Daniel Moynihan

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I rise today to introduce two tax bills. The first, the section 501(c)(3) Nonprofit Organizations Tax-Exempt Bond Reform Act of 1996, has been introduced several times previously by this Senator, with several of my distinguished colleagues as cosponsors. It would undo what ought never have been done: the classification of bonds of private nonprofit higher education institutions and other nonprofit organizations as those of a private activity. I reintroduce this legislation today because of its critical importance, and because we have found a particularly appropriate offset: The Stop Tax-Exempt Arena Debt Issuance Act, which I introduce today for the first time. The Stop Tax-Exempt Arena Debt Issuance Act would close a gaping loophole. Recently, a spate of tax-exempt bonds have been issued to finance professional sports facilities, even though Congress acted to proscribe this practice in 1986. The bill would eliminate this tax- subsidized financing of professional sports facilities. Taken together, these two bills correct a serious misallocation of our limited resources under present law: a tax subsidy that inures largely to the benefit of wealthy sports franchise owners would be replaced with increased funding for educational and research facilities at private colleges and universities. Let me briefly describe the two measures: the section 501(c)(3) nonprofit organizations tax-exempt bond reform act of 1996 The first bill would remove the ``private activity'' label from the tax-exempt bonds of private, nonprofit higher education institutions and other organizations, and thereby eliminate the arbitrary $150 million cap on the amount of tax-exempt bonds that such an institution may have outstanding. The Tax Reform Act of 1986 imposed the ``private activity'' label on bonds issued on behalf of nonprofit institutions, collectively known as section 501(c)(3) organizations, obscuring the longstanding recognition in the Internal Revenue Code of the public purposes served by these private institutions. Prior to that time, the tax law historically had treated private nonprofit colleges and universities essentially the same as governmental entities. Governmental units and section 501(c)(3) organizations were both classified as ``exempt persons,'' and were afforded the benefits of tax-exempt bonds on the same basis. This was an explicit recognition in the Tax Code of the public purposes served by private nonprofit institutions of higher learning. The 1986 act's elimination of the ``exempt person'' category and the classification of section 501(c)(3) organizations' bonds as ``private activity'' bonds was a serious error. It has relegated private higher education institutions to a diminished, restricted status. Most significant among the restrictions imposed in the 1986 act was the $150 million limitation on the amount of bonds that any nonprofit institution--other than a hospital--may have outstanding. We were successful in 1986 in keeping other ``private activity'' bond strictures from being imposed on nonprofits--the minimum tax and statewide volume caps, for example. Now we must rectify our error, remove the ``private activity'' label, and restore equal access to tax-exempt financing. If we do not act soon, the vitality of our private institutions in higher education and research will be at risk. A distinguishing feature of American society is the singular degree to which we maintain an independent sector-- ``private universit[ies] in the public service,'' to paraphrase the motto of New York University. This is no longer so in most of the democratic world; it never was so in the rest. It is a treasure and a phenomenon that has clearly produced excellence--indeed, the envy of the world. We must insure the strength of the independent sector by restoring parity of treatment for tax-exempt finance. Otherwise, in 20 years, we will look up and find we have lost a unique feature of American democracy of inestimable value. The sciences are now capital intensive undertakings. The need for capital for university research facilities is acute and critical. In 1990, the National Science Foundation estimated that for every $1 spent for maintenance of university research facilities, an additional $4.25 was deferred. As for new construction, the Foundation reports that for every $1 spent, another $3.11 in needed new construction was deferred in 1990. The practical effect of the $150 million cap is to deny tax-exempt financing to large, private, research-oriented educational institutions most in need of capital to carry out their research mission. This will have a predictable, inevitable impact over a generation: the distribution of major research among the leading institutions in this country will profoundly change. If I may use an example from California: with this kind of differential in capital costs, we could look up one day and find Stanford to be still an institution of the greatest quality as an undergraduate teaching facility--with a fine law school and excellent liberal arts degree program--but with all the big science projects at Berkeley, the State institution. This is not hyperbole. Already, 31-private colleges and universities are at or near the $150 million cap, and foreclosed from using tax- exempt debt. A few years ago, as the $150 million cap was beginning to take effect, 19 of the universities that ranked in the top 50 in research undertaking were private institutions. Now, only 14 of those 19 private institutions remain in the top 50, and all but 1 are foreclosed from tax-exempt financing as a result of the $150 million per institution limit. This legislation will restore the status of private nonprofit institutions of higher learning, making their access to tax-exempt financing equal to that of their public counterparts. The legislation also reestablishes recognition in the Tax Code of the essential public purposes served by private nonprofit institutions. Mr. President, the capital needs of private universities merit the very serious attention of this body. The cost of these changes is modest, given their importance. The staff of the Joint Committee on Taxation has estimated the revenue loss previously at $308 million over 5 years. The Senate has twice passed legislation to reverse the $150 million bond cap mistake--in the Family Tax Fairness, Economic Growth, and Health Care Access Act of 1992 (H.R. 4210) and the Revenue Act of 1992 (H.R. 11)--only to have both bills vetoed by President Bush. We should correct this error before it is too late. If we do not, we will soon not recognize the higher education sector. The Stop Tax-exempt Arena Debt Issuance Act--A Bill to Correct the Treatment of Tax-exempt Financing of Professional Sports Facilities Mr. President, the second bill is an especially appropriate offset for the first bill and is an important piece of legislation in its own right. This legislation will close a big loophole, a loophole that ultimately injures State and local governments and other issuers of tax exempt bonds, that provides an unintended Federal subsidy (in fact, contravenes congressional intent), and that contributes to the enrichment of persons who need no Federal assistance whatsoever. I refer to the large number of professional sports facilities subsidized in recent years through the issuance of tax-exempt bonds. It seems that nearly every day, another professional sports franchise owner demands a new stadium, one subsidized by Federal, State and local taxpayers. Why do owners want new stadiums? Our existing stock of stadiums is not functionally obsolete. Many stadiums are new, and our older ones generally can and will continue to serve, and serve well, for the exhibition of professional sports for years to come. In fact many older, historic stadiums are beloved by fans. The reason for new stadiums is economics--the team owners' bottom line. The owner can generate more revenues with a new stadium replete with luxury skyboxes and other amenities. Building new professional sports facilities is fine by me. Let the new stadiums be built. But, please, do not ask the American taxpayer to pay for them. Prior to 1984, professional sports stadiums could be completely financed with tax-exempt, ``private activity'' bonds (or industrial development bonds as they were formerly known). In the Deficit Reduction Act of 1984, Congress stipulated that tax-exempt bond proceeds could not be used to finance the construction of luxury skyboxes. And in the Tax Reform Act of 1986, we fundamentally restructured the tax-exempt bond provisions of the Internal Revenue Code. As part of that effort, we repealed the ``private activity'' bond category for stadium bonds, intending to eliminate tax-exempt financing of professional sports facilities altogether. Unfortunately, Congress did not address the issue of whether stadium bonds could be issued as governmental bonds because that possibility was too remote to have occurred to us. And in our silence, a loophole was born. Innovative bond counsel have devised aggressive schemes to finance stadiums with tax-exempt, governmental purpose bonds. So this legislation is corrective. It will put an end to a practice we thought we had stopped in 1986. The history of the changes made by the 1986 act reveals why the use of tax-exempt financing for professional sports facilities is a loophole that should be closed. In May 1985, President Reagan issued a report recommending that tax-exempt bonds be limited to traditional governmental purposes. In December 1985, the House largely adopted the Reagan administration's recommendations for tax-exempt bond reform. The Senate was of course not inclined to go as far as the House. The 1986 act, as it emerged from conference, reflected a compromise between the House and Senate. We allowed States and local governments to continue to issue tax-exempt bonds for traditional governmental purposes, such as schools, roads, bridges. At the same time, we limited the issuance of tax-exempt bonds for private activities to a short list of projects with significant public benefits, even though carried out with private ownership. And we subjected private activity bonds to other significant limitations, chief among them being a unified, statewide volume limitation. Why did Congress make these changes? Why did the Reagan administration propose curtailing the use of tax-exempt bonds? We were all concerned with the large and increasing volume of tax-exempt bonds, including an increasing percentage of industrial development bonds that were being issued at that time to subsidize private business activities. The increasing proliferation of tax-exempt bonds led to a number of problems. First, it drove up interest costs. Larger interest costs drove up the cost of financing roads, bridges, and other items traditionally financed with tax-exempt bonds, and meant that State and local governments had to increase taxes or reduce services in order to pay for these improvements--or forego improvements. Second, the proliferation of tax-exempt bonds led to mounting revenue losses to the U.S. Treasury. The Congressional Research Service recently reported that from 1980 to 1985, the annual amount of foregone tax revenue from tax exempt bonds had risen 236 percent to $18.2 billion. Third, the use of taxpayer-subsidized financing for a rapidly growing number of private business activities resulted in an inefficient allocation of capital. Investment decisions were being made on the basis of which projects qualified for tax-exempt financing, rather than on the economic viability of the underlying project. Fourth, taxpayers were able to shield a growing amount of their investment income from income tax by purchasing tax-exempt bonds. We had become very concerned with a number of tax sheltering activities during the 1980's and the undermining effect such activities had on our tax system. So in 1986, we fundamentally restructured the tax exempt bond rules. And one of the things we did was prohibit the issuance of tax-exempt bonds to finance sports stadiums. Or so we thought. Once again, under a loophole in the law, professional sports team owners are financing newer and more luxurious stadiums with tax-exempt stadium bonds. Cities are promising new stadiums, with dozens of luxury skyboxes, to entice professional sports teams to relocate. Should the taxpayers in the team's current home town be forced to pay for the team's new stadium in a new city? The answer is unmistakably no. Mr. President, this is extraordinary. Particularly when compared to the limitations we place on private activity bonds, and these stadium bonds assuredly are private activity bonds in fact if not in name. Most States cannot issue more than $150 million of private activity bonds per year. However, no limit is imposed on the amount of bond financing that can be used to finance a professional sports facility. Where is the private activity bond prohibition against building luxury skyboxes with tax-exempt bond proceeds? Where is the private activity bond provision that subjects the interest on stadium bonds to the alternative minimum tax? Where are all of the other limitations on private activity bonds that we have judged are necessary? They apparently do not apply to these new stadium bonds. And the situation is also unfair when compared to the restrictions we impose on the ability of our private, nonprofit educational institutions to issue tax-exempt debt. New York University can only issue $150 million in tax-exempt debt to finance its facilities in Manhattan. Stanford, Boston College, University of Miami, Northwestern University, Emory, Georgetown, University of Pennsylvania--these are a few of the institutions that can no longer issue tax-exempt debt to finance their laboratories, classrooms, and other facilities that are essential to our private institutions of higher education. The Congressional Research Service issued a critical report late last month on the new stadium bonds, and concluded that the federal tax subsidy inherent in tax-exempt bond financing is not justified: Proponents argue that these stadium's economic benefits justify the subsidies. Economic analysis suggests this is not the case. One study found that a new stadium had no discernible impact on economic development in 27 of 30 metropolitan areas, and had a negative impact in the other three areas. The reason for this can be illustrated with the Baltimore football stadium proposal. Economic benefits were overstated by 236%, primarily because the reduced spending on other activities that enables people to attend stadium events was not netted against stadium spending. And no account was taken of losses incurred by foregoing more productive investments. The state's $177 million stadium investment is estimated to create 1,394 jobs at a cost of $127,000 per job. The cost per job generated by the state's Sunny Day Fund economic development program is estimated to be $6,250. The economic case against federal subsidy of stadiums is stronger. Almost all stadium spending is spending that would have been made on other activities within the United States, which means benefits to the Nation as a whole are near zero. The report continues by citing several problems caused by the change in treatment of tax-exempt bonds for stadiums made by the Tax Reform Act of 1986: It continues stadium financing as an open-ended matching grant for which the magnitude of the federal subsidy in any given year is determined without the input of federal officials and federal taxpayers; it virtually requires state- local governments to offer more favorable lease terms to its professional tenants; and it requires state-local governments to finance their subsidy with general revenue sources rather than benefit-type payments such as stadium-related user charges and rents. Finally, what makes the new spate of stadium bonds all the more egregious is the price that we paid to end this practice in the first place. The realities of the legislative process in 1986 required that we provide extraordinarily generous transition relief to those persons planning to build such facilities at that time. We wrote special rules that allowed the tax-exempt financing of ``virtually every stadium in the planning or gleam-in-the-eye stages,'' as described in the aforementioned Congressional Research Service report. First, we allowed all proposed sports stadiums with binding commitments to issue tax- exempt bonds, as they had planned. In addition, additional transitional relief was provided to allow the issuance of up to $2.7 billion in tax- exempt bonds for the construction and repair of 25 specifically described sports facilities that were too preliminary in their development to satisfy the transition rules. Mr. President, the legislation I am introducing will do what we intended to do, and thought we did, in 1986. This legislation makes clear that professional sports facilities may not be financed with tax- exempt bonds. There are a few technical issues on which I would like to solicit comments. First, the proposed effective date would be today. Perhaps it should be made effective on October 22, 1986, the day President Reagan signed the Tax Reform Act of 1986 into law and we prohibited the issuance of stadium bonds in the first place. After all, this bill is, in a sense, a ``technical correction.'' Nevertheless, I would like to consider the need for equitable relief for stadiums already in the planning stages. Second, a number of sports facilities that are not built for a professional sports franchise will be used for the occasional charitable or isolated sporting event. Thus, charitable or de minimis use exceptions to this legislation may be appropriate. Mr. President, these two bills, taken together, would correct a serious misallocation of our limited resources. Should we subsidize professional sports franchises and underwrite bidding wars among cities seeking (or fighting to keep) professional sports franchises, or should we act to prevent a significant decline in the ability of our nonprofit, private research universities to attract capital for classrooms and research facilities? To my mind, this is not a difficult choice. Mr. President, I ask unanimous consent that the two bills be printed in the Record, along with explanatory statements.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I rise to introduce legislation that would establish a Medical Education Trust Fund to support America's 124 medical schools and 1,250 teaching hospitals. These institutions are national treasures; they are the very best in the world. Yet today they find themselves in a precarious financial situation as market forces reshape the health care delivery system in the United States. Explicit and dedicated funding for these institutions, which this legislation will provide, will ensure that the United States continues to lead the world in the quality of its health care system. This legislation requires that the public sector, through the Medicare and Medicaid programs, and the private sector, through an assessment on health insurance premiums, will contribute broad-based and fair financial support. Over the 5-year period, 1997 to 2001, the Medical Education Trust Fund established under this legislation would provide average annual payments of about $17 billion, roughly doubling the funding that we currently provide for medical education. Brief History My particular interest in this subject began in 1994, when the Finance Committee took up the President's Health Security Act. I was Chairman of the Committee at the time. In January of that year, I asked Paul Marks, M.D., President of Memorial Sloan-Kettering Cancer Center in New York City, if he would arrange a ``seminar'' for me on health care issues. He agreed, and gathered a number of medical school deans together one morning in New York. Early on in the meeting, one of the seminarians remarked that the University of Minnesota might have to close its medical school. In an instant I realized I had heard something new. Minnesota is a place where they open medical schools, not close them. How, then, could this be? The answer was that Minnesota, being Minnesota, was a leading state in the growth of Health Maintenance Organizations, and HMO's do not send patients to teaching hospitals, absent which you cannot have a medical school. We are in the midst of a great age of discovery in medical science. It is certainly not a time to close medical schools. This great era of medical discovery is occurring right here in the United States, not in Europe like past ages of scientific discovery. And it is centered in New York City. This heroic age of medical science started in the late 1930's. Before then, the average patient was probably as well off, perhaps better, out of a hospital as in one. Progress from that point 60 years ago has been remarkable. The last few decades have brought us images of the inside of the human body based on the magnetic resonance of bodily tissues; laser surgery; micro surgery for reattaching limbs; and organ transplantation, among other wonders. I can hardly imagine what might be next. Physicians are now working on a gene therapy that might eventually replace bypass surgery. After months of hearings and debate on the President's Health Security Act, I became convinced that special provisions would have to be made for medical schools, teaching hospitals, and medical research if we were not to see this great moment in medical science suddenly constrained. To that end, when the Committee on Finance voted 12 to 8 on July 2, 1994, to report the Health Security Act, it included a graduate medical education and academic health centers trust fund. The trust fund provided an 80-percent increase in Federal funding for academic medicine; as importantly, it represented stable, long-term funding. While nothing came of the effort to enact universal health care coverage, the medical education trust fund enjoyed widespread support. An amendment by then-Senator Malcolm Wallop of Wyoming to kill the trust fund by striking the source of its revenue--a 1.75-percent assessment on health insurance premiums--failed on a 7 to 13 vote in the Finance Committee. I continued to press the issue in the first session of the 104th Congress. On September 29, 1995, during Finance Committee consideration of the budget reconciliation legislation, I offered an amendment to establish a similar trust fund. With a new majority in control and the committee in the midst of considering a highly partisan budget reconciliation bill, my amendment failed on a tie vote, 10 to 10. Notably, however, the House version of the reconciliation bill did include a graduate medical education trust fund. That provision ultimately passed both Houses as part of the conference agreement, which was subsequently vetoed by President Clinton. The conference agreement on the budget resolution, being considered by the Senate and House this week, also apparently assumes that this year's Medicare reconciliation bill will include a similar trust fund. That is the history of this effort, briefly stated. Need for Legislation Medical education is one of America's most precious public resources. It should be explicitly financed with contributions from all sectors of the health care system, not just the Medicare Program as is the case today. The fiscal pressures of a competitive health care market are increasingly closing off traditional implicit revenue sources--such as additional payments from private payers--that have in the past supported medical schools, graduate medical education, and research. This legislation provides alternative funding to prevent the deterioration of these institutions and the invaluable services they provide. Events in Rochester, NY, a community with a long and proud tradition of quality, cost-effective health care, provide a good example of how market forces are reshaping the health care delivery system. Last year, the only option available to retirees of Kodak at no additional cost was a managed care plan. Unfortunately, that managed care plan excluded Strong Memorial, Rochester's prestigious teaching hospital. Strong Memorial was established in 1920 with the help of George Eastman and was named for Henry Strong, a financier of Eastman. Yet ironically, 75 years later, Eastman Kodak's retirees could not get care at Strong Memorial Hospital. After much protest, the managed care plan brought Strong Memorial into its provider network, but only after Kodak agreed to make separate payments for 1 year to support the costs of graduate medical education at Strong. The Rochester community worked out a solution, however temporary, to the problems faced by its primary teaching hospital, but we cannot, and should not, rely on the Kodaks of the world to finance medical education. We must adopt a comprehensive Federal strategy. Other teaching hospitals are facing similar difficulties. In its June 1995 ``Report to Congress,'' the Prospective Payment Assessment Commission [ProPAC], the Commission which advises Congress on Medicare hospital insurance part A payment, summarized the situation of teaching hospitals as follows: As competition in the health care system intensifies, the additional costs borne by teaching hospitals will place them at a disadvantage relative to other facilities. The role, scale, function, and number of these institutions increasingly will be challenged. . .. Accelerating price competition in the private sector . . . is reducing the ability of teaching hospitals to obtain the higher patient care rates from other payers that traditionally have contributed to financing the costs associated with graduate medical education. ProPAC's June 1996 ``Report to Congress,'' issued just last week, confirmed that ``major teaching hospitals have the dual problems of higher overall losses from uncompensated care and less above cost revenue from private insurers.'' It is obvious that teaching hospitals can no longer rely on higher payments from private payers to cover the costs of their teaching programs. Nor should they. The establishment of this trust fund, which reimburses teaching hospitals for the costs of graduate medical education, will ensure that teaching hospitals can pursue their vitally important patient care, training, and research missions in the face of an increasingly competitive health system. Medical schools also face an uncertain future. There are many policy issues that need to be examined regarding the role of medical schools in our health system, but two threats faced by medical schools now require immediate attention. This legislation addresses both. First, many medical schools are immediately threatened by the dire financial condition of their affiliated teaching hospitals. Medical schools rely on teaching hospitals to provide a place for their faculty to practice and perform research, a place to send third- and fourth-year medical school students for training, and for some direct revenues. By improving the financial condition of teaching hospitals, this legislation significantly improves the outlook for medical schools. The second immediate threat faced by medical schools stems from their reliance on a portion of the clinical practice revenue generated by their faculties to support their operations. As competition within the health system intensifies and managed care proliferates, these revenues are shrinking. This legislation provides payments to medical schools from the trust fund that are designed to partially offset this loss of revenue. None of the foregoing is meant to suggest that the new competitive forces reshaping health care have brought only negative results. To the contrary, the onset of competition has had many beneficial effects, the dramatic curtailing of growth in health insurance premiums being the most obvious. But as Msgr. Charles J. Fahey of Fordham University warned in testimony before the Finance Committee in 1994, we must be wary of the ``commodification of health care,'' by which he meant that health care is not just another commodity. We can rely on competition to hold down costs in much of the health system, but we must not allow it to bring a premature end to this great age of medical discovery, an age made possible by this country's exceptionally well-trained health professionals and superior medical schools and teaching hospitals. This legislation complements a competitive health market by providing tax- supported funding for the public services provided by teaching hospitals and medical schools. Description of Legislation The medical education trust fund established in the legislation I have just introduced would receive funding from three sources broadly representing the entire health care system: A 1.5-percent tax on health insurance premiums, the private sector's contribution; Medicare, and Medicaid, the latter two sources comprising the public sector's contribution. The relative contribution from each of these sources will be in rough proportion to the medical education costs attributable to their respective covered populations. Over the 5-year period 1997 to 2001, the medical education trust fund will provide average annual payments of about $17 billion. The tax on health insurance premiums, including self-insured health plans, raises approximately $4 billion per year for the trust fund. Federal health programs contribute about $13 billion per year to the trust fund: $9 billion in transfers of Medicare graduate medical education payments and $4 billion in Federal Medicaid spending. This legislation is only a first step. It establishes the principle that, as a public good, medical education should be supported by dedicated, long-term Federal funding. To ensure that the United States continues to lead the world in the quality of its medical education and its health system as a whole, the legislation would also create a medical education advisory commission to conduct a thorough study and make recommendations, including the potential use of demonstration projects, regarding the following: alternative and additional sources of medical education financing; alternative methodologies for financing medical education; policies designed to maintain superior research and educational capacities in an increasingly competitive health system; the appropriate role of medical schools in graduate medical education; and policies designed to expand eligibility for graduate medical education payments to institutions other than teaching hospitals. Mr. President, the services provided by this Nation's teaching hospitals and medical schools--groundbreaking research, highly skilled medical care, and the training of tomorrow's physicians--are vitally important and must be protected in this time of intense economic competition in the health system. I therefore urge Senators to support the Medical Education Trust Fund Act of 1996. I ask unanimous consent that a summary and a copy of the bill be printed in the Record.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I rise in support of the National Environmental Education Amendments Act, a measure which I am proud to cosponsor. I was also proud to support the original enacting legislation in 1990. This bill is designed to extend the life of the National Environmental Education and Training Foundation [NEETF], which was established in 1990 to meet critical environmental needs in the very best way we know how. It relies on solid, reputable science to bring broad-based environmental education to citizens and workers across the country and around the world. Specifically, the Foundation serves as a link between public and private resources. It administers a matching grant program to encourage, leverage, and manage private gifts for environmental education. Those funds are spent on school projects, after-school activities, worker training, and adult education. In my home State of New York, the Foundation has sponsored approximately 80 projects, which I expect will have tremendous impact on the participants and many others. One grant was awarded to the High School for Environmental Studies Project, sponsored by the Council on the Environment of New York City, to infuse environmental awareness into all subjects in the 9th through 12th grade curricula. The NEETF also sponsored a bilingual program addressing environmental issues affecting Harlem residents through the waste reduction demonstration project, which is part of the Harlem environmental impact project. In Cortland, NY, NEETF operates an environmental education after-school program for elementary students. These projects share a common theme: They are visionary and proactive efforts to make citizens better informed about issues which affect them. In the June 10th issue of US News & World Report, Michael Satchell writes about the growing criticism of environmental education in this country. Although some 20 States now require or strongly encourage environmental education, the quality of the education is spotty and the criticism from some camps has been overly pointed. The answer is not to abandon environmental education; there are identifiable risks about which the public deserves honest information. Rather, we should encourage fair, credible education based on solid science--a philosophy which is very much consistent with the mission of the NEETF. I urge my colleagues to join me in support of this program.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I rise to introduce legislation that would establish a Medical Education Trust Fund to support America's 124 medical schools and 1,250 teaching hospitals. These institutions are national treasures; they are the very best in the world. Yet today they find themselves in a precarious financial situation as market forces reshape the health care delivery system in the United States. Explicit and dedicated funding for these institutions, which this legislation will provide, will ensure that the United States continues to lead the world in the quality of its health care system. This legislation requires that the public sector, through the Medicare and Medicaid programs, and the private sector, through an assessment on health insurance premiums, will contribute broad-based and fair financial support. Over the 5-year period, 1997 to 2001, the Medical Education Trust Fund established under this legislation would provide average annual payments of about $17 billion, roughly doubling the funding that we currently provide for medical education. Brief History My particular interest in this subject began in 1994, when the Finance Committee took up the President's Health Security Act. I was Chairman of the Committee at the time. In January of that year, I asked Paul Marks, M.D., President of Memorial Sloan-Kettering Cancer Center in New York City, if he would arrange a ``seminar'' for me on health care issues. He agreed, and gathered a number of medical school deans together one morning in New York. Early on in the meeting, one of the seminarians remarked that the University of Minnesota might have to close its medical school. In an instant I realized I had heard something new. Minnesota is a place where they open medical schools, not close them. How, then, could this be? The answer was that Minnesota, being Minnesota, was a leading state in the growth of Health Maintenance Organizations, and HMO's do not send patients to teaching hospitals, absent which you cannot have a medical school. We are in the midst of a great age of discovery in medical science. It is certainly not a time to close medical schools. This great era of medical discovery is occurring right here in the United States, not in Europe like past ages of scientific discovery. And it is centered in New York City. This heroic age of medical science started in the late 1930's. Before then, the average patient was probably as well off, perhaps better, out of a hospital as in one. Progress from that point 60 years ago has been remarkable. The last few decades have brought us images of the inside of the human body based on the magnetic resonance of bodily tissues; laser surgery; micro surgery for reattaching limbs; and organ transplantation, among other wonders. I can hardly imagine what might be next. Physicians are now working on a gene therapy that might eventually replace bypass surgery. After months of hearings and debate on the President's Health Security Act, I became convinced that special provisions would have to be made for medical schools, teaching hospitals, and medical research if we were not to see this great moment in medical science suddenly constrained. To that end, when the Committee on Finance voted 12 to 8 on July 2, 1994, to report the Health Security Act, it included a graduate medical education and academic health centers trust fund. The trust fund provided an 80-percent increase in Federal funding for academic medicine; as importantly, it represented stable, long-term funding. While nothing came of the effort to enact universal health care coverage, the medical education trust fund enjoyed widespread support. An amendment by then-Senator Malcolm Wallop of Wyoming to kill the trust fund by striking the source of its revenue--a 1.75-percent assessment on health insurance premiums--failed on a 7 to 13 vote in the Finance Committee. I continued to press the issue in the first session of the 104th Congress. On September 29, 1995, during Finance Committee consideration of the budget reconciliation legislation, I offered an amendment to establish a similar trust fund. With a new majority in control and the committee in the midst of considering a highly partisan budget reconciliation bill, my amendment failed on a tie vote, 10 to 10. Notably, however, the House version of the reconciliation bill did include a graduate medical education trust fund. That provision ultimately passed both Houses as part of the conference agreement, which was subsequently vetoed by President Clinton. The conference agreement on the budget resolution, being considered by the Senate and House this week, also apparently assumes that this year's Medicare reconciliation bill will include a similar trust fund. That is the history of this effort, briefly stated. Need for Legislation Medical education is one of America's most precious public resources. It should be explicitly financed with contributions from all sectors of the health care system, not just the Medicare Program as is the case today. The fiscal pressures of a competitive health care market are increasingly closing off traditional implicit revenue sources--such as additional payments from private payers--that have in the past supported medical schools, graduate medical education, and research. This legislation provides alternative funding to prevent the deterioration of these institutions and the invaluable services they provide. Events in Rochester, NY, a community with a long and proud tradition of quality, cost-effective health care, provide a good example of how market forces are reshaping the health care delivery system. Last year, the only option available to retirees of Kodak at no additional cost was a managed care plan. Unfortunately, that managed care plan excluded Strong Memorial, Rochester's prestigious teaching hospital. Strong Memorial was established in 1920 with the help of George Eastman and was named for Henry Strong, a financier of Eastman. Yet ironically, 75 years later, Eastman Kodak's retirees could not get care at Strong Memorial Hospital. After much protest, the managed care plan brought Strong Memorial into its provider network, but only after Kodak agreed to make separate payments for 1 year to support the costs of graduate medical education at Strong. The Rochester community worked out a solution, however temporary, to the problems faced by its primary teaching hospital, but we cannot, and should not, rely on the Kodaks of the world to finance medical education. We must adopt a comprehensive Federal strategy. Other teaching hospitals are facing similar difficulties. In its June 1995 ``Report to Congress,'' the Prospective Payment Assessment Commission [ProPAC], the Commission which advises Congress on Medicare hospital insurance part A payment, summarized the situation of teaching hospitals as follows: As competition in the health care system intensifies, the additional costs borne by teaching hospitals will place them at a disadvantage relative to other facilities. The role, scale, function, and number of these institutions increasingly will be challenged. . .. Accelerating price competition in the private sector . . . is reducing the ability of teaching hospitals to obtain the higher patient care rates from other payers that traditionally have contributed to financing the costs associated with graduate medical education. ProPAC's June 1996 ``Report to Congress,'' issued just last week, confirmed that ``major teaching hospitals have the dual problems of higher overall losses from uncompensated care and less above cost revenue from private insurers.'' It is obvious that teaching hospitals can no longer rely on higher payments from private payers to cover the costs of their teaching programs. Nor should they. The establishment of this trust fund, which reimburses teaching hospitals for the costs of graduate medical education, will ensure that teaching hospitals can pursue their vitally important patient care, training, and research missions in the face of an increasingly competitive health system. Medical schools also face an uncertain future. There are many policy issues that need to be examined regarding the role of medical schools in our health system, but two threats faced by medical schools now require immediate attention. This legislation addresses both. First, many medical schools are immediately threatened by the dire financial condition of their affiliated teaching hospitals. Medical schools rely on teaching hospitals to provide a place for their faculty to practice and perform research, a place to send third- and fourth-year medical school students for training, and for some direct revenues. By improving the financial condition of teaching hospitals, this legislation significantly improves the outlook for medical schools. The second immediate threat faced by medical schools stems from their reliance on a portion of the clinical practice revenue generated by their faculties to support their operations. As competition within the health system intensifies and managed care proliferates, these revenues are shrinking. This legislation provides payments to medical schools from the trust fund that are designed to partially offset this loss of revenue. None of the foregoing is meant to suggest that the new competitive forces reshaping health care have brought only negative results. To the contrary, the onset of competition has had many beneficial effects, the dramatic curtailing of growth in health insurance premiums being the most obvious. But as Msgr. Charles J. Fahey of Fordham University warned in testimony before the Finance Committee in 1994, we must be wary of the ``commodification of health care,'' by which he meant that health care is not just another commodity. We can rely on competition to hold down costs in much of the health system, but we must not allow it to bring a premature end to this great age of medical discovery, an age made possible by this country's exceptionally well-trained health professionals and superior medical schools and teaching hospitals. This legislation complements a competitive health market by providing tax- supported funding for the public services provided by teaching hospitals and medical schools. Description of Legislation The medical education trust fund established in the legislation I have just introduced would receive funding from three sources broadly representing the entire health care system: A 1.5-percent tax on health insurance premiums, the private sector's contribution; Medicare, and Medicaid, the latter two sources comprising the public sector's contribution. The relative contribution from each of these sources will be in rough proportion to the medical education costs attributable to their respective covered populations. Over the 5-year period 1997 to 2001, the medical education trust fund will provide average annual payments of about $17 billion. The tax on health insurance premiums, including self-insured health plans, raises approximately $4 billion per year for the trust fund. Federal health programs contribute about $13 billion per year to the trust fund: $9 billion in transfers of Medicare graduate medical education payments and $4 billion in Federal Medicaid spending. This legislation is only a first step. It establishes the principle that, as a public good, medical education should be supported by dedicated, long-term Federal funding. To ensure that the United States continues to lead the world in the quality of its medical education and its health system as a whole, the legislation would also create a medical education advisory commission to conduct a thorough study and make recommendations, including the potential use of demonstration projects, regarding the following: alternative and additional sources of medical education financing; alternative methodologies for financing medical education; policies designed to maintain superior research and educational capacities in an increasingly competitive health system; the appropriate role of medical schools in graduate medical education; and policies designed to expand eligibility for graduate medical education payments to institutions other than teaching hospitals. Mr. President, the services provided by this Nation's teaching hospitals and medical schools--groundbreaking research, highly skilled medical care, and the training of tomorrow's physicians--are vitally important and must be protected in this time of intense economic competition in the health system. I therefore urge Senators to support the Medical Education Trust Fund Act of 1996. I ask unanimous consent that a summary and a copy of the bill be printed in the Record.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, one of the stories Bob Dole likes to tell in speeches and interviews has to do with the events in the first 2 weeks of 1983 when, quite literally, the Social Security system was saved. As with many tales told on political campaign trails, it is not one hundred percent accurate. We all recall that opening passage from Huckleberry Finn in which Huck tells us that we will recognize him from the book about Tom Sawyer which was written by Mr. Mark Twain, ``and he told the truth mainly.'' Which Bob Dole does. The only part of the tale he leaves out is his own role. It could not have happened without him. To the contrary, he made it happen. I was there. I so attest. It was January 3, 1983. A new Congress was convening. I had just been sworn in for a second term. This was agreeable enough, indeed, hugely so, but there was a cloud over the occasion. I had gone on to the Finance Committee in 1977 and had worked on the Social Security Amendments of that year, under the superb leadership of Gaylord Nelson. We had realized the actuarial troubles the Social Security Trust Fund would face with the curious demography of the baby boom on the still-distant but recognizable horizon. We put in place a number of F.I.C.A. tax increases to provide for this. And thought our work was done. Then came the second oil shock and the great inflation of the late 1970's. For the first time in our history price increases ran ahead of wage increases. The Trust Funds sank to the point of approaching insolvency. In 1981, the new director of the Office of Management and Budget, David Stockman, warned the country to expect the ``world's largest bankruptcy'' on a date certain in the near future. It wasn't as bad as that, but Robert J. Myers, the former chief actuary, knew it was bad enough and he passed this on. President Reagan called for and Congress created a Commission on Social Security Reform, headed by Alan Greenspan. We met all through 1982, but could come to no agreement on what to do. The year ended, the Commission ended, an inconsequential report was drafted. But something had, in fact, happened. Bob Dole, a member of the Commission, had listened. He always listens, as Senators know. But this time he was listening to information quite at odds with all he had ever heard. That Social Security was not a crazy New Deal Ponzi scheme certain to go broke one day. That day being at hand. Which is what so many members of his party were willing to believe. No; he learned, largely from Myers, there were difficulties but they could be resolved and should be resolved. On that January 3 morning, Senator Dole had an op-ed article in The New York Times. I ask unanimous consent that it be reprinted in the Record.

Mr. MOYNIHAN. Mr. President, note that paragraph about Social Security. ``. . . The system can be saved.'' I had read it. I went up to Senator Dole on the floor and said, ``Bob, if you think that, and I think you are right, oughtn't we give it one more try?'' He asked me if I could meet with him the next day. Both of us were planning vacations, but this came first. At 4 o'clock next, Tuesday, January 4, we met in his office. I give you now the events of the next 13 days. They are written from my daily schedule, but think Bob Dole all along. Tuesday, January 4, 1983, 4:30 p.m.: Senators Dole and Moynihan meet with Robert J. Myers re Social Security. Wednesday, January 5, 2:00 p.m.: Senator Moynihan meets privately with Alan Greenspan, Congressman Conable and Robert J. Myers re Social Security. 4:30 p.m.: Meeting at James Baker's residence with Senator Dole, Cong. Conable, Robert J. Myers and Alan Greenspan. Friday, January 7, 8:30 a.m.: Meeting at Blair House re Social Security. 2:30 p.m.: Senators Dole and Moynihan meet with Robert J. Myers. Saturday, January 8, 9:30 a.m.: All-day confidential meeting at residence of James Baker--also with Richard Darman. Tuesday, January 11, 5:15 p.m.: Confidential meeting at Blair House. Wednesday, January 12, 3:15 p.m.: Meeting re Social Security at Blair House. Friday, January 14, 10:30 a.m.: Meeting with David Stockman, Richard Darman and Robert Myers in Senator Moynihan's office. Saturday, January 15, 11:00 a.m.: All-day meeting re Social Security at Blair House--Agreement reached. Monday, January 17, 7:10 a.m.: Senators Dole and Moynihan, and James Baker interviewed on ABC ``Good Morning America'' re Social Security. Indeed, I have a handwritten note in my Economist Diary, ``Noon Jan. 3, 10:00 p.m., Jan. 15, 13 days.'' Thirteen days that changed the world for a good many Americans. They were Dole days and should never be forgotten.

Mr. MOYNIHAN

Mr. MOYNIHAN. Madam President, if I may ask the Senate's indulgence. On the 16th of this month, my friend and sometime counselor, Paul F. Eaton, Sr., of Walton, NY, will celebrate his 87th birthday. This is, of course, a happy occasion for Paul, his family and many friends, in our upstate Delaware County. Both Paul Eaton and I came to reside in the foothills of the Catskills as adults. Paul came to practice law in the early 1930's. And Liz and I bought our farm in the early 1960's. And we have all stayed. The beauty of the place and the welcoming nature of its people have kept us there. Paul made Walton his home; he was elected village police justice and later mayor; served in the Office of Price Administration during World War II; has spent over a half century as trustee of St. John the Baptist Church; married Frances Kellogg, raised a family; remained a loyal Democrat; played golf; and practiced law. And if I may say, Madam President, he has practiced law, and continues to practice law, in a manner that brings nothing but honor to that profession. Paul Eaton is a general practitioner. He draws wills, handles real estate closings, tries cases, and counsels his clients. His reputation as a skillful lawyer is matched only by his reputation for honesty and integrity. He is still at it. For while we will celebrate his birthday on the 16th, he will be in his law office on the 17th. This is as it should be. We wish him well. Happy birthday Paul. Madam. President, I yield the floor.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, on the seventh day of June, 1796, the founding block of sandstone was placed at the base of the Montauk Point Lighthouse on the eastern tip of Long Island. Two hundred years of Atlantic breakers have worn away more than half of the land that once separated the great black and white striped tower from the ocean; however, this steady beacon continues to welcome seafarers from near and far and guides them around the point, safely to shore. On April 12, 1792, President George Washington signed into law the congressional authorization for the construction of the Montauk Point Lighthouse. On March 2, 1793, a sum of $20,000 was appropriated for the project. Unbiased in its service to the vessels of the sea, the lighthouse was the first to be constructed in New York State at full Federal expense, and it remains a shining beacon of the best of what we can do as a nation. From the top of the lighthouse tower, one can see Long Island, Connecticut, Rhode Island and Block Island. This range of sight proved beneficial during World War II, when spotters from the tower would coordinate the 16" cannons located in the battery at Fort Hero--500 meters to the west. Throughout the war, the lighthouse was operated by the Army Signal Corps and established itself as a crucial part of the eastern coastal defensive shield. Though its construction was significantly altered only once, the lighthouse has changed with the times. Originally it burned whale oil, housed a lightkeeper, and could be seen from but a few miles from its source. Today the lighthouse runs on an automated system, and can be seen at a distance of 19 nautical miles. In addition, it forms part of a satelite-based global positioning system. This year the Montauk Point Lighthouse Museum will welcome its 1 millionth visitor by land. On behalf of those who pass both by land and by sea, I would like to thank the Montauk Historical Society and the Coast Guard for their dutiful service to the light, and I am delighted to celebrate the Bicentennial of the Montauk Lighthouse.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I rise today to pay tribute to George L. Wessel, a friend and associate, who is stepping down as president of the Buffalo AFL-CIO Council after 27 years as Erie County's foremost labor leader representing more than 100,000 workers in more than 200 labor locals. Though he will continue to stay active in the community, he will now be fortunate enough to spend more time with his wife of 49 years, Mary; his daughter, Mary Catherine; and his three grandchildren, Joseph, Mary Anna, and Catherine Victoria. I thank him for his good work and wish him the best of luck in the future. George Wessel's career involvement with the labor movement began when he returned home from serving his country in the U.S. Navy during World War II. He worked for Remington Rand, joined the Printing Pressmen's Union, and eventually became a journeyman printer. From that position, he advanced to become a chief steward in the plant and a member of the Local 27 executive board. His fellow workers noticed his dedication to the cause of organized labor, and in January 1961, they elected George as secretary-treasurer of the local which represented all print shops in western New York. In this post, he again served with distinction until January 1, 1969, when he was elected to succeed Judge James L. Kane as president of the Buffalo AFL-CIO Council. As President, George Wessel has enjoyed great popularity as a leader of labor and as a leader in civic life. Elected to nine 3-year terms as president of the Buffalo AFL-CIO Council, George has been a tremendous influence on the labor movement in the past quarter century. In the early 1980's, the Buffalo AFL-CIO Council was in the forefront of efforts to organize Solidarity Day in Washington, DC. Since then, thousands of union activists have converged at the Nation's Capital each year to call attention to issues affecting working men and women. George has also overseen council activities, negotiated with business leaders, mobilized affiliated locals for public demonstrations, and been the official spokesman for organized labor in Erie County. He also started the grand tradition of the Labor Day parade through the streets of Buffalo. It was several times my honor to march through the streets with George during the parade, and I was always the better for having done so. George Wessel has also been a sterling member of the community as he has constantly worked to improve the physical, social, and cultural environment of Buffalo. Whether as a member of the United Way, or as a member of the labor advisory board at Cornell University, George Wessel has strived to make Buffalo a better place to live and work. Though labor has faced many setbacks in western New York and throughout much of the country in recent years, George Wessel has fought to stem that tide. Due to his great efforts, organized labor still remains at the forefront of commercial activity and is a much respected movement in the Buffalo community. We shall all be sorry to see George step down as president of the council, but organized labor will still remain a force in Erie County. Like the Workers Memorial in Chestnut Ridge, this is a testament to George Wessel's half century of involvement with the union movement in Buffalo.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, as the distinguished chairman of the Finance Committee has so clearly stated, discussions of American foreign trade policy are increasingly bedeviled by the use of an 18th century term, most favored nation, to describe trade agreements reached with other nations. The most favored nation involved is not the nation with which we are negotiating, but rather a third nation altogether which happens to have the lowest tariff, or whatever, with respect to some product or other. The United States agrees to give to country X whatever terms are the best terms it gives to some third country. Whichever that might be. This issue arises for the simple reason that the last tariff schedule enacted by statute was the Smoot-Hawley Tariff Act of 1930, with the highest tariff rates, overall, in American history. In response to the disaster that followed the Roosevelt administration began a series of trade treaties entered into as executive agreements. This arrangement continues to this day. As a result, nations entering the Western trading regime, which is to say, in the main, former or current Communist nations, must receive the treatment accorded under the GATT or the WTO, or else Smoot-Hawley. Granting the former status is no sign of favor, simply of normal trade relations. For more than two centuries this has been our practice, but only recently has the term caused public misunderstanding. What we mean is that we will confer on country X normal trading relations. The time has come, then, to say so. We grant country X normal trade relations (NTR) in return for country X treating us in the same manner. Which is to say, NTR. Just last month the Finance Committee acted on legislation to grant permanent most-favored-nation treatment to Bulgaria and Cambodia. Yesterday, the Trade Subcommittee held a hearing regarding Romania's MFN status, and tomorrow the committee will hear witnesses speak to questions surrounding the granting of most-favored-nation treatment to China. If one read the headlines, one might believe these four countries to be the most important in all of American trade policy. But not at all. As the chairman has just said, MFN treatment is not special treatment. Countries to which we grant this supposed most favored treatment are not, in fact, the most preferred in our trade relations. When we undertake an obligation to provide most-favored- nation treatment to another country, we simply agree to give that country the same treatment that we give the great majority of our trading partners. The rationale is that, if every country observes this principle, all countries will benefit in the long run through the resulting more efficient use of resources. Indeed, there is no single most favored nation in our trade policy. As noted in a 1919 report to the Congress by the U.S. Tariff Commission, now the U.S. International Trade Commission, It is neither the purpose nor the effect of the most- favored-nation clause to establish a ``most-favored nation;'' on the contrary its use implies the intention that the maximum of advantages which either of the parties to a treaty has extended or shall extend to any third State--for the moment the ``most-favored''--shall be given or be made accessible to the other party. . . . ``Reciprocity and Commercial Agreements,'' United States Tariff Commission, 1919. In fact, over time, we have developed a great variety of relations with our trading partners. We have agreed to free trade with Canada, Israel, and Mexico. We offer special benefits to countries of the Caribbean and Andean regions. We have a longstanding policy of duty- free treatment for imports from developing countries under the Generalized System of Preferences. If one really wants to identify a most favored country, one certainly must take note of these relationships, which are all more advantageous than general most- favored-nation treatment. MFN is a principle from the past. The concept has been traced to 12th century arrangements between trading cities of the Mediterranean and the Arab princes of North Africa, although the phrase most-favored- nation did not appear until the end of the 17th century. In United States law, the principle was first recognized in the 1778 commercial treaty between the United States and France, stating: The Most Christian King and the United States engage mutually not to grant any particular favor to other nations, in respect of commerce and navigation, which shall not immediately become common to the other party. . . . Thereafter, an MFN clause became a standard element of treaties of friendship, commerce, and navigation, the early formal bilateral economic treaties of the United States. In essence, this was our mechanism for assuring fair and equal treatment for the trade of the United States. Over time, an ever-lengthening chain of commercial agreements, incorporating the MFN obligation, reduced barriers and increased trade. Ultimately, this basic principle was adopted in 1947 as the central obligation of the General Agreement on Tariffs and Trade--article I, part I of the ``GATT 1947''. It continues central to the World Trade Organization created in 1994--article I, part I of the ``GATT 1994''. But, as the GATT has been succeeded by the WTO, so it is time to consider a successor term to MFN. A term that recognizes that, in the modern world, it is the norm, not the exception, to treat our trading partners equally. Senator Roth and I, along with Senator Chafee, would propose for the Senate's consideration a more accurate term--``normal trade relations.'' Shortly, we will introduce legislation changing U.S. law, as necessary and appropriate.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, last year I presented three papers to the Senate urging opposition to this constitutional amendment. The first paper argued that the existing deficits were a recent event and marked a sharp departure from the fiscal problems of earlier administrations, which were directed primarily to the problem of a persistent full employment surplus, with its accompanying downward pressure on consumer demand. The second paper related the singular events of the 1980s, which led to huge deficits and a huge debt. The third paper explored the folly and danger of writing into the Constitution decrees concerning fiscal policy which would have been inappropriate to a small 18th century republic, and would be potentially destabilizing to a world power in the 20th century. In the FY 1973 budget, OMB Director George P. Shultz explained the ``full-employment budget concept'' as follows: . . . expenditures should not exceed the level at which the budget would be balanced under conditions of full employment. Which is to say that in the absence of full employment, as was the case in FY 1973, the Federal government should deliberately contrive to incur a deficit equal to the difference between the revenues that would actually come in at levels of underemployment, and those that would come in at full employment. Far from being inevitable and unavoidable, there were points in the business cycle where a deficit had to be created. Otherwise, surpluses would choke off recovery. The term ``full employment surplus'' had originated earlier. The January 1962 report of the Council of Economic Advisers explained that as the recovery from the recession of 1958 got underway, economic activity grew and so did the revenues of the Federal government. But Congress would not spend the additional revenue. As a result, the recovery stalled. This untoward event was ascribed to ``fiscal drag.'' Beginning in 1980, the Reagan White House and Office of Management and Budget set about creating a crisis by bringing about deficits intended to force Congress to cut certain programs. In a television address 16 days after his inauguration, President Reagan said: There were always those who told us that taxes couldn't be cut until spending was reduced. Well, you know we can lecture our children about extravagance until we run out of voice and breath. Or we can cut their extravagance by simply reducing their allowance. Haynes Johnson wrote of this in Sleepwalking Through History: America Through the Reagan Years (1991). I will simply quote a footnote on page 111: [Stockman's] former mentor Moynihan was the first to charge that the Reagan Administration ``consciously and deliberately brought about'' higher deficits to force congressional domestic cuts. Moynihan was denounced and then proven correct, except that the cuts to achieve balanced budgets were never made and the deficits ballooned even higher. A balanced budget amendment would undo all that we have learned about economic policy over the past 60 years. There was enormous volatility in economic activity prior to 1945--volatility that would be considered unacceptable today. For example in 1906, output increased by 11.6 percent, to be followed 2 years later by a decline of 8.2 percent in 1908, and an increase of 16.6 percent in 1909. And in 1918, output increased by 12.3 percent to be followed by 3 consecutive years of negative growth including a drop of 8.7 percent in 1921. And then, of course there was the Great Depression. After increasing by 6.7 percent in 1929, output fell by 9.9 percent in 1930, another 7.7 percent in 1931, and then a further devastating decline of 14.8 percent in 1932. After World War II all this changed, following a brief adjustment period, as the country converted from a wartime to peacetime economy. Since then, the largest reduction in output was 2.1 percent in 1982. In the 1970's I asked Council of Economic Advisers Chairman, Charles L. Schultze, what would happen if we had tried to balance the budget in the middle of the 1975 recession. He reported back that the computers at the Council ``blew up''. GDP--then called GNP--dropped another 12 percent in an economy in which output was already 5 percent below capacity. During the debate on the balanced budget amendment last year, this simulation was repeated by the Treasury Department and by my own staff with the same results. A moderate recession in which the unemployment rate increases by 2-3 percent turns into a major contraction--may I say depression--in which unemployment soars over 10 percent and output falls by 15 percent or more. In the entire post- World War II era the unemployment rate exceeded 10 percent only for a brief 10 months during the 1981-82 recession. Let us not undo the progress we have already made--progress easily seen if we look at the facts. Last year, in my third paper opposing this constitutional amendment, I noted: As a result of the deficit reduction policies we have had three straight years of deficit reduction--the first such string of declines since the administration of Harry S. Truman. Here are the numbers: FY 1992: $290.4 billion. FY 1993: $255.1 billion. FY 1994: $203.2 billion. OMB 1995 est.: $192.5 billion. CBO 1995 est.: $176 billion. With a year of hindsight I confess to being somewhat inaccurate. Remarkably, the deficit for fiscal year 1995 was even lower than projected: $163.8 billion compared to projections of $176 to $192 billion. The fiscal year 1996 deficit will be even lower, resulting in 4 consecutive years of deficit reduction. And the budget outlook improves almost monthly. While I was on the floor opposing a balanced budget amendment last February, the Congressional Budget Office was projecting a fiscal year 1996 deficit of $207 billion. By August 1995, CBO had lowered its projection to $189 billion. And then again another reduction in December 1995 to $172 billion. Even the latest CBO forecast of $144 billion released last month is outdated. Following new revenue estimates from the Treasury Department, June O'Neill, Director of CBO, indicated on May 20, 1996 that her agency had lowered its estimate of the fiscal year 1996 deficit to $130 billion. Some will note that the latest estimates incorporate the effects of both an expected fiscal dividend from a balanced budget and legislative actions that reduced discretionary spending. But the bottom line is even better than expected, so let's give a cheer. The deficit has been cut by more than 50 percent from $290 billion to about $130 billion in 4 years. The deficit is now about 1.7 percent of GDP. And we have a primary surplus--that is, excluding interest payments, revenues exceed outlays. Adopting a constitutional amendment to balance the budget--which I argued in 1981 in the Wall Street Journal is tantamount ``to writing algebra into the Constitution''--can only jeopardize the remarkable progress we have already made. We can and we will complete the job of balancing the budget without this amendment. I urge the Senate to once again reject this proposed balanced budget amendment to the Constitution.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, for over a year I have served as the Chairman of the Commission on Protecting and Reducing Government Secrecy. Among the Commission's concerns is the often corrupting nature of secrets. Undocumented allegations, sweeping generalizations, personal biases, and outright lies can all be wrapped in the protective cloak of secrecy and receive a level of credibility that they would quickly lose if their documentation and sources were subject to public scrutiny. In addition to the problem of formal classification, the Commission has witnessed examples of instances in which unclassified information gathered from open sources is given greater weight by restricting the distribution of such information to those who hold security clearances. We were recently witness to an example of this phenomenon. In October, 1995, a counterintelligence profile by the Defense Investigative Service of the Defense Department was sent to 250 leading defense contractors warning of the danger posed by the State of Israel. Israel, the reader was warned, is a ``nontraditional adversary'' with a proven history of aggressive espionage against the United States, utilizing the strong ethnic ties to Israel present in the United States and the skilled exploitation of selective employment opportunities to infiltrate American industry. These are serious allegations. They are substantiated with a reading list of three leading daily newspapers and four recent best-selling books about Israeli espionage. No specific citations, no references to pages, or even issues of the newspapers. No attempt to link the explosive statements in the memorandum to the list of sources that follow. Before entering the Senate, I taught at both Syracuse and Harvard Universities. Had I received a term paper from a college freshman with such inadequate documentation I would have returned it without bothering to read the material. But add the magic words counterintelligence profile and send it out on a computer from the Defense Investigative Service and for 3 long months these ugly allegations festered unchallenged. For 3 long months none of the 250 defense contractors who had received this document raised a question in public. After all, who wanted to betray the contents of a Defense Department counterintelligence profile, albeit one adorned with a notation that the document did ``not necessarily represent the views of the Defense Investigative Service or the Department of Defense?'' Certainly not a defense contractor concerned that such action might raise suspicions of involvement in the pro- Israel cabal. Incidently, the very word ``cabal'' has its roots in the medieval suggestion that Jewish sages--students of the Cabala--were planning to subvert established European regimes. The silence that greeted this outrageous memorandum is hardly the first time that people who knew better have been quiet in the face of similar ugly allegations. A century ago the Czar's secret police crafted their own counterintelligence profile in response to the world's outrage at the government-sanctioned pogroms against Russian Jews. This document, the infamous Protocols of the Elders of Zion, purported to be proof of the international Jewish conspiracy bent on world dominance. After the First World War, the Protocols were translated into numerous languages and became popular in nativist and anti-Semitic circles in this country. Virtually everyone knew the Protocols were an ugly lie. But for much too long almost no one had the courage to say so in a clear and unambiguous voice. The damage done by the Defense Investigative Service memorandum was real and the questions it raised could not be ignored. The loyalties and integrity of millions of American citizens have been questioned in a report prepared at Government expense and released, in a manner which suggested it carried the authority of the Department of Defense, to a select group of corporations who were advised to be cautious about employees with strong ethnic ties to Israel. When I learned of this memorandum in January, I spoke to Under Secretary of Defense John White to say that we need to have an affirmative statement of what the policy of the Department of Defense is. Which is to say that Israel is most assuredly not a nontraditional adversary and that defense contractors are in no way to consider ethnic origins in their employment practices. I subsequently met with Michael Waguespack, Director of the National Counterintelligence Center, and with John F. Donnelly, then the Director of the Defense Investigative Service. Both appreciated the implications and lessons of this incident. One hopes that no group of Americans, and no foreign country, ever has to endure similar allegations.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, I rise today to pay tribute to Seymour H. Knox III, a civic and business leader from Buffalo, NY. Seymour Knox, age 70, died on May 22, 1996, at his home in East Aurora, New York, after a long battle with cancer. Like his father before him, Seymour Knox created a lasting institution for the city of Buffalo by which he shall be remembered. For the father, this was the Albright-Knox Art Gallery. For the son, it was the Buffalo Sabres hockey team. Seymour, in cooperation with his brother Northrup, led an investor group that acquired a National Hockey League Franchise in 1969. For over a quarter century, the Sabres have made the long winter a bit more enjoyable for the people of Buffalo, and with the recent completion of the Marine Midland Arena, Seymour Knox has assured that this alliance will long continue. Apart from his interest in hockey, Seymour Knox was a leading investment executive at Kidder Peabody and Co., and active in the community. He was chairman of the Buffalo Fine Arts Academy, the body which oversees the gallery created by his father, and was also named chairman of the Smithsonian Associates in 1984. He was also active in the Buffalo YMCA, the U.S. Squash Racquets Association, and the Seymour H. Knox Foundation. He will long be remembered as someone who cared deeply about the city of Buffalo and who used his standing in the community to improve the lives of countless citizens. Seymour Knox will be fondly remembered by his wife, Jean; his brother, Northrup: his three sons, Seymour IV, W.A. Read, and Avery F.; his daughter, Helen K. Keilholtz; and five grandchildren. We offer our condolences and prayers to his family. I ask unanimous consent that the text of an article from the Buffalo News be printed in the Record.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, a number of careful statements have been made on the floor yesterday and today concerning the use of the Consumer Price Index [CPI] as a proxy for measuring changes in the cost of living. As we all surely know, the Bureau of Labor Statistics [BLS] is insistent that the CPI is not a cost of living index: never has been; cannot be. It would be more than a third of a century ago that I became Assistant Secretary of Labor in the Kennedy administration. In that role, I had nominal supervision of the Bureau, and I attest that this was fully understood at that time, well before the CPI began to be used as it is today as an index for various entitlement programs and tax schedules. The question has been properly raised as to whether economists are in general agreement that the CPI overstates inflation. My distinguished friend from North Dakota, Senator Conrad, described the near unanimous testimony of a panel of economists that testified before the Senate Committee on Finance to this effect. I would draw the attention of the Senate to the fact that well before the Finance Committee established the Boskin commission to enquire into this matter, the subject was under consideration in the Office of Management and Budget. Specifically, a memorandum of October 3, 1994, sets forth the matter in specific terms. I ask that portions of that memorandum be printed in the Record. The material follows: October 3, 1994. From: Alice M. Rivlin. Subject: Big Choices. When we met in August, we noted that it was time for a serious discussion of the budget and economic agenda for 1995 and 1996. Decisions must be made soon about the policies to be articulated in the FY 1996 budget, the State of the Union, and our response to the Kerrey-Danforth Commission report. These policies and the message they contain are crucial to the record we will run on in 1996. Illustrative entitlement options Options 5-yr savings (S B) COLA reduction: CPI minus 0.5 ``technical'' reform (CPI may be overstated by 0.4% to 1.5%).......................................................33 Eliminate COLAs for one year.....................................55 109 2 for five years.........................................

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, yesterday morning, May 20, 1996, ``a gathering to celebrate the life of Dick Clurman'' took place at the Beth-El Chapel of the Temple Emanu-El in New York City. William F. Buckley, Jr. led off with a wonderfully moving tribute, which ended, ``It will require the balance of my own lifetime to requite what he gave to me.'' He was followed by Osborn Elliott, a lifelong friend and fellow journalist. There followed equally singular tributes from Harry Evans, H.D.S. Greenway, David Halberstam, Phyllis Newman, who sang a Gershwin tune, Hugh Sidey, Mike Wallace, Barbara Walters, and then the Clurman family. Rabbi Richard S. Chapin and Cantor Howard Nevison provided liturgy and liturgical music. It was indeed a life to celebrate and to remember. I ask that Mr. Buckley's and Mr. Elliott's remarks be printed in the Record, along with a fine obituary by Lawrence Van Gelder which appeared in the New York Times. The material follows: Remarks by Wm. F. Buckley, Jr. at the Memorial Service for Richard M. Clurman Three years ago, one evening in July, he asked whether I'd cross the ocean again in 1995, what would have been the fifth such venture, done at five-year intervals beginning in 1975. ``I'm prepared to go,'' he told me. I suppose I smiled; it was dark on the veranda when he spoke. I told him I doubted my crew could be mobilized for one more such trip, and just the right crew was indispensable. He had done with me two Atlantic crossings, one Pacific crossing. He was an instant celebrity for his ineptitudes at sea, done in high spirit with a wonderful, persistent incomprehension of what was the job at hand. He was the object of hilarious ridicule in my son's published journal--and he loved it all, even as Christopher loved him; even when, while discoursing concentratedly on matters of state, he would drop his cigarette ash into Christopher's wine glass, or very nearly set fire in the galley when trying to light the stove. He thrived on the cheerful raillery of his companions, but on one occasion thought to say to me, in a voice unaccustomedly low, ``I'm good at other things.'' He hardly needed to remind me. Yes, and from everything he was good at he drew lessons, little maxims of professional and extra-professional life of great cumulative impact, instantly imparted to all his friends, at the least suggestion from them, or from their situation, that they needed help, or instruction. It is awesome to extrapolate from one's own experience of his goodness the sum of what he did for others. When Oz Elliott, on Shirley's behalf, asked me to say something today I went right to my desk but I found it impossible to imagine his absence from the scene. Was it true that there would be no message from him tomorrow on our E- mail circuit? That we would not be dining together during the week, or sharing a tenth Christmas together? In the strangest sense, the answer is No, it isn't impossible that we will continue as companions, because his companionship left indelible traces: how to work, how to read, how to love. It came to me last Thursday when just after midnight my son reached me at the hotel, that I have always subconsciously looked out for the total Christian, and when I found him, he turned out to be a non-practicing Jew. It will require the balance of my own lifetime to requite what he gave to me.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, just last week, on May 7, the House of Representatives appointed its four members of the Advisory Board on Welfare Indicators, as provided by the Welfare Indicators Act of 1994, incorporated in the Social Security Act amendments of that year. The measure was introduced on the first day of the 103d Congress, January 31, 1993, the first legislative day that is, and signed just at the end of that Congress. In a floor statement at the time of introduction, I noted that the measure was directly modeled on the Employment Act of 1946. This was a statement of a large national goal, accompanied by provision for an annual assessment of progress toward that goal. Congress declared it to be the continuing policy and responsibility of the Federal Government to promote maximum employment, production, and purchasing power. Words at first, but great consequences followed in our ability to measure and understand these purposes. I stated on the floor: Mr. President, I rise today to introduce the Welfare Dependency Act of 1993. The purpose of the bill, which is directly modeled on the Employment Act of 1946, is to declare it the policy and the responsibility of the Federal Government to strengthen families and promote their self- sufficiency. To this end, the bill directs the Secretary of Health and Human Services to conduct a study to determine which statistics, if collected and analyzed on a regular basis, would be most useful in tracking and predicting welfare dependency. Within 2 years, the Secretary would report the conclusions to Congress, and, a year later, would submit a first report on dependency. Thereafter, reports would be submitted annually. These reports would include annual numerical goals for recipients and expenditures within each public welfare program. For the interim, the bill establishes a goal of reducing dependency to 10 percent of families with children. For the first time in American history the largest proportion of persons in poverty are to be found among children, not among adults or among the aged. This is new. When we first began to notice this trend in the 1960's, it seemed that we had discovered something uniquely American. Then we began to get the returns of the Luxembourg Income Survey. Children, it seems, are poorer than adults in all manner of places: Australia, Canada, Germany, England, as well as the United States. For too long we have been trying to measure a postindustrial phenomenon--dependency--with statistics designed to track industrial-era phenomena. We used to know something about how to predict welfare dependency. In the early 1960's when I was Assistant Secretary in the Department of Labor for Policy, Planning, and Research, we found that there was an extraordinary correlation between male unemployment and new welfare cases from the period starting in 1946 up to about 1958-59. Then the correlation weakened, until finally in 1963 the lines crossed and the relationship became negative--the lower the unemployment rate, the higher the number of AFDC cases. Now, even during prosperous periods for our Nation, a shockingly high percentage of our children are dependent on public support. We do have some data on the magnitude of this problem, if not its origins. Back in the 1960's the Office of Economic Opportunity had the good sense to put up money for a longitudinal study of families at the Institute for Social Research at the University of Michigan. The researchers computed the incidence of welfare dependency among children born in the late 1960's. The findings are dismaying. Almost one quarter--22.1 percent --of these children were dependent on AFDC for at least 1 year before reaching their 18th birthday. That's 72.3 percent of black and 15.7 percent of nonblack children. But these findings on the extent of the problem tell us little about what causes it or how to address it. Certainly some part of this explosion in welfare dependency can be attributed to changes in family structure. Three decades ago there was nothing notably amiss with the traditional family. American divorce rates were high, but stabilizing. The traditional family of parents with children was the norm. As recently as 1970, 40 percent of the Nation's households were made up of a married couple with one or more children. The proportion dropped to 31 percent in the next decade. It is now around a quarter of all families. Simultaneously, the proportion of families headed by a single mother has exploded. In 1970, 11.5 percent of all families with children were headed by a single mother. In 1980, 19.4 percent. In 1990, 24.2 percent. Now a quarter of all live births are out of wedlock. Our data collection needs to become more systematic and institutionalized. As we did earlier in this century for the problem of unemployment when we enacted the Employment Act of 1946, we need to define welfare dependency as a national problem and to begin to measure, analyze, and address it. Since 1946 unemployment has hardly disappeared but neither is it ignored, much less denied. I am introducing this bill on the first day of the new Congress because I believe that its passage would represent one of the most important moments in social welfare policy since Aid to Families with Dependent Children was enacted as part of the Social Security Act of 1935. It might be noted here that in 1946 it was commonly assumed that with the war over, the Depression of the 1930's would resume. Western society had been stunned by that catastrophic and protracted economic crisis, a crisis which was interrupted by world war, but which was widely thought to be systemic, and which would accordingly resume. No one seemed to know how to make a modern industrial economy work. Some economists had ideas about this, but these were not widely subscribed to. A more common view was that industrial democracies were inherently unstable and would necessarily disappear. It helps in this time of vast unease associated with the breakdown of family structure to recollect with some tranquillity that capitalism was deemed doomed not a half century ago. Here are the specifics for the statute: (a) Congressional Policy.--The Congress hereby declares that--(1) it is the policy and responsibility of the Federal Government to reduce the rate at which and the degree to which families depend on income from welfare programs and the duration of welfare receipt, consistent with other essential national goals; (2) it is the policy of the United States to strengthen families, to ensure that children grow up in families that are economically self-sufficient and that the life prospects of children are improved, and to underscore the responsibility of parents to support their children; (3) the Federal Government should help welfare recipients as well as individuals at risk of welfare receipt to improve their education and job skills, to obtain child care and other necessary support services, and to take such other steps as may be necessary to assist them to become financially independent; and (4) it is the purpose of this section to provide the public with generally accepted measures of welfare receipt so that it can track such receipt over time and determine whether progress is being made in reducing the rate at which and, to the extent feasible, the degree to which, families depend on income from welfare programs and the duration of welfare receipt. (b) Development of Welfare Indicators and Predictors.--The Secretary of Health and Human Services (in this section referred to as the ``Secretary'') in consultation with the Secretary of Agriculture shall--(1) develop--(A) indicators of the rate at which and, to the extent feasible, the degree to which, families depend on income from welfare programs and the duration of welfare receipt; and (B) predictors of welfare receipt; (2) assess the data needed to report annually on the indicators and predictors, including the ability of existing data collection efforts to provide such data and any additional data collection needs . . . [The Welfare Indicators Act of 1994, as incorporated in the Social Security Act Amendments of 1994, P.L. 103-432]. No notice was taken of the measure at the time of enactment, and so it is not inappropriate to do so now that the appointments to the Advisory Board are completed. An interim report is due from the Secretary by next October 31, 2 years from enactment, as provided in the statute, with a regular annual report to be prepared thereafter. I would note that the measure was a long time coming; indeed, that we seemed somehow reluctant to learn too much about this subject. In March 1991, the Subcommittee on Social Security and Family Policy of the Senate Committee on Finance held hearings at which a number of the Nation's most respected social scientists, including several experts who are now members of the Advisory Board, commented on the subject of ``Welfare Dependency.'' Many urged the need for a continuing Federal assessment of this matter, as baffling in our time as was the issue of unemployment a half century ago. That eminent scholar, Douglas J. Besharov of the American Enterprise Institute, noted that ``There used to be a National Center for Social Statistics * * * . It was a Federal agency and had a client. Its client was the * * * Social and Rehabilitative Service.'' But when that program was reorganized there was no client to support the Center and it simply faded away. Now, however, we have the responsibility firmly lodged with the Secretary of Health and Human Services. We can expect diligent attention from the distinguished incumbent, Donna Shalala, and from her ingenious, industrious and committed associate, Wendell Primus, Deputy Assistant Secretary for Human Service Policy. The Secretary will receive, I cannot doubt, great good counsel from this Advisory Board, now finally constituted. Its distinguished members are as follows: Appointed by the Senate majority leader are Jo Anne B. Barnhart, political director, National Republican Senatorial Committee; Martin H. Gerry, director of the Center for Study of Family, Neighborhood, and Community Policy, University of Kansas; Gerald H. Miller, Director, Michigan Department of Social Services. Appointed by the Senate minority leader is Paul E. Barton, director of the Policy Information Center, Educational Testing Service. Appointed by the President are Judith M. Gueron, president, Manpower Demonstration Research Corporation; Kristin A. Moore, executive director of Child Trends, Inc.; Joan M. Reeves, Commissioner, Department of Human Services, city of Philadelphia; Gary J. Stangler, Director, Missouri Department of Social Services. Appointed by the Speaker of the House of Representatives are Eloise Anderson, Director, California Department of Social Services; Wade F. Horn, director, National Fatherhood Initiative; Marvin H. Costers, resident scholar and director of Economic Policy Studies, American Enterprise Institute. Appointed by the minority leader, House of Representatives is Robert Greenstein, executive director, Center on Budget and Policy Priorities. I am sure the Senate will join me in congratulating the board members and in expressing our expectation that the first welfare dependency report, due next fall, will mark the onset of a new age of information in this troubled area of social policy.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, on Saturday morning last, Nat Hentoff devoted his ever-insightful column to a tribute to Dorothy Rabinowitz. Much deserved; beautifully accomplished. I ask that Mr. Hentoff's column be printed in the Record. The column follows: [From the Washington Post, May 11, 1996] She Listened to the Children--and Had Some Doubts (By Nat Hentoff) I.F. Stone, one of my mentors in this business, used to tell young reporters: ``If you intend to use the First Amendment to change the world, forget it. If you're lucky, you may be able, over time, to make small, incremental changes.'' Once in a while, however, a journalists does make a big difference, even rescuing innocent people from prison--and changing the way many other journalists cover a particular kind of story. For much of the past 10 years, Dorothy Rabinowitz has been rigorously investigating cases of preschool teachers and others around the country who have been convicted of sexual child abuse. She first became involved in the New Jersey sentencing of Kelly Michaels to 47 years in prison on 115 counts of bizarrely molesting 20 children from the ages of 3 to 5. (One child testified that Michaels had turned her into a mouse. Others said the teacher made them eat a ``cake'' of her feces.) The press at the time found the testimony of the accusers entirely convincing, and a Pulitzer Prize winner, Anna Quindlen, then a columnist for the New York Times, urged her readers to ``believe the children.'' Rabinowitz interviewed everyone she was able to reach, including the furious parents of the allegedly abused children. She also obtained transcripts of the state's ``investigators'' who questioned the children until the kids gave the required answers. I also had those transcripts. The manipulation and intimidation of the children was so obvious that if the trail had not been about sexual violations of kids, the charges would have been dismissed. The prosecution did not introduce a single piece of physical evidence to support the charges and the children's stories. After five years in prison, Michaels was released because lawyers who had read Dorothy Rabinowitz's investigative pieces volunteered to prove her innocence. By then, most of the press had come to the belated conclusion that somehow an injustice had been done, but there were no apologies. Rabinowitz had joined the Wall Street journal by then, writing commentary. But an inveterate reporter, she bases her commentaries on research that comes from legwork. Although she writes on other issues, Rabinowitz continues to confront prosecutors and juries who have convicted defendants accused by children--coached by therapists and law enforcement ``specialists'' in sexual abuse. As Alan Kors, a history professor at the University of Pennsylvania, notes: ``What Rabinowitz has disclosed to full public scrutiny and understanding is sadly reminiscent of Europe's witch-craze--a jurisprudence of leading questions, sociopathology, disregard of evidence and logic, and careerism joined to fanaticism.'' In the Massachusetts Amiraults' case, Rabinowitz's persistent stories finally led to the release from prison of two of the three defendants. She has not given up on the third. In the Boston Globe, critic at large Ed Siegel emphasizes that Rabinowitz was ``the first journalist to provide in-depth reporting on the case'' and ``her series had a ripple effect.'' And Malcolm Gladwell noted in The Post that ``the Amiraults' case became a national cause celebre because of doubts about the veracity of the children's testimony against them.'' Those doubts came largely from stories in the Wall Street Journal. A movie could be made about Dorothy Rabinowitz, journeying alone, to the city of Wenatchee in the state of Washington, where many have been charged and imprisoned on the testimony of children in a nightmarish setting that resembled a fusion of the TV series ``Picket Fences'' and a Stephen King novel. A local television reporter, Tom Grant, told me he had to fight to get air time to report the story, which he nonetheless did with much courage in a town that had aspects of 17th-century Salem, Mass. This year, Grant received a George Polk Award for local television reporting. He says, however, that Wenatchee became a national concern because of Dorothy Rabinowitz. ``Six months after I started on the story,'' he said to me, ``Dorothy came and everything exploded. Then the other media came.'' Rabinowitz was a finalist for a Pulitzer Prize in commentary this year, but was not considered worthy. Some members of the ultimate Pulitzer Board had been told--as one of them assured Tucker Carlson of the Standard--that she had had no effect on the local situations she wrote about. So much for accuracy of reporting on high. In 1965, when the august Pulitzer board overruled a music jury award to Duke Ellington, he said: ``Fate doesn't want me to be too famous too young.'' Ellington easily survived the ignorance of the Pulitzer Board. And Dorothy Rabinowitz also knows she is worth a lot more than one of its prizes. (At the request of Mr. Daschle, the following statement was ordered to be printed in the Record.)

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, last Tuesday evening several thousand New Yorkers gathered at New York City's Battery Park for a gala celebration of the city of Jerusalem's trimillenium. This magnificent reception was hosted by New York State Gov. George E. Pataki and cosponsored by the Jewish Community Relations Council of New York. Senators will recall that a similar ceremony was held in the rotunda of the Capitol on October 25, 1995. The main address on that occasion was given by a heroic son of Jerusalem, Israeli Prime Minister Yitzchak Rabin, in what would prove to be his last visit to Washington and to the Congress. It was thus all the more appropriate that Governor Pataki chose to dedicate New York State's official celebration of Jerusalem's trimillenium to Yitzchak Rabin's memory. I ask that Governor Pataki's moving remarks at the Jerusalem celebration be printed in the Record. The remarks follow: Remarks by Gov. George Pataki on Jerusalem 3000 Celebration Good evening ladies and gentlemen and welcome to New York State's celebration of the 3000th anniversary of the City of Jerusalem. Today we are truly making history, as we gather together in a display of unity and solidarity between the people of the State of New York and the people of the State of Israel. We all agree that now, more than ever, Israel needs our support and help. Like so many times when the United States relied on Israel for help, today we return the favor with an unprecedented showing of support for Jerusalem and the State of Israel. We are aware that Israel has sacrificed much in their support of our country. One need only to recall the Gulf War, when Israel respected the wish of the United States Government that Israel exercise restraint so as not to disrupt Operation Desert Storm. In 1003 B.C., the Bible records that King David moved the Capital of Israel to Jerusalem. Since that monumental event 3000 years ago, Jerusalem has been a beacon of hope to all those who cherish religion and spirituality. All of the major religions have a special connection to this city. For 3000 years, people have traveled from all over the world to visit this majestic city. Poets, artists, religious figures, heads-of-state, and people from all walks of life have been captivated by Jerusalem and its beauty, and so have we. Today we are extremely honored to have guests who have traveled from all of New York State, and from around the world. I am particularly grateful to our most esteemed guests, the Foreign Minister of Israel, General Ehud Barak, Mayor Ehud Olmert of Jerusalem, and John Cardinal O'Connor for taking the time out of their schedules to join us here for this historic occasion, and other great men and women who we heard from today. To the others from the various Jewish communities and other communities, who have traveled from as far away as Syracuse, Albany, Buffalo, and from throughout our great State and elsewhere, we welcome you and thank you for joining us here this evening. As the invitation for this event indicated, this evening's celebration is dedicated to the memory and legacy of a great hero of the State of Israel, Yitzhak Rabin. All of us here today, Jew and non-Jew alike, recognize Prime Minister Rabin not just as a great statesman, but as a man who gave his life attempting to bring peace and security to his nation. I still find it sad that my first trip to the Holy Land and Jerusalem was for the purpose of paying my last respects to this great man. Tonight's celebration would not be complete without us taking a moment to remember his dream of a secure and peaceful Israel. We miss him greatly. As I indicated earlier, Jerusalem is significant to many religions. This is why we have asked leaders of the various faiths to join with us here today to show their unity with Israel. I think we can all agree that never has there been more accommodation, access and respect for sites holy to all faiths and religions than through the care and consideration of the government of Israel. For those who have had the privilege to visit Jerusalem, there is no denying its beauty, its spirituality and an indescribable feeling of magic. Who could forget a trip to Western Wall? How can one put into words the history that surrounds the old City? I think that the Babylonian Talmud described it best when it said that ``Ten Measures of beauty were bestowed upon the world; nine were taken by Jerusalem, and one by the rest of the world.'' As we rejoice this evening, I would be remiss if I did not mention something about the Holocaust and the lessons taught to us by that darkest moment in history, particularly in view of the site upon which we stand today--adjacent to New York's Holocaust Museum, which is under construction behind us. New York is home to one of the world's largest number of Holocaust survivors. New York State understands the importance of remembering and teaching about the Holocaust. Toward that end, I am proud of the fact that New York State has allocated $10 million dollars to the construction of the New York Holocaust museum. And many of us will be returning next month for the formal dedication of this museum. Israel has meant rebirth for the Jewish people. It is for this reason that I know George Klein was right when he suggested that we celebrate Israel and Jerusalem right her, next to this museum. Once again, I would like to thank all of you for coming, and may we all hope and pray for a peaceful and secure Jerusalem for another 3000 years and for all time to come. May God bless you all.

Mr. MOYNIHAN

Mr. MOYNIHAN. Mr. President, the distinguished Senator from Virginia knows that I have just come to the floor to speak and do not control time. But I see no other Senator on this side seeking to speak. If my friend from Virginia wants 10 minutes, I would be happy to, and I will assume the position that I can yield that time and would be honored to do so with the understanding as I shall listen with close attention to what he says for 10 minutes, that he might undertake to do the same.

Mr. MOYNIHAN. Mr. President, the erudition is from Alfred Marshall, not of this poor student of his or his successor three times removed. Mr. President, it fell to me, then chairman of the Committee on Finance, to reach agreement on our Democratic side on the Omnibus Budget Reconciliation Act of 1993. There was no Republican involvement and no Republican support, for perfectly straightforward reasons. It fell to me to negotiate among ourselves the 4.3-cent increase in the gasoline tax which is suddenly under discussion today. The President had originally proposed an increase in the Btu tax. And I suppose it is not inappropriate if I am going to be speaking from Alfred Marshall's text, he having been a distinguished professor in Great Britain, to refer to the Btu, which stands for ``British thermal units.'' The House voted a larger Btu tax increase, but the matter came to the Senate, and there was no disposition here to address the general range of energy uses--that involved coal and gas and other sources of energy--as against simply gasoline. It was not easy to reach agreement on the 4.3 cents. That was the last part of the budget deficit reduction that we had to put together, a total reduction of $500 billion, half of it by raising--I will use that dread word ``taxes''--not fees, not premiums--taxes, and a somewhat smaller proportion from reducing, cutting, and, in many cases, eliminating Federal programs. The last bit we had to get was that 4.3 cents. We had to get up to 4.3 to reach our $500 billion mark. I record this simply to say it was not easy. It took 1 week with the Finance Committee Democrats in room 301 of this building, some of the longest days I have spent in the Senate. In the end we did it because it had to be done. And we have results to show for it. So much of what happens in Government, as in other aspects of life, has indistinct or very long-run consequences not easily seen. To the contrary, today, the American economy is the wonder of the world. There is no nation in the OECD, the Organization of Economic Cooperation and Development, formed just after World War II, that comes anywhere close to our rate of growth, our unemployment rate, our price stability, and the long, sustained period of growth which we are in. We are now, sir, as of May, in the 63d month, more than 5 years, of continued economic expansion--not the longest, as in the 1960's, but something that would have been considered beyond imagining 50, 60, 70 years ago. The budget deficit, Mr. President, has been cut in half. The numbers are astounding. We went from a budget deficit of $290 billion in 1992-- these are fiscal years--to what, if you average out OMB, which says 146, and CBO, 144, is a deficit of $145 billion in the current year. Half--we have cut it in half in 4 years. The deficit now is the lowest, in proportion to our annual gross domestic product, it has been in 15 years. Real growth rate is at a solid 2 percent, which is very impressive, given the fact that we have full employment and no inflation. Our distinguished Director of the Congressional Budget Office--and I apologize for the initials CBO--Dr. June O'Neill, recently testified before the Senate Budget Committee: CBO continues to believe that the U.S. economy is fundamentally sound and estimates that the chances of a major downturn in the next two years are not high. Now, one of the reasons things are very good is that we did what was difficult to do in 1993, and we did it on our own on this side of the aisle. We are not complaining whatever about that. If it was to be our budget, let us do it. I could wish it was bipartisan. It was not. But that has nothing to do with the fact we found 50 votes here plus the Vice President. It was close. And that last tenth of a cent on the gasoline tax did it. In January 1994, our eminent Chairman of the Federal Reserve Board, Alan Greenspan, testified before the Joint Economic Committee as follows: The actions taken last year-- Referring to our budget deficit reduction measure with the gasoline tax. to reduce the Federal budget deficit have been instrumental in creating the basis for declining inflation expectations and easing pressures on long-term interest rates. . . What I argued at the time is that the purpose of getting a lower budget deficit was essentially to improve the long-term outlook, and that if the deficit reduction is credible, then the long-term outlook gets discounted upfront. Indeed, that is precisely what is happening. The term, sir, is the deficit premium on the interest rate, the expectation upfront that inflation will increase so that interest rates would be higher than they otherwise would be. They are now down. And that added another $100 billion of deficit reduction. That is how we were able to cut the deficit in half. Do we have problems in the outyears? Indeed, we do. But are we on the right track now? Indeed, we are. Unemployment for April was 5.4 percent. That is roughly full employment in our present jargon. Inflation is in check. The Consumer Price Index, which overstates inflation, is at 3 percent-- something unprecedented -- and real wages and salaries increased in the first 3 months of this year by 1 percent, a very handsome rate. One of the consequences, Mr. President--and I hesitate to use another chart on the Senate floor, but this one, I think is important. The public is watching and my colleagues might find it interesting. For the first time, sir, since the 1960's, the Federal budget has a primary surplus. A primary surplus is the difference between revenues and outlays for programs. I came to Washington in 1961 with the Kennedy administration, and I can report something that may have been lost to the memory of many of us. Our biggest problem as then seen by the economic advisers to the President was that the Federal Government was taking in more money than it was spending and hence depressing our move toward full employment. The term was ``fiscal drag.'' The efforts to get Federal revenues out, back into circulation, were extraordinary. I can recall my first visit, the first time I was ever in the Oval Office. It was with the beloved Secretary of Labor, Arthur Goldberg, and we were bringing to the President a proposal to increase the pay of public servants, postwar and such. And the President looked at our proposal and said, ``Is that all?'' Walter Heller, the chairman of the Council, said, oh, surely we need to do more than that; he added up the numbers on the page, just like that. We were about to propose revenue sharing. If Congress would not spend the money, perhaps Governors would. I am not speaking lightly of what you spend, but there is such a thing as seeing that you do not keep the economy depressed by taking in more revenue than goes back into the economic stream. In the 1960's we had those surpluses. Those blue marks indicate a slight surplus, primary surplus, not big, but big enough to preoccupy us. Then we had the oil crisis of the 1970's and deficits came. Then the 1980's and deliberate deficits of enormous amounts and the debt that went from $995 billion at the end of fiscal year 1981 to where we just now, just recently, raised the debt ceiling to $5.5 trillion. We added almost $5 trillion to our debt. The debt is huge and the interest has to be paid and it will be. But in the meantime, if you can look at this chart, we are back to a primary surplus--we did a good job in 1993--a primary surplus averaging about $66 billion for the next 4 years. A little good news does not do any harm, sparingly. And this is solid good news. Now, suddenly, we are asked to dismantle that last, painful mile we had to travel in 1993, that 4.3 cents. It took 1 week to get from 4 cents to 4.3 cents and then bring it to the floor where it passed just barely, with the remarkable results we now see. If a reasonable case could be made that to eliminate this gasoline tax right now would save consumers money, then it should be considered. Some have tried to make that argument. But it is simply not the case that there should be any expectation whatsoever of any impact on gasoline prices from a reduction of this tax, because the present spike in prices is the result of a series of very simple events. We had a very cold winter and used up more oil reserves than we might have done. There was an expectation that Iraq's petroleum might come out to the world market--it did not do so. In California, a number of refineries that were moving along well have ceased to do so. Then there is apparently a development within the refining industry of just-in-time inventories. Perfectly good economics. It has made a big difference in the profitability of firms all over the country. But what happens, when you have a short-term shortage, to prices when you try to do something such as this? Well, my good friend and deskmate and member of the Finance Committee, the Senator from Louisiana, earlier cited Philip K. Verleger, Jr., an economist at Charles River Associates, who was quoted in the press just yesterday, in the Washington Post, saying, ``The Republican-sponsored solution to the current fuels problem * * * is nothing more and nothing less than a refiner's benefit bill* * *. It will transfer upwards of $3 billion from the U.S. Treasury to the pockets of refiners and gasoline marketers.'' Is that the result of some conspiracy among the big oil companies? No, sir. I have no reason to think--it may be true, but I have never heard it mentioned--that an oil company came to anybody on Capitol Hill and said, ``Would you cut that tax?'' The reason Mr. Verleger said the reduction in the tax would benefit refiners is that for a century it has been the clearest understanding of the economics profession that under short-term supply conditions, a change such as a reduction in an excise tax does not affect the price paid by the consumer. In 1890, Alfred Marshall, as I mentioned to my friend from Virginia, the great professor of economics at Cambridge University--he taught John Maynard Keynes, the father of modern macro economics--produced his opus, his great text, ``Principles of Economics.'' I have here a volume reprinted in 1961. This was the summation of what economists knew at that time, in the late 19th century.

Mr. MOYNIHAN. Three. I would not bring up Marshall if I expected to hold my audience very much longer than 3 minutes. Marshall took the example--to illustrate short-term supply, a fascinating thing--he took the example of fish. He said, what happens if there is a sudden change in the situation? Weather makes fish more or less available--a nice point--or if there is an increased demand for fish caused by the scarcity of meat during the year or two following a cattle plague. Mad cow disease in the late 19th century. A scarcity of fish caused by uncertainties of the weather has its exact parallel in our cold winter. These things come. I do not have to tell the Senator from Vermont about cold winters. Would outside intervention change the price of fish to the consumer in that circumstance, when there was a fixed supply? The answer from Alfred Marshall is emphatically ``no.'' Students of economics my age will remember this book. It is a very heavy book, but it is still around and it works. What it propounded is very clear. He said: To go over the ground in another way. Market values are governed by the relation of demand to stocks actually in the market. . . .'' This is something businessmen know. Mr. Mike Bowlin, Chairman of ARCO, said on ABC's ``Nightline'' Tuesday evening: My concern is that there are other market forces that clearly will overwhelm the relatively small decrease in the price of gasoline, and that alarms me, that people's expectations will be that the minute the tax is removed, they want to see gasoline prices go down 4.3 cents, and that won't happen. This is something we know. Or it can be said as much as things like this are knowable, this we know. The businessman says it, the economist says it, the grandfather of them all explained it 100 years ago. There is good news, which is that the futures markets show the price of crude oil going down very sharply, from about $22 a barrel today to about $18 for next September. Gas prices will go down. Can we not just let them go down by normal market forces and keep the budget agreement intact, the agreement which has brought us to this happy moment? I do thank the President for his patience. I look forward to listening attentively to my friend from Virginia.

Mr. MOYNIHAN. Mr. President, I yield 10 minutes to the distinguished Senator from Virginia.

Mr. MOYNIHAN. I propose to discourse at some length on Alfred Marshall's ``Principles of Economics'' published in 1890.

Mr. MOYNIHAN

Mr. MOYNIHAN. I very much agree with his comments and would add that, after the 1993 deficit reduction legislation, the price at the pump-- when that small tax increase took effect--was lower than when it was enacted. Perhaps the Senator from Illinois also saw in the Wall Street Journal an article today under the section called ``The Economy.'' It is headlined, ``Economists Say Gasoline Tax Is Too Low.'' The subhead is, ``GOP's Proposed Rollback Is Seen Aggravating Deficit.'' This is by Jackie Calmes and Christopher Georges. It begins: Republicans seeking to gain political mileage from a lower gasoline tax can't look to economists to support their case. Not that economists are infallible. Who is? But they make that point. I do not have to explain the term ``externalities'' to the learned Senator from Illinois. Gasoline costs you, air pollution costs you, as do the wear and tear on the environment and infrastructure, and so forth. You have to pay for that. You better be careful about how much you do because the costs that you have not paid for keep mounting. I wonder if he has not read this. Would he wish to have it printed in the Record at this point?

Mr. MOYNIHAN. Something called the ``market'' comes along and the price rises because of the demand. The supply has not instantly responded.