pass something that is veto proof? I hope in fact we can. I must say at the beginning, I praise the Republican leadership for attacking this problem. It is very difficult, almost always guaranteed to produce a considerable amount of controversy. It is rarely popular when you take something away from somebody who has an expectation they are going to get it and you always set yourself up for exaggerated claims, regardless of whether they are coming from this side of the aisle or coming from out in the community. I have done it as Governor. I voted for it as a Senator in 1990 and 1993. It always happens. It is very seldom the sort of thing that gets you a round of applause, when you do what I consider to be a very important and responsible thing. So I begin my analysis of this conference report by thanking the Republican leadership for tackling this problem. I believe we do need to balance our budget. I do not in fact buy into the argument that our debt is rising at an unacceptable level. As a percent of GDP, it is actually going down. Relative to where we were after World War II, it looks fairly good. As a matter of fact, if you look at the markets and what the market is doing right now, it seems to me we ought to be careful as we examine this argument about whether or not our debt is where it ought to be or should it be higher or should it be lower. It seems to me it is heading in the right direction. Nonetheless, it is important, in my judgment, for the Federal Government to have its budget in balance. So, again, I praise the Republican leadership for setting before this body a proposal that will accomplish that. I hope, after this proposal is vetoed, that some of the comments I have made might give Republican leadership some ideas of where I, at least, as one Democrat, want to see some change. To begin with, I do think it has to be fair. It has to pass some test of fairness. This proposal left no impact upon me. It will have absolutely no impact upon me. Before I got here, and after I leave, and right now, my income is high enough it does not have any impact upon me. I do not receive a great deal of Government services, and as a consequence I can stand here courageously and say, ``Go ahead and do the deal.'' I have some stocks and bonds, so maybe I will have a gain on the capital gains tax reduction. It seems to me some standard of fairness needs to be applied. Second, one of the things I think we urgently need to do as a body is answer the question, what kind of safety net does the Federal Government need to provide? If we want to have a market economy, and I think most of us understand we need to have a market economy in order to create jobs, and I think most of us support the idea of creating tax and regulatory environments so that people will want to make investments so our economy will grow, we need a safety net of some kind. All of us understand that. That is one of the most encouraging things in this debate, is Republicans saying they want to preserve and protect Medicare. Medicare is a safety net provided for people over the age of 65. When they leave the work force they have been and are able to purchase health insurance. It has worked. Nobody over the age of 65 is uninsured. Mr. President, 100 percent of the people over the age of 65 are insured. The problem is, the economy has changed substantially since 1965 and all you have to do is pick up the newspaper and read about record mergers and read about companies laying folks off, or go home and talk to somebody who is 50 years of age, man or woman, who has worked in a company for 30 years, who finds himself or herself unable to purchase health care, finds himself or herself struggling with retirement questions, struggling with how do I retrain myself. We have a radically different economy, and if we want a market economy, it seems to me, the question we ought to be wrestling with is what kind of safety net should be built? This proposal, as I see it, moves us away from a safety net, particularly as regards to health care. And particularly, especially the block granting of Medicaid back to the States, as I see it, will erode and move us away from that kind of--at least that kind--of a safety net. I have a number of objections to this proposal that cause me to have to vote no. I had to vote no earlier and vote no again on the conference report. First and foremost are the reductions in Medicare and Medicaid over the next 7 years, in exchange, it seems to be, for tax cuts. Or at least the exchange is occurring somewhere. There is $270 billion in Medicare, $180 in Medicaid, $245 billion for the tax cuts. Condition No. 1 for me, as a Democrat, is let us drop the tax cut. Again, if we are going to ask people to sacrifice and take less in their Government, take less in the way of income from their Government, it seems to me one of the ways, one of the actions we need take to restore fairness, is drop the idea of providing a tax cut which will benefit less than half of the American homes. More than half of the American homes will not even be impacted by this tax cut proposal. It seems to me that it is reasonable for us to say, at the beginning, let us drop that tax cut proposal. I, as a Democrat, am willing, in exchange for that, to vote for some things that I also think need to be included. I think the CPI does need to be adjusted, the Consumer Price Index that is used to adjust transfer payments and used to adjust as well our Tax Code. It seems to me at least a half a point adjustment is reasonable. If you drop the tax cut and you drop the CPI, we will still be reducing the growth of Medicare and the growth of Medicaid. But we will be able to do it in a fashion, it seems to me, Mr. President, that is much more fair, much more reasonable, and much more likely that, in a bipartisan fashion, we can sell what will be nonetheless a difficult proposal to the American people. I, for one, as well, happen to believe if you are going to really reform our Medicare system and our entitlement system, that you do have to adjust the age. In the Entitlement Commission recommendation, Senator Danforth and I recommended, and Senator Simpson and I have a proposal on Social Security that phases in an adjustment of eligibility age for Social Security. I would propose to do the same thing in Medicare. Not for current beneficiaries, not for anybody who is currently in the program, but for future beneficiaries. The longer we wait to do that the more difficult, it seems to me, it is going to be to break the news that when the baby boomers retire we have this promise laying on the table we are simply not going to be able to keep. I say to my Republican colleagues, I am willing to vote to drop the CPI by at least a half a point. I am willing to do the same thing on eligibility age. I have no difficulty adjusting the premium for part B. It is fair, it is reasonable, it ought to be done. It seems to me, at the very least we should say no more than a 70 percent subsidy for part B Medicare. I am willing to vote for that. But I do not want a tax cut proposal on there because I cannot sell it as fair. I cannot explain it as being necessary, because it is not necessary. There are other ways for us to do this, to generate the savings needed to balance the budget in 7 years and get us to that objective. The next thing I want to spend a little more time on is talking about this idea of building a safety net. I listen to people talk, both at home and as I watch the news and read the newspaper. Increasingly, people are saying this debate has provoked their concern once again about whether or not they are going to be able to have health care. Why? Mr. President, in the State of Texas, 50 percent of all babies are paid for by Medicaid. These are working families out there. These are people who are earning the minimum wage or slightly above, that cannot afford to buy health insurance. If you want to preserve and protect Medicare, if you have ever come to this floor and said let us preserve and protect Medicare, the fundamental premise of that program is that at some point the market does not work, that we have to collectively look for some way to provide for health care for people who either are not going to be able to afford to buy it or might be excluded as a consequence of some physical condition on their part. We need a safety net that guarantees health insurance to every single American. No one should be left off the hook of having to pay. The payment ought to be based upon our capacity to pay. Not only do I support a means testing, an affluence testing of Medicare, but I would love to see us change the eligibility and allow every single American or every legal resident--once you pass those two tests, you know with certainty you have it. You can go out and work. You can go out and pay attention to your education and do the sorts of things you need to do to lift your earning power and do not worry that you are going to lose health insurance. I think we need a safety net in changing our retirement laws. I think we need a safety net as well in education. The work force today places a very heavy premium on those with skills. It seems to me one of the worst things about this proposal is that we are not increasing the amount of money that families need to be able to send their children to college. It seems to me we are moving in the opposite direction in trying to build the kind of safety net that we need for an active, vibrant market economy. Finally, Mr. President, I would like to talk about something I have talked about ad nauseam on this floor a time or two before, and that is this question of entitlements as a percent of our budget and what this does to our ability to invest in education, transportation, research, those things that either will improve the quality of our lives like parks or helping those who are mentally retarded. Whatever it is we decide we want to do to strengthen our conscience, we are decreasing our ability to do it as entitlements as a percent of our budget grow. This year, it is 34.5 percent for domestic spending. At the end of this budget proposal it is 26.5 percent. Now, percentages do not mean much to us typically, so let me try to convert that. If you think this year's budget is tough on appropriations, wait until 2002. I do not think we can do the things that are required in this budget proposal. If you think you can, do not try to construct a budget with these numbers. Mr. President, 27.5 percent gives you $435 billion for defense and nondefense spending. Let us presume we spend $263 billion on defense, which we did this year. I think we can spend slightly less than that. No matter what you do, you are going to spend $255 to $265 billion on defense. So let us take $263 billion out, which is this year's spending, which I presume most, if not all, of the Republicans believe ought to occur. That leaves you $172 billion. I know the occupant of the chair, who is on the Appropriations Committee, probably is familiar with this, but let me just show you what I have done. I take $18.7 billion for law enforcement, for drug efforts, for the FBI, for Border Patrol, for the U.S. attorneys; I take $17 billion for international affairs--I did not really pull these because they are my priorities; I just pulled some numbers--$17 billion, slightly more than 1 percent of our entire budget; $20 billion appropriated for veterans--that is veterans' pensions that are only appropriated accounts; $10 billion for community efforts such as the CDBG efforts; $17 billion for science and space; $38 billion for transportation; $53 billion for all of education and training. Mr. President, that is $174 billion. Right there you have $174 billion. So I ask those who say: Well, that is fine, what are you going to do about the NIH? What are you going to do about all environmental protection, all of housing, the management of our national parks, disaster relief, natural resources management? The list goes on and on and on. The answer is you cannot do it. There is not a single Member of this body, I suggest to my colleagues, who could come to the floor and tell me, make a proposal that would show how we are going to in the year 2002 allocate defense and nondefense with only $435 billion. It is not possible. It is not desirable either, I might point out, for us to be heading in that direction. If you think that is bad in 2002, just look a little beyond that when my generation starts to retire. Instead of a 1-percent erosion of operations, which is about $15 billion a year, it will double in the year 2008, and then it is too late. Then the kinds of changes that we have to put in place, the kinds of changes that we have to put in place will cut current beneficiaries of Social Security and Medicare. It will cut current beneficiaries substantially or we are going to have to say to our young people in the work force: We have to have a substantial increase in your payroll taxes in order to be able to cover the bills. I am here to say again I appreciate the work that the Republicans have done in trying to tackle this problem. There are other problems that need to be addressed that are left unaddressed in this proposal. It is going to be vetoed by the President. It is going to be sent back here, and it will be up to the Republican leadership. Do we embrace the ranking Democrat on the Budget Committee, who is one of the most fiscally conservative Members of this body. For gosh sakes, if he and the chairman cannot put together a balanced budget, I do not know who else can. The question will occur, when the Republican leadership package is vetoed and sent back, not can you not find Democrats who will support it, but will you make an active effort to recruit and bring us into the process and say, what are your standards of fairness? What are the things you want before you will support this proposal? I think there is the will to balance the budget, but there is a desire to do an awful lot more than that. I hope that after this bill is vetoed and after it is sent back to us and after we have unsuccessfully attempted to override it, that those who want to balance the budget will join those of us on this side who want to balance the budget as well. I hope you will turn to us and give us an opportunity to participate. I yield the floor.

Mr. KERREY

Mr. KERREY. Mr. President, I am pleased to join the subcommittee chairman, Senator Shelby, in bringing this conference report to the floor. As the chairman pointed out, this conference report is substantially below the requested and enacted levels for the many programs and activities under the jurisdiction of the Treasury Department, the Executive Office of the President, and certain independent agencies. Having said that, I want to take this opportunity to compliment the distinguished Senator from Alabama, Mr. Shelby, and the House subcommittee chairman, Mr. Lightfoot, for the bipartisan spirit they both displayed during the conference to craft a conference agreement which, under the most severe budgetary constraints, meets the highest priorities of both the executive branch and the Congress. The conference report contains funding for the continuation of the Council of Economic Advisers, which the House had proposed to eliminate, and does not include many of the controversial legislative riders which would most assuredly open this bill to a Presidential veto. This conference report funds Federal programs where a compelling case has been made for their continued existence. And, in the case of two agencies, the Administrative Conference of the United States and the Advisory Commission on Intergovernment Relations, it provides only limited funding for the orderly close out of their operations. While most programs have been reduced below enacted levels, the conference agreement does contain modest increases for Treasury law enforcement agencies to permit them to sustain current levels of vigilance in the war on drugs, violent and financial crimes investigations, counterterrorism, Presidential protection, White House security, and law enforcement training. Funding for new Federal building and courthouse construction has been funded at the Senate-passed level of $573 million, or $415 million below the requested level. In addition, the Senate criteria on Federal building construction were adopted by the conferees. These criteria provide full funding for GSA's highest priority projects, which have received site or design funds in the past; but do not permit the funding of new starts or projects where the construction contract awards will not be awarded in fiscal year 1996. I believe this is a sound approach. We are funding buildings at levels that will permit GSA to complete the projects. We did not go along with the House proposal to provide 40-percent funding for these projects. That approach will only prolong these projects and will not enable GSA to let any contracts in fiscal year 1996. Mr. President, having said that, I do not support all of the actions taken by the conference committee. I am particularly concerned that the Senate provision fencing IRS tax systems modernization funds until GAO certifies that certain corrections in the management of the program have been made, was dropped. Mr. President, to date, $2.5 billion has been invested in this program to modernize IRS' outdated computer systems. The conference agreement contains an additional $695 million toward this effort. When all is said and done, this program could cost the taxpayers upward of $8 billion. This is a hefty sum of money, particularly in these budgetary times, for a program which according to GAO is fraught with mismanagement and infrastructure problems. There is no doubt that the TSM concept should revolutionize the IRS. However, the way the agency is progressing on its implementation at this juncture, at some point in the future, we could find us regretting this substantial investment. Mr. President, I am also concerned about the reduced funding level for the IRS returns processing and taxpayer assistance account. The conference agreement cuts $81 million from the President's requested level for IRS' front-line returns processing and taxpayer assistance activities. The IRS estimates that it will process about 211 million returns and supplemental documents and will issue about 83 million tax refunds in fiscal year 1996. This is an increase of about 3 million returns and documents and 2 million refunds above the 1995 level. I just hope, Mr. President, that as a result of these reductions, refunds are not delayed and taxpayer questions do not go unanswered because we have not provided the agency with the funds it needs to operate at increased service levels. I am pleased that the final agreement includes a provision which I offered on the Senate bill to establish a Commission on the Restructuring of the Internal Revenue Service. I am hopeful, that through the work of this Commission, we will come up with some workable solutions to make the IRS a more customer-oriented organization, which will be the Nation's leading revenue producer while operating more economically and efficiently. Mr. President, depending on what happens to the amendment in disagreement, amendment No. 132, I believe this bill will be signed by the President. This bill was passed by the Senate on August 5, the conferees met September 12 and was it not for the controversial Istook- McIntosh-Erlich provision, this bill could have been sent to the President and I believe signed prior to the close of the fiscal year. Unfortunately, we are now past that date, our agencies have been operating at reduced funding levels through two continuing resolutions, and now most of the agencies funded in this bill are in the shutdown phase. I believe we have an opportunity here to get this bill to the President without further delay. We have an obligation to the American public to get the job done and ensure that important tax, financial management, law enforcement, and Federal building programs move forward. So, I would urge my colleagues to support this conference report and put an end to the gridlock. I urge the adoption of the conference report. Let me comment on a couple of things. I suppose I am not unique. I imagine all of us are getting questions from home as to why we were unable to pass appropriations bills, why do we have the furloughing of Federal employees, and why have we essentially shut down parts of the Government. There are 200,000 Federal employees who have been furloughed for 2 days as a consequence of this particular appropriations bill. The Senator from Alabama referenced it. There were 141 amendments on this legislation that were subject to the conference of this subcommittee--141. The chairman called a conference, he and Chairman Lightfoot. We met on the 12th and 13th of September, a full 2 weeks before we were supposed to finish our work. According to the Budget Impoundment Act, we had to have that work done by the 30th of September. On the 12th and 13th, the chairman was successful in disposing of 140 of 141 amendments. As he indicated, the only one that remained was the so-called Istook amendment, which appeared in neither version of the bill and which, regardless of your position on the issue, had no relevance to this appropriation bill, and which had a little or no support in the Senate, and delayed the final House and Senate action on this conference report. I mention it because there is a kind of a common perception--I think it is common--that there are significant differences between Republicans and Democrats on all these appropriations items, and that is why the Government was shut down. I agree with Senator Shelby on this piece of legislation. I am prepared to vote for it. Both of us wanted to move this thing out before the 30th of September, and it could have been not nearly as difficult as it might appear to the average citizen out there that is wondering what has gone on in the past couple of days--200,000 Federal employees being furloughed in the last 2 days. Again, not because of great ideological differences on spending, not because Democrats and Republicans disagreed that we need to get rid of the deficit that has been, I think, tormenting the Nation for many, many years, but because of a single amendment having to do with the regulation of 501(c)(3)'s and 501(c)(4)'s. Mr. President, I, too, appreciate the willingness of the Senator from Wyoming to allow us to recede to the House. I supported the original Simpson proposal, and appreciate very much his willingness to recede to the House in this particular case so we can move this to the President for his signature and end the furloughing of 200,000 Federal employees who are covered by this legislation. Let me also comment. The distinguished chairman mentioned his concern about the drug czar. I share that concern. I have a great deal of respect for Dr. Brown. It is not as if I am critical of him as an individual but the number one problem that we face with drugs today is the illegal consumption of drugs by young people 12, 13, and 14 years of age. Those who have made it either their living or their avocation trying to help us reduce drug consumption in America will say to us that the most important thing is to reduce the size of the funnel of people that are coming on line using illegal drugs. That means we have to get to young people and say to them that you should not use these illegal and dangerous drugs. I remember when former First Lady Nancy Reagan started the Just Say No Program. And I thought, well, this is a silly program. It cannot possibly work. The fact is it did work. The fact is that young people see the consumption and the use of illegal drugs in black or white materials. It is either yes or no. If we as adults do not say no to them, they are likely to say, ``Well, maybe it is OK.'' Over the past 4 or 5 years, according to those like Jim Burke who have been involved in this effort in the private sector, there has been an increase of exposure to the youth of illegal drugs, either on television shows or in movies. This has been creeping in again to our culture--sort of an acceptance that perhaps marijuana use is OK, or that perhaps cocaine use is OK. So this idea that our leaders say to our youth do not do drugs, say no to drugs, this idea that can have a very powerful impact on our youth, to me, has sunken in rather impressively after listening to people out there in the private sector. I have been quite discouraged in looking at the drug czar who has legal authority to take action and has failed to either use that legal authority or to make much progress in the war on drugs. So I join with the Senator from Alabama. We initially were going to zero out the drug czar. We entered into a negotiation here on the floor, and when the bill was first being considered by the Senate and talked to the distinguished chairman of the Judiciary Committee and the ranking member of the Judiciary Committee, and they convinced us to accept some language that would urge the President to take stronger leadership. I personally am pleased to see that the President has announced that in January he is going to begin communicating. He is organizing a conference of youth. I think it is terribly important that our political leaders put that message out there, and that we start doing it repeatedly in order to reduce the size of the funnel of the number of people that are coming in and beginning to use illegal drugs. To say for emphasis, I am also with the chairman. The verdict is still out as far as I am concerned. I was willing to yield on this point, willing to give him a little bit more rope to try to see if they could be effective. But the bottom line for me is, if it is not effective, I will be back here next year suggesting that this Senate vote to zero out the drug czar. Get the job done or let us find some other organization or somebody else that can do it. Let us not pretend that we are solving the problem if the problem in fact is getting worse. Again, I say in closing that I appreciate very much the fine work Senator Shelby has done on this bill. I hope that in an expeditious fashion we can get this down to the President for his signature. proposed privatization of investigative services by the office of personnel management

Mr. KERREY. We have to vote at 4:45.

Mr. KERREY. I would like to begin. I know Senator Shelby will be down here shortly. How long will the Senator speak?

Mr. KERREY. I am aware of that. The Senator from Alabama is coming to the floor.

Mr. KERREY. I believe they are going to try to set the time for the vote at 5 o'clock, and I doubt that Senator Shelby and I are going to take a great deal of time in opening statements.