Carl Levin

Mr. LEVIN

Mr. LEVIN. I thank the Senator.

Mr. LEVIN. Madam President, let me briefly comment on a few of the questions which have been raised here today. First, in terms of the amendment which is offered, we are requiring that there be an increase in fuel economy. That is No. 1. But what we also say is that there are many factors that need to be considered, including safety factors, before that decision is made. We list those factors. We list every factor that we can reasonably think of that somebody ought to consider before we arbitrarily adopt a number which is then imposed upon this economy and upon the American public. We have heard a lot about safety today. I want to read some things from the National Academy of Sciences about safety. This isn't the automobile industry and it is not the opponents of the Levin-Bond amendment. This is the National Academy of Sciences. It creates a lot of difficulty for the opponents of my amendment because it raises an issue they do not consider. As Senator Kerry from Massachusetts simply said: The National Academy of Sciences says that his proposal, ``will not affect safety.'' Those are the words of Senator Kerry. The National Academy of Sciences says his proposal won't affect safety. I am afraid that the National Academy of Sciences specifically found that the increase in CAFE, whether you like what we did or do not like what we did back in the 1970's, had an effect on safety. Here is what they said: Based on the most comprehensive and thorough analyses currently available, it was estimated in chapter 2 of their study that there would have been between 1,300 and 2,600 fewer crash deaths in 1993-- Which is the year they looked at it had the average weight and size of the light duty motor vehicle fleet in that year been that of the mid-1970's. Similarly, it was estimated that there would have been 13,000 to 26,000 fewer moderate to critical injuries. These are deaths and injuries that would have been prevented with larger heavier vehicles, given the improvement in vehicle occupant protection-- That was raised today: Does this consider the improvements? Yes. and travel environment that occurred during the intervening years. In other words, the National Academy of Sciences study says these deaths and injuries were one of the painful tradeoffs that resulted from downweighting and downsizing, and the resulting improved fuel economy. Those are difficult words for many people to even consider, but they are words of the National Academy of Sciences. They repeat them in a number of places relative to safety. There is a tradeoff. That was the majority vote of the National Academy of Sciences. For the Senator from Massachusetts to simply say the National Academy of Sciences said it will not affect safety--referring to his proposal-- he is simply wrong. It was amazing to me that then almost in the same breath he attacked the very findings of the National Academy of Sciences as being flawed. Within 1 minute of each other, those two thoughts were uttered by our good friend from Massachusetts: One, the National Academy of Sciences say the increase in CAFE mandated by his bill won't affect safety; second, that the National Academy of Sciences study, which has been quoted on this floor today, is flawed. Then he goes into the reasons why it is flawed. My point is actually a simpler one. Somewhere, somebody who has some expertise ought to look at some factors that should go into the decision: What should a new fuel economy standard be? We can do it here arbitrarily. We can say it ought to be 35 miles a gallon, that it is technologically feasible using possible advanced technologies. We can say that without consideration of cost, by the way; without consideration of safety; without consideration of disproportionate impacts on different manufacturers. We could do that here arbitrarily. Or we can do what this amendment does, which is to say there are a lot of criteria that ought to go into that decision: Technological feasibility, economic practicability, the effect of other Government motor vehicle standards on fuel economy--I want to come back to that in a moment--the need to conserve energy, the desirability of reducing U.S. dependence on foreign oil, the effect on motor vehicle safety, the effects of increased fuel economy on air quality, the adverse effects of increased fuel economy standards on the relative competitiveness of manufacturers, the effect on U.S. employment, the cost and lead time required for introduction of new technologies, the potential for advanced technology vehicles such as hybrid and fuel cell vehicles to contribute to significant fuel savings; the effect of near-term expenditures required to meet increased fuel economy standards on the resources available to develop advanced technology, and the report of the National Research Council, which is the National Academy of Sciences. Do we want these factors to be considered? Do we think they are relevant? Do we think they should be part of a process that addresses where the new standard should be? It seems to me, yes. It is for 15 months. Under our amendment, we direct the Department of Transportation to--I use this word because it is very important--increase standards for cars and light trucks based on the consideration of those facts. That is No. 1. Those facts are relevant. They ought to be considered. They are the alternative. One of the things that the NAS also points out is that if new regulations favor one class of manufacturer over another, they will distribute the cost unevenly and could evoke unintended responses. On page 69 of the NAS study, they say that in general new regulations should distribute the burden equally among manufacturers unless there is a good reason not to. For example, raising the standard for light trucks to that of cars would be more costly for light truck manufacturers. The Kerry-Hollings proposal affects manufacturers unequally because it looks at fleet average instead of class average. We have gone into this in some detail today. We have pointed out that if you look at classes of vehicles and compare the light trucks, which we have listed here manufacturer by manufacturer but do it class by class, American- made vehicles are at least as fuel efficient as imports. Is that relevant? It should be. Even if you decide that you want to have an arbitrary number selected in law now without a committee report, without consideration of any factor except potential technological feasibility--one of 13 factors--if you want to ignore all the others, surely we ought to do it in a way which does not have a discriminatory impact on American manufacturers. I find it incredible, I find it bizarre, that we would build a system that would not say that equal vehicles by size and manufacturer ought to be treated equally. By the way, that is also what the NAS says. Here I am quoting them: That one concept of equity among manufacturers requires equal treatment of equivalent vehicles made by different manufacturers. The suggestion was made today that this proposal of Senators Kerry and Hollings would have a positive impact on air quality. I am afraid that is inaccurate. Air quality standards are set for all light-duty vehicles on a per-mile basis. So that the amount of any exhaust gases that can be emitted and limited to a fixed amount per mile driven, regardless of the fuel economy of the vehicle, makes no difference. Large vehicles, medium-sized vehicles, or small vehicles all have, under the so-called tier 2 rules, which will soon be in effect, exactly the same requirement relative to emissions that go into the air. All full-sized vehicles, including Ford's Excursion, GM's Suburban, the Dodge Durango, the Toyota Land Cruiser, have to meet the same emissions as a Honda Civic or a Chevy Metro. Talking about the Chevy Metro, the GM dealer, which was referred to by Senator Durbin, I presume, had Chevy Metros for sale, and could have sold all they wanted, I assume, since they were a GM and Chevy dealer. Yet the percentage of those small subcompacts that were sold is less than 2 percent of the entire sales of this country. They have been available. They are highly fuel efficient. They have some disadvantages in terms of size. But to suggest, as one Chevy dealer did in a letter that was cited by the Senator Durbin, that somehow or other General Motors should give to him a fuel-efficient vehicle so he could sell more--2 percent of all of our sales in this country are subcompact, are highly fuel efficient, and with a small number of other disadvantages. GM provided an electric vehicle, which has much better fuel economy by any kind of a test than any of the proposed vehicles or any other existing vehicles that we have. Yet these vehicles have been, if not a significant disappointment, a serious disappointment. They have had these vehicles. We have probably a dozen vehicles of extremely high fuel economy available for consumers, should they choose to buy those vehicles and should dealers such as the dealer in Chicago choose to or be able to sell those vehicles to their customers. Just a couple of other points before we finish for the evening: The NAS does not recommend fuel economy goals. They have said that over and over again. They lay out the facts. We have quoted many of them on our side of this issue. But they say very clearly that the committee cannot emphasize strongly enough that the cost-efficient fuel economy levels they identified are not recommended fuel economy goals. That is not what they were about. What they were about was to do an analysis of various kinds of technology. What are the possibilities? What they came up with are conclusions which we very much support. We very much rely on them. The amendment of Senator Bond and myself very heavily relies on the NAS study which has been referred to today. I think a letter from Honda was referred to earlier in the day, the implication being that somehow or other Honda might be supportive of the Kerry-Hollings language. I want to read a Honda document from their government relations folks. It says here that the Levin-Bond amendment requires NHTSA to set new standards for light trucks within 15 months. They support this amendment. These kinds of technological feasibilities are among the factors considered in setting new standards, and, perhaps most importantly, it says: We ask you to call your Senators immediately to express your support for what is being called the Levin-Bond amendment, and not support alternative amendments. They write: Other Senators may offer amendments, but there are none that meet our criteria better than Levin-Bond. That is the Honda dealer document to which I am referring. It is quite opposite from the implication which was made earlier this evening that somehow or other Honda was supportive of the arbitrary identification of a particular standard in the Kerry-Hollings language. Again, Honda specifically said: We ask you to call your Senators immediately and express your support for what is being called the Levin-Bond amendment. There was a reference made to Europe: Why can't we do what they do in Europe where there is a much different situation? The small car percentage in Europe is 64 percent. Ours is 24 percent. They obviously do better on fuel economy. But they do better for a number of reasons. Not only do they have three times as many small cars in use, mainly because of the cost of gasoline, which is about 2\1/2\ times higher than our gasoline prices, but also they use diesel engines. They have 36 percent diesel engines in Europe. We have about 1 percent here. The reason they are able to do that is diesel engine standards are very different from ours. Our tier 2 emission standards will not allow the European diesel engine to be used here. I did not hear supporters of Kerry-Hollings today say they would support the European diesel standard. I would be interested as to whether they would. If they will, that has a very different effect on our air quality. The emission standards in tier 2, which are very tough, and which are stronger than they are in Europe, and which protect our air cannot be met by the European diesel. Maybe someday they will be, but they cannot yet. When we heard that argument from the Senator from Arizona about air quality, and about being worried about NOx and the other components of smog, then what we are talking about is: Are the proponents of the Kerry-Hollings language willing to adopt the European diesel standards which would allow our manufacturers to use diesels of that same quality? That will have a huge impact on CAFE standards and on the CAFE averages of fleets, if our manufacturers can use the European diesel standard. I guarantee you that there would be a huge outcry in this country if there were an effort made to adopt the European diesel standard for American manufacturers and sales here. To simply say, look, they are doing it in Europe, they are meeting much higher CAFE standards or fleet averages in Europe than they do here, is to completely mix apples and oranges, because the difference, No. 1, in gas prices; and, No. 2, because of the difference in the number of small cars in Europe, mainly because of gas prices, but, most importantly, because of the percentage that diesels have of the market in Europe. Madam President, I close with this: Senator Kerry, a good friend of the Presiding Officer and myself, suggested that maybe he and I ought to go in a back room--his words--and just adopt CAFE standards class by class for each of these six classes, since I pointed out how discriminatory it is to have one fleet standard for each manufacturer because of the different component makeup of the fleets, and how it is comparing, in a very unfair way, the American automobiles to the imports, and that the only fair way, in my judgment, is to have the same standard fuel economy for the same class vehicle. Senator Kerry, at that point, suggested--again, his words--I challenge you to go in a back room and set standards for each class. What he pointed out, accurately, is that our amendment does not set a standard. He wants to set a standard. My answer to that is, to do so would be to adopt in law six arbitrary standards instead of one--one arbitrary standard for each class. I do not think we should legislate that way. I think what we ought to do is, at least for a brief period of time--have the people who are designated by law as experts look at all the criteria which are relevant to the setting of fuel economy standards, including safety, impact on jobs, cost, short-term versus long-term benefits, and the other criteria that I mentioned. Then if they do not act within 15 months, we have an expedited process to guarantee that alternatives can be considered by the Congress by under expedited procedures. If they do adopt a regulation that we do not like, under existing law, there is a process called legislative review, under which we can veto that regulation. We have that option after a rational process is pursued. We can either arbitrarily select a standard now, based on 1 of those 13 criteria--and even that is partial--or we could do something which, it seems to me, is a lot more rational, which is to tell that regulatory agency, which has that responsibility under law: These are our policies. We want you to consider all of these criteria to adopt a rule. If we do not like it, we are going to veto it. If you do not do it, we are going to have an expedited process to consider it. Madam President, I do not know if there is anybody else who seeks recognition. I see none. I yield the floor. I suggest the absence of a quorum.

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

Mr. LEVIN. In the same breath, the Senator from Massachusetts says NAS found an increasing safety standard, and that his proposed level will not affect safety. There was no such finding by the NAS. Would the Senator from Alaska agree? Would the Senator from Alaska agree that when the NAS said that it is technically feasible and potentially economical to improve fuel economy without reducing vehicle weight or size, and, therefore, without significantly affecting the safety of motor vehicle travel, they were not talking about increasing fuel economy to the Kerry level?

Mr. LEVIN. Mr. President, first let me thank my good friend from Missouri for the tremendous effort he has put into fashioning this bipartisan approach to increasing fuel economy. He has played an indispensable role. I am very much appreciative of that and, of course, his presentation today. This bipartisan approach is an alternative to the language in the substitute that is pending, the language which I will refer to as the Kerry-Hollings language. Our amendment is aimed at increasing fuel economy. That is No. 1. We want to increase fuel economy. We want to do it in a way that also allows the domestic manufacturing industry in our U.S. economy to thrive as well. We think we can accomplish both goals. We don't think these are mutually exclusive goals, inconsistent goals, or goals that are in conflict with each other, providing we do it right. If we do it wrong, we will have a very negative effect on the American economy and on manufacturing jobs in America. If we do it wrong, we will not even benefit the environment the way we should. I will get into the right way and the wrong way in a few moments. We really have a three-point policy that we are talking about--three policies that we want to emphasize in this amendment. First is the need to increase fuel economy in our vehicles. That is policy No. 1. No. 2, we put a much greater emphasis on incentives to achieve that goal, positive ways of achieving that goal. We do it in a number of ways in this bill. We have a requirement here that the Government purchase a large number of advanced technology vehicles. Government purchases are a way of advancing the way of fuel economy. The Presiding Officer is a member of the Armed Services Committee and may remember that last year in our defense authorization bill we actually put in a requirement that the Defense Department, starting in the year 2005, purchase hybrid vehicles. What this bill does is it applies the same principle to the balance of our Federal Government so that we use the purchasing power, the pulling power, the positive power of Government purchases to provide a market for advanced technology vehicles or hybrids. We also have a greater emphasis on joint research and development. The administration has proposed an approach, which is a very useful approach, built on what was called the ``partnership for a new generation of vehicles,'' which the last administration put into place, which is based on partnerships between the Federal Government and the private sector in trying to develop new technology. The administration now has talked about moving with greater emphasis on fuel cells--they call it the ``freedom car.'' We would add about 40 percent additional funds to advanced technology research and development between the private sector and the Federal Government. That is the second thing we do in terms of positive incentives to try to achieve greater fuel economy. A third thing that we would do, we would do it in a separate bill, so that this bill would not be subject to a point of order, or subject to a slip that the House of Representatives might be able to file against it. We do something on the tax credit side. We would significantly enhance the tax credits--tax deductions--that are provided for both advanced technologies and for new technologies. In the provision that is going to be offered, I believe, which has been adopted by the Finance Committee, for electric vehicles, we would increase the existing electric vehicle tax credit up to a maximum of $6,000 for 6 years, beginning this year going through 2007. For fuel cell vehicles, we would establish a tax credit up to a maximum of $11,000 for 8 years, beginning in the year 2004, ending in 2011. For hybrid vehicles, the separate amendment we will be offering would establish a tax credit up to a maximum of $5,000 for hybrid vehicles for 6 years, beginning in 2004. We also would have a greater emphasis on using tax deductions for infrastructure equipment and infrastructure for fuels and alternative fuels--for hydrogen. We would take the existing tax deductions and make them last longer. We would apply them to a greater range of equipment, and we would also establish a tax credit of up to $30,000 for the cost of installation of alternative fuel and hydrogen distribution equipment, beginning in 2002 and ending in 2007. There are--in addition to what I have just outlined--some research and development programs that we would emphasize. On diesel research, we would coordinate with the Secretary of Energy on an accelerated R&D program to improve diesel combustion. We would have a fuel cell demonstration program between the Department of Defense and the Department of Energy. Those, briefly, are the things we would do to create positive incentives, market pull, and partnerships between the Federal Government and the private sector, to try to get us to a greater level of fuel economy. Our third policy is based on our belief that there are a host of factors that should be considered before the CAFE requirement is adopted. We think there should be a new CAFE requirement. Our provision calls upon the Department of Transportation to increase--that is our word--standards for cars and light trucks based on the consideration of a number of factors. Then we list the factors that we hope the Department of Transportation will consider. They include technological feasibility. That is the only one that is in the bill before us. The bill says it would take the most advanced technologies, assume they will be incorporated into vehicles, and then do not consider, however, the other factors that we say logically must be considered before a new CAFE standard is adopted, such as cost-effective Government motor vehicle standards on fuel economy. For instance, what is the impact on our tailpipe emission standards? The need to conserve energy; that is obvious. We all want to do that. That is a goal. The desirability of reducing U.S. dependence on foreign oil, clearly, that is one of our goals. What is the effect on motor vehicle safety? As the Senator from Missouri pointed out, the study of the National Academy of Sciences shows that there is a loss of lives and a significant number of injuries which result when you raise the CAFE standards, as we did some years ago. I will get back to the safety issue in a moment because it is a factor that should be considered. That is all we are saying. We are saying that it is logical and rational to have a process where other factors beside potential technological advances should be considered in setting a new CAFE standard. The adverse effects of increased fuel economy standards on the relative competitiveness of manufacturers, I will come back to that issue because the CAFE structures had a discriminatory impact on the American auto industry with vehicles just as fuel efficient, I emphasize. I want to spend some time on that issue in a moment. The American-manufactured vehicles are just as fuel efficient, and they are put in a negative position, vis-a-vis the imports, because of the CAFE structure--the fact that it looks at a fleetwide average rather than looking at class of vehicles compared to class of vehicles. Instead of saying the same size vehicle will be subject to the same CAFE standard, the same mileage standard, it lumps together all vehicles of a manufacturer, and the results are, in my judgment, bizarre and costs huge numbers of American jobs without the benefit to the environment. We would ask the Department of Transportation, during this period of time that we give to them, to consider rulemaking would also take a look at the effect on U.S. employment, the effect on near-term expenditures that are required to meet increased fuel economy standards on the resources available to develop advanced technology. What is the relationship between requiring short-term gains on the need to make leap-ahead technologies available to us earlier, to make the advanced hybrids available earlier--and I emphasize advanced hybrids available earlier--to make the fuel cells available to us in 10 years instead of 20 years? What is the impact on taking arbitrary numbers requiring the auto industry year by year to meet those standards on what our ultimate goal I hope will be, which is huge reductions in the use of oil by the advanced technologies called advanced hybrids and fuel cells? Another thing we would require is that the National Research Council, the part of the National Academy of Sciences that reported in a report entitled ``Effectiveness and Impact of Corporate Average Fuel Economy Standards,'' which was issued in January of this year--we would require that report be considered. I am going to give some quotations, as the good Senator from Missouri did, from that report because we think that report is an important report. The time line we would give the Department of Transportation is 15 months to complete the rulemaking for light trucks, and 24 months to complete their rulemaking for passenger cars. If they do not complete it, it would be in order, under an expedited process, for Congress to then take up alternatives which could be considered. It at least puts in place a rational system of looking at many criteria which are relevant to the question of where the new standards for fuel economy ought to be instead of arbitrarily picking a number out of the air, having staff, for instance--apparently we are told staff is considering some numbers--and come up with a conclusion that we could impose a 36- mile-per-gallon or a 34-mile-per gallon requirement on the entire fleet, lumping together trucks and passenger cars.

Mr. LEVIN. I will be happy to yield at the end of my remarks. I thank the Senator. Instead of doing that, we should have a rational rulemaking process that is put in place for a fixed period of time that then makes a decision on what the new standards should be. That would be subject to legislative review under existing law, under an expedited process. It can then be vetoed, and under our bill, if there is no report within that fixed period of time, it would then be in order, under the expedited process, to offer alternatives to it. Those are some of the provisions of our alternative. We think it is a much more rational process. It takes advantage of a rulemaking opportunity where various criteria can be considered, where safety factors can be considered--and I want to get to safety factors in a moment--where we can look at the discriminatory impact on various manufacturers that are put in different positions, put in worse positions. Even though their cars are equal or better in terms of fuel efficiency, they are put in a negative position vis-a-vis their competition. What is truly bizarre, it seems to me, is it is the American manufacturers that are put in that discriminatory position, that negative position, not based on their efficiency, because we are going to go through that in a minute, but based on the way this CAFE provision is structured. It puts American jobs at risk with no benefit to the environment. It does not help our environment or the air to push somebody into an equally efficient or less efficient imported vehicle than a domestic vehicle that is equally efficient or more efficient. We are not doing anything for the air, and we are costing American jobs. That is the effect of the CAFE structure. It seems to me, at a minimum, we should ask the Department of Transportation to include in their rulemaking review what are the adverse effects of increased fuel economy standards on the relative competitiveness of manufacturers. I wish to show a few charts. This is a chart which I have produced which compares, class by class, some American-made and imported vehicles. This is not a chart which was produced by the auto industry. It was produced by me. It obviously does not include every vehicle, but we believe it makes an important point, which is that American vehicles, class by class, are at least as fuel efficient as foreign vehicles. This chart shows trucks, pickups, SUVs, and the minivan. Those are the three vehicles we studied. A similar chart can be made for passenger vehicles. We did not do that because that has not been the focus, but we are perfectly happy to compare numbers on passenger vehicles provided we are comparing apples and apples, providing we are comparing classes of vehicles of the same relative size. We can also look at passenger vehicles, and we can reach basically the same conclusion. The problem is, if you lump all the different classes of vehicles together, at that point you come up with a system which has a discriminatory impact on some manufacturers, and it is the American manufacturers that carry the brunt of that disparate impact. Take a look, for instance, at the large SUVs. Ford Expedition gets 15 miles per gallon. GMC Yukon gets 15 miles per gallon. Dodge Durango gets 15 miles per gallon. The Toyota Land Cruiser gets 14 miles per gallon. If people want to choose a Toyota, that is their business, but it seems to me we should not be creating a system which pushes people to imports because Toyota can produce hundreds of thousands of additional Land Cruisers without any negative effect in terms of their bumping up against the CAFE limit when the Land Cruiser is not as fuel efficient as the American vehicles. Midsize SUVs: Ford Explorer, 17 miles; Chevrolet Trail Blazer, 18 miles; Jeep Liberty, 17 miles; Toyota 4Runner, 17 miles--equal or a little better fuel efficient in case of the Trail Blazer. It is the same with the small SUV, the large pickup, and the small pickup. We can go through these one by one, but in each case, the U.S. vehicles are either as fuel efficient or slightly more. One can also pick cases where an imported vehicle may be 1 mile per gallon or somewhat more efficient. Those cases will exist if one looks at it enough. If we look at the entire picture class by class, American vehicles are as fuel efficient as imported vehicles, or in the cases I gave--and in many other cases--more fuel efficient. We have a situation called CAFE where foreign manufacturers are relatively unconstrained by CAFE because of a fleet mix, not because they are more fuel efficient class by class. Nothing is gained for the environment if an imported SUV is bought instead of an American-made SUV where the American SUV is at least as fuel efficient as the foreign SUV. Nothing is gained for the air, but a lot of American jobs are lost. If we look at the opportunity for just one manufacturer--let me back up 1 minute. This is the impact of a 36-mile-per-gallon combined car/truck standard on five manufacturers. Honda only has to increase theirs by 20 percent; Toyota, 36 percent; GM, 51 percent; Ford, 56 percent; DaimlerChrysler, 59 percent. Again, I emphasize, because this is the key point, those disparate impacts have nothing to do with the relative fuel efficiencies of the vehicles of the same class. It has to do with the fleet mix. What we have put in place--I guess the word ``bizarre'' is as close as I can come to it, because this does not do anything for the environment to push people into an imported vehicle which is no more fuel efficient than a domestic. If people want to buy an imported vehicle, that is their judgment, that is their business, but for us to have a structure which pushes people in that direction because we constrain the number of larger vehicles which the American manufacturers can produce, although they are equally efficient and many times more efficient in terms of fuel than the imports, it seems to me does not do anything for the environment and it costs American jobs. That is something we should avoid. We ought to take the time to avoid it. We ought to have a regulatory process where people can look at the disparate impacts on various manufacturers, as well as all of the other criteria which ought to be used, such as vehicle safety. I will read a couple of statements from the National Academy of Sciences study relative to safety. Page 27: The downsizing and downweighting of the vehicle fleet that occurred during the 1970s and early 1980s still appear to have imposed a substantial safety penalty in terms of lost lives and additional injuries. Page 70: There would have been between 1,300 and 2,600 fewer crash deaths in 1993. That is the year they studied. They picked the year, not me. They picked the year 1993 to look at the impact of CAFE on safety. The National Academy of Sciences said--not the American auto industry, not the insurance industry but the National Academy of Sciences--there would have been between 1,300 and 2,600 fewer crash deaths in 1993 had the average weight and size of the light-duty motor vehicle fleet in that year been that of the mid-1970s. Similarly, it was estimated there would have been 13,000 to 26,000 fewer moderate-to-critical injuries. These are deaths and injuries that would have been prevented in larger, heavier vehicles given their improvements in vehicle occupant protection and the travel environment that occurred during the intervening years. In other words--and this is the bottom line for me--these deaths and injuries were one of the painful tradeoffs that resulted from downweighting and downsizing and the resultant improved fuel economy. Painful tradeoffs. Should somebody consider that? Is it worth considering between 1,300 and 2,600 deaths in 1993? That is the typical year they picked. Should that not be at least a factor on the scale? It is not on the scale in the language that is in the substitute before us. We want to put it on that scale. There is no one of these factors which by itself ought to result in any particular outcome. All of these factors ought to be weighed, but that is not what is in the substitute. In the substitute is a number, arbitrarily selected, which in the judgment of some--and we do not know how, we do not have a committee report to help us through that mine field. All we know is we have a number and then we are told that is reasonable; they can do that. Look, they can produce vehicles that get 40 miles per gallon. Sure, they can. They can produce electric vehicles which even do better than that. The question is, Are there people who want to buy them? That is always the question. In trying to determine that, do we want to try to factor in what is the cost? I urge people to take a look at the National Academy of Sciences tables when it comes to costs. They are complicated, they are technical, but they are worth looking at. Now, the National Academy does not conclude what a new CAFE number should be. We should set the policy, it says, and we are. In this amendment, we are setting the policy. Our policy is, we want to rely more on positive incentives. Our policy is, we want to increase fuel economy. Our policy is, we want to look at a lot of provisions which are relevant to the question of what the new CAFE numbers should be; not just the one factor which the proponents of the language in the substitute rely on, which is potential technological feasibilities, but other factors: costs, safety, adverse effects on relative competitiveness of manufacturer, effect on U.S. employment and the National Research Council's entire report. I talked about the disparate effects. The amendment I have made reference to I would now send to the desk on behalf of myself, Senators Bond, Stabenow, and Mikulski.

Mr. LEVIN. Mr. President, I ask unanimous consent that the reading of the amendment be dispensed with.

Mr. LEVIN. For a question of the majority whip, if I could: Did I understand the majority whip to indicate that the debate on this amendment would be completed tonight under this proposed UC?

Mr. LEVIN. The National Academy of Sciences report also makes some references to these disparate impacts on different manufacturers of CAFE, and this is what they say on page 102: That one concept of equity among manufacturers requires equal treatment of equivalent vehicles made by different manufacturers. Equal treatment of equivalent vehicles made by different manufacturers seems pretty reasonable to me. This is what they say about that: The current CAFE standards fail this test. If one manufacturer was positioned in the market selling many large passenger cars, thereby was just meeting the CAFE standard, adding a 22-mile-per- gallon car would result in a financial penalty or would require significant improvements of fuel economy for the remainder of the passenger cars. Then they also say on page 69: A single standard that did not differentiate between cars and trucks would be particularly difficult to accommodate. On page 15: For foreign manufacturers, the standards appear to have served more as a floor towards which their fuel economy descended in the 1990s. This is the result of CAFE. This is the additional sales of large pickups and SUVs which would be allowed under CAFE under today's standard because of the way it is based. GM, again whose vehicles are equally fuel efficient class by class with their imported competitors: Toyota and Honda, zero. They are up to the limit. Because of the fleet mix, Toyota can sell 312,000 additional, Honda 324,000 additional. If one adds credits which have been built up over the years to that, it reaches, I believe, a million. That is the CAFE system. Should somebody look at that system? Is that a system which is worth looking at again to see whether or not in fact it has these kinds of disparate impacts? The National Academy acknowledges that the current CAFE standards fail the test of manufacturers of equivalent vehicles receiving equal treatment. That ought to be enough, it seems to me, to say we should take another look at the CAFE structure. Someone ought to take another look at it. There ought to be a regulatory process where people can come in, make arguments, where people who have the responsibility to look at all the criteria weigh the criteria, publish a proposed rule for comment, and get comment on it. That is not what is proposed in the substitute. It is proposed we get an arbitrary number and say that is what it will be because some people think that is doable. Some people here, apparently, and some of the outside folks they rely on think that is doable. That is not a rulemaking process, it seems to me, that looks at all the criteria that need to be looked at when we have something as important as this is for the economy of this country. I will be happy to answer questions of my friend from Massachusetts if they are still on his mind after I close. In conclusion, the stakes we have are huge for the environment and for the economy. I have been sensitive to the environment all my life, coming from a State where the environment is absolutely critical, where water and air mean everything. We are in the middle of the greatest batch of fresh water in the world, the Great Lakes. We care deeply about it. We are a State where environment is high on everybody's list. I will take a back seat--since we are talking about vehicles--to nobody when it comes to my belief we should protect the environment. I believe we can protect the environment in a way which does not negatively impact our economy if we will do it the right way, if we will go at this the right way, with greater emphasis on positive incentives, but greater caution, before we pick a number which we then impose on an industry, particularly when we know from the NAS study that the CAFE system has not been equitable, that it treats equivalent vehicles of different manufacturers in an equal way. We can fix that--it will take a little time--if we will turn this over, with a fixed calendar and schedule, to a regulatory body which has the responsibility to do this, and then watch them go through a process, issue a regulation, publish that regulation, either adopt it or veto it under existing law, and if they do not comply with the calendar we set for them, we then have an expedited process here to consider alternatives, including those offered by my good friend from Massachusetts and my friend from South Carolina. I yield the floor.

Mr. LEVIN. Mr. President, I am asking the Senator from Alaska a question. Does the Senator from Alaska agree that the National Academy of Sciences does not specify what increase in CAFE would be possible in a way which does not affect, in a negative way, safety? Would the Senator from Alaska agree with that?

Mr. LEVIN. Will the Senator from Missouri yield?

Mr. LEVIN. They were just simply saying, it is possible to increase fuel economy. You might be able to increase fuel economy by 1 mile per gallon without affecting safety. They did not reach a conclusion there. This line has been quoted----

Mr. LEVIN. Prior to the vote?

Mr. LEVIN

Mr. LEVIN. Madam President, I ask unanimous consent that when the Senate completes its business today, it adjourn until the hour of 9 a.m., Wednesday, March, 13; that following the prayer and pledge, the Journal of proceedings be approved to date, the morning hour be deemed expired, the time for the two leaders be reserved for their use later in the day, and there be a period of morning business until 9:30 a.m., with the time under the control of Senator Allen; further, at 9:30 a.m., the Senate resume consideration of the energy reform bill, for debate only in relation to ethanol until 11:30 a.m., with the time equally divided between Senators Nelson of Nebraska and Bond or their designees; further, that at 11:30 a.m., the Senate proceed under the previous order.

Mr. LEVIN

Mr. LEVIN. Madam President, if there is no further business to come before the Senate--and I thank the Chair for her patience tonight--I ask unanimous consent that the Senate stand in adjournment under the previous order.

Mr. LEVIN

Mr. LEVIN. Madam President, I ask unanimous consent there now be a period of morning business, with Senators permitted to speak for up to 5 minutes each.

Mr. LEVIN

Mr. LEVIN. Mr. President, although I strongly support an extension of unemployment insurance benefits, because this bill--which is called a stimulus bill--would in reality have a detrimental impact on our economy, I cannot support it. First, while I agree that bonus depreciation for corporations should be included in an economic stimulus package, this bill provides it for three years. The package is intended to stimulate the economy now, in 2002. Giving a company 30% bonus depreciation in 2003 and 2004 does not help stimulate the economy in 2002. The incentive to invest now, when we need it, is not just missing. In fact, since companies know that this bonus depreciation will be around for three years, they don't need to invest now when the economic picture is still uncertain. The incentive will be reversed--companies can choose to delay investments and still take advantage of the bonus depreciation in 2003 or 2004. A three year bonus depreciation provision therefore could actually encourage businesses to wait to invest, and therefore be counterproductive to the goal of jumpstarting the economy. Not only is the bonus depreciation provision not stimulative, it is also extremely expensive. This provision will cost us about $97 billion over the next three years at a time in when we are already projected to tap into our Social Security surpluses. That's almost 80% of the three- year cost of this bill in this one provision alone. If we passed bonus depreciation for two years or one year--time periods which may actually encourage immediate investment and stimulate the economy--we would save anywhere between approximately $30 billion to $60 billion in revenue. That's money we could use to help protect Social Security, pay down the debt, pay for a prescription drug benefit, or rebuild some of our nation's crumbling schools. Instead, under the guise of ``stimulus,'' this tax break for corporations will have real impacts long after this recession has ended. That's bad policy, and I cannot support it. Also, this bonus depreciation provision will severely harm our states at a time when many are facing severe budget shortfalls. The bill is estimated to cost states some $14 billion over the next three years; Michigan will lose an estimated $144 million over the next three years from this bonus depreciation provision. That is money Governor Engler has argued Michigan cannot afford to lose. Instead of stimulating growth in our states, we are making the economic picture worse. I also have concerns about the five year extension to the Subpart F exceptions concerning foreign subsidiaries of U.S. corporations located in tax havens. While many Subpart F exceptions have a valid business purpose, there are loopholes in the law that are being exploited that allow some corporations to combine the exceptions with the use of tax haven jurisdictions to avoid paying a fair share of taxes. Most extensions in this bill are for no more than two years, but the extension for Subpart F in this bill is for 5 years. That's not appropriate given concerns about loopholes in Subpart F. I had hoped we would have provided the extension for no more than 2 years during which time we would have hearings on this important issue to get to the abuses. Instead, this bill extends the exceptions, unchanged, for five years time at a cost of $9 billion. This issue is something I will continue to pursue. Tightening up Subpart F to prevent it from being used for purposes for which it was not intended requires our prompt attention. There are some important provisions in this bill. I strongly support the extension of unemployment benefits for an additional thirteen weeks; I support the aid to New York City; and I support the extension of the Welfare to Work and Work Opportunity tax credits. Regarding the extension of unemployment benefits, I voted earlier this year for a bill to accomplish that. Congress should have taken this action months ago. As I have said previously, we have an obligation in times like these to assist Americans who have lost their jobs. Many are suffering right now and need our help. But their needs go beyond just a simple extension of UI benefits. While I am pleased that this bill contains the additional 13 weeks of benefits, it does not go nearly far enough in providing the help that is needed--it does not provide any health care assistance to our unemployed, increase weekly benefits, or expand unemployment insurance eligibility. Because of this bill's short-term costs, the harm it causes to our states, its lengthy extension of a provision that may be being abused for tax avoidance, and the fact that over 50% of its 10 year costs go to provisions that are not really stimulative to our economy, I cannot support it.

Mr. LEVIN

Mr. LEVIN. Mr. President, sadly another gun tragedy occurred in my State this past Tuesday in Mount Pleasant, MI when three people were shot and killed allegedly by the ex-husband of one of them. According to a Detroit Free Press article, the man had a recent domestic violence conviction. This case illustrates the importance of closing the loopholes in our gun laws and preventing domestic violence offenders from owning firearms. According to a Violence Policy Center analysis, a woman is 14 times more likely to be murdered by a spouse, intimate acquaintance or close relative if there was a history of domestic violence. Having one or more guns in the home makes a woman more than seven times more likely to be the victim of homicide. Current law prohibits the possession of firearms by any person convicted of a misdemeanor crime of domestic violence and prohibits the sale of any firearm or ammunition to a person convicted of domestic violence. But we have to do more to prevent women from being victims of gun violence. First, we must continue to fund the National Criminal History Improvement Program, which assists States in compiling criminal records and establishing identification systems for Brady gun background checks. In addition, we need to act now to close the gun show loophole and keep domestic abusers and other criminals from buying weapons at gun shows. These critical steps will help make America safer by ensuring that the criminal background information is accurate and accessible and make it tougher for those with a domestic violence conviction to obtain a firearm by easily bypassing a background check.

Mr. LEVIN

Mr. LEVIN. Mr. President, the fight to reduce gun violence must be waged on two fronts. First, we need to keep guns out of the hands of criminals, prevent children from gaining access to firearms and give law enforcement the resources they need to thoroughly investigate gun- related crimes. At the same time, we have to vigorously prosecute criminals who commit gun-related crimes. According to the 2000 National Crime Victimization Survey, 533,470 victims of rape and sexual assault, robbery and aggravated assault faced a perpetrator with a firearm. The Community Gun Violence Prosecution Program can play a major role in improving prosecution of criminals who commit these gun-related violent crimes by providing funding to hire prosecutors solely to prosecute firearm-related violent crimes. Providing funds to improve prosecution will not only bring felons to justice, but will also act as a deterrent to future crimes. On Monday, it was announced that the Dickinson County, MI, prosecutors office will receive $119,117 from the U.S. Department of Justice through CGVPP. The grant will be used to hire an assistant prosecutor who will devote his or her time to prosecuting violent crimes committed with a firearm. This grant is the latest of several that prosecutors in Michigan, including Wayne, Muskegon and Ingham County prosecutors, have received to combat and deter gun-related crime. The efforts of prosecutors are critical to getting violent criminals off the streets. However we cannot forget that preventing gun violence ultimately requires that we enact sensible gun-safety legislation.

Mr. LEVIN

Mr. LEVIN. Madam President, today, I join the many Americans who this month reflect on the rich and extraordinary achievements of African Americans. We do so in keeping with the spirit and the vision of Dr. Carter G. Woodson, son of a former slave, who in 1926, proposed such a recognition as a way of preserving the history of the Negro. Each year, during the month of February, we celebrate African American History Month. Dr. Woodson was, himself, an extraordinary individual and I would like to pay tribute to him, as well as several courageous and accomplished individuals claimed by my state of Michigan, all of whom have earned a unique place in African American history. Dr. Woodson overcame seemingly insurmountable challenges in his rise from the coal mines of West Virginia to one of the highest levels of academic achievement of his time. Author Lerone Bennett, writes of the struggles and successes of Carter G. Woodson, who was an untutored coal miner at the age of 17; and at the age of 19, after teaching himself the fundamentals of English and arithmetic, entered high school and mastered the four-year curriculum in less than two years. At 22, after two-thirds of a year at Berea College in Kentucky, Woodson returned to the coal mines and studied Latin and Greek between trips to the mine shafts. He then went on to the University of Chicago, where he received bachelor's and master's degrees, and Harvard University, where be became the second African American to receive a doctorate in history. The rest, of course, is history. Dr. Benjamin Solomon Carson, Sr., who was born and raised in Detroit, had a childhood dream of becoming a physician. In his books, Gifted Hands. THINK BIG, and The Big Picture he reveals how growing up in dire poverty with horrible grades and being called ``dummy'' as well as having a horrible temper, and low self-esteem,'' appeared to preclude the realization of that dream. He writes about an inspiring mother, with a third grade education, who worked two and sometimes three jobs as a domestic to care for her two sons, determined that they would succeed. Carson remembers, ``we had to read two books a week from the Detroit Public Library, and submit to her written book reports, which she could not read, but we didn't know that . . . my mother was one of twenty four children, went through the foster care system and married at the age of 13--a marriage that rapidly deteriorated.'' Today, despite all of the odds stacked against her and him, Sonya Carson's son is one of the world's most gifted surgeons, performing over 500 critical operations on children in dire need each year, over triple the average neurosurgeon's caseload. Dr. Ben Carson is Director of Pediatric Neurosurgery at the Johns Hopkins Medical Institutions, a position he had held since 1984 when he was 32 years old, then the youngest surgeon in the nation to hold this distinguished title. He is also a professor of neurosurgery, oncology, plastic surgery, and pediatrics. On the occasion of its 200th anniversary the Library of Congress named him one of the 89 ``Living Legends.'' In 2001, he was chosen by CNN and Time Magazine as one of America's top 20 physicians and scientists. After graduating with honors from high school, Ben Carson was accepted to Yale University on a scholarship. He received his M.D. from the University of Michigan. In 1987, he gained worldwide recognition as the principal surgeon in the 22-hour separation of the Binder Siamese twins from Germany. This was the first time occipital craniopagus twins had been separated with both surviving. In 1997, Dr. Carson was the primary surgeon in the team of South African and Zambian surgeons that separated type-2 vertical carniopagus twins (joined at the top of the head) in a 28-hour operation. It represents the first time such complexly joined siamese twins have been separated with both remaining neurologically normal. He is noted for his use of cerebral hemispherectomy to control intractable seizures as well as for his work in craniofacial reconstructive surgery, achondroplasia (human dwarfism), and pediatric neuro-oncology (brain tumors). Dr. Carson is the president and co-founder of the Carson's Scholars Fund, which recognizes young people of all backgrounds for exceptional academic and humanitarian accomplishments, which he hopes will positively change the perception of high academic achievers among their peers across our nation. Madam President, I would also like to pay tribute to two women who played a pivotal role in addressing American injustice and inequality. They are Sojourner Truth, who helped lead our country out of the dark days of slavery, and Rosa Parks, whose dignified leadership sparked the Montgomery Bus Boycott and the start of the Civil Rights movement. Sojourner Truth, though unable to read or write, was considered one of the most eloquent and noted spokespersons of her day, on the inhumanity and immorality of slavery. She was a leader in the abolitionist movement, and a ground breaking speaker on behalf of quality for women. Michigan honored her several years ago with the dedication of the Sojourner Truth Memorial Monument, which was unveiled in Battle Creek, Michigan on September 25, 1999. Sojourner Truth had an extraordinary life. She was born Isabella Baumfree in 1797, served as a slave under several different masters, and was eventually freed in 1828 when New York state outlawed slavery. In 1851, Sojourner Truth delivered her famous ``Ain't I a Woman?'' speech at the Women's Convention in Akron, Ohio. In the speech, Truth attacked both racism and sexism. Truth made her case for equality in plain-spoken English when she said, ``Then that little man in black there, he says women can't have as much rights as men, cause Christ wasn't a woman? Where did your Christ come from? Where did your Christ come from? From God and a woman! Man had nothing to do with Him'' By the mid-1850s, Truth had settled in Battle Creek, Michigan. She continued to travel and speak out for equality. During the Civil War, Truth traveled throughout Michigan, gathering food and clothing for Negro volunteer regiments. Truth's travels during the war eventually led her to a meeting with President Abraham Lincoln in 1864, at which she presented her ideas on assisting freed slaves. Truth remained in Washington, DC for several years, helping slaves who had fled from the South and appearing at women's suffrage gatherings. Due to bad health, Sojourner Truth returned to Battle Creek in 1875, and remained there until her death in 1883. Sojourner Truth spoke from her heart about the most troubling issues of her time. A testament to Truth's convictions is that her words continue to speak to us today. On May 4, 1999 legislation was enacted which authorized the President of the United States to award the Congressional Gold Medal to Rosa Parks. The Congressional Gold Medal was presented to Rosa Parks on June 15, 1999 during an elaborate ceremony in the U.S. Capitol Rotunda. I was pleased to cosponsor this fitting tribute to Rosa Parks--the gentle warrior who decided that she would no longer tolerate the humiliation and demoralization of racial segregation on a bus. Her personal bravery and self-sacrifice are remembered with reverence and respect by us all. Forty six years ago in Montgomery, Alabama the modern civil rights movement began when Rosa Parks refused to give up her seat and move to the back of the bus. The strength and spirit of this courageous woman captured the consciousness of not only the American people, but the entire world. My home state of Michigan proudly claims Rosa Parks as one of our own. Rosa Parks and her husband made the journey to Michigan in 1957. Unceasing threats on their lives and persistent harassment by phone prompted the move to Detroit where Rosa Parks' brother resided. Rosa Parks' arrest for violating the city's segregation laws was the catalyst for the Montgomery bus boycott. Her stand on that December day in 1955 was not an isolated incident but part of a lifetime of struggle for equality and justice. For instance, twelve years earlier, in 1943, Rosa Parks had been arrested for violating another one of the city's bus related segregation laws, which required African Americans to pay their fares at the front of the bus then get off of the bus and re- board from the rear of the bus. The driver of that bus was the same driver with whom Rosa Parks would have her confrontation 12 years later. The rest is history. The boycott which Rosa Parks began was the beginning of an American revolution that elevated the status of African Americans nationwide and introduced to the world a young leader who would one day have a national holiday declared in his honor, the Reverend Martin Luther King Jr.

Mr. LEVIN

Mr. LEVIN. Mr. President, I rise today to pay tribute to the greatest source of strength of our military forces engaged in the war on terrorism--the support they receive from the American people. Over Thanksgiving, Senator Warner and I traveled to Central Asia to visit with our soldiers, sailors, airmen and Marines serving in Operation Enduring Freedom. Nothing lifted our spirits more than sharing Thanksgiving with these wonderful troops. Nothing lifted their spirits more than our message that the American people totally support their mission and are deeply grateful for their service. We have seen that support on display in countless ways in recent months. Americans from every corner of our country have reached into their hearts and reached out to our men and women in uniform, especially over the holidays. One particular story came to my attention that I think captures the American spirit at this time in history. Just before Thanksgiving, Kasi Brannan of Covington, LA, decided to send a simple holiday card to her son, AT3 Eric Lepkowski, who was serving on the aircraft carrier USS Theodore Roosevelt in the Arabian Sea. When family, friends, and members of the community learned of her effort, they wanted to add their wishes as well. When a television station and newspaper from New Orleans reported the story, people from all over Louisiana wanted to add their appreciation. And when other families and friends of sailors abroad the Theodore Roosevelt heard the news through the Internet and e-mail, they wanted to include wishes to their own husbands, wives, sons, brothers, sisters and friends. As the news spread across the Nation, even total strangers wrote in to express their thanks to our servicemen and women. What started out as a simple holiday message to one sailor had quickly grown to a greeting card from all America--a 75-foot banner with more than 1,000 stars, each containing the holiday wishes from grateful Americans from nearly every state and at least three continents. Among them were several families from my home state of Michigan. Those wishes made all the difference to the 5,000 men and women of the Theodore Roosevelt, who displayed the banner in one of their hanger bays as a reminder of home and a daily inspiration. I know my Senate colleagues will join me in celebrating the spirit of America's unity embodied in Kasi Brannan and all our military families who endure separation from their loved ones and who sacrifice in ways that most Americans will never know. I know my Senate colleagues will join me in acknowledging the commitment of our senior military leaders to the morale and welfare of our forces, as evidenced in the efforts of Vice Chief of Naval Operations Admiral William Fallon and U.S. Fifth Fleet Commander Vice Admiral Charles Moore Jr. to quickly transport the 1,000-star banner to the Theodore Roosevelt in time for the holidays. Finally, I know my Senate colleagues will also join me in honoring the service of AT3 Eric Lepkowski and all the brave, dedicated and skilled men and women serving in the armed forces to keep this Nation free.

Mr. LEVIN

Mr. LEVIN. Mr. President, for the Committee on Armed Services I report favorably the following nomination lists which were printed in the Records on the dates indicated, and ask unanimous consent, to save the expense of reprinting on the Executive Calendar that these nominations lie at the Secretary's desk for the information of Senators.

Mr. LEVIN

Mr. LEVIN. Mr. President, according to the Office of Justice Programs, 40 percent of women killed with firearms are murdered by an intimate partner. In 1996, Congress passed legislation to deny firearms purchases to individuals who were under a domestic violence restraining order or convicted of a domestic violence misdemeanor. Despite the passage of this law many people are slipping through the system. For example, according to a November 1999 Washington Post article, a background check failed to discover that a Maryland man was the subject of a domestic violence restraining order that his wife had obtained. As a result, he was able to purchase a gun and he later shot his 3-year- old daughter and 2-year-old son. To help prevent such tragedies, Congress established the National Criminal History Improvement Program in 1995 to provide funding to assist States in compiling criminal records and establishing identification systems as well as developing a comprehensive national record system. One of the goals of the NCHIP program is to ensure that accurate records are available to law enforcement to identify ineligible firearm purchasers. The NCHIP program has put special emphasis on ensuring that domestic violence-related offenses are included in criminal records. As the Washington Post article suggests, there is still work to be done. In fact, according to a January 2002 study released by Americans for Gun Safety, only 30 States have automated records of both domestic violence misdemeanors and domestic violence restraining orders. Fifteen States have no automated records of domestic violence misdemeanors and 13 States have no automated records of domestic violence restraining orders. I have long supported programs that will ensure that guns do not get into the hands of criminals, as well as individuals under domestic violence restraining orders. The NICS system of background checks for gun purchases has already blocked more than 400,000 gun sales to ineligible persons. Continuing the NCHIP grant program will help make America safer by ensuring that the criminal background information is complete, accurate and accessible. This improves our ability to prevent people who commit violent acts against their family from purchasing firearms.

Mr. LEVIN

Mr. LEVIN. Mr. President, today I am pleased to introduce Ending the Double Standard for Stock Options Act along with my colleagues Senator McCain, Senator Fitzgerald and Senator Durbin. As another lesson learned from the Enron debacle, this bill addresses a costly and dangerous double standard that allows a company to take a tax deduction for stock option compensation as a business expense while not showing it as a business expense on its financial statement. Stock options were a driving force behind management decisions at Enron that focused on increasing Enron's stock price rather than the solid growth of the company. Stock options are opportunities given to certain employees, usually top executives, to purchase a company's stock at a set price for a specified period of time, such as 5 or 10 years. When the stock price increases, the potential profit to the executive rises, and the more stock options an executive has, the smaller the increase needed to realize significant gain. Stock options are a stealth form of compensation, because they do not, under current accounting rules, have to be shown as an expense on the corporate books. In fact they're the only form of compensation that doesn't have to be treated as an expense at any time. But, like other forms of compensation, option expenses are allowed as a tax deduction for a corporation. It doesn't make sense, but that's the way it is. And this long-standing mismatch between U.S. accounting and tax rules was exploited by Enron to the hilt. The result was both misleading financial statements and an incentive to push accounting rules to the limit in order to artificially raise stock prices so as to make the stock options more valuable. A New York Times article from last October 21, reports that, ``Since 1993, studies from Wall Street to Washington have shown that pushing [stock option] expenses off the income statement has inflated corporate earnings and misled investors about profits, particularly at technology concerns. Options are also a titanic but stealthy transfer of wealth from shareholders to corporate management.'' Let's look at how it worked at Enron. We've all heard about the many ways that Enron inflated its earnings and hid its debts by keeping various partnerships off the company books. Well, Enron did the same thing with stock options. For five years, from 1996 until the year 2000, Enron told its shareholders that it was rolling in revenues. One analysis by Citizens for Tax Justice, using Enron's public filings, reports that Enron claimed a total 5-year income of $1.8 billion. This figure apparently included, however, a number of accounting gimmicks, one of which was Enron's decision to relegate all stock option compensation it had provided to a footnote and to exclude such compensation from its total expenses, even though, according to the same study, the stock option pay over five years had reached almost $600 million. That $600 million, by the way, represented one-third of all the income reported by Enron over a 5-year period. Yet all $600 million was, legally, kept off-the-books, away from Enron's bottom line. That's because existing U.S. accounting rules allow U.S. companies to omit employee stock option compensation as a charge to earnings on their financial statements. That is a unique rule. Stock option compensation is the only kind of employee compensation that a U.S. company never has to record on its financial statements at any time as an expense. That means Enron could give its executives, directors and other employees $600 million in stock options and never show one penny of that pay on its books. It could dole out stock options like candy and never reduce by one penny its alleged income of $1.8 billion. The result was that Enron was able to provide extravagant compensation, without ever having to account for that extravagance on its bottom line where stockholders and the public might take notice. But Enron's misleading financial statements are not the end of the story. The backside of the story is that, at the same time Enron was touting its skyrocketing revenues and providing extravagant pay to insiders, it was apparently telling Uncle Sam that its expenses exceeded its income and its tax liability was little or nothing. The study by Citizens for Tax Justice, after reviewing Enron's public filings, has calculated that, despite claiming a 5-year revenue total of $1.8 billion, Enron apparently failed to pay any U.S. tax in 4 out of the last 5 years. How did a company with $1.8 billion in revenue apparently pay so little in taxes? The same study calculated that with a 35 percent corporate tax rate, Enron should have paid about $625 million over five years. But, apparently, according to the study, the principal way Enron avoided paying these taxes was by claiming that its income had been wiped out by nearly $600 million in stock option expenses, the same $600 million that Enron chose not to put on its financial statements as an expense. While these numbers are based on public filings and not based on a review of the actual tax returns, the significance of Enron's actions is the same, avoiding tax liability through the use of stock options. As I noted earlier, Enron was not acting illegally here, nor were its actions unique. It took advantage of the tax provisions which we hope to change in our bill which allow a company to claim a stock option expense on its tax return even if the company never lists that expense on the company books. These tax provisions incomprehensibly and indefensibly allow companies to tell Uncle Sam one thing and their stockholders something else. And to add insult to injury, last year the IRS issued Revenue Ruling 2001-1 which determined that companies whose tax liability was erased through stock option expenses are not subject to the corporate Alternative Minimum Tax. That revenue ruling means that our most successful publicly traded companies, if they dole out enough stock options to insiders, can arrange their affairs to escape paying any taxes. That absurd result leaves the average taxpayer feeling like a chump for paying his fair share when a company like Enron can use its success in the stock market to apparently end up tax free. Now you may have noticed that, in discussing Enron's tax returns, I have been using the words ``appears to'' and ``apparently.'' That is because, despite a pending request from Senators Baucus and Grassley of the Senate Finance Committee, Enron has yet to release its tax returns to either Congress or the public. The lack of direct access to Enron's tax returns requires Congress and the public to have to continue making educated guesses about Enron's tax conduct, without having the actual facts. It is much too late and much too serious for Enron to be asking everyone to play this guessing game. Enron is in bankruptcy; it has brought economic loss to individuals and financial institutions across this country; its management claims to have done nothing wrong, and the company professes to be cooperating with investigators. Enron should immediately release to the public the last five years of its tax returns. Then we'll know with certainty if Enron paid no taxes in 4 out of the last 5 years and why. Then we'll know with certainty if Enron eliminated its taxes primarily through stock option deductions, or whether it used other tax provisions to avoid payment of tax such as diverting income through offshore tax havens. The public and the Congress have a right to know what really happened at Enron. It is also important to realize that most companies treat stock options the same way Enron did. A recent USA Today article reports that out of the S&P 500 companies, only Boeing and Winn-Dixie currently record stock option expenses on both their financial statements and tax returns. The other 498 companies apparently do not. The article says that had stock option expense been recognized on their earnings statements, the S&P 500's revenues would have fallen by 9 percent, another measure of how much off-the-books stock option pay is out there. Even more troubling, and something that needs more investigation and attention is the claim in the article that ``half a dozen academic studies have concluded that companies time the release of good or bad news near the date that executives are issued their options, orchestrating a potential windfall.'' In other words, some believe that executives are timing the release of company information around the dates they are to receive their stock options, thereby artificially inflating the value of their options. The future promises more of the same. A February 3rd New York Times article entitled, ``Even Last Year, Option Spigot Was Wide Open,'' reports that companies are providing more stock options than ever to their executives, even in the face of poor company performance and diluted stockholder earnings. ``It's a great time to give options,'' one expert is quoted as saying. ``They're cheap because they involve no change to earnings, and that's important at a time when profits are down.'' Ten years ago, some of us tried to end corporate stock option abuses by urging the Board that issues generally accepted accounting principles, the Financial Accounting Standards Board or FASB, to require stock option expenses to be shown on company books. We were not successful. Corporate America fought back tooth and nail. Intense pressure was brought to bear on FASB. Arthur Levitt told the Governmental Affairs Committee last month that he spent 50 percent of his first four months at the SEC talking to corporate executives who wanted to keep their stock option pay off the books. On one day during the height of the campaign, 100 CEOs flew into Washington to lobby Members of Congress on this issue. In 1994, in the midst of this intense lobbying, the Senate voted 88-9 to recommend against putting stock option pay on the books. Arthur Levitt testified before our committee that one of his greatest regrets from his days at the SEC was that he didn't work harder to get stock options treated as an expense on a company's financial statement. Several accounting firms, including Andersen and Deloitte, now support expensing options. They are joined by more than 80 percent of U.S. financial analysts, as reported in a September 2001 survey conducted by the leading financial research organization, the Association for Investment Management and Research. In addition, the newly re-constituted International Accounting Standards Board in London, the international equivalent of our FASB, has announced that one of its first projects will be to propose international standards requiring stock options to be expensed on company books. But in a repeat of what happened here in the United States, corporate lobbyists are already organizing to oppose this project. An Enron document uncovered by my Subcommittee casts light on how this battle may be fought. The document is an email dated February 23, 2001, from David Duncan, the lead auditor of Enron at Andersen, to several Andersen colleagues, describing Enron's reaction to a request that it consider donating funds to the new International Accounting Standards Board. Today [Enron Chief Accountant] Rick Causey called to say that Paul Volker had called Ken Lay (Enron Chairman) and asked Enron to make a 5 year, 100k per year commitment to fund the Trust Fund of 'the FASB's International equivalent' . . . . While I believe Rick is inclined to do this given Enron's desire to increase their exposure and influence in rulemaking broadly, he is interested in knowing whether these type of commitments will add any formal or informal access to this process (i.e., would these type commitments present opportunities to meet with the Trustees of these groups or other benefits). I think any information along this front or further information on the current strategic importance of supporting these groups for the good of consistent rulemaking would help Enron with its decision to be supportive. First, let me be clear that I'm not suggesting in any way that Paul Volker's request of Enron for a contribution to FASB's international equivalent was in any way improper. It wasn't. That is exactly how these accounting standards boards get funded. And the response by Enron is not really suprising, it's something we've all known but we've never had written confirmation of it. Contributions to the accounting standards boards affect the boards' independence, and that's bad news for reliable accounting. No one was mincing any words here. Enron wanted to know whether its money would buy access and influence at the new accounting standards board, and its auditor didn't bat an eye at this inquiry but asked his colleagues for ``any information along this front.'' The bill we are introducing today does not require that stock options be charged to earnings. That is a decision for the accounting standards boards to make. And many of us in Congress will be working on legislation to make the accounting standards board more independent and less vulnerable to pressures from its contributors. The legislation we are offering today would simply state, in essence, that companies can take a tax deduction or tax credit for stock option expenses only to the extent that the company actually recognizes the same stock option expenses in the company books. The bill does not get into the accounting side of the issue. It does not, for example, tell companies that they have to expense stock options. It does not tell them when to take a stock option expense or how to book that expense. It focuses solely on the income tax deduction and states, in essence, that any tax deduction must mirror the company books. If a company declares a stock option expense on its books, then the company can deduct the expense on its tax return. If there is no stock option expense on the company books, there can be no expense on the company tax return. That's tax honesty. That will end the stock option double standard. The stock option double standard has been a long festering problem in corporate America. It has been one of the driving engines of stretching accounting rules to increase the value of a company's stock. Enron has put a face on this faceless problem and shown the cost of off-the-books stock option pay. Like other accounting gimmicks, off-the-books stock option pay coupled with a large tax deduction doesn't pass the smell test, because we all know that ``off-the-books'' means stealth compensation that is harder to track and easier for insiders to abuse. Add to the stealth factor and the insider abuse factor, a government policy of giving large corporate tax deductions which can completely eliminate a company's tax liability, and you've set the stage for just the type of stock option results we saw at Enron. It is time to end the stock option double standard, and I urge all of my colleagues to support enactment of this legislation this year. I ask unanimous consent to print in the Record, a bill summary, a section-by-section analysis, and the following materials: ``Less than Zero Enron's Corporate Income Tax Payments, 1996-2000'' (Citizens for Tax Justice, January 17, 2002); Duncan email (2/23/01); ``Enron's fall fuels push for stock option law'' (USA Today, 2/8/02); ``Even Last Year, Option Spigot Was Wide Open'' (New York Times, 2/3/02); ``Stock Option Madness'' (Washington Post, 1/30/02); ``Enron's Way: Pay Packages Foster Spin, Not Results'' (New York Times, 1/27/02); and stock option survey results by Association for Investment Management Research, as posted on the AIMR website on 2/8/02.

Mr. LEVIN

Mr. LEVIN. Mr. President, today I am pleased to introduce Ending the Double Standard for Stock Options Act along with my colleagues Senator McCain, Senator Fitzgerald and Senator Durbin. As another lesson learned from the Enron debacle, this bill addresses a costly and dangerous double standard that allows a company to take a tax deduction for stock option compensation as a business expense while not showing it as a business expense on its financial statement. Stock options were a driving force behind management decisions at Enron that focused on increasing Enron's stock price rather than the solid growth of the company. Stock options are opportunities given to certain employees, usually top executives, to purchase a company's stock at a set price for a specified period of time, such as 5 or 10 years. When the stock price increases, the potential profit to the executive rises, and the more stock options an executive has, the smaller the increase needed to realize significant gain. Stock options are a stealth form of compensation, because they do not, under current accounting rules, have to be shown as an expense on the corporate books. In fact they're the only form of compensation that doesn't have to be treated as an expense at any time. But, like other forms of compensation, option expenses are allowed as a tax deduction for a corporation. It doesn't make sense, but that's the way it is. And this long-standing mismatch between U.S. accounting and tax rules was exploited by Enron to the hilt. The result was both misleading financial statements and an incentive to push accounting rules to the limit in order to artificially raise stock prices so as to make the stock options more valuable. A New York Times article from last October 21, reports that, ``Since 1993, studies from Wall Street to Washington have shown that pushing [stock option] expenses off the income statement has inflated corporate earnings and misled investors about profits, particularly at technology concerns. Options are also a titanic but stealthy transfer of wealth from shareholders to corporate management.'' Let's look at how it worked at Enron. We've all heard about the many ways that Enron inflated its earnings and hid its debts by keeping various partnerships off the company books. Well, Enron did the same thing with stock options. For five years, from 1996 until the year 2000, Enron told its shareholders that it was rolling in revenues. One analysis by Citizens for Tax Justice, using Enron's public filings, reports that Enron claimed a total 5-year income of $1.8 billion. This figure apparently included, however, a number of accounting gimmicks, one of which was Enron's decision to relegate all stock option compensation it had provided to a footnote and to exclude such compensation from its total expenses, even though, according to the same study, the stock option pay over five years had reached almost $600 million. That $600 million, by the way, represented one-third of all the income reported by Enron over a 5-year period. Yet all $600 million was, legally, kept off-the-books, away from Enron's bottom line. That's because existing U.S. accounting rules allow U.S. companies to omit employee stock option compensation as a charge to earnings on their financial statements. That is a unique rule. Stock option compensation is the only kind of employee compensation that a U.S. company never has to record on its financial statements at any time as an expense. That means Enron could give its executives, directors and other employees $600 million in stock options and never show one penny of that pay on its books. It could dole out stock options like candy and never reduce by one penny its alleged income of $1.8 billion. The result was that Enron was able to provide extravagant compensation, without ever having to account for that extravagance on its bottom line where stockholders and the public might take notice. But Enron's misleading financial statements are not the end of the story. The backside of the story is that, at the same time Enron was touting its skyrocketing revenues and providing extravagant pay to insiders, it was apparently telling Uncle Sam that its expenses exceeded its income and its tax liability was little or nothing. The study by Citizens for Tax Justice, after reviewing Enron's public filings, has calculated that, despite claiming a 5-year revenue total of $1.8 billion, Enron apparently failed to pay any U.S. tax in 4 out of the last 5 years. How did a company with $1.8 billion in revenue apparently pay so little in taxes? The same study calculated that with a 35 percent corporate tax rate, Enron should have paid about $625 million over five years. But, apparently, according to the study, the principal way Enron avoided paying these taxes was by claiming that its income had been wiped out by nearly $600 million in stock option expenses, the same $600 million that Enron chose not to put on its financial statements as an expense. While these numbers are based on public filings and not based on a review of the actual tax returns, the significance of Enron's actions is the same, avoiding tax liability through the use of stock options. As I noted earlier, Enron was not acting illegally here, nor were its actions unique. It took advantage of the tax provisions which we hope to change in our bill which allow a company to claim a stock option expense on its tax return even if the company never lists that expense on the company books. These tax provisions incomprehensibly and indefensibly allow companies to tell Uncle Sam one thing and their stockholders something else. And to add insult to injury, last year the IRS issued Revenue Ruling 2001-1 which determined that companies whose tax liability was erased through stock option expenses are not subject to the corporate Alternative Minimum Tax. That revenue ruling means that our most successful publicly traded companies, if they dole out enough stock options to insiders, can arrange their affairs to escape paying any taxes. That absurd result leaves the average taxpayer feeling like a chump for paying his fair share when a company like Enron can use its success in the stock market to apparently end up tax free. Now you may have noticed that, in discussing Enron's tax returns, I have been using the words ``appears to'' and ``apparently.'' That is because, despite a pending request from Senators Baucus and Grassley of the Senate Finance Committee, Enron has yet to release its tax returns to either Congress or the public. The lack of direct access to Enron's tax returns requires Congress and the public to have to continue making educated guesses about Enron's tax conduct, without having the actual facts. It is much too late and much too serious for Enron to be asking everyone to play this guessing game. Enron is in bankruptcy; it has brought economic loss to individuals and financial institutions across this country; its management claims to have done nothing wrong, and the company professes to be cooperating with investigators. Enron should immediately release to the public the last five years of its tax returns. Then we'll know with certainty if Enron paid no taxes in 4 out of the last 5 years and why. Then we'll know with certainty if Enron eliminated its taxes primarily through stock option deductions, or whether it used other tax provisions to avoid payment of tax such as diverting income through offshore tax havens. The public and the Congress have a right to know what really happened at Enron. It is also important to realize that most companies treat stock options the same way Enron did. A recent USA Today article reports that out of the S&P 500 companies, only Boeing and Winn-Dixie currently record stock option expenses on both their financial statements and tax returns. The other 498 companies apparently do not. The article says that had stock option expense been recognized on their earnings statements, the S&P 500's revenues would have fallen by 9 percent, another measure of how much off-the-books stock option pay is out there. Even more troubling, and something that needs more investigation and attention is the claim in the article that ``half a dozen academic studies have concluded that companies time the release of good or bad news near the date that executives are issued their options, orchestrating a potential windfall.'' In other words, some believe that executives are timing the release of company information around the dates they are to receive their stock options, thereby artificially inflating the value of their options. The future promises more of the same. A February 3rd New York Times article entitled, ``Even Last Year, Option Spigot Was Wide Open,'' reports that companies are providing more stock options than ever to their executives, even in the face of poor company performance and diluted stockholder earnings. ``It's a great time to give options,'' one expert is quoted as saying. ``They're cheap because they involve no change to earnings, and that's important at a time when profits are down.'' Ten years ago, some of us tried to end corporate stock option abuses by urging the Board that issues generally accepted accounting principles, the Financial Accounting Standards Board or FASB, to require stock option expenses to be shown on company books. We were not successful. Corporate America fought back tooth and nail. Intense pressure was brought to bear on FASB. Arthur Levitt told the Governmental Affairs Committee last month that he spent 50 percent of his first four months at the SEC talking to corporate executives who wanted to keep their stock option pay off the books. On one day during the height of the campaign, 100 CEOs flew into Washington to lobby Members of Congress on this issue. In 1994, in the midst of this intense lobbying, the Senate voted 88-9 to recommend against putting stock option pay on the books. Arthur Levitt testified before our committee that one of his greatest regrets from his days at the SEC was that he didn't work harder to get stock options treated as an expense on a company's financial statement. Several accounting firms, including Andersen and Deloitte, now support expensing options. They are joined by more than 80 percent of U.S. financial analysts, as reported in a September 2001 survey conducted by the leading financial research organization, the Association for Investment Management and Research. In addition, the newly re-constituted International Accounting Standards Board in London, the international equivalent of our FASB, has announced that one of its first projects will be to propose international standards requiring stock options to be expensed on company books. But in a repeat of what happened here in the United States, corporate lobbyists are already organizing to oppose this project. An Enron document uncovered by my Subcommittee casts light on how this battle may be fought. The document is an email dated February 23, 2001, from David Duncan, the lead auditor of Enron at Andersen, to several Andersen colleagues, describing Enron's reaction to a request that it consider donating funds to the new International Accounting Standards Board. Today [Enron Chief Accountant] Rick Causey called to say that Paul Volker had called Ken Lay (Enron Chairman) and asked Enron to make a 5 year, 100k per year commitment to fund the Trust Fund of 'the FASB's International equivalent' . . . . While I believe Rick is inclined to do this given Enron's desire to increase their exposure and influence in rulemaking broadly, he is interested in knowing whether these type of commitments will add any formal or informal access to this process (i.e., would these type commitments present opportunities to meet with the Trustees of these groups or other benefits). I think any information along this front or further information on the current strategic importance of supporting these groups for the good of consistent rulemaking would help Enron with its decision to be supportive. First, let me be clear that I'm not suggesting in any way that Paul Volker's request of Enron for a contribution to FASB's international equivalent was in any way improper. It wasn't. That is exactly how these accounting standards boards get funded. And the response by Enron is not really suprising, it's something we've all known but we've never had written confirmation of it. Contributions to the accounting standards boards affect the boards' independence, and that's bad news for reliable accounting. No one was mincing any words here. Enron wanted to know whether its money would buy access and influence at the new accounting standards board, and its auditor didn't bat an eye at this inquiry but asked his colleagues for ``any information along this front.'' The bill we are introducing today does not require that stock options be charged to earnings. That is a decision for the accounting standards boards to make. And many of us in Congress will be working on legislation to make the accounting standards board more independent and less vulnerable to pressures from its contributors. The legislation we are offering today would simply state, in essence, that companies can take a tax deduction or tax credit for stock option expenses only to the extent that the company actually recognizes the same stock option expenses in the company books. The bill does not get into the accounting side of the issue. It does not, for example, tell companies that they have to expense stock options. It does not tell them when to take a stock option expense or how to book that expense. It focuses solely on the income tax deduction and states, in essence, that any tax deduction must mirror the company books. If a company declares a stock option expense on its books, then the company can deduct the expense on its tax return. If there is no stock option expense on the company books, there can be no expense on the company tax return. That's tax honesty. That will end the stock option double standard. The stock option double standard has been a long festering problem in corporate America. It has been one of the driving engines of stretching accounting rules to increase the value of a company's stock. Enron has put a face on this faceless problem and shown the cost of off-the-books stock option pay. Like other accounting gimmicks, off-the-books stock option pay coupled with a large tax deduction doesn't pass the smell test, because we all know that ``off-the-books'' means stealth compensation that is harder to track and easier for insiders to abuse. Add to the stealth factor and the insider abuse factor, a government policy of giving large corporate tax deductions which can completely eliminate a company's tax liability, and you've set the stage for just the type of stock option results we saw at Enron. It is time to end the stock option double standard, and I urge all of my colleagues to support enactment of this legislation this year. I ask unanimous consent to print in the Record, a bill summary, a section-by-section analysis, and the following materials: ``Less than Zero Enron's Corporate Income Tax Payments, 1996-2000'' (Citizens for Tax Justice, January 17, 2002); Duncan email (2/23/01); ``Enron's fall fuels push for stock option law'' (USA Today, 2/8/02); ``Even Last Year, Option Spigot Was Wide Open'' (New York Times, 2/3/02); ``Stock Option Madness'' (Washington Post, 1/30/02); ``Enron's Way: Pay Packages Foster Spin, Not Results'' (New York Times, 1/27/02); and stock option survey results by Association for Investment Management Research, as posted on the AIMR website on 2/8/02.