Joseph Lieberman

Mr. LIEBERMAN

Mr. LIEBERMAN. Mr. President, I ask unanimous consent that the Committee on Health, Education, Labor, and Pensions, Subcommittee on Public Health, be authorized to meet for a hearing on Staying Healthy: Health Issues Surrounding Proposed Changes in Clean Air Standards during the session of the Senate on Tuesday, September 3, 2002, at 2:30 p.m. in SD-430.

Mr. LIEBERMAN. Mr. President, I ask unanimous consent that the Committee on Commerce, Science, and Transportation be authorized to meet on Tuesday, September 3, 2002, at 2:30 pm on the nomination of Marion Blakey to be the Administrator of the Federal Aviation Administration.

Mr. LIEBERMAN

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 President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. LIEBERMAN

Mr. LIEBERMAN. I agree with my friend from Maryland: The Senator from West Virginia has made a contribution here with his thoughtful leadership over the years, of course, and his thoughtful statements today. Even when I do not meet the statements with personal agreement, I know he forces me to think about fixed premises that I may bring to the debate, as well as everyone in this case, and that will make the product of our deliberations better than it would otherwise be. I was thinking about the quote at the end of Senator Byrd's remarks. It is true that reorganization or reform can sometimes not be in the interest of progress and can be a cover for disorganization and an excuse for inaction more broadly. I do want to argue that this proposal that has come out of the Senate Governmental Affairs Committee, which builds on work that had been done by the Hart-Rudman Commission, which meshed with recommendations from the White House, is a necessary reorganization. The current state of reality in our Federal Government is that we are disorganized. It is in some ways dysfunctional as it comes to protecting the security of the American people from a threat we have imagined, we have seen some small evidence of over the years. But on September 11 we were shocked from our lethargy and our apathy and our tolerance of disorganization, seeing the painful personal consequences of that disorganization--almost 3,000 Americans dead only because they were Americans, struck in a vicious and savage and cunning way only because they were Americans. They did not have the courage to take us on on a conventional field of battle but struck an undefended target full of innocent Americans. That disorganization can no longer be tolerated. I have a sense of urgency about this. I look at the evidence we have accumulated about the various ways in which our intelligence and law enforcement personnel could have cooperated, could have shared information prior to September 11. I wonder, could we have prevented this from happening? I look at the way in which we have tolerated disorganization and overlap at our borders with failures of the various Federal agencies there and inability even to communicate with one another. I look at our ports, with 95 percent of the goods coming into the United States of America. Most people are shocked by this number: 95 percent come in by ship, yet the Customs Service is able to truly inspect only 1 percent of the containers coming in. I could go on and on about airport security pre-September 11 and security of our financial systems, cybersystems, and all the rest. We are just not organized to prevent what happened on September 11 from ever happening again. In this regard, I have the echo in my mind of a meeting I attended some months ago with families of victims of September 11, mostly families of victims because most of them were from Connecticut, some from New York, who died in the World Trade Center. The plaintive question they asked me was, how could this have happened? I do not want to ever be in a position to face another group of fellow Americans who ask me again, how could this have happened? I make no claims that adoption of the bill that our committee has reported on will be a guarantee against terrorism. I suppose if someone has so little regard for their own life and other lives that they are prepared to strap bombs around themselves and walk into a crowd, that is not easy to stop. But something as well planned, as comprehensive, with as many contacts with private sector bodies, including flight training schools and public agencies, we should be able to prevent. The only way to begin to do it is to create a structure that is accountable, that has a uniform chain of command, and that will put people in place to overcome the gaps the terrorists took advantage of on September 11. That is why I have urgently brought this matter to the floor, with the wonderful bipartisan group of members of the Governmental Affairs Committee who contributed substantially to the product on the floor, and the various Members of the Senate on both sides with whom we have worked on parts of this proposal. There were 18 hearings, 3 or 4 days of committee meetings and markup. A lot of work has been done on this, building on work that had been done years before by others, as to how we can best protect the American people from terrorism. It is time to proceed. We have had a very good opening day of debate. Obviously, there are some differences of opinion regarding the pace of action in Congress or whether the executive branch is seeking or being given too much authority, whether one or another agency that is consolidated by this bill should be consolidated, how strong our intelligence division should be in this Department, how much should we bring matters together. Should we give this President and his successors unprecedented authority over civil service and Federal employees? All of these matters, I know, will be directly discussed in the days ahead. And many of them, if not all of them, will be subjects of amendment before this Chamber. This is a big bill. It is a big proposal which responds to an urgent problem. As others have said, it would be the largest reorganization of the Federal Government in 50 years, since the post-World War II reorganization of our national security apparatus. That is what the reality of our times requires. It is why we need the debate we will have in the days, and perhaps weeks, ahead. In the paper today, there is a story that our intelligence service is working with foreign intelligence services and has tracked the movement of gold, substantial amounts of gold, apparently owned by al-Qaida, from Pakistan through Iran, the United Arab Emirates, into Sudan, where it may be in Khartoum now. What does this tell us? That the enemy is out there, that we won a victory, a great victory, in Afghanistan, but that was only the first battle of the war. Again, the enemy is not out there on a field of battle where we can see them, or in ships at sea. They are in the shadows. They have not diminished their intention to strike at America, and Americans only, because we are America and Americans. Now we, as the representatives of the American people here in Congress, we draw ourselves together, to have our debate, have our discussion, but in the end, to do what we must do to create a Department of Homeland Security that will be a strong line of defense against al-Qaida and anyone else out there intending to strike at the American people here at home. One thing I do know, in the midst of all the debate, is we are ready to proceed. We have had a good opening day. Many more days of debate will come. But on the specific motion before us now, the motion to proceed, I am sure we are ready to vote. I yield whatever remaining time I have and I ask for the yeas and nays on the motion to proceed.

Mr. LIEBERMAN. I do not regret the acceptance by the Senator from Pennsylvania, and I thank him very much for his remarks. He went right to the heart of one of the most important debates we will have on the bill, which is how do we structure the intelligence division of this new Department to make sure that we never again look back, as we have now after September 11, and say these barriers to communication between the FBI, the CIA, a whole bunch of people, if those barriers had been broken, and all the information was in one place, we might well have been able to prevent September 11. We have to have it within our power to do that. I understand some of the concerns of the White House, but I do think the phrasing that Senator Specter has talked about is just right. I hope he may play a role in bringing us all together on this. I thank him, also, for the fact that he was my lead cosponsor; I was his lead cosponsor in October of last year when we introduced the original version of the bill creating the Department of Homeland Security which, in fairness, was based in good measure on the recommendation of the Hart-Rudman Commission. I look forward to his active participation in this debate and the days ahead. Under a previous order, I believe Senator Boxer was to be recognized next, with the time to be taken from Senator Byrd.

Mr. LIEBERMAN

Mr. LIEBERMAN. Mr. President, I rise in strong support of stock option reforms, and propose legislation that will make stock options, a powerful tool in the democratization of capitalism, even more effective as an incentive to spur innovation and create wealth. The waves of corporate abuse that our economy has suffered over the past ten months have been devastating to so many employees, shareholders, and families across America. The investments that people have counted upon to safeguard their retirement, send their children to college, buy a home, start a business-trillions of dollars have gone up in smoke, turned to ash while, for a few executives, those misfortunes turned to cash. That's maddening, as a result, the most productive economy in the world-in the history of the world-has been scarred. The American corporation, a great institution of democratic capitalism in which the public owns the company, has been stained. Potentially empowering innovations that enable individual investment, like the 401-k account, have been skewered. Today, I want to talk about another fundamentally decent idea that has been dragged into the quicksand of corporate corruption: stock options. We've discovered over the last ten months that too many companies and executives have been misusing and abusing them. In far too many cases, options have been turned into mere feed in the corporate trough by the greed of corporate executives. Stock options are a hammer. They can be used well or used poorly. We've seen corporate executives use this hammer to weaken the foundations of their companies, build rickety and top-heavy structures ready to collapse, and build themselves nice, secure shelters from the damage. That's unconscionable. The bill I propose today will correct this abuse by ensuring that the tool of stock options is put in the hands of more and more employees so it can be used as it was initially intended-to construct wealth, to build fortunes, to strengthen companies, and to incentivize the long- term soundness and stability of a company. The way to fix this problem is not, as some have suggested, to require stock option expensing at the time an option is granted. That would, in fact, make the problem worse. It would disincentive the dissemination of options in the first place-and in the end, those at the top of the corporate food chain will still take care of themselves. No, the way to fix this problem is to ensure that stock options are more broadly shared by more and more employees of American corporations-that they truly are the democratizing tool that they can be. Our challenge is to fix the flaws that have been exposed without hurting stock options themselves. In the name of addressing this serious crisis in corporate accountability, let's not make the mistake of pushing through unwise reforms that threaten to further confuse investors and endanger the engines of entrepreneurship that make America's economy, for all its faults and flaws, the envy of history and of the world. It would be a terrible shame if we threw out the stock options baby with the corporate corruption bathwater. That's the spirit of my legislation: to mend, not end, stock option distribution. My legislation focuses on three critical reform issues regarding stock options, distribution, shareholder approval, and disposition by senior executives. I believe that my proposed reforms will ensure that stock options serve their highest purpose: that we give shareholders more control to ensure that stock options are issued consistent with their interests, while we do away with the perverse incentive for senior executives to cash in and bail out of their companies. The bill does not address the elephant in the room-the issue of whether or not companies should be required to account for stock options. That is because I remain firmly convinced that would fail to address the fundamental problems we face-and would, in fact, create new problems with which we will have to grapple. If the Congress were to require expensing of stock options, we can be sure that the fat cats would still get their milk. Top corporate executives would still take care of themselves. But the middle-income employees, who represent the vast majority of Americans who benefit from stock options, would have no option but to accept no options. Requiring the expensing of options will not give shareholders a greater say in approving stock option plans or ensuring that they are focused on effective incentives for growth. The reforms I propose today will. And requiring the expensing of options will not address the incentives that executives may have to manipulate earnings immediately prior to selling shares acquired through a stock option plan. The reforms I propose today will. The reform issues addressed in my bill are ones that are well suited for Congress because they are policy matters, not accounting rules. I have little doubt that FASB will again take up the stock option accounting issue. When it does, I think it will find, again, that expensing options at the time they are granted is not possible. This is the unsung issue with stock option accounting. There is no doubt that stock options are a form of compensation, but this happens when they are exercised, not when they are granted. Options that go ``underwater'', when the stock price drops, never become compensation and the options are worthless. We only know if options are compensation when they are exercised and only then do we know how much compensation has been received. This is the issue I have raised about expensing, not whether they are compensation, but when they become compensation and when the amount of the compensation can be measured. I said in 1994 and I say it again today, I do not believe at the time an option is granted that we know if or how much it is worth as compensation. I doubt if the champions of expensing can point to a single case where a company's disclosure of stock option costs at grant, now included in footnotes to the company's P&L statement, proved to be accurate. The Enron footnotes estimated stock option costs that proved to wildly inflated and inaccurate because they did not anticipate the decline in Enron's stock price. In this bear market, I would think that every company's footnote estimates have proven to be wildly inflated and inaccurate. I doubt if the champions of expensing can cite a single stock broker or analyst who uses the Black-Scholes estimating method to pick stocks. I do not believe that these champions would be willing to put their own money behind a stock based on the Black-Scholes estimates. Anyone who finds a reliable way to estimate the price of a stock three to ten years in the future is bound to be rich, and will certainly win the Nobel Prize for Economics. These are issues that FASB will review and it is not an appropriate subject for this or any other legislation. This legislation focuses on reforms that address abuses. Expensing of stock options, whatever its merits as an accounting standard, do not address any of the key reform issues addressed in this legislation. Expensing is quite irrelevant to these reforms; it's a sideshow and a diversion. It's a false surrogate for reform. I have long championed broad-based stock option plans and I believe they are a great spur to productivity and competitiveness. A study by two Rutgers University professors found that over a three-year post- plan period, companies that grant options to most or all employees show a 17 percent improvement in productivity over what would have been expected had they not set up such a plan. The return on assets of these companies went up 2.3 percent per year over what would have been expected, while their stock performance is either better or about the same than comparable companies, depending on how performance is measured. These were companies that granted options broadly, which unfortunately is still not the norm. On June 29, 1993, I introduced the ``Equity Expansion Act,'' S. 1175, to provide a tax incentive in favor broad-based stock option plans, options I referred to as ``performance'' stock options. The incentives were available only for options where ``immediately after the grant of the option, employees who are not highly compensated employees hold * * * share options which permit the acquisition of at least 50 percent of all shares which may be acquired * * *: In my statement about this bill I stated that the bill could ``spur the competitiveness and profitability of American companies by expanding the number of employees in all industries who will have the opportunity to receive part of their remuneration in the form of stock options.'' I argued that that bill was appealing because it ``America's best companies learned long ago that the key to success in the world's toughest markets is a dedicated work force that shares the common goals for their company.'' The bill required shareholders to approve the plans and the employees were required to hold the shares for at least two years. I noted that ``much of the criticism of stock options revolves around horror stories about a small number of extravagantly compensated executives.'' My 1993 bill provided incentives for broad-based plans. It proposed a special capital gains incentive for the stock option shares. At the time, there was no capital gains preference; it had been repealed in 1986. Since then, of course, the capital gains preference has been restored. At that time, and at all times since then, companies can deduct the ``spread'' on an option at the time the option is exercised. The ``spread'' is the difference between the grant price and the market price, the discount. There is a trend in favor of broad-based stock option plans. The National Center for Employee Ownership estimates that 7-10 million employees now hold stock options. The number of people who hold options has grown dramatically since 1992, when only about one million people held options. Stock options are a way to provide productivity incentives to many middle-class employees. Despite the trend in favor of broad-based stock option plans, I am not satisfied with the status quo. In companies with broad-based plans, NCOE finds that 34 percent of the options go to senior management, the average grant value for senior executives was more than $500,000 compared to only about $8,000 for hourly employees and $35,000 for technical employees. In non-broad-based plans, of course, the distribution is even more skewed to senior management. The NCOE estimates that ``While the growth of broad-based options has been an important economic trend, our data nonetheless indicate that even in plans that do share options widely, executives still get an average of 65 percent to 70 percent of the total options granted.'' Similarly, estimates by the National Association Stock Plan Professionals finds in a 2000 survey that 26 percent of the plans only grant options to senior and middle management, and 43 percent to all employees. For high tech companies, the percentage of these top-heavy plans is only 4 percent, and 73 percent of the plans provide options to all of the employees. For non-high tech companies, the percentage of these top-heavy plans is 36 percent, and 29 percent of the plans provide options to all of the employees. So the prevalence of top-heavy plans seems to be concentrated in the non-high tech companies. If options are justified as incentives for company performance and as a way of giving employees a stake in the company performance, which I believe they are, then this is not fair and not appropriate. This is why we need to go beyond enacting an incentive in favor of broad-based plans. As the NCOE has stated, ``Options for ordinary employees can work out to a new car, college tuition, a down payment on a house, a great vacation, and maybe even a more secure retirement. Options for executives can amount to enough money to fund a small nation. The option packages some executives have received would amount to tens of thousands of dollars per employee in their company.'' This imbalance is not good public policy. In addition, if it turns out that companies are forced to expense their options at the time of grant, many of us fear that the first options that would be cut are those for middle-income and rank and file employees. We fear that the senior executives and their allies on the Board would take care of themselves, and drop or not enact broad-based plans. The legislation I propose here would help to ensure that this will not happen. The bill I introduce today takes a direct and forceful approach and provides that this tax deduction is limited to the spread on options that are granted on a broad-basis to the employees of the firm. The intent and thrust of the bill is the same as the one I introduced in 1993, and the definitions are the same. The approach is more direct and forceful. The bill, called the ``Rank and File Stock Option Act'', states that the ordinary and necessary business expense deduction attributed to the spread on the exercise of stock options (deducting the ``spread'' between the strike and exercise price) is limited on a pro rata basis to the extent stock option grants for the taxpayer are not broad-based. So, when the three-year average of the stock option grants is broad- based, as defined in the bill, there is no limitation on the deduction. In terms of a pro-rata reduction, the deduction would be limited by the same percentage to which the percentage of highly compensated employees options exceeded the broad-based standard. This test goes to the number of options granted, not the exercise price or any other weighting or valuation. No deduction is allowed if the options granted to senior management are different in form and superior to those granted to rank and file employees, which will help ensure that there are no efforts to evade the purpose of this legislation. The stock option grants are deemed to be broad-based when, immediately after the grant of the options, employees who are not highly compensated employees hold share options that permit the acquisition of at least 50 percent of all shares that may be acquired pursuant to all stock options outstanding (whether or not exercisable) as of such time. The bill does not require that stock option grants be made to literally every employee, but as a practical matter such grants to every employee may be necessary to meet the test. Requiring that all employees receive some options involves complex issues about part-time employees and new employees. The 50 percent test is tough enough to ensure that the options are broad- based. The definition of a ``highly compensated employee'' includes all employees who earn $90,000 or more and are among the firm's top 20 percent highest paid employees. This is similar to the current test applied to prevent ``discrimination'' in 401K plans. In addition, under the legislation no deduction is allowed if more than 5 percent of the total number of options is granted to any one individual. And no deduction is allowed if more than 15 percent of the stock option grants go to the top 10 officers and directors of the firm. The legislation applies only to public companies. The Treasury Department shall issue regulations to implement this provision. The effective date is for stock grants after December 31 of this year. During the remainder of the year, corporations granting stock options must disclose grants in filings to the SEC within 3 days. To be clear, the legislation does not prevent a company from adopting a stock option plan that does not meet the terms of this legislation. It simply denies them a tax deduction on the spread when they do so. This should ensure that broad-based stock option plans become the norm and that senior executives do not hoard the options for themselves to the detriment of their companies and shareholders. There is ample precedent for the limitation on deductions. Deductions are only permitted for ``ordinary and necessary'' business expenses and Congress has frequently intervened to define what this means. There is no right for corporations, or any other taxpayer, to avoid taxes on any and all expenses that they choose to incur. There is also ample precedent for limiting the deduction for non- broad based stock option plans. We have similar limitations in the law defining contributions for 401K plans, the compensation in closely held corporations is regulated to prevent abuse, and we have limits on excessive compensation paid to executives of non-profit entitles. To make sure that an employer's 401(k) plan does not unfairly favor its higher-paid workers, there are also rules governing highly- compensated employees or HCEs. The term highly-compensated employees may include a person who was a 5 percent owner at any time during the current or prior year or an employee who earned more than $90,000. An employee whose salary ranked in the top 20 percent of payroll for the prior year might also be considered an HCE. Generally, to make sure a 401(k) plan is compliant, each year the plan must pass a non- discrimination test. These tests generally compare the amounts contributed by and on behalf of highly compensated employees to those contributed by and on behalf of the non-highly compensated employees. As long as the difference between the percentages of these two groups is within the Internal Revenue Code's guidelines, the plan retains its tax-qualified status. If the plan does not pass the tests, the plan must take corrective action or lose its tax-favored status. With regard to closely held corporations, the deduction for ordinary and necessary expenses is limited to ``reasonable'' compensation for services performed by the shareholders/employees. A corporation paying excessive compensation to a shareholder-employee is required to reclassify the excess as a dividend (provided there are adequate corporate earnings and profits). This has unfavorable tax consequences, since dividends are not deductible. In addition to an employee's salary, employer-provided benefits should be considered in determining whether an employee's compensation is reasonable. This includes pension and welfare benefits, as well as fringe benefits such as the use of a company car. Finally, the 1993 Taxpayer's Bill of Rights enacted Section 4958 which imposes an excise tax on transactions that provide excessive economic benefits to top executives of non-profit charitable groups. The Internal Revenue Service finalized regulations implementing this law on January 10, 2001. The regulations define what constitutes excessive compensation and benefits. The limitation on the deduction proposed in my legislation serves a constructive public policy purpose. The only purpose of the limitation on deduction we find in S. 1940, the lead bill on expensing of stock options, is to coerce companies into expensing their options at grant. If the companies do not expense options at grant, as S. 1940 prefers that they do despite FASB's current rule that this is not necessary, then they lose their tax deduction. If this legislation is effective, and companies are forced to expense their options at grant, the likely result is that fewer options will be granted, especially to rank and file employees, although not for top executives. My legislation is directed at protecting the stock options of rank and file employees. In addition to ensuring that stock options are broad-based and performance oriented and not just allocated to the top executives, we need to make sure that shareholders are involved in the decision to implement these stock option plans. The legislation provides that not later than one year after the date of enactment of this Act, the Commission shall finalize rules pursuant to the Securities and Exchange Act of 1934 to ensure that shareholder approval is required for stock option plans and grants, stock purchase plans, and other arrangements by public companies by which any person may acquire an equity interest in the company in exchange for consideration that is less than the fair market value of the equity interest at the time of the exchange. This approval would apply to any stock option plan, not just a stock option plan that meets the terms for a broad-based plan. In securing this approval, prior to submission of such plans to shareholders for approval, the company must give its shareholders detailed information about the stock option plans and grants, including (a) the economic rationale and interest of shareholders in the plan or grant; (b) a detailed description of the anticipated distribution of the plan or grant among directors, officers, and employees and the rationale such distribution; (c) the total number of options reserved or intended for grants to each director and officer, and to different classes of employees; (d) the maximum potential future earnings per share dilution of investors' shareholdings assuming the exercise of all in-the-money options with no adjustment for the use of the Treasury stock method, as stock price varies; (e) the terms under which stock option grants may be cancelled or reissued; and (f) the number, weighted average exercise prices, and vesting schedule of all options previously approved or outstanding. The Commission shall ensure that all disclosures required by this Section shall increase the reliability and accuracy of information provided to shareholders and investors. Such shareholder approval requirement may exempt stock option grants to individual employees under terms and conditions specified by the Commission. Such exemptions shall be available only where the grant is (1) made to an individual who is not a director or officer of the company at the time the grant is approved; (2) necessary, based on business judgment; (3) represents a deminimus potential dilution of future earnings per share of investors' shareholdings; and (4) made on terms disclosed to shareholders of the grant that is made in the next filing with the Securities and Exchange Commission. Such approval requirement may exempt stock option plans and grants of any registrant that qualifies as a small business issuer under applicable securities laws and regulations or to such additional small issuers as the Commission determines would be unduly burdened by such requirements as compared to the benefit to shareholders. The Commission is authorized to phase in the applicability of this rule both as to the applicability and to its effective date so that it can determine the size of issuer to which this rule will apply and the extent to which the rule should apply to plans that exclude officers and directors. The bill also focuses on the issue of the incentives stock options give to executives as they manage a company. Questions have been raised about whether the options are partly responsible for the deception and fraud that has occurred at Enron and other companies. The charge is that the options gave these executives an irresistible rationale to deceive shareholders and investors to pump up the stock price and increase the value of the options. Charges have been made that these manipulations were timed to occur immediately before options were exercised and shares were sold. While there is intuitive appeal to this argument, it is difficult to establish the role of stock options in these acts of deceptions, fraud and manipulation. The concerns are sufficient, however, that we need to turn to the Securities and Exchange Commission to evaluate them and determine what restrictions might be imposed on the sale of stock acquired through stock options. The bill directs the SEC to conduct an analysis and make regulatory and legislative recommendations on the need for new stock holding period requirements for senior executives. The Commission is directed to make recommendations regarding minimum holding periods after exercise of options to purchase stock and maximum percentage of stock purchased through options that may be sold. These recommendations would include transactions involving sales to company, sales on public markets, and derivative sales. We need the expertise of the Commission on this complicated issue. It would probably not be reasonable to bar executives from selling any shares during their employment with the firm. Executives may need the proceeds of these sales to finance the college education of their children and many other completely legitimate reasons. The Commission is in a better position to evaluate the incentives, the opportunities for fraud, and other key factual and policy questions. Stock options have been under attack. We need to focus on how to prevent abuse of stock options, not just abandon these incentives. They are a uniquely American idea, they provide a way to increase productivity and broaden the winner's circle. As with any economic incentive, they can be abused and we need to focus on these abuses. By reforming stock options, we can ensure that these incentives will be even more effective. I believe that the reforms I have proposed will address the abuses we have seen. It is unfortunate that the accounting for stock options has become a surrogate for any and all issues regarding stock options. I continue to believe that accounting for stock options as an expense at the time they are granted is not appropriate or possible. But irrespective of the outcome of this debate, the reforms I have proposed here address the real issues, the real abuses, and the real opportunities to ensure that stock options continue to provide a powerful incentive in favor of economic growth and democratic capitalism. I ask unanimous consent than the following outline of the legislation and the text of the legislation be printed in the Record.

Mr. LIEBERMAN

Mr. LIEBERMAN. Mr. President, I rise in strong support of stock option reforms, and propose legislation that will make stock options, a powerful tool in the democratization of capitalism, even more effective as an incentive to spur innovation and create wealth. The waves of corporate abuse that our economy has suffered over the past ten months have been devastating to so many employees, shareholders, and families across America. The investments that people have counted upon to safeguard their retirement, send their children to college, buy a home, start a business-trillions of dollars have gone up in smoke, turned to ash while, for a few executives, those misfortunes turned to cash. That's maddening, as a result, the most productive economy in the world-in the history of the world-has been scarred. The American corporation, a great institution of democratic capitalism in which the public owns the company, has been stained. Potentially empowering innovations that enable individual investment, like the 401-k account, have been skewered. Today, I want to talk about another fundamentally decent idea that has been dragged into the quicksand of corporate corruption: stock options. We've discovered over the last ten months that too many companies and executives have been misusing and abusing them. In far too many cases, options have been turned into mere feed in the corporate trough by the greed of corporate executives. Stock options are a hammer. They can be used well or used poorly. We've seen corporate executives use this hammer to weaken the foundations of their companies, build rickety and top-heavy structures ready to collapse, and build themselves nice, secure shelters from the damage. That's unconscionable. The bill I propose today will correct this abuse by ensuring that the tool of stock options is put in the hands of more and more employees so it can be used as it was initially intended-to construct wealth, to build fortunes, to strengthen companies, and to incentivize the long- term soundness and stability of a company. The way to fix this problem is not, as some have suggested, to require stock option expensing at the time an option is granted. That would, in fact, make the problem worse. It would disincentive the dissemination of options in the first place-and in the end, those at the top of the corporate food chain will still take care of themselves. No, the way to fix this problem is to ensure that stock options are more broadly shared by more and more employees of American corporations-that they truly are the democratizing tool that they can be. Our challenge is to fix the flaws that have been exposed without hurting stock options themselves. In the name of addressing this serious crisis in corporate accountability, let's not make the mistake of pushing through unwise reforms that threaten to further confuse investors and endanger the engines of entrepreneurship that make America's economy, for all its faults and flaws, the envy of history and of the world. It would be a terrible shame if we threw out the stock options baby with the corporate corruption bathwater. That's the spirit of my legislation: to mend, not end, stock option distribution. My legislation focuses on three critical reform issues regarding stock options, distribution, shareholder approval, and disposition by senior executives. I believe that my proposed reforms will ensure that stock options serve their highest purpose: that we give shareholders more control to ensure that stock options are issued consistent with their interests, while we do away with the perverse incentive for senior executives to cash in and bail out of their companies. The bill does not address the elephant in the room-the issue of whether or not companies should be required to account for stock options. That is because I remain firmly convinced that would fail to address the fundamental problems we face-and would, in fact, create new problems with which we will have to grapple. If the Congress were to require expensing of stock options, we can be sure that the fat cats would still get their milk. Top corporate executives would still take care of themselves. But the middle-income employees, who represent the vast majority of Americans who benefit from stock options, would have no option but to accept no options. Requiring the expensing of options will not give shareholders a greater say in approving stock option plans or ensuring that they are focused on effective incentives for growth. The reforms I propose today will. And requiring the expensing of options will not address the incentives that executives may have to manipulate earnings immediately prior to selling shares acquired through a stock option plan. The reforms I propose today will. The reform issues addressed in my bill are ones that are well suited for Congress because they are policy matters, not accounting rules. I have little doubt that FASB will again take up the stock option accounting issue. When it does, I think it will find, again, that expensing options at the time they are granted is not possible. This is the unsung issue with stock option accounting. There is no doubt that stock options are a form of compensation, but this happens when they are exercised, not when they are granted. Options that go ``underwater'', when the stock price drops, never become compensation and the options are worthless. We only know if options are compensation when they are exercised and only then do we know how much compensation has been received. This is the issue I have raised about expensing, not whether they are compensation, but when they become compensation and when the amount of the compensation can be measured. I said in 1994 and I say it again today, I do not believe at the time an option is granted that we know if or how much it is worth as compensation. I doubt if the champions of expensing can point to a single case where a company's disclosure of stock option costs at grant, now included in footnotes to the company's P&L statement, proved to be accurate. The Enron footnotes estimated stock option costs that proved to wildly inflated and inaccurate because they did not anticipate the decline in Enron's stock price. In this bear market, I would think that every company's footnote estimates have proven to be wildly inflated and inaccurate. I doubt if the champions of expensing can cite a single stock broker or analyst who uses the Black-Scholes estimating method to pick stocks. I do not believe that these champions would be willing to put their own money behind a stock based on the Black-Scholes estimates. Anyone who finds a reliable way to estimate the price of a stock three to ten years in the future is bound to be rich, and will certainly win the Nobel Prize for Economics. These are issues that FASB will review and it is not an appropriate subject for this or any other legislation. This legislation focuses on reforms that address abuses. Expensing of stock options, whatever its merits as an accounting standard, do not address any of the key reform issues addressed in this legislation. Expensing is quite irrelevant to these reforms; it's a sideshow and a diversion. It's a false surrogate for reform. I have long championed broad-based stock option plans and I believe they are a great spur to productivity and competitiveness. A study by two Rutgers University professors found that over a three-year post- plan period, companies that grant options to most or all employees show a 17 percent improvement in productivity over what would have been expected had they not set up such a plan. The return on assets of these companies went up 2.3 percent per year over what would have been expected, while their stock performance is either better or about the same than comparable companies, depending on how performance is measured. These were companies that granted options broadly, which unfortunately is still not the norm. On June 29, 1993, I introduced the ``Equity Expansion Act,'' S. 1175, to provide a tax incentive in favor broad-based stock option plans, options I referred to as ``performance'' stock options. The incentives were available only for options where ``immediately after the grant of the option, employees who are not highly compensated employees hold * * * share options which permit the acquisition of at least 50 percent of all shares which may be acquired * * *: In my statement about this bill I stated that the bill could ``spur the competitiveness and profitability of American companies by expanding the number of employees in all industries who will have the opportunity to receive part of their remuneration in the form of stock options.'' I argued that that bill was appealing because it ``America's best companies learned long ago that the key to success in the world's toughest markets is a dedicated work force that shares the common goals for their company.'' The bill required shareholders to approve the plans and the employees were required to hold the shares for at least two years. I noted that ``much of the criticism of stock options revolves around horror stories about a small number of extravagantly compensated executives.'' My 1993 bill provided incentives for broad-based plans. It proposed a special capital gains incentive for the stock option shares. At the time, there was no capital gains preference; it had been repealed in 1986. Since then, of course, the capital gains preference has been restored. At that time, and at all times since then, companies can deduct the ``spread'' on an option at the time the option is exercised. The ``spread'' is the difference between the grant price and the market price, the discount. There is a trend in favor of broad-based stock option plans. The National Center for Employee Ownership estimates that 7-10 million employees now hold stock options. The number of people who hold options has grown dramatically since 1992, when only about one million people held options. Stock options are a way to provide productivity incentives to many middle-class employees. Despite the trend in favor of broad-based stock option plans, I am not satisfied with the status quo. In companies with broad-based plans, NCOE finds that 34 percent of the options go to senior management, the average grant value for senior executives was more than $500,000 compared to only about $8,000 for hourly employees and $35,000 for technical employees. In non-broad-based plans, of course, the distribution is even more skewed to senior management. The NCOE estimates that ``While the growth of broad-based options has been an important economic trend, our data nonetheless indicate that even in plans that do share options widely, executives still get an average of 65 percent to 70 percent of the total options granted.'' Similarly, estimates by the National Association Stock Plan Professionals finds in a 2000 survey that 26 percent of the plans only grant options to senior and middle management, and 43 percent to all employees. For high tech companies, the percentage of these top-heavy plans is only 4 percent, and 73 percent of the plans provide options to all of the employees. For non-high tech companies, the percentage of these top-heavy plans is 36 percent, and 29 percent of the plans provide options to all of the employees. So the prevalence of top-heavy plans seems to be concentrated in the non-high tech companies. If options are justified as incentives for company performance and as a way of giving employees a stake in the company performance, which I believe they are, then this is not fair and not appropriate. This is why we need to go beyond enacting an incentive in favor of broad-based plans. As the NCOE has stated, ``Options for ordinary employees can work out to a new car, college tuition, a down payment on a house, a great vacation, and maybe even a more secure retirement. Options for executives can amount to enough money to fund a small nation. The option packages some executives have received would amount to tens of thousands of dollars per employee in their company.'' This imbalance is not good public policy. In addition, if it turns out that companies are forced to expense their options at the time of grant, many of us fear that the first options that would be cut are those for middle-income and rank and file employees. We fear that the senior executives and their allies on the Board would take care of themselves, and drop or not enact broad-based plans. The legislation I propose here would help to ensure that this will not happen. The bill I introduce today takes a direct and forceful approach and provides that this tax deduction is limited to the spread on options that are granted on a broad-basis to the employees of the firm. The intent and thrust of the bill is the same as the one I introduced in 1993, and the definitions are the same. The approach is more direct and forceful. The bill, called the ``Rank and File Stock Option Act'', states that the ordinary and necessary business expense deduction attributed to the spread on the exercise of stock options (deducting the ``spread'' between the strike and exercise price) is limited on a pro rata basis to the extent stock option grants for the taxpayer are not broad-based. So, when the three-year average of the stock option grants is broad- based, as defined in the bill, there is no limitation on the deduction. In terms of a pro-rata reduction, the deduction would be limited by the same percentage to which the percentage of highly compensated employees options exceeded the broad-based standard. This test goes to the number of options granted, not the exercise price or any other weighting or valuation. No deduction is allowed if the options granted to senior management are different in form and superior to those granted to rank and file employees, which will help ensure that there are no efforts to evade the purpose of this legislation. The stock option grants are deemed to be broad-based when, immediately after the grant of the options, employees who are not highly compensated employees hold share options that permit the acquisition of at least 50 percent of all shares that may be acquired pursuant to all stock options outstanding (whether or not exercisable) as of such time. The bill does not require that stock option grants be made to literally every employee, but as a practical matter such grants to every employee may be necessary to meet the test. Requiring that all employees receive some options involves complex issues about part-time employees and new employees. The 50 percent test is tough enough to ensure that the options are broad- based. The definition of a ``highly compensated employee'' includes all employees who earn $90,000 or more and are among the firm's top 20 percent highest paid employees. This is similar to the current test applied to prevent ``discrimination'' in 401K plans. In addition, under the legislation no deduction is allowed if more than 5 percent of the total number of options is granted to any one individual. And no deduction is allowed if more than 15 percent of the stock option grants go to the top 10 officers and directors of the firm. The legislation applies only to public companies. The Treasury Department shall issue regulations to implement this provision. The effective date is for stock grants after December 31 of this year. During the remainder of the year, corporations granting stock options must disclose grants in filings to the SEC within 3 days. To be clear, the legislation does not prevent a company from adopting a stock option plan that does not meet the terms of this legislation. It simply denies them a tax deduction on the spread when they do so. This should ensure that broad-based stock option plans become the norm and that senior executives do not hoard the options for themselves to the detriment of their companies and shareholders. There is ample precedent for the limitation on deductions. Deductions are only permitted for ``ordinary and necessary'' business expenses and Congress has frequently intervened to define what this means. There is no right for corporations, or any other taxpayer, to avoid taxes on any and all expenses that they choose to incur. There is also ample precedent for limiting the deduction for non- broad based stock option plans. We have similar limitations in the law defining contributions for 401K plans, the compensation in closely held corporations is regulated to prevent abuse, and we have limits on excessive compensation paid to executives of non-profit entitles. To make sure that an employer's 401(k) plan does not unfairly favor its higher-paid workers, there are also rules governing highly- compensated employees or HCEs. The term highly-compensated employees may include a person who was a 5 percent owner at any time during the current or prior year or an employee who earned more than $90,000. An employee whose salary ranked in the top 20 percent of payroll for the prior year might also be considered an HCE. Generally, to make sure a 401(k) plan is compliant, each year the plan must pass a non- discrimination test. These tests generally compare the amounts contributed by and on behalf of highly compensated employees to those contributed by and on behalf of the non-highly compensated employees. As long as the difference between the percentages of these two groups is within the Internal Revenue Code's guidelines, the plan retains its tax-qualified status. If the plan does not pass the tests, the plan must take corrective action or lose its tax-favored status. With regard to closely held corporations, the deduction for ordinary and necessary expenses is limited to ``reasonable'' compensation for services performed by the shareholders/employees. A corporation paying excessive compensation to a shareholder-employee is required to reclassify the excess as a dividend (provided there are adequate corporate earnings and profits). This has unfavorable tax consequences, since dividends are not deductible. In addition to an employee's salary, employer-provided benefits should be considered in determining whether an employee's compensation is reasonable. This includes pension and welfare benefits, as well as fringe benefits such as the use of a company car. Finally, the 1993 Taxpayer's Bill of Rights enacted Section 4958 which imposes an excise tax on transactions that provide excessive economic benefits to top executives of non-profit charitable groups. The Internal Revenue Service finalized regulations implementing this law on January 10, 2001. The regulations define what constitutes excessive compensation and benefits. The limitation on the deduction proposed in my legislation serves a constructive public policy purpose. The only purpose of the limitation on deduction we find in S. 1940, the lead bill on expensing of stock options, is to coerce companies into expensing their options at grant. If the companies do not expense options at grant, as S. 1940 prefers that they do despite FASB's current rule that this is not necessary, then they lose their tax deduction. If this legislation is effective, and companies are forced to expense their options at grant, the likely result is that fewer options will be granted, especially to rank and file employees, although not for top executives. My legislation is directed at protecting the stock options of rank and file employees. In addition to ensuring that stock options are broad-based and performance oriented and not just allocated to the top executives, we need to make sure that shareholders are involved in the decision to implement these stock option plans. The legislation provides that not later than one year after the date of enactment of this Act, the Commission shall finalize rules pursuant to the Securities and Exchange Act of 1934 to ensure that shareholder approval is required for stock option plans and grants, stock purchase plans, and other arrangements by public companies by which any person may acquire an equity interest in the company in exchange for consideration that is less than the fair market value of the equity interest at the time of the exchange. This approval would apply to any stock option plan, not just a stock option plan that meets the terms for a broad-based plan. In securing this approval, prior to submission of such plans to shareholders for approval, the company must give its shareholders detailed information about the stock option plans and grants, including (a) the economic rationale and interest of shareholders in the plan or grant; (b) a detailed description of the anticipated distribution of the plan or grant among directors, officers, and employees and the rationale such distribution; (c) the total number of options reserved or intended for grants to each director and officer, and to different classes of employees; (d) the maximum potential future earnings per share dilution of investors' shareholdings assuming the exercise of all in-the-money options with no adjustment for the use of the Treasury stock method, as stock price varies; (e) the terms under which stock option grants may be cancelled or reissued; and (f) the number, weighted average exercise prices, and vesting schedule of all options previously approved or outstanding. The Commission shall ensure that all disclosures required by this Section shall increase the reliability and accuracy of information provided to shareholders and investors. Such shareholder approval requirement may exempt stock option grants to individual employees under terms and conditions specified by the Commission. Such exemptions shall be available only where the grant is (1) made to an individual who is not a director or officer of the company at the time the grant is approved; (2) necessary, based on business judgment; (3) represents a deminimus potential dilution of future earnings per share of investors' shareholdings; and (4) made on terms disclosed to shareholders of the grant that is made in the next filing with the Securities and Exchange Commission. Such approval requirement may exempt stock option plans and grants of any registrant that qualifies as a small business issuer under applicable securities laws and regulations or to such additional small issuers as the Commission determines would be unduly burdened by such requirements as compared to the benefit to shareholders. The Commission is authorized to phase in the applicability of this rule both as to the applicability and to its effective date so that it can determine the size of issuer to which this rule will apply and the extent to which the rule should apply to plans that exclude officers and directors. The bill also focuses on the issue of the incentives stock options give to executives as they manage a company. Questions have been raised about whether the options are partly responsible for the deception and fraud that has occurred at Enron and other companies. The charge is that the options gave these executives an irresistible rationale to deceive shareholders and investors to pump up the stock price and increase the value of the options. Charges have been made that these manipulations were timed to occur immediately before options were exercised and shares were sold. While there is intuitive appeal to this argument, it is difficult to establish the role of stock options in these acts of deceptions, fraud and manipulation. The concerns are sufficient, however, that we need to turn to the Securities and Exchange Commission to evaluate them and determine what restrictions might be imposed on the sale of stock acquired through stock options. The bill directs the SEC to conduct an analysis and make regulatory and legislative recommendations on the need for new stock holding period requirements for senior executives. The Commission is directed to make recommendations regarding minimum holding periods after exercise of options to purchase stock and maximum percentage of stock purchased through options that may be sold. These recommendations would include transactions involving sales to company, sales on public markets, and derivative sales. We need the expertise of the Commission on this complicated issue. It would probably not be reasonable to bar executives from selling any shares during their employment with the firm. Executives may need the proceeds of these sales to finance the college education of their children and many other completely legitimate reasons. The Commission is in a better position to evaluate the incentives, the opportunities for fraud, and other key factual and policy questions. Stock options have been under attack. We need to focus on how to prevent abuse of stock options, not just abandon these incentives. They are a uniquely American idea, they provide a way to increase productivity and broaden the winner's circle. As with any economic incentive, they can be abused and we need to focus on these abuses. By reforming stock options, we can ensure that these incentives will be even more effective. I believe that the reforms I have proposed will address the abuses we have seen. It is unfortunate that the accounting for stock options has become a surrogate for any and all issues regarding stock options. I continue to believe that accounting for stock options as an expense at the time they are granted is not appropriate or possible. But irrespective of the outcome of this debate, the reforms I have proposed here address the real issues, the real abuses, and the real opportunities to ensure that stock options continue to provide a powerful incentive in favor of economic growth and democratic capitalism. I ask unanimous consent than the following outline of the legislation and the text of the legislation be printed in the Record.

Mr. LIEBERMAN

Mr. LIEBERMAN. Mr. President, I rise to address the pending McConnell medical malpractice amendment. I have long agreed with my colleague from Kentucky that our legal system needs reforming, and I have joined him in supporting a bill in many ways similar to this amendment in the past. But I cannot support him today, because I do not believe that this prescription drug debate is either the right time or the right place to address the medical malpractice issue. The Senate has been debating the critical and urgent issue of how to provide seniors with prescription drug coverage for 2 weeks. As my colleagues know, we are having a very hard time finding common ground on the issue. The last thing we need now is to inject into this debate a highly controversial issue which we all know for a certainty will prevent us from ever fulfilling our goal of giving seniors the prescription drug benefits they need. We should be focused on debating and passing a prescription drug bill, not other issues. For that reason, I will vote to table this amendment.

Mr. LIEBERMAN

Mr. LIEBERMAN. Madam President, it is with sadness that I come to the floor today to note the untimely passing of a great man whose life and work in Connecticut have made my State, and our country, a better place, particularly for our children. Dr. Albert Solnit, Chair of the Yale Child Study Center from 1966 to 1983 and Commissioner of Mental Health and Addiction Services for the State of Connecticut from 1991 to 2000, died tragically and suddenly on June 21, as a result of injuries sustained in a car accident earlier that day. This loss has compounded the mourning of the men and women of the Yale Child Study Center, who lost another former director in Donald Cohen last October. Albert Solnit spent an entire lifetime serving his fellow human beings with great dedication, enthusiasm, and distinction. Having served in the U.S. Army as a psychiatrist, Dr. Solnit arrived at Yale, my alma mater, in 1948, as a psychiatric resident. Two years later, he became the first trainee in child psychiatry ever at the Child Study Center. In another 2 years, he joined the faculty of the Center. And by 1964, he was a full professor there. With years of diverse training in medicine, pediatrics, anatomy, and communicable diseases and a passionate commitment to bettering the lives of children of Connecticut, Dr. Solnit became director of the Child Study Center in 1966. Every day, Dr. Solnit would arrive at the Yale Child Study Center long before his colleagues. He would work late into the evening. He didn't have to; after all, he was the boss. But he did, because he had a tireless work ethic and a clear vision of how his effort could better the world. Even if I had an hour or two here on the floor, I could not catalogue Dr. Solnit's accomplishments in full. So let me focus briefly on what were his deepest interests: assisting children caught in complicated custody situations, children being adopted, or children committed to the well-intentioned, though often challenging, foster care system of my state. Dr. Solnit didn't simply observe and dissect problems with the status quo; he corrected them. He helped set the standards for how the legal system would work with child development experts on behalf of children. In the late 1960s, he worked with the state government to develop a new department of juvenile delinquency called the Department of Children and Youth Services, and to build a separate State psychiatric hospital that would treat only children, and treat them with special focus and care. He wrote two books, ``In the Best Interests of the Child'' and ``Beyond the Best Interests of the Child,'' that are known as classics in the field of child mental health. This man was always taking his vast range of knowledge and figuring out how best to apply it to touch the lives of others. He was always mentoring his colleagues. He was always nurturing children. It is with sorrow that I mourn his sudden death, and it is with far greater pride, respect, and love that I pay tribute today to the life of inspiration that Dr. Al Solnit gave to us all. I extend my deepest condolences to his colleagues at the Child Study Center, to his wife Martha, and to his children David, Ruth, Ben, and Aaron--and their families. And I ask that the following obituary, written by Dean David Kessler of the Yale School of Medicine, be printed into the Record, so that this man's life, a model to which we might all aspire, is remembered forever. The obituary follows: Dear Faculty, It is with great sadness that I write to inform you of yet another deep and tragic loss of a member of the faculty and senior leadership of the Yale Child Study Center and Yale School of Medicine. Dr. Albert J. Solnit died on Friday evening, June 21st, as a result of injuries he sustained in an automobile accident earlier that day. His wife, Martha, was also involved in the accident and is in stable condition in the intensive care unit of Waterbury Hospital. Dr. Solnit was chair of the Child Study Center from 1966 to 1983 and Commissioner of Mental Health and Addiction Services for the State of Connecticut from 1991 to 2000. He was also the Sterling Professor Emeritus of Pediatrics and Psychiatry in the Child Study Center. Named a Sterling Professor in 1970, he was the middle of three Sterling professors who led the Center. The most recent was Donald J. Cohen who succeeded Dr. Solnit as chairman of the Center in 1983, and who died last October. Al arrived at Yale in 1948 as a psychiatric resident and in 1950 became the first trainee in child psychiatry in the Child Study Center. He was born in 1919 and grew up in Los Angeles, California, attended the University of California in Berkeley and San Francisco, and received his medical degree in 1943. After pediatric training in Long Island College Hospital, he entered the U.S. Army and served as a psychiatrist during his two-year commitment. He joined the faculty of the Child Study Center in 1952 and became a full professor in 1964. Like his predecessor, Al came to his leadership position at the Child Study Center with a broad background that also included a masters degree in anatomy and a year as a resident in communicable diseases. He also had begun psychoanalytic training in the New York Psychoanlytic Institute from which he graduated in 1955. Al's tenure as chair of the Center was infused with his distinctive energy and broad vision, he was a man of remarkable stamina, arriving at Center long before his colleagues and continuing to work late into the evening, a characteristic that was enduring from his very first years at Yale through the day before this death. Long concerned for the needs for poor and underprivileged children, he had been working as consultant to various school districts and many child-serving such social agencies in the New Haven community and the state. In the late 60's, he worked with the state government of Connecticut to develop new department of juvenile delinquency, the Department of Children and Youth Services, and to build a separate state psychiatric hospital for children. In his effort to bring the Center into the community, Al built bridges throughout the university and the city of New Haven. Among those initiatives was his collaborative work with the law school. Trained as a child and adult psychoanalyst he cared deeply for children caught in the turmoil of the foster care system, or complicated custody situations. With his close colleagues, Anna Freud and Joseph Goldstein, he set the standards for an informed, collaborative interface between the legal system and child development experts on behalf of children. His books, In the Best Interests of the Child and Beyond the Best Interests of the Child, are recognized classics in the field of child mental health. Throughout his career--even up to last week--he was regularly consulting with colleagues and trainees about how to think about complex questions of adoption, custody, and child placement. His perceptiveness in these often difficult areas was legendary and much respected by judges and child psychiatrists alike. Other of his scholarly contributions, set forth in seventeen books and over two hundred papers and chapters, set the tone of the emerging field of child psychiatry. Al maintained strong and close ties to pediatrics and to pediatricians. He established a long-standing collaborative group involving both child psychiatrists and practicing pediatricians that has met monthly for over forty years to discuss the common clinical ground between the two disciplines. He developed the concept of the `vulnerable child' that detailed the effects on parents and children of neonatal or very clearly serious illness or threatened illness. With his close colleagues, Sally Provence, Julius Richmond, and Irving Harris. Al also began the organization Zero To Three that defined the field of infant psychiatry. Al was a recognized and prodigious leader in the world of child mental health and child psychoanalysis. He was president of the American Psychoanalytic Association from 1970 to 1971; of the American Academy of Child and Adolescent Psychiatry from 1971-73; and of the International Association of Child and Adolescent Psychiatry and Allied Professions from 1974-76. In the latter organization, he remained an active, contributing member of the leadership and was intimately involved just this past week in developing a new training agenda to bring international child mental health scholars together. He was editor of the Psychoanalytic Study of the Child, a position he assumed in 1971 and through which he turned the journal into one of the leading publications in the field. Al was an international leader in psychoanalysis. He was actively involved with the Yale Press and with the Muriel Gardiner Seminar for Psychoanalysis and the Humanities. Both of these efforts reflect Al's broad intellectual interests and his ability to span fields. He was an enduringly curious scholar and enjoyed most bringing individuals from different disciplines together to encourage cross-talk and interdisciplinary understanding. He was masterful in his ability to detect even the faintest possibility of common ground among apparently disparate points of view and for bringing these groups together. Many individuals in the field of child psychiatry, and more broadly child mental health, attribute their careers to Al's ability to see their potential and make connections that put them in the right place at a critical time for their personal development. He worked often quietly behind the scenes to help young faculty members find sufficient help and resources to start their research or to feel sufficiently grounded so that they could flourish. He stayed in touch with his patients for years, long after they were adults and parents, even grandparents, themselves and he never ceased to be their physician, always available and sensitive to their needs. Though an emeritus professor, Al Solnit was by no means retired. He was mentoring, guiding, and caring every hour of the day. He was a vital, present member of the Child Study Center's leadership and carried the wisdom afforded by living the history of a place. His untimely, unexpected death cuts short a continuing vigorous life with mentoring and leadership yet to give. I know you join me in extending sympathy to all of his colleagues in the Child Study Center and to his wife Martha, his children David, Ruth, Ben, Aaron, and their families. Al Solnit was a vital citizen of this medical school and university. We shall miss him and do our best to carry out his constant imperative that there is always more to be done on behalf of the world's children.--David Kessler, M.D., Dean, Yale School of Medicine.

Mr. LIEBERMAN

Mr. LIEBERMAN. Mr. President, I want to talk briefly today about how America got caught in the current quicksand of corporate scandal and how we can help dig our economy out of it. Our economy is in trouble today not because we have a shortage of parts, labor, or ingenuity, but because the American people have a shortage of confidence in the basic mechanics of the marketplace. Every new corporate scandal jostles our markets with the force of a jab or an uppercut. If the punches keep coming and we don't react, our economy will get even wobblier. It may even get knocked down. Investors are shaken. They don't know what's real anymore. Trust has eroded. The stock exchanges are suffering. These are serious problems that demand a serious response, which is why I strongly support Senator Sarbanes' legislation to reform accounting oversight and strengthen corporate accountability. I welcome President Bush's voice to this discussion, and appreciated the principled remarks he made in New York on Tuesday. But the President's substantive proposals were late and they were limited. I regret that he still hasn't committed, and committed forcefully, to the meaningful, systemic reforms in the legislation before the Senate today. This is a responsive bill. It is a responsible bill. A vote for it is a strong vote of confidence in the American economy. And the President's failure to speak out in favor of it, in my view, sends the wrong message to our markets. In the wake of Enron's collapse, I had hopes that self-regulation could heal many of the wounds inflicted on our markets and on our economy. I have called for the markets to toughen listing standards, and for companies to make ethics a front-burner issue, not a footnote. Many companies have made progress. The stock exchanges and other business groups have worked to root out conflicts of interest and to demand more independent corporate oversight. But the new revelations, which seem to come daily, have demonstrated that these problems go far beyond a bad company or two or three. We now have to ask not whether there are more scandals lurking in the fine print, but how many more are there? And we have to ask, what is it about the shape of the system that needs to be corrected to prevent similar debacles from happening again? The system isn't broken, but it is strained. And we all now understand that self-regulation, as critical as it is, will not do enough to fix the damage. The stakes are high. Over the last two decades we have witnessed an explosion in middle-class participation in the capital markets. A majority of Americans now have a direct stake in stock or mutual funds, usually, through their 401-k plans. Those American investors have discovered, through the painful shock of every new recent revelation, that the basic, traditional ethical values of small businesses, where you respect every dollar, pay back your investors, treat your employees well, and serve your customers honestly, are not always shared in the boardrooms of some large corporations. Today and tomorrow, the American people deserve every confidence that their government is setting the highest standards of honesty, transparency, and accountability and enforcing those standards without hesitation. That is why I strongly support Senator Sarbanes' bill. It is a potent prescription for the serious ethical ills that ail our economy. The aim here is not just to penalize individuals when fraud happens; it is to prevent future economic catastrophes, to the degree that we can, and re-instill confidence in the marketplace. I regret that after the collapse of Enron and the pretty pathetic parade that has followed of Global Crossings, Tycos, ImClones, and WorldComs, the President still hasn't awakened to the full scope of the problem or the need for a strong solution like that proposed by Senator Sarbanes. Gene Sperling, former Economic Adviser to President Clinton, put it well. After September 11, we all understood what was necessary to get people back in airports and on airplanes. Cracking down on hijackers with tough new criminal penalties wouldn't be enough. We knew that we needed to improve baggage and passenger screening, fortify cabin doors, and make a whole host of other changes that addressed the systemic problems that let the attacks happen in the first place. The same is true here. If we want Americans to regain confidence in our economy and get back in the market, as they have gotten back in the skies, we need to not only get tough on offenders, but to get tough on the structural problems that enable the offenses. That means closing loopholes and rooting out the endemic conflicts of interest that put even decent people in difficult if not untenable situations. Senator Sarbanes' bill would set up a strong, independent board to oversee accountants--a critical step that will give Americans reason to believe their numbers again. The President hasn't come out clearly in favor of that. The bill would restrict firms from doing both consulting and auditing for the same company in most cases, addressing what is a corrosive conflict in the system today. The President hasn't supported that as a law yet. The bill would also go further than the new NASD or NYSE rules to address the inherent conflicts of interest that currently prevent Wall Street analysts, who make the judgments so many Americans rely upon in making their investment decisions, from thoroughly and independently scrutinizing the companies they cover. In the hearings of the Senate Governmental Affairs Committee I chair, we discovered that those conflicts are real, deep, and widespread. Unfortunately, the President hasn't been strong enough or sharp enough on this issue. And the bill would require disclosure within 7 days anytime a corporate executive takes a loan from the company he is working for. We in Washington cannot and should not pretend to be able to fix all these problems single-handedly, but we have an essential role to play. We must lead. And at the same time, we must take care not to let this turn into an anti-business crusade. I believe in American business. My father was a small business owner in Stamford, CT. Through hard work he bought a house, sent his kids to college, prepared for retirement, and bettered his community. You cannot be pro-jobs and anti-business. You can't be pro-growth and anti-business. You can't be pro-opportunity and anti-business. Business has created our unprecedented prosperity, and business will continue to extend more and more opportunities to more and more Americans and people around the world. But not if we let this erosion of confidence, this rust of distrust, keep eating away at our markets. American values are better than Enron's values. They're better than Global Crossing's values. They're better than WorldCom's values. And so is the American economy better and stronger than these companies' ethical and economic breaches of trust. This bill will point the way to both better ethics and better economics. It should become law.

Mr. LIEBERMAN

Mr. LIEBERMAN. Mr. President, I vote today against the motion to proceed to the consideration of the Yucca Mountain resolution. I have cast this vote for several reasons. First, on procedural grounds, I agree with the majority leader that to consider the issue now would be an unacceptable divergence from Senate practice and procedure. It is the right of the majority leader to schedule the consideration of legislation on the floor of the Senate, and for me to vote for this motion would be to sanction what I view as an inappropriate procedure. But the biggest problem is the substance of this plan. I don't believe that the Yucca Mountain site is ready to be approved by the Congress. There is an old saying: ``underpromise, overperform.'' Unfortunately, the Yucca Mountain nuclear waste storage plan overpromises and underperforms for the people of my State. I have studied this issue carefully, mindful of how important nuclear power is to Connecticut, and of how concerned Connecticut families are about the health and safety effects of storing nuclear waste on site. They are right to be concerned. But after many months of deliberation, I have decided that the plans aren't ready. Voting to create a waste repository at Yucca Mountain today would solve no problems and create a few new ones for the people of my state. It is not wise policy. I believe the most obvious indication of this fact is the Department of Energy's plans to apply for a license from the Nuclear Regulatory Commission. Even though the Nuclear Waste Policy Act instructs the Energy Department to submit an application to the Nuclear Regulatory Commission 90 days after Congress acts, Secretary Abraham has stated that his agency will not submit an application until December 2004 at the earliest. Obviously, the Energy Department is not ready to make their case for this site. Why should we be endorsing the project long before the Department is ready? From studying the plans for the site, I believe that the reason that the Energy Department is not ready to submit its application is because, simply, too many unanswered questions remain. In dealing with nuclear waste, we should first do no harm. It is too soon to say conclusively that the Yucca Mountain plans meet that standard. Consider the storage problems. In a December 2001 report to members of Congress, the General Accounting Office wrote of ``uncertainties'' relating to the ``longevity of [engineered] waste containers,'' and noted that ``significant work is needed'' before the safety of the containers can be substantiated. The GAO also felt that more studies needed to be completed before the physical characteristics of the site could be declared suitable for the project. Most notably, the report stated the GAO's uncertainty on ``how the combination of heat, water, and chemical processes caused by the presence of nuclear waste . . . would affect the flow of water through the repository.'' Among the remaining physical ``uncertainties,'' the GAO prominently listed: faulting and fracturing of the repository rock; the flow of water through the repository rock; and the stability of the repository rock under heated conditions and conditions involving seismic events as main concerns. The GAO's view of uncertainties was seconded by the Nuclear Waste Technical Review Board--an independent review board that acts as a check for the Energy Department's view of the science. In a January 24, 2002 letter to Congress, the Review Board offered criticisms of the DOE study, finding that, ``as a whole . . . the technical basis for the DOE's repository performance estimates is weak to moderate.'' But, the most important point for my home state of Connecticut is that, even if Yucca Mountain worked perfectly, with none of the potential problems that many experts have raised, it would not answer our problem of nuclear waste storage. It gives the people of my State the false hope of a solution to this serious problem. In fact, the plan may well create new problems in many areas of the state that are now free of nuclear waste problems. It is not as if, if we were to approve this site, the tons of nuclear waste in Connecticut would be instantly transported to Nevada. Rather, it would take 40 years and thousands of shipments to transport that waste across the country, and by the time Yucca was filled, we would have generated just as much waste at each of Connecticut's nuclear sites. So the opening of Yucca Mountain will not free us of the terrorist threat at each of the sites. To the contrary, it will disperse the waste even more than it is currently dispersed. And the most dangerous waste of all--the ``hot'' waste that has just been removed from the reactors--cannot be moved off of our sites in Connecticut until it has cooled for at least 5 years. Thus, as long as we are operating nuclear plants in Connecticut, we will have dangerous nuclear waste at those plants. In other words, the current Yucca storage plans do not resolve Connecticut storage issues. Finally, I am concerned that the transportation of the waste would bring new problems to regions of Connecticut that do not face them. The Energy Department has formulated no logical and systematic plan regarding the transportation of waste. To transport the approximately 40,000 tons of nuclear waste to Yucca Mountain, over 100,000 truck shipments or 36,000 combined rail and truck shipments would be needed, to be spread over the next 40 or so years. This would include waste from other States coming across on Connecticut highways and railroads. The attacks on September 11 have created major new questions about the transport of this waste, which could have a major effect on my State and which have not been addressed. Until some safe and proven plan to transport this waste is offered, I am troubled by the danger on our roads and rails. We need to deal with this nuclear waste--but no one has demonstrated yet that Yucca Mountain is the answer. With technology advancing every day, perhaps it will be the answer tomorrow. Or perhaps in the future we will find another, much better solution. Until then, the imperfect status quo is better than a highly uncertain and incomplete plan such as this one. This proposal is simply not yet ready for our consideration. Unfortunately, the Energy Department has stated that it will not continue to consider the site if this vote does not go its way. I think that is the wrong approach--the questions I have raised today may be able to be answered satisfactorily with more planning and better technology, and if they are, I would probably support the site. But this proposal is not ready for prime-time, and I am concerned that it will not be responsible to proceed to its consideration at this point.

Mr. LIEBERMAN

Mr. LIEBERMAN. Mr. President, I rise to bring to my colleagues' attention the fact that the National Science Board, NSB, has honored Erich Bloch as the 24th recipient of the Vannevar Bush Award for Science and Technology, its highest award for scientific achievement and statesmanship. Mr. Bloch's record of innovation and leadership in the advanced technology sector and the immense impact that his career has had on the field make him especially deserving of lofty praise. He received the award on May 7 in Washington, DC. Mr. Bloch is a member of the President's Council of Advisors on Science and Technology, a distinguished fellow at the Council on Competitiveness, a former director of the National Science Foundation, and an outspoken supporter of fundamental research in leading innovation. He occupies a senior statesman status in science and engineering and has been a longtime supporter of science and mathematics education programs funded by the Federal government. Erich Bloch is a visionary innovator of enormous stature-- in both high technology for the private sector--and in the organization and objectives of science and engineering research,'' Eamon Kelly, National Science Board chair, stated in announcing the honor. ``He has been an exceptionally effective communicator of the benefits of public funding for science and technology, and a leader in establishing widely emulated mechanisms for productive partnerships in research and education across public, academic, and private sectors. Before moving to Washington to become the National Science Foundation's only director from industry, Mr. Bloch was a famed electrical engineer at IBM and was one of the key figures responsible for IBM's STRETCH Computer Systems Engineering Project and in the groundbreaking developments of the IBM Systems 360. Until the 1960s, every computer model was generally designed independently, and at times individual machines were custom modified for a particular customer. The advent of the IBM-360 family of computers changed this forever. All these machines had the same user instruction set, taking advantage of IBM's engineering leadership in powerful disk drive systems. On the smaller machines, many of the more complex instructions were done in microcode rather than in hardware. Mr. Bloch headed IBM's development of the solid logic technology program, which provided IBM with the microelectronics technology for the System/360. Mr. Bloch's leadership ability was one of the key reasons for the success of the System/360. His strategy was to work around organizational structures and, as technical problems were identified, to assign groups or individuals who offered the best proposals. Mr. Bloch was the first to develop an IBM product with a ferrite core memory--a significant achievement in the search for memory technology. Mr. Bloch's accomplishments on the system, and the developments that occurred as part of his management style, helped revolutionize the computer industry and led to his receiving the 1985 National Medal of Technology with his IBM colleagues, Frederick P. Brooks, Jr. and Bob O. Evans. In his 6-year term as NSF director, Erich Bloch built national support for advances in high-performance computing and networking. Mr. Bloch's important leadership in transitioning NSFNET to a commercialized Internet helped create an immense economic and societal impact from the 1990s to today. Mr. Bloch supported NSF's take over of the Defense Department's ARPANET, creating the government-owned and managed NSFNET connected to five university-based supercomputer centers via a 56-Kbps backbone. NSFNET replaced ARPANET in 1990 and expanded to include a variety of regional networks that linked universities into the backbone network. The only other wide-area networks in existence, all government owned, supported only limited numbers of specialized contractors and researchers. Mr. Bloch supported key colleagues at NSF, like Steve Wolff, and they had the vision to see the power of networking in the academic and research communities, and in the process created a powerful user base, the first real customer base, that would not let the networking revolution stop. Just 10 years later, the Internet was ``owned'' by no one and managed by a wide variety of commercial and nonprofit organizations on a decentralized basis. NSFNET's backbone operated at 45 Mbps, which was raised to 155 Mbps after NSFNET was decommissioned. NSFNET was decommissioned in 1995 when there was enough commercial Internet service providers, web browsers, and search engines to sustain the networks, operations, and management--nearly 60,000 networks were connected to the backbone. Now, 61.4 percent of the U.S. population has online access according to the latest Nielsen Net Ratings. According to a report published by the policy division of non-profit corporation SRI International entitled ``The Role of NSF's Support of engineering in Enabling Technological Innovation,'' Erich Bloch played an important leadership role in three key decisions that spurred today's Internet. First, he influenced the NSF decision to make NSFNET an ``open'' network rather than one that served supercomputer researchers exclusively. NSF decided to make NSFNET a three-tiered, distributed network consisting of backbone, regional or mid-level networks, and local, initially campus-based, networks. Finally, NSF decided to make the Internet self-supporting, and a series of decisions Mr. Bloch backed concerning the implementation of the self-supporting Internet led to its burgeoning. DARPA in the '70's developed the prototype for the Internet, ARPANET. Assisted by Erich Bloch's leadership, NSF played a crucial role in transitioning NSFNET in the 1980s into the remarkable Internet system so important to us today. Internet innovation was not Mr. Bloch's only role at NSF. Before his arrival at NSF, the agency largely saw computing as a research tool for existing science disciplines. As detailed in the book, ``Funding the Revolution'' by the National Research Council, Mr. Bloch treated computing as a new scientific field in its own right, both a new science and an interdisciplinary science connector. Mr. Bloch created a new science directorate at NSF entirely for computing, consolidating all of NSF's computing initiatives in one place, and recruited another famed computer pioneer, Gordon Bell of DEC, to head it up. Computer science was now on a par with the established physical and biological sciences and budgeting at NSF grew from $23 million in 1984 to $100 million in 1986 and has continued to rise since then. While NSF had followed distantly behind DARPA's leadership in computing, under Erich Bloch it came into its own and began sponsoring important scientific computing advances. Erich Bloch has always realized government's significant role in technology development, in coordination with the academic and commercial sectors. In receiving this award, he acknowledged that, ``we have learned that in these days of rapid development and keen competition much is to be gained from cooperative activities.'' He continued that, ``the global market is a reality'' due to the development of computers, communication networks and IT. ``This paradigm change has pushed science and technology to the forefront of policy issues and policy considerations, here and across the globe.'' Along with Erich Bloch's key contributions to computing and the Internet and his foresightedness in matters of public policy, he deserves acclaim for the role that he has played in education. His creation of the NSF engineering research centers and science and technology centers reflect his belief in knowledge transfer. He brought together university scientists and industry researchers to provide educational benefits and help transform engineering education as well as to extend fundamental research benefits to industry. In education, Mr. Bloch also oversaw NSF's support of system wide reform for K-12 math and science education, including emphasis on participation by women and minorities in science and engineering. During his tenure, the budget for education and human resources more than tripled and NSF's overall budget increased to $2 billion. As a distinguished fellow with the Council on Competitiveness, a private, non-profit organization dedicated to furthering U.S. economic leadership, Mr. Bloch continues to advocate policies that promote the effective use of innovation in the development of the U.S. economy. He is also a member of the President's Council of Advisors on Science and Technology, has been a distinguished visiting professor at George Mason University, has been awarded 13 honorary degrees from major universities and ten major awards and medals, and serves as a member of numerous boards in both the public and private sectors. For his remarkable vision, innovation, and continued contributions to the advanced technology sector and to the national interest in the economy and education, Erich Bloch is most deserving of the venerable Vannevar Bush Award. Very few can boast of having made similar contributions to society. I am delighted to bring this honor to the attention of my colleagues, awarded to a computer and Internet pioneer, a visionary research administrator and science educator, to the attention of my colleagues and to express my sincere congratulations to Mr. Bloch.

Mr. LIEBERMAN

Mr. LIEBERMAN. Madam President, I come to the floor today to discuss with the distinguished chair of the Emerging Threats Subcommittee, Senator Landrieu, and the senior Senator from Connecticut, Mr. Dodd, about developing Navy airborne radar technology capable of all-weather attack of time critical targets and of the enemies' mobile ground forces.

Mr. LIEBERMAN. Technologies associated with one of the Navy's designated Future Naval Capabilities, ``Time Critical Strike,'' are being implemented through a team effort at the Office of Naval Research in conjunction with the responsible acquisition program management organizations within the Navy. This technology area addressed the documented requirement for reducing the target cycle to below 10 minutes and enhancing the ability to detect, locate and strike these targets under all weather conditions--a current operational deficiency.

Mr. LIEBERMAN. That is my understanding as well. In light of recent hostilities, this technology area is an excellent example of the things the military will need to defeat a highly mobile enemy. We certainly hope that we can work with the distinguished chairman to provide necessary resources for the development of these capabilities when we conference this bill with the House.

Mr. LIEBERMAN

Mr. LIEBERMAN. I thank my friend from Florida. We have worked our way along a jurisprudential path that has taken us in our time to a result that I believe was totally unintended by the Framers of the Constitution, by the writers of the Declaration of Independence, by the drafters of the Bill of Rights particularly. This decision today is the most extreme and senseless expression of it. We believe in the separation of church and state. We believe in freedom of religion. We believe in every individual's freedom to observe and worship as he or she is moved in his or her heart to do so. We have always respected nonbelievers. But we have asked that the great majority of Americans who may approach the altar from different paths, nonetheless worship the same God, that we not be deprived of our rights to do so, and to do so in a public context that does not diminish the rights of any one of us but enlarges and strengthens the rights of the whole. That has been the gift of this country. I heard it once described, I read it once described by someone, as America's civic religion, nondenominational, deistic, God centered, inclusive, and tolerant. There is a great book that had a profound effect on me, written by Father Neuhaus, which was called ``The Naked Public Square.'' It commented on some of the earlier generation of decisions that had put the expressions of this civic religion, this shared faith in God, out of our public places and said we would suffer from that because the vacuum doesn't remain for long; other forces, less humane, less moral, less unifying, tend to fill the public square. I always believed this pledge, with this simple statement that was added under President Eisenhower, that we pledge our loyalty to this one Nation under God, was beyond question, beyond rebuke. It is the baseline, most accessible statement of the source of this country's values and strengths. To my way of thinking, it obviously in no way compromises the most important freedom of religion, which is the most important aspect of the religion clause--the freedom of religion. It doesn't compromise any single American's ability to worship God or not to worship God as they choose. It certainly does not establish religion in the sense that the Framers clearly intended because they came from a country that had an official religion and discriminated against them because of their religion. In this sense, the American people have not lost their way. I think a lot of our judges have in their decisions. This one is so far out, so offensive, that I hope it draws a reaction that is unifying and constructive. Again, I say to my friend from Florida, my expectation is that this decision will be appealed. My hope is that the Supreme Court will overturn this decision. If they do not, then we will all join as one, I would guess, to offer a constitutional amendment.

Mr. LIEBERMAN. Madam President, I yield the floor to the Senator from Florida.

Mr. LIEBERMAN. Yes, I will.

Mr. LIEBERMAN. I thank my friend from Florida very much for his leadership and eloquence. I will yield to the Senator from Nevada in a moment.

Mr. LIEBERMAN. I accept the challenge and the opportunity. We will work on that together. A final thought on Senator Nelson's comments. This decision is so twisted. We both referred to the Declaration of Independence. There it is stated that the rights we enjoy as Americans are the endowment of our Creator or are a gift from God. So this court has interpreted the rights that we have to mean that we cannot join to pledge our allegiance to the one nation under God, whose endowment was the source of the rights. It is just a twisted piece of logic that is offensive to our values and, I believe, also to our minds. I thank my colleagues. I am delighted to see my friend and colleague from Nevada. I yield the floor to him at this time.

Mr. LIEBERMAN

Mr. LIEBERMAN. I thank the Chair. Madam President, I rise to join my friend and colleague from Florida, Senator Nelson, in expressing dismay, outrage, and amazement at the news today of the decision by the Ninth Circuit Court declaring the recitation of the Pledge of Allegiance unconstitutional. I say to my friends from Florida and friends in the Chamber, when my staff members told me this, I, frankly, thought they were joking. This is a decision that offends our national morality, that rejects the most universally shared values of our country, that diminishes our unity, and that attempts to undercut our strength at a time after September 11 when we need the strength, unity, and our shared belief in God which has historically brought the American people together, and does so today. There may have been a more senseless, ridiculous decision issued by a court somewhere at some time, but I have never heard of it. I find the decision by this court hard to believe. I remember a day, I say to my friends, a decade or so ago when the Supreme Court issued a ruling saying that it was unconstitutional for a clergymen--in that case, it was a Rabbi--to give an invocation at a high school graduation in Rhode Island. I couldn't believe that decision. In some sense this decision is its progeny. It offends the very basis of our rights as Americans. My friend from Florida read from the Declaration of Independence. According to their decision of the Ninth Circuit Court, the reading of the Declaration of Independence is unconstitutional. If that isn't turning logic and morality on its head, I do not know what is, because the paragraph is the first statement by the Founders of our independence and the first declaration of the basis for our rights that have so distinguished our history in the 226 years since. First paragraph: When in the Course of human events . . . and to assume among the powers of Earth, the separate and equal station to which the Laws of Nature and Nature's God entitle them. Right there is the basis of the assertion of independence--the rights that we have under ``the Laws of Nature and Nature's God.'' And then the second paragraph, famous to every schoolchild and American citizen: We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. So that the premise of the rights that have distinguished America for the 226 years since, that were embraced in the Constitution as an expression of the declaration, all come from God, not from the Framers and the Founders, as gifted as they were, not from the philosophers of the enlightenment who affected their judgments, but were the endowment of our Creator. And that judgment has framed our history in two ways. It has been the basis of our rights because it is from our shared belief in God, and the foundation place it has in our system of government, as stated right here in the first statement of the first Americans, the Declaration of Independence, that we are all children of the same God. That means we all have the rights. It also has meant that we feel a deep sense of unity with one another. I remember, after the terrible events of September 11, how struck I was by the classically American reaction that not only at that moment when we were so shaken by the horror of inhumanity of what had happened did we go to our houses of worship to ask for strength and purpose and comfort, we went to each other's houses of worship--that is the American way--and gained strength and purpose from it.

Mr. LIEBERMAN. I thank my friend from Virginia. I want to say a few words more. One is that your statement reminds me, my dad served in World War II. My dad passed away 18 years ago. One of the treasured possessions of his that I have is a small Bible that he was given with a written statement in it from President Roosevelt. All who served in defense of our liberty in World War II got similar Bibles--and to carry it with them as a source of strength. It has been my honor, each time I have been sworn in as a Senator up there, to put my hand on that Bible. It meant a lot to me personally. But under the twisted logic of this decision, it was unconstitutional for the U.S. military, the Pentagon, to give my dad, and the generations of others since him, a Bible as a source of strength.

Mr. LIEBERMAN. I appreciate my friend from Virginia sharing that moving story. I will conclude in a moment because I know----

Mr. LIEBERMAN. Of course I will yield to my friend from Nevada.

Mr. LIEBERMAN. I thank my friend from Nevada. In my opinion, having seen a precis of the decision, it offends all logic. The facts of the circumstances are that students, by previous court decisions, are allowed, if they are offended by a part of the pledge that says we are ``one nation under God,'' to not say the pledge or, in fact, to leave the room. Secondly, this decision is the most extreme and ridiculous expression of what I take to be a fundamental misunderstanding of the religion clauses of the Constitution, which, to me, promised--if you will allow me to put it this way--freedom of religion, not freedom from religion. They protect the American people against the establishment of an official religion but have always, in the best of times, acknowledged the reality that our very rights, our very existence comes from an acknowledgment of the authority and goodness of Almighty God, and that people of faith, throughout the 226 years since then, in our history, are the ones who repeatedly have led movements that have made the ideals of the Declaration and the Constitution real--the abolitionists, the suffragettes, all those who worked, beginning in the 19th century, and then in the 20th century, on social welfare, child labor legislation, and, of course, the civil rights movement of the 20th century. So I do not see any logic. In fact, I think this decision offends logic. It will outrage the public. And if there is anything positive that comes out of it, it will unify this most religious and tolerant of people. We have found a way in this country, that is unique in world history, to express our shared faith in God, and to do so in a way that has not excluded anyone. I was privileged to benefit from that and feel that in a most personal and validating and inspiring way in the election of 2000. So I thank the Senator from Nevada and the Senator from Virginia. I thank the Senator from Florida for initiating this discussion. I agree with him, this decision will be appealed. I hope and trust it will be overturned. But if, may I say, God forbid, it is not overturned, then we will join to amend the Constitution to make clear that in this one Nation of ours--because we are one Nation under God--we are one Nation because of our faith in God, that the American people, children, forever forward will be able to stand and recite the pledge.