Ron Paul

Mr. PAUL

Mr. PAUL. Mr. Speaker, today the Federal Reserve lowered interest rates by a half a percentage point. They have been asked to lower this interest rates by just about everybody in the country. Whether they are investors or politicians, everybody literally has been screaming at the Fed and Alan Greenspan to lower the interest rates, lower the interest rates. It was anticipated that he would, and he did. He lowered the interest rates by 50 basis points. The stock market promptly went down 236 points. So obviously just lowering interest rates is not the solution to the problems we face. As a matter of fact, I believe it is the problem. Interest rates have been manipulated by the Federal Reserve as long as I can remember, especially in the last 30 years since we have had a total fiat monetary system. So it is the manipulation of interest rates that causes a problem. In a free market economy, you do not have a central bank pretending it has knowledge it does not have, that it knows exactly what the money supply should be and what interest rate should be. That is a prescription for disaster; and it leads to booms and busts, speculations in the stock markets, crashes in the stock markets. This is a well-known phenomenon. It has been with us since 1913, since we have had the Federal Reserve. We have seen it in the speculation in the 1920s and the depression of the 1930s. It is ongoing. We have a responsibility here in the Congress to deal with this. We have a responsibility to maintain the integrity of the money. Yet we up that responsibility to a secretive body that works on its own, deliberating and deciding how much money supply we should have. To lower interest rates, a central bank has to increase the money. That is debasement. That is devaluing the money deliberately. In the old days, when the king would do this, they would clip coins. Literally coin debasement, stealing value from coinage in the old days was a capital crime. Today, though, it is accepted practice in all economies of the world. We have had no linkage of any currency of the world in the last 30 years to anything of real value. The economies have functioned relatively well. But just in the last 6 years, we have had eight financial international crises, all patched together by more inflation, more printing of more money. Let me tell my colleagues, I am convinced it will not last, it will not continue. Take a look at what is happening in Japan today. Japan lowered their interest rates, too. They have been doing this for a long time. They are down to 0 percent, and nothing seems to be happening. Their stock market is at a level it was 16 years ago. We have to decide whether or not we may be moving into a similar situation. I think it is a very serious problem. We talk about interest rates. We talk about stimulating the economy. But we really do not talk about the problem, and that is the monetary system and the nature of the dollar. The money supply right now is currently rising at the rate of 20 percent, as measured by MZN. This is horrendous inflation. This is inflation. Everybody says no, there are reassurances. The Federal Reserve and all the statisticians say there is no inflation. The CPI is okay and the PPI is okay. But there is inflation. Because if one increases the supply of money, one is creating inflation. The most important aspect of that is the instability it creates in the marketplace. It does not always lead to a CPI increasing at 10 or 15 percent. Our CPI is rising significantly. We have other prices going up significantly, like education costs and medical care costs, housing costs. So there is a lot of inflation even when one measures it by prices. But the real problem with the inflation when one allows a central bank to destroy its money is twofold. One, it creates an overcapacity or overinvestment, excessive debt that always has to be wiped out and cleaned out of the situation, or economic growth cannot be resumed. Japan has not permitted this to happen, and economic growth has not resumed. That is the most important aspect because that causes the unemployment and that causes the harm to so many people. Now, there is another aspect of inflation, that is the monetary debasement that I have great concern about. That is, when it goes to extremes, it inevitably wipes out the middle class. It destroys the middle class. We are just starting to see that happening in this country. Low middle-income earners, individuals who are still not on the dole but willing to work, they are having a tough time paying their bills. That is the early stages of what happens when a currency is destroyed. Last year, for the first time in our history of keeping this record since 1945, in 55 years, the wealth of the American people went down 2 percent.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I rise to introduce the Medical Privacy Protection Resolution, which uses the Congressional Review Act to repeal the so-called Medical Privacy regulation. Many things in Washington are misnamed, however, this regulation may be the most blatant case of false advertising I have come across in all my years in Congress. Rather than protect an individual right to medical privacy, these regulations empower government officials to determine how much medical privacy an individual ``needs.'' This ``one-size-fits-all'' approach ignores the fact that different people may prefer different levels of privacy. Certain individuals may be willing to exchange a great deal of their personal medical information in order to obtain certain benefits, such as lower-priced care or having information targeted to their medical needs sent to them in a timely manner. Others may forgo those benefits in order to limit the number of people who have access to their medical history. Federal bureaucrats cannot possibly know, much less meet, the optimal level of privacy for each individual. In contrast, the free market allows individuals to obtain the level of privacy protection they desire. The so-called ``medical privacy'' regulations not only reduce an individual's ability to determine who has access to their personal medical information, they actually threaten medical privacy and constitutionally-protected liberties. For example, these regulations allow law enforcement and other government officials access to a citizen's private medical record without having to obtain a search warrant. Allowing government officials to access a private person's medical records without a warrant is a violation of the fourth amendment to the United States Constitution, which protects American citizens from warrantless searches by government officials. The requirement that law enforcement officials obtain a warrant from a judge before searching private documents is one of the fundamental protections against abuse of the government's power to seize an individual's private documents. While the fourth amendment has been interpreted to allow warrantless searches in emergency situations, it is hard to conceive of a situation where law enforcement officials would be unable to obtain a warrant before electronic medical records would be destroyed. Mr. Speaker, these regulations also require health care providers to give medical records to the federal government for inclusion in a federal health care data system. Such a system would contain all citizens' personal health care information. History shows that when the government collects this type of personal information, the inevitable result is the abuse of citizens' privacy and liberty by unscrupulous government officials. The only fail-safe privacy protection is for the government not to collect and store this type of personal information. In addition to law enforcement, these so-called ``privacy protection'' regulations create a privileged class of people with a federally-guaranteed right to see an individual's medical records without the individual's consent. For example, medical researchers may access a person's private Forcing individuals to divulge medical information without their consent also runs afoul of the fifth amendment's prohibition on taking private property for public use without just compensation. After all, people do have a legitimate property interest in their private information. Therefore, restrictions on an individual's ability to control the dissemination of their private information represents a massive regulatory taking. The takings clause is designed to prevent this type of sacrifice of individual property rights for the ``greater good.'' In a free society such as the one envisioned by those who drafted the Constitution, the federal government should never force a citizen to divulge personal information to advance ``important social goals.'' Rather, it should be up to the individuals, not the government, to determine what social goals are important enough to warrant allowing others access to their personal property, including their personal information. To the extent these regulations sacrifice individual rights in the name of a bureaucratically-determined ``common good,'' they are incompatible with a free society and a constitutional government. The collection and storage of personal medical information ``authorized'' by these regulations may also revive an effort to establish a ``unique health identifier'' for all Americans. The same legislation which authorized these privacy rules also authorized the creation of a ``unique health care identifier'' for every American. However, Congress, in response to a massive public outcry, has included a moratorium on funds for developing such an identifier in HHS budgets for the last three fiscal years. By now it should be clear to every member of Congress that the American people do not want their health information recorded on a database, and they do not wish to be assigned a unique health identifier. According to a survey by the respected Gallup Company, 91 percent of Americans oppose assigning Americans a ``unique health care identifier'' while 92 percent of the people oppose allowing government agencies the unrestrained power to view private medical records and 88 percent of Americans oppose placing private health care information in a national database. Mr. Speaker, Congress must heed the wishes of the American people and repeal these HHS regulations before they go into effect and become a backdoor means of numbering each American and recording their information in a massive health care database. The American public is right to oppose these regulations, for they not only endanger privacy but could even endanger health! As an OB-GYN with more than 30 years experience in private practice, I am very concerned by the threat to medical practice posed by these regulations. The confidential physician-patient relationship is the basis of good health care. Oftentimes, effective treatment depends on the patient's ability to place absolute trust in his or her doctor. The legal system has acknowledged the importance of maintaining physician-patient confidentiality by granting physicians a privilege not to divulge confidential patient information. I ask my colleagues to consider what will happen to that trust between patients and physicians when patients know that any and all information given their doctor may be placed in a government database or seen by medical researchers or handed over to government agents without so much as a simple warrant? Mr. Speaker, I am sure my colleagues agree that questions regarding who should or should not have access to one's medical privacy are best settled by way of contract between a patient and a provider. However, the government-insurance company complex that governs today's health care industry has deprived individual patients of control over their health care records, as well as over numerous other aspects of their health care. Rather than put the individual back in charge of his or her medical records, the Department of Health and Human Services' privacy regulations give the federal government the authority to decide who will have access to individual medical records. These regulations thus reduce individuals' ability to protect their own medical privacy. These regulations violate the fundamental principles of a free society by placing the perceived ``societal'' need to advance medical research over the individual's right to privacy. They also violate the fourth and fifth amendments by allowing law enforcement officials and government favored special interests to seize medical records without an individual's consent or a warrant and could facilitate the creation of a federal database containing the health care data of every American citizen. These developments could undermine the doctor-patient relationship and thus worsen the health care of millions of Americans. I, therefore, call on my colleagues to join me in repealing this latest threat to privacy and quality health care by cosponsoring the Medical Privacy Protection Resolution.

Mr. PAUL

Mr. PAUL. Mr. Speaker, the golden new era of the 1990s has been welcomed and praised by many observers, but I am afraid a different type of new era is arriving, a dangerous one, heralding the end of 30 years of fiat money. If so, it is a serious matter that deserves close attention by Congress. There is nothing to fear from globalism, free trade and a single worldwide currency, but a globalism where free trade is competitively subsidized by each nation, a continuous trade war is dictated by the WTO, and the single currency is pure fiat, fear is justified. That type of globalism is destined to collapse into economic despair, inflationism and protectionism and managed by resurgent militant nationalism. Efforts to achieve globalist goals are quickly abandoned when the standard of living drops, unemployment rises, stock markets crash and artificially high wages are challenged by markets forces. When tight budgets threaten spending cuts, cries for expanding the welfare state drown out any expression of concern for rising deficits. The effort in recent decades to unify government surveillance over all world trade and international financial transaction through the UN, the IMF, the World Bank, the WTO, the ICC, the OECD and the Bank of International Settlements can never substitute for a peaceful world based on true free trade, freedom of movement, a single but sound market currency and voluntary contracts with property private rights. Mr. Speaker, great emphasis in the last 6 years has been placed on so-called productivity increases that gave us the new-era economy. Its defenders proclaimed that a new paradigm had arrived. Though productivity increases have surely helped our economy, many astute observers have challenged the extent to which improvements in productivity have actually given us a distinctly new era. A case can be made that the great surge in new technology of the 1920s far surpassed the current age of fast computers, and we all know what happened in spite of it, after 1929. A truly new era may well be upon us, but one quite different than what is generally accepted today. The biggest era in interrupting today's events is the totally ignoring of how monetary policy in a fiat system affects the entire economy. Politicians and economists are very familiar with business cycles with most assuming that slumps erupt as a natural consequence of capitalism, an act of God, or as a result of Fed-driven high interest rates. That is to say the Fed did not engage in enough monetary debasement becomes the most common complaint by Wall Street pundits and politicians. But today's economy is unlike anything the world has ever known. The world economy is more integrated than ever before. Indeed, the effort by international agencies to expand world trade has had results, some good. Labor costs have been held in check, industrial producers have moved to less regulated low costs, low tax countries while world mobility has aided these trends with all being helped with advances in computer technology. But the artificial nature of today's world trade and finance being systematically managed by the IMF, the World Bank and the WTO and driven by a worldwide fiat monetary system has produced imbalances that have already prompted many sudden adjustments. There have been eight major crises in the last 6 years requiring a worldwide effort, led by the Fed, to keep the system afloat, all being done with more monetary inflation and bailouts. The linchpin to the outstanding growth of the 1990s has been the U.S. dollar. Although it, too, is totally fiat, its special status has permitted a bigger bonus to the United States while it has been used to prop up other world economies. The gift bequeathed to us by owning the world reserve currency allows us to create dollars at will. Alan Greenspan has not hesitated to accommodate everyone, despite his reputation as an inflation fighter. This has dramatically raised our standard of living and significantly contributed to the new-era psychology that has been welcomed by so many naive enough to believe that perpetual prosperity had arrived and the bills would never have to be paid. One day it will become known that technological advances and improvements in productivity also have a downside. This technology hid the ill effects of the monetary mischief the Fed had enthusiastically engaged in the past decades. Technological improvements while keeping the CPI and the PPI prices in check, led many, including Greenspan, to victoriously declare that no inflation existed and that a new era had, indeed, arrived. Finally it is declared that the day has arrived that printing money is equivalent to producing wealth, and without a downside. Counterfeit works. But the excess credit created by the Fed found its way into the stock market, especially the NASDAQ, and was ignored. This set the stage for the stock market collapse now ongoing. Likewise ignored has been the excess capacity, mal-investment and debt that permeates the world economy.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I rise to introduce legislation to forbid the use of federal funds to develop or implement a national system of teacher certification or a national teacher test. My bill also forbids the Department of Education from denying funds to any state or local education agency because that state or local educational agency has refused to adopt a federally-approved method of teacher certification or testing. This legislation in no way interferes with a state's ability to use federal funds to support their chosen method of teacher certification or testing. Federal control of teacher certification will inevitably lead to a national curriculum. National teacher certification will allow the federal government to determine what would-be teachers need to know in order to practice their chosen profession. Teacher education will revolve around preparing teachers to pass the national test or to receive a national certificate. New teachers will then base their lesson plans on what they needed to know in order to receive their Education Department-approved teaching ceirtificate. Therefore, I call on those of my colleagues who oppose a national curriculum to join me in opposing national teacher testing and certification. Many educators are voicing opposition to national teacher certification and testing. The Coalition of Independent Education Associations (CIEA), which represents the majority of the over 300,000 teachers who are members of independent educators associations, has passed a resolution opposing the nationalization of teacher certification and testing. As more and more teachers realize the impact of this proposal, I expect opposition from the education community to grow. Teachers want to be treated as professionals, not as minions of the federal government. In conclusion, Mr. Speaker, I once again urge my colleagues to join me in opposing national teacher certification or national teacher testing. Training and certification of classroom teachers is the job of state governments, local school districts, educators, and parents; this vital function should not be usurped by federal bureaucrats and/or politicians. Please stand up for America's teachers and students by signing on as a cosponsor of my legislation to ensure taxpayer dollars do not support national teacher certification or national teacher testing.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I highly recommend the attached article, ``Blame Congress for HMOs'' by Twila Brase, a registered nurse and President of the Citizens' Council on Health Care, to my colleagues. Ms. Brase demolishes the myth that Health Maintenance Organizations (HMOs), whose power to deny Americans the health care of their choice has been the subject of much concern, are the result of an unregulated free-market. Instead, Ms. Brase reveals how HMOs were fostered on the American people by the federal government for the express purpose of rationing care. The story behind the creation of the HMOs is a classic illustration of how the unintended consequences of government policies provide a justification for further expansions of government power. During the early seventies, Congress embraced HMOs in order to address concerns about rapidly escalating health care costs. However, it was Congress which had caused health care costs to spiral by removing control over the health care dollar from consumers and thus eliminating any incentive for consumers to pay attention to costs when selecting health care. Because the consumer had the incentive to control health care cost stripped away, and because politicians where unwilling to either give up power by giving individuals control over their health care or take responsibility for rationing care, a third way to control costs had to be created. Thus, the Nixon Administration, working with advocates of nationalized medicine, crafted legislation providing federal subsidies to HMOs, preempting state laws forbidding physicians to sign contracts to deny care to their patients, and mandating that health plans offer an HMO option in addition to traditional fee-for- service coverage. Federal subsidies, preemption of state law, and mandates on private business hardly sounds like the workings of the free market. Instead, HMOs are the result of the same Nixon-era corporatist, Big Government mindset that produced wage-and-price controls. Mr. Speaker, in reading this article, I am sure many of my colleagues will think it ironic that many of the supporters of Nixon's plan to foist HMOs on the American public are today promoting the so-called ``patients' rights'' legislation which attempts to deal with the problem of the HMOs by imposing new federal mandates on the private sector. However, this is not really surprising because both the legislation creating HMOs and the Patients' Bill of Rights reflect the belief that individuals are incapable of providing for their own health care needs in the free market, and therefore government must control health care. The only real difference between our system of medicine and the Canadian ``single payer'' system is that in America, Congress contracted out the job of rationing health care resources to the HMOs. As Ms. Brase, points out, so-called ``patients' rights'' legislation will only further empower federal bureaucrats to make health care decisions for individuals and entrench the current government-HMO complex. Furthermore, because the Patient's Bill of Rights will increase health care costs, thus increasing the number of Americans without health insurance, it will result in pleas for yet another government intervention in the health care market! The only true solution to the health care problems is to truly allow the private sector to work by restoring control of the health care dollar to the individual through Medical Savings Accounts (MSAs) and large tax credits. In the Medicare program, seniors should not be herded into HMOs but instead should receive increased ability to use Medicare MSAs, which give them control over their health care dollars. Of course, the limits on private contracting in the Medicare program should be lifted immediately. In conclusion, Mr. Speaker, I hope all my colleagues will read this article and take its lesson to heart. Government-managed care, whether of the socialist or corporatist variety, is doomed to failure. Congress must instead restore a true free-market in health care if we are serious about creating conditions under which individuals can receive quality care free of unnecessary interference from third-parties and central planners. [From the Ideas On Liberty, Feb. 2001] Blame Congress for HMOs (By Twila Brase) Only 27 years ago, congressional Republicans and Democrats agreed that American patients should gently but firmly be forced into managed care. That patients do not know this fact is evidenced by public outrage directed at health maintenance organizations (HMOs) instead of Congress. Although members of Congress have managed to keep the public in the dark by joining in the clamor against HMOs, legislative history puts the responsibility and blame squarely in their collective lap. The proliferation of managed-care organizations (MCOs) in general, and HMOs in particular, resulted from the 1965 enactment of Medicare for the elderly and Medicaid for the poor. Literally overnight, on July 1, 1966, millions of Americans lost all financial responsibility for their health- care decisions. Offering ``free care'' led to predictable results. Because Congress placed no restrictions on benefits and removed all sense of cost-consciousness, health-care use and medical costs skyrocketed. Congressional testimony reveals that between 1969 and 1971, physician fees increased 7 percent and hospital charges jumped 13 percent, while the Consumer Price Index rose only 5.3 percent. The nation's health-care bill, which was only $39 billion in 1965, increased to $75 billion in 1971. Patients had found the fount of unlimited care, and doctors and hospitals had discovered a pot of gold. This stampede to the doctor's office, through the U.S. Treasury, sent Congress into a panic. It had unlocked the health-care appetite of millions, and the results were disastrous. While fiscal prudence demanded a hasty retreat, Congress opted instead for deception. Limited by a noninterference promise attached to Medicare law--enacted in response to concerns that government health care would permit rationing--Congress and federal officials had to be creative. Although Medicare officials could not deny services outright, they could shift financial risk to doctors and hospitals, thereby influencing decision-making at the bedside. Beginning in 1971, Congress began to restrict reimbursements. They authorized the economic stabilization program to limit price increases; the Relative Value Resource Based System (RVRBS) to cut physician payments; Diagnostic- Related Groups (DRGs) to limit hospitals payments; and most recently, the Prospective Payment System (PPS) to offer fixed prepayments to hospitals, nursing homes, and home health agencies for anticipated services regardless of costs incurred. In effect, Congress initiated managed care. National Health-Care Agenda Advances Advocates of universal coverage saw this financial crisis as an opportunity to advance Senator Edward M. Kennedy, a longtime advocate of national health care, proceeded to hold three months of extensive hearings in 1971 on what was termed the ``Health Care Crisis in America.'' Following these hearings, he held a series of hearing ``on the whole question of HMO's.'' Introducing the HMO hearings, Kennedy said, ``We need legislation which reorganizes the system to guarantee a sufficient volume of high quality medical care, distributed equitably across the country and available at reasonable cost to every American. It is going to take a drastic overhaul of our entire way of doing business in the health-care field in order to solve the financing and organizational aspects of our health crisis. One aspect of that solution is the creation of comprehensive systems of health-care deliver.'' In 1972, President Richard M. Nixon heralded his desire for the HMO in a speech to Congress: ``the Health Maintenance Organization concept is such a central feature of my National Health Strategy.'' The administration had already authorized, without specific legislative authority, $26 million for 110 HMO projects. That same year, the U.S. Senate passed a $5.2 billion bill permitting the establishment of HMOs ``to improve the nation's health-care delivery system by encouraging prepaid comprehensive health-care programs.'' But what the House of Representatives refused to concur, it was left to the 93rd Congress to pass the HMO Act in 1973. Just before a voice vote passed the bill in the House, U.S. Representative Harley O. Staggers, Sr., of West Virginia said, ``I rise in support of the conference report which will stimulate development of health maintenance organizations. . . . I think that this new system will be successful and give us exciting and constructive alternatives to our existing programs of delivering better health services to Americans.'' In the Senate, Kennedy, author of the HMO Act, also encouraged its passage: ``I have strongly advocated passage of legislation to assist the development of health maintenance organizations as a viable and competitive alternative to fee-for-service practice. . . . This bill represents the first initiative by the Federal Government which attempts to come to grips directly with the problems of fragmentation and disorganization in the health care industry. . . . I believe that the HMO is the best idea put forth so far for containing costs and improving the organization and the delivery of health-care services.'' In a roll call vote, only Senator Herman Talmadge voted against the bill. On December 29, 1973, President Nixon signed the HMO Act of 1973 into law. As patients have since discovered, the HMO--staffed by physicians employed by and beholden to corporations--was not much of a Christmas present or an insurance product. It promises coverage but often denies access. The HMO, like other prepaid MCOs, requires enrollees to pay in advance for a long list of routine and major medical benefits, whether the health-care services are needed, wanted, or ever used. The HMOs are then allowed to manage care--without access to dollars and service--through definitions of medical necessity, restrictive drug formularies, and HMO-approved clinical guidelines. As a result, HMOs can keep millions of dollars from premium-paying patients. HMO Barriers Eliminated Congress's plan to save its members' political skins and national agendas relied on employer-sponsored coverage and taxpayer subsidies to HMOs. The planners' long-range goal was to place Medicare and Medicaid recipients into managed care where HMO managers, instead of Congress, could ration care and the government's financial liability To accomplish this goal, public officials had to ensure that HMOs developed the size and stability necessary to take on the financial risks of capitated government health-care programs. This required that HMOs capture a significant portion of the private insurance market. Once Medicare and Medicaid recipients began to enroll in HMOs, the organizations would have the flexibility to pool their resources, redistribute private premium dollars, and ration care across their patient populations. Using the HMO Act of 1973, Congress eliminated three major barriers to HMO growth, as clarified by U.S. Representative Claude Pepper of Florida: ``First, HMO's are expensive to start; second, restrictive State laws often make the operation of HMO's illegal; and, third, HMO's cannot compete effectively in employer health benefit plans with existing private insurance programs. The third factor occurs because HMO premiums are often greater than those for an insurance plan.'' To bring the privately insured into HMOs, Congress forced employers with 25 or more employees to offer HMOs as an option--a law that remained in effect until 1995. Congress then provided a total of $373 million in federal subsidies to fund planning and startup expenses, and to lower the cost of HMO premiums. This allowed HMOs to undercut the premium prices of their insurance competitors and gain significant market share. In addition, the federal law pre-empted state laws, that prohibited physicians from receiving payments for not providing care. In other words, payments to physicians by HMOs for certain behavior (fewer admissions to hospitals, rationing care, prescribing cheaper medicines) were now legal. The combined strategy of subsidies, federal power, and new legal requirements worked like a charm. Employees searching for the lowest priced comprehensive insurance policy flowed into HMOs, bringing their dollars with them. According to the Health Resources Services Administration (HRSA), the percentage of working Americans with private insurance enrolled in managed care rose from 29 percent in 1988 to over 50 percent in 1997. In 1999, 181.4 million people were enrolled in managed-care plans. Once HMOs were filled with the privately insured, Congress moved to add the publicly subsidized. Medicaid Section 1115 waivers allowed states to herd Medicaid recipients into HMOs, and Medicare+Choice was offered to the elderly. By June 1998, over 53 percent of Medicaid recipients were enrolled in managed-care plans, according to HRSA. In addition, about 15 percent of the 39 million Medicare recipients were in HMOs in 2000. HMOs Serve Public-Health Agenda Despite the public outcry against HMOs, federal support for managed care has not waned. In August 1998, HRSA announced the creation of a Center for Managed Care to provide ``leadership, coordination, and advancement of managed care systems . . . [and to] develop working relationships with the private managed care industry to assure mutual areas of cooperation.'' The move to managed care has been strongly supported by public-health officials who anticipate that public-private partnerships will provide funding for public-health infrastructure and initiatives, along with access to the medical records of private patients. The fact that health care is now organized in large groups by companies that hold millions of patient records and control literally hundreds of millions of health-care dollars has allowed unprecedented relationships to form between governments and health plans. For example, Minnesota's HMOs, MCOs, and nonprofit insurers are required by law to fund public-health initiatives approved by the Minnesota Department of Health, the state regulator for managed care plans. The Blue Cross-Blue Shield tobacco lawsuit, which brought billions of dollars into state and health-plan coffers, is just one example of the you- scratch-my-back-I'll-scratch-yours initiatives. Yet this hidden tax, which further limits funds available for medical care, remains virtually unknown to enrollees. Federal officials, eager to keep HMOs in business, have even been willing to violate federal law. In August 1998, a federal court chided the U.S. Department of Health and Human Services for renewing HMO contracts that violate their own Medicare regulations. The Ruse of Patient protection Truth be told, HMOs allowed politicians to promise access to comprehensive health-care services without actually delivering them. Because treatment decisions could not be linked directly to Congress, HMOs provided the perfect cover for its plans to contain costs nationwide through health-care rationing. Now that citizens are angry with managed (rationed) care, the responsible parties in Congress, Senator Kennedy in particular, return with legislation ostensibly to protect patients from the HMOs they instituted. At worst, such offers are an obfuscation designed to entrench federal control over health care through the HMOs. At best they are deceptive placation. Congress has no desire to eliminate managed care, and federal regulation of HMOs and other managed-care corporations will not protect patients from rationing. Even the U.S. Supreme Court acknowledged in its June 12, 2000, Pegram v. Herdrich decision that to survive financially as Congress intended, HMOs must give physicians incentives to ration treatment. Real patient protection flows from patient control. Only when patients hold health-care dollars in their own hands will they experience the protection and power inherent in purchasing their own insurance policies, making cost- conscious health-care decisions, and inciting cost-reducing competition for the cash. What could be so bad about that? A lot, it seems. Public officials worry privately that patients with power may not choose managed-care plans, eventually destabilizing the HMOs Congress is so dependent on for cost containment and national health-care initiatives. Witness congressional constraints on individually owned, tax-free medical savings accounts and the reluctance to break up employer-sponsored coverage by providing federal tax breaks to individuals. Unless citizens wise up to Congress's unabashed but unadvertised support for managed care, it appears unlikely that real patient power will rise readily to the top of its agenda.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I rise to introduce the Workers Access to Accountable Governance in Employment (WAGE) Act. This bill takes a first step toward restoring the rights of freedom of association and equal protection under the law to millions of American workers who are currently denied these rights by federal law. The WAGE Act simply gives workers the same rights to hold decertification elections as they have to hold certification elections. Currently, while workers in this country are given the right to organize and have union certification elections each year, provided that 30 percent or more of the workforce wish to have them, workers are not given an equal right to have a decertification election, even if the same requirements are met. As a result of the National Labor Relations Board (NLRB) created contract-bar rule, if 30 percent or more of a bargaining unit wants to hold an election to decertify a union as their representative, they are prohibited from doing so unless the contract is in at least its third year. In other words, it does not matter whether or not workers want to continue to have the union as their representative. It does not matter whether or not the union represents the will of the workers. It does not even matter if the majority of the current workforce voted for union representation. They must accept that representation. Mr. Speaker, this is absurd. The lowest criminal in this country has the right to change their representative in the courtroom. Yet millions of hardworking, law-abiding citizens cannot change their representation in the workplace. As a result of the passage of the National Labor Relations Act (NLRA) in 1935 and the action taken by the federally-funded NLRB, workers can be forced to pay union dues or fees for unwanted representation as a condition of employment. Federal law may even force workers to accept union representation against the will of the majority of workers. Talk about taxation without representation! Mr. Speaker, the WAGE Act takes a step toward returning a freedom to workers that they never should have lost in the first place: the right to choose their own representative. I urge my colleagues to support the nonpartisan, pro- worker WAGE Act.

Mr. PAUL

Mr. PAUL. Mr. Speaker, today I reluctantly rise in opposition to H. Res. 34. This resolution is unclear and, hence, leaves the ability for much mischief. As the resolution's introductory sentence makes clear, this legislation is considered for ``other purposes,'' which is to say, unspecified purposes. Certainly Israel has been a longstanding friend to the United States, sharing many of our interests including peace, open trade, and free movement across international borders. It is equally clear that the people of Israel and the Middle East have long been torn by violence and, as such, share our desire to seek peace. We should, in fact, call for an end to the violence and hope all parties will see why this must be achieved. We are also right to congratulate Mr. Sharon, as is customary to be done with the victor of any election. We have all fought those battles ourselves and rightly understand the commitment needed to succeed in that arena. What then is the problem with this resolution? In fact, there are two problems and they are closely related. The substantive problem here is summed up in that last clause which ``restates the commitment of the United States to a secure peace for Israel.'' Certainly we wish peace upon all the people of the world, and in this sense, we are committed to peace. However, we must ask what other sorts of commitments are implied here. The vagary of this resolution leaves open the possibility that those who support it are endorsing unwise and constitutionally- suspect financial and military commitments abroad. Moreover, peace will not best be secured for Israel by the further injection of the United States into regional affairs; rather, it will come when Israel has the unfettered sovereignty necessary to protect its own security. As written, this resolution can be interpreted as an endorsement of unconstitutional acts of aggression upon Israel's sovereignty. In this I cannot engage. Thus, it is the less-than-clear nature of the resolution upon which we are voting that makes it necessary for me to object. This brings me to the second problem, the procedural laxity involved here. This resolution was submitted by a number of distinguished members and referred to the Committee on International Relations. The highly-regarded chairman of that committee is the primary sponsor of this legislation and a number of other committee members are among its original cosponsors. Nonetheless, a number of other members of the committee and I were not included in the process. Perhaps, had this bill traveled through the commonly established processes of this institution we would have had the ability to clarify the ``commitments'' and ``other purposes'' to which this bill refers. In short, had the committee held a hearing and mark-up, the vagaries could've been removed in the markup process. In such an instance it would be likely that we could achieve the kind of unanimous support for these resolutions, for which I often hear personal appeals. In the future, those who are interested in gaining such unanimous support might consider these procedural concerns if they seek unanimity on this floor. In the instant case, however I must vote ``no'' for the reasons I have here expressed. Hopefully these reasons will be considered so that in future instances the opportunity to make clarifications will be offered to those duly-elected members of the committees of this House.

Mr. PAUL

Mr. PAUL. Mr. Speaker, many government and Federal Reserve officials have repeatedly argued that we have no inflation to fear; yet those who claim this define inflation as rising consumer and producer prices. Although inflation frequently leads to price increases, we must remember that the free market definition of inflation is the increase in supply of money and credit. Monetary inflation is seductive in that it can cause great harm without significantly affecting government price indices. The excess credit may well go into the stock market and real estate speculation, with consumer price increases limited to such things as energy, repairs, medical care and other services. One should not conclude, as so many have in the past decade, that we have no inflation to worry about. Imbalances did develop with the 1990s monetary inflation, but were ignored. They are now becoming readily apparent as sharp adjustments take place, such as we have seen in the past year with the NASDAQ. When one is permitted to use rising prices as the definition for inflation, it is followed by a nonsensical assumption that a robust economy is the cause for rising prices. Foolish conclusions of this sort lead our economic planners and Federal Reserve officials to attempt to solve the problem of price and labor cost inflation by precipitating an economic slowdown. Such a deliberate policy is anathema to a free market economy. It is always hoped that the planned economic slowdown will not do serious harm, but this is never the case. The recession, with rising prices, still comes. That is what we are seeing today. Raising interest rates six times in 1999 to 2000 has had an effect, and the central planners are now worried. Falsely, they believe that if only the money spigot is once again turned on, all will be well. That will prove to be a pipe dream. It is now recognized that indeed the economy has sharply turned downward, which is what was intended. But can the downturn be controlled? Not likely. And inflation, by even the planners' own definition, is raising its ugly head. For instance, in the fourth quarter of last year, labor costs rose at an annualized rate of 6.6 percent, the biggest increase in 9 years. What is happening to employment conditions? They are deteriorating rapidly. Economist Ed Hyman reported that 270,000 people lost their jobs in January, a 678 percent increase over a year ago. A growing number of economists are now doubtful that private growth will save us from the correction that many free market economists predicted would come as an inevitable consequence of the interest rate distortion that Federal Reserve policy causes. Instead of blind faith in the Federal Reserve to run the economy, we should become more aware of Congress' responsibility for maintaining a sound dollar and removing the monopoly power of our central bank to create money and credit out of thin air, and to fix short-term interest rates, which is the real cause of our economic downturns. Between 1995 and today, Greenspan increased the money supply, as measured by MZM, by $1.9 trillion, or a 65 percent increase. There is no reason to look any further for the explanation of why the economy is slipping, with labor costs rising, energy costs soaring, and medical and education costs skyrocketing, while the stock market is disintegrating. Until we look at the unconstitutional monopoly power the Federal Reserve has over money and credit, we can expect a continuation of our problems. Demanding lower interest rates is merely insisting the Federal Reserve deliberately create even more credit, which caused the problem in the first place. We cannot restore soundness to the dollar by debasing the dollar, which is what lowering interest rates is all about, printing more money. When control is lost in a sharp downturn, dealing with it by massive monetary inflation may well cause something worse than the stagflation that we experienced in the 1970s; an inflationary recession or depression could result. This need not happen, and will not if we demand that our dollar not be casually and deliberately debased by our unaccountable Federal Reserve.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I highly recommend the attached article ``Know Your Customer'' by Christoper Whalen, which recently appeared in Barron's, to my colleagues. This article examines the horrors faced by victims of America's fastest-growing crime: identity theft. As the article points out, millions of Americans have suffered deep financial losses and the destruction of their credit history because of identity theft. Victims of identity theft often discover that the process of reestablishing one's good reputation resembles something out of a Kafka novel. identity fraud also effects numerous businesses which provide credit to unscrupulous individuals based on a stolen credit history. Just last year, American businesses and consumers lost 25 billion dollars to identity thieves! Mr. Whalen properly identifies the Social Security number and its use as a universal identifier as the root cause of identity theft. Unfortunately, thanks to Congress, today no American can get a job, open a bank account, or even go fishing without showing their Social Security number. Following the lead of the federal government, many private industries now use the Social Security number as an identifier. After all, if a bank needs to see their customers' Social Security number to comply with IRS regulations, why shouldn't the bank use the Social Security number as a general customer identifier? In order to end this government-facilitated identity theft, I have introduced the Identity Theft Prevention Act (H.R. 220). This act requires the Social Security Administration to issue new, randomly- generated Social Security numbers to all citizens within five years of enactment. The Social Security Administration would be legally forbidden to give out the new number for any purpose not related to Social Security administration. Numbers issued prior to implementation of this legislation would have no legal value as an identifier-- although the Social Security Administration could continue to use the old numbers to cross reference an individual's records to ensure smooth administration of the Social Security system. This act also forbids the federal government from creating national ID cards or establishing any identifiers for the purpose of investigating, monitoring, overseeing, or regulating private transactions between American citizens, as well as repealing those sections of the Health Insurance Portability and Accountability Act of 1996 that require the Department of Health and Human Services to establish a uniform standard health identifier. By putting an end to government-mandated uniform IDs, the Identity Theft Prevention Act will prevent millions of Americans from having their liberty, property and privacy violated by private-and-public sector criminals. I urge my colleagues to read the attached article and act to repeal government policies which facilitate identity theft by cosponsoring the Identity Theft Prevention Act. [From Barrons, January 15, 2001] Know Your Customer Lenders increasingly are paying for ignoring that maxim (By Christopher Whalen) High-yield paper is out of favor with Wall Street as an economic slowdown raises concerns about credit quality. One in five issuers have paper trading at distressed levels. Consumer lenders are under particular pressure due to worries about a looming recession. But investors in companies that make consumer loans should worry about more than a slowing economy. Consumer lenders write off an average of 6% of loans each year. That's a bad enough record, but investors ought to realize that the industry's own sloppy screening practices contribute significantly to the losses. Identity theft is the fastest-growing crime in America and costs companies $25 billion last year. Much of the cause lies with one factor completely avoidable by lenders; the use of Social Security numbers as identifiers. One of my in-laws--I will call her Jean to protect what remains of her privacy--was the victim of identity theft in 1999. Jean is a teacher who lives in Westchester County, New York, and drives a Volvo. She and her husband have perfect credit. About a year ago, Jean called in a panic, saying that her bank had frozen the family checking account because someone had a judgment against her. Being the banker in the family, I agreed to act for Jean. What I discovered during more than a year of investigation was a personal outrage and an investor's nightmare. Every investor who buys securities back by consumer loans or the equity of companies that are significantly involved in the consumer-loan business should think twice before investing in such paper. One of the world's biggest nonbank financial firms--wee'll call it Megacorp--provided credit to a criminal who used Jean's Social After the perpetrator defaulted on the loan payments, Megacorp obtained a judgment against the alias. Using the Social Security number, Megacorp's agents found Jean's family checking account at a big New York commercial bank. Even though the name and address were clearly wrong, Jean's bank enforced a garnishment order from Megacorp and froze $5,000 in the account. I contacted the police and Secret Service, who were familiar with the Bronx address used to commit the fraud against Megacorp. I then called and wrote to the lawyer for Megacorp, a lowbrow law firm and collection agency that handles hundreds of such claims per month. I explained that Jean was the victim of identity theft and that Megacorp wrongly garnished her bank account. Lawyers for Megacorp refused to back off and responded with a torrent of verbal abuse, accusing Jean of committing other misdemeanors. The law firm used a similar tone in telephone calls to Jean's mother. We responded by filing with the court a strongly worded show cause motion, as well as a motion seeking sanctions. Megacorp's attorneys subsequently began to back-pedal and eventually withdrew the garnishment. The cost of this exercise was roughly $1,500 in legal fees, plus the time to draft documents and letters, and two visits to the Bronx Civil Court, a venue too near Yankee Stadium for comfort. I contacted Megacorp and the three major credit reporting agencies, Experian, TransUnion and Equifax. I asked how a criminal using a dubious Bronx mailing address and a false, oddly spelled name could obtain credit using the Social Security number and non- existent credit history of a middle-class woman who lives in Westchester. On examining Jean's credit reports, I discovered that it was Megacorp, after extending credit to the Bronx delinquent, that reported the false name and new address to Experian linked to Jean's Social Security number. The alias and new address were automatically added to Jean's credit history without any verification whatsoever. By making the false report to Experian, Megacorp apparently created a window of opportunity, enabling the Bronx lawbreaker to open accounts with Home Depot, Exxon, and AT&T Wireless, eventually involving over $10,000 in bad debt. I contacted these vendors to correct their misimpression that Jean was their customer. Significantly, neither Megacorp nor Experian nor any of the other credit reporting agencies attempted to contact Jean to verify the significant change in name and address reported by Megacorp. I confronted representatives of Experian and the other credit agencies about the false information place in Jean's credit report, yet they disclaimed any responsibility for the validity of the information. Representatives of Experian say they aren't responsible for the accuracy of the data provided by financial institutions and that they don't even review the information. ``The banks do that,'' they asserted. Experian's representatives were courteous, however, and amended the reports after we provided copies of the relevant court documents. Megacorp continued to send Jean demand letters from various collection agencies for months after my first telephone and written responses. I kept on asking: How could anyone of even minimal competence look at the credit reports from Experian and other agencies and approve credit to the fictions Bronx resident? Answer: The credit report tied to Jean's Social Security number wasn't reviewed. One Megacorp representative told me unofficially that the Social Security number was simply checked for defaults, judgments, etc., and when it came up clean--the number, not the name and not the application--the credit was approved. The Secret Service agent in White Plains, New York, who took the report on Jean's experience confirmed that he sees dozens of such cases every month in which Social Security numbers are used to commit fraud. The perpetrators are rarely caught. Lenders and the providers of credit information have created a system that is inadequate to its purpose if a valid Social Security number and a couple of other pieces of information are sufficient to defeat most credit controls. Lenders may complain that it would be too costly to manually screen applicants and verify identities, but how much more costly would it be if they had to bear the costs they now push off onto Jean and other victims of fraud? Financial author Martin Mayer rightly says that there are no economies of scale in banking, but the loan approval operation of too many consumer lenders suggests there are dis-economies of scale. It seems that the bigger a bank gets, the sloppier it gets. To maximize revenue growth and control costs, consumer lenders use statistical screening tools and computer models to make credit decisions. In other words, they use the law of large numbers and simply roll the dice. If a criminal finds a Social Security number with a clean history, he's off to the races. Eliminating the use of Social Security numbers as identifiers by law seems like a logical solution. Texas Rep. Ron Paul has introduced legislation to prohibit the commercial use of Social Security numbers as identifiers, but Congress needs to more thoroughly examine the issue. Even if Social Security did not exist, the financial system would invent another system of universal identification. Congress should place the blame where it belongs, on the lenders and credit bureaus. It should require credit bureaus to obtain written affirmation from consumers prior to accepting a change in the name, address or other details on a credit history. Lenders should be held liable for reporting false information to credit bureaus, especially in cases where false reports lead to acts of financial fraud. Additionally, Congress needs to afford consumers greater protection from asset seizures based solely on Social Security numbers. We are, after all, innocent until proven guilty. A bank or Megacorp that treats us otherwise has committed a gross injustice. And it--not we--should pay.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I have asked for this special order today to express my concerns for our foreign policy of interventionism that we have essentially followed throughout the 20th century. Mr. Speaker, foreign military interventionism, a policy the U.S. has followed for over 100 years, encourages war and undermines peace. Even with the good intentions of many who support this policy, it serves the interests of powerful commercial entities. Perpetual conflicts stimulate military spending. Minimal and small wars too often get out of control and cause more tragedy than originally anticipated. Small wars, like the Persian Gulf War, are more easily tolerated, but the foolishness of an out of-control war like Vietnam is met with resistance from a justifiably aroused Nation. But both types of conflicts result from the same flawed foreign policy of foreign interventionism. Both types of conflict can be prevented. National security is usually cited to justify our foreign involvement, but this excuse distracts from the real reason we venture so far from home. Influential commercial interests dictate policy of when and where we go. Persian Gulf oil obviously got more attention than genocide in Rwanda. If one were truly concerned about our security and enhancing peace, one would always opt for a less militaristic policy. It is not a coincidence that U.S. territory and U.S. citizens are the most vulnerable in the world to terrorist attacks. Escalation of the war on terrorism and not understanding its causes is a dangerous temptation. Not only does foreign interventionism undermine chances for peace and prosperity, it undermines personal liberty. War and preparing for war must always be undertaken at someone's expense. Someone must pay the bills with higher taxes, and someone has to be available to pay with their lives. It is never the political and industrial leaders who promote the policy who pay. They are the ones who reap the benefits, while at the same time arguing for the policy they claim is designed to protect freedom and prosperity for the very ones being victimized. Many reasons given for our willingness to police the world sound reasonable: We need to protect our oil; we need to stop cocaine production in Colombia; we need to bring peace in the Middle East; we need to punish our adversaries; we must respond because we are the sole superpower, and it is our responsibility to maintain world order; it is our moral obligation to settle disputes; we must follow up on our dollar diplomacy after sending foreign aid throughout the world. In the old days, it was, we need to stop the spread of communism. The excuses are endless. But it is rarely mentioned that the lobbyists and the proponents of foreign intervention are the weapons manufacturers, the oil companies, and the recipients of huge contracts for building infrastructures in whatever far corners of the Earth we send our troops. Financial interests have a lot at stake, and it is important for them that the United States maintains its empire. Not infrequently, ethnic groups will influence foreign policy for reasons other than preserving our security. This type of political pressure can at times be substantial and emotional. We often try to please too many, and by doing so support both sides of conflicts that have raged for centuries. In the end, our effort can end up unifying our adversaries while alienating our friends. Over the past 50 years, Congress has allowed our Presidents to usurp the prerogatives the Constitution explicitly gave only to the Congress. The term ``foreign policy'' is never mentioned in the Constitution, and it was never intended to be monopolized by the President. Going to war was to be strictly a legislative function, not an executive one. Operating foreign policy by executive orders and invoking unratified treaties is a slap in the face to the rule of law and our republican form of government. But that is the way it is currently being done. U.S. policy over the past 50 years has led to endless illegal military interventions, from Korea to our ongoing war with Iraq and military occupation in the Balkans. Many Americans have died and many others have been wounded or injured or have just simply been forgotten. Numerous innocent victims living in foreign lands have died as well from the bombings and the blockades we have imposed. They have been people with whom we have had no fight but who were trapped between the bad policy of their own leaders and our eagerness to demonstrate our prowess in the world. Over 500,000 Iraqi children have reportedly died as a consequence of our bombing and denying food and medicine by our embargo. For over 50 years, there has been a precise move towards one-world government at the expense of our own sovereignty. Our Presidents claim that our authority to wage wars come from the United Nations or NATO resolution, in contradiction to our Constitution and everything our Founding Fathers believed. U.S. troops are now required to serve under foreign commanders and wear U.N. insignias. Refusal to do so prompts a court-martial. The past President, before leaving office, signed the 1998 U.N.-Rome treaty indicating our willingness to establish an international criminal court. This gives the U.N. authority to enforce global laws against Americans if ratified by the Senate. But even without ratification, we have gotten to the point where treaties of this sort can be imposed on non-participating nations. Presidents have, by executive orders, been willing to follow unratified treaties in the past. This is a very dangerous precedent. We already accept the international trade court, the WTO. Trade wars are fought with the court's supervision, and we are only too ready to rewrite our tax laws as the WTO dictates. The only portion of the major tax bill at the end of the last Congress to be rushed through for the President's signature was the foreign sales corporation changes dictated to us by the WTO. For years the U.S. has accepted the international financial and currency management of the IMF, another arm of one-world government. The World Bank serves as the distributor of international welfare, of which the U.S. taxpayer is the biggest donor. This organization helps carry out a policy of taking money from poor Americans and giving it to rich foreign leaders, with kickbacks to some of our international corporations. Support for the World Bank, the IMF, the international criminal court, always comes from the elites and almost never from the common man. These programs, run by the international institutions, are supposed to help the poor, but they never do. It is all a charade. If left unchecked, they will bankrupt us and encourage more world government mischief. It is the responsibility of Congress to curtail this trend by reestablishing the principles of the U.S. Constitution and our national sovereignty. It is time for the United States to give up its membership in all these international organizations. Our foreign policy has led to an incestuous relationship between our military and Hollywood. In December, our Secretary of Defense used $295,000 of taxpayers' money to host a party in Los Angeles for Hollywood bigwigs. Pentagon spokesman Kenneth Bacon said it was well worth it. The purpose was to thank the movie industry for putting the military in a good light. A similar relationship has been reported with TV stations licensed by the U.S. Government. They have been willing to accept suggestions from the government to place political messages in their programming. This is a dangerous trend, mixing government and the media. Here is where real separation is needed. Our policy should change for several reasons. It is wrong for our foreign policy to serve any special interest, whether it is for financial benefits, ethnic pressures, or some contrived moral imperative. Too often the policy leads to an unintended consequence, and more people are killed and more property damaged than was intended. Controlling world events is never easy. It is better to avoid the chance of one bad decision leading to another. The best way to do that is to follow the advice of the Founders and avoid all entangling alliances, and pursue a policy designed solely to protect U.S. national security interests. The two areas in the world that currently present the greatest danger to the United States are Colombia and the Middle East. For decades we have been engulfed in the ancient wars of the Middle East by subsidizing and supporting both sides. This policy is destined to fail. We are in great danger of becoming involved in a vicious war for oil, as well as being drawn into a religious war that will not end in our lifetime. The potential for war in this region is great, and the next one could make the Persian Gulf War look small. Only a reassessment of our entire policy will keep us from being involved in a needless and dangerous war in this region. It will be difficult to separate any involvement in the Balkans from a major conflict that breaks out in the Middle East. It is impossible for us to maintain a policy that both supports Israel and provides security for western-leaning secular Arab leaders, while at the same time taunting the Islamic fundamentalists. Push will come to shove, and when that happens in the midst of an economic crisis, our resources will be stretched beyond the limit. This must be prevented. Our involvement in Colombia could easily escalate into a regional war. For over 100 years, we have been involved in the affairs of Central America, but the recent escalation of our presence in Colombia is inviting trouble for us. Although the justification for our enhanced presence is the war on drugs, protecting U.S. oil interests and selling helicopters are the real reasons for the last year's $1.3 billion emergency funding. Already neighboring countries have expressed concern about our presence in Colombia. The U.S. policymakers gave their usual response by promising more money and support to the neighboring countries that feel threatened. Venezuela, rich in oil, is quite nervous about our enhanced presence in the region. Their foreign minister stated that if any of our ships enter the Gulf of Venezuela, they will be expelled. This statement was prompted by an overly aggressive U.S. Coast Guard vessel intrusion into Venezuela's territorial waters on a drug expedition. I know of no one who believes this expanded and insane drug war will do anything to dampen drug usage in the United States, yet it will cost us plenty. Too bad our political leaders cannot take a hint. The war effort in Colombia is small now, but under current conditions, it will surely escalate. This is a 30-year-old civil war being fought in the jungles of South America. We are unwelcome by many, and we ought to have enough sense to stay out of it. Recently, new policy has led to the spraying of herbicides to destroy the coca fields. It has already been reported that the legal crops in the nearby fields have been destroyed, as well. This is no way to win friends around the world. There are many other areas of the world where we ought to take a second look and then come home. Instead of bullying the European Union for wanting to have their own rapid deployment force, we should praise them and bring our troops home. World War II has been over for 55 years. It is time we look at Korea and ask why we have to broker, with the use of American dollars and American soldiers, the final settlement between North and South Korea. Taiwan and China are now trading and investing in each other's country. Travel restrictions have been recently liberalized. It is time for us to let the two of them settle their border dispute. We continue to support Turkey with dollars and weapons. We once supported Iraq with the same. Now, we permit Turkey, armed with American weapons, to kill Kurds in Iraq, while we bomb the Iraqis if they do the same. It makes no sense. Selling weapons to both factions of almost all the major conflicts of the past 50 years reveals that our involvement is more about selling weapons than spreading the message of freedom. That message can never be delivered through force to others over their objection. Only a policy of peace, friendship, trade, and our setting a good example can inspire others to look to what once was the American tradition of liberty and justice for all. Entangling alliances will not do it. It is time for Congress and the American people to wake up. The political system of interventionism always leads to social discord. Interventionism is based on relative rights, majoritarianism, and disrespect for the Constitution. Degenerating moral standards of the people encourages and feeds on this system of special interest favoritism, all of which contributes to the friction. Thomas Jefferson was worried that future generations might one day squander the liberties the American Revolution secured. Writing about future generations, Jefferson wondered if, in the enjoyment of plenty, they would lose the memory of freedom. He believed material abundance without character is the path to destruction. The challenge to America today is clearly evident. We lack character. And we also suffer from the loss of respect, understanding, and faith in the liberty that offers so much. The American Republic has been transformed and only a remnant remains. It appears that, in the midst of plenty, we have forgotten about freedom. We have just gone through a roaring decade with many Americans enjoying prosperity beyond their wildest dreams. Because this wealth was not always earned and instead resulted from borrowing, speculation and inflation, the correction that is to come will contribute to the social discord already inherent in a system of government interventionism. If indeed the economy enters a severe recession, which is highly possible, it will compound the problems characteristic of a system that encourages government supervision over all that we do. Conflicts between classes, races and ethnic groups and even generations are already apparent. This is a consequence of pitting workers and producers against the moochers and the special-interest rich. Divvying up half of the GDP through a process of confiscatory taxation invites trouble. It is more easily tolerated when wealth abounds. But when the economy slips, quiescent resentment quickly turns to noisey confrontation. Those who feel slighted become more demanding at the same time resources are diminished. But the system of government we have become accustomed to have has for decades taken over responsibilities that have never intended to be the prerogative of the Federal Government under the Constitution. Although mostly well-intended, the efforts at social engineering have caused significant damage to our constitutional republic and have resulted in cynicism toward all politicians. Our presidents now are elected by less than 20 percent of those old enough to vote. Government is perceived to be in the business of passing out favors rather than protecting individual liberty. The majority of the people are made up of independents and non-voters. The most dramatic change in the 20th century social attitudes was the acceptance of abortion. This resulted from a change in personal morality that then led to legislation nationally through the courts and only occurred by perverting our constitutional system of government. The Federal costs should never have been involved, but the Congress compounded the problem by using taxpayers' funds to perform abortions both here and overseas. Confrontation between the pro-life and pro- abortion forces is far from over. If governments were used only to preserve life rather than act as an accomplice in the taking of life, this conflict would not nearly be so rancorous. Once a society and a system of laws deny the importance of life, privacy and personal choices are difficult to protect. Since abortions have become commonplace, it has been easier to move the issue of active euthanasia to center stage. As Government budgets become more compromised, economic arguments will surely be used to justify reasonable savings by not wasting vital resources on the elderly. Issues like abortion and euthanasia do not disappear in a free society but are handled quite differently. Instead of condoning or paying for such act, the State is responsible for protecting life rather than participating in taking it. This is quite a different role for Government than we currently have. We can expect the pro-life and pro-abortion and euthanasia groups to become more vocal and confrontational in time as long as Government is used to commit acts that a large number of people find abhorrent. Partial-birth abortion dramatize the issue at hand and clearly demonstrates how close we are to legalizing infanticide. This problem should be dealt with by the States and without the Federal courts or the U.S. Congress involvement. The ill-conceived drug war of the past 30 years has caused great harm to our society. It has undermined privacy and challenged the constitutional rights of all our citizens. The accelerated attack on drug usage seen since the early 1970s has not resulted in any material benefit. Over $300 billion has been spent on this war, and we are less free and poorer because of it. Civil liberties are sacrificed in all wars, both domestic and foreign. It is clear that even if it were a legitimate function for Government to curtail drug usage, eliminating bad habits through Government regulation is not achievable. Like so much else the Government tries to do, the harm done is not always evenly distributed. Some groups suffer more than others, further compounding the problem by causing dissention and distrust. Anthony Lewis of The New York Times reported last year, ``The 480,000 men and women now in U.S. prisons on drug charges are 100,000 more than all prisoners in the European Union, where the population is 100 million more than ours.'' There are 10 times the number of prisoners for drug offenses than there were in 1980, and 80 percent of the drug arrests are for nonviolent possession. In spite of all the money spent and energy wasted, drug usage continues at a record pace. Some day we must wake up and realize the Federal drug war is a farce, it has failed, and we must change our approach. As bad as drug addiction is and the harm it causes, it is minuscule compared to the dollar cost, the loss of liberty and social conflict that results from our ill-advised drug war. Mandatory drug sentencing have done a great deal of harm by limiting the discretion that judges could use in sentencing victims in this drug war. Congress should repeal or change these laws just as we found it beneficial to modify seizure and for forfeiture laws 2 years ago. The drug laws, I am sure, were never meant to be discriminatory. Yet they are. In Massachusetts, 82.9 percent of the drug offenders are minorities, but they make up only 9 percent of the State population. The fact that crack-cocaine users are more likely to land in prison than powder- cocaine users and with harsher sentences discriminates against black Americans. A wealthy suburbanite caught using drugs is much less likely to end up in prison than someone from the inner city. This inequity adds to the conflict between races and between the poor and the police. And it is so unnecessary. There are no documented benefits from the drug war. Even if reduction in drug usage could have been achieved, the cost in dollars and loss of liberty would never have justified it. But we do not have that to deal with since drug usage continues to get worse. In addition, we have all the problems associated with the drug war. The effort to diminish the use of drugs and to improve the personal habits of some of our citizens has been the excuse to undermine our freedoms. Ironically, we spend hundreds of billions of dollars waging this dangerous war on drugs while Government educational policies promote a huge and dangerous overusage of Ritalin. This makes no sense whatsoever. Seizure and forfeiture laws, clearly in violation of the Constitution, have served as a terrible incentive for many police departments to raise money for law enforcement projects outside the normal budgeting process. Nationalizing the police force for various reasons is a trend that should frighten all Americans. The drug war has been the most important factor in this trend. Medicinal use of illegal drugs, in particular, marijuana, has been prohibited and greater human suffering has resulted. Imprisoning a person who is dying from cancer and AIDS for using his own self- cultivated marijuana is absolutely bizarre and cruel. All addiction, alcohol and illegal drugs, should be seen as a medical problem, not a legal one. Improving behavior just for the sake of changing unpopular habits never works. It should never be the responsibility of government to do so. When government attempts to do this, the government and its police force become the criminals. When someone under the influence of drugs, alcohol, also a drug, or even from the lack of sleep, causes injury to another, local law enforcement officials have a responsibility. This is a far cry from the Justice Department using Army tanks to bomb the Davidians because Federal agents claimed an amphetamine lab was possibly on the premises. An interventionist government, by its nature, uses any excuse to know what the people are doing. Drug laws are used to enhance the IRS agent's ability to collect every dime owed the government. These laws are used to pressure Congress to use more dollars for foreign military operations in places, such as Colombia. Artificially high drug prices allow governments to clandestinely participate in the drug trade to raise funds to fight the secret controversial wars with off-budget funding. Both our friends and foes depend on the drug war at times for revenue to pursue their causes, which frequently are the same as ours. The sooner we wake up to this seriously flawed approach to fighting drug usage, the better. The notion that the Federal Government has an obligation to protect us from ourselves drives the drug war. But this idea also drives the do-gooders in Washington to involve themselves in every aspect of our lives. American citizens cannot move without being constantly reminded by consumer advocates, environmentalists, safety experts and bureaucratic busybodies what they can or cannot do. Once government becomes our protector, there are no limits. Federal regulations dictate the amount of water in our commodes and the size and shape of our washing machines. Complicated USDA regulations dictate the size of the holes in Swiss cheese. We cannot even turn off our automobile air bags when they present a danger to a child without Federal permission. Riding in a car without a seatbelt may be unwise, but should it be a federal crime? Why not make us all wear rib pads and football helmets that would reduce serious injuries and save many dollars for the government health system. Regulations on holistic medicine, natural remedies, herbs and vitamins are now commonplace and continue to grow. Who gave the Government the right to make these personal decisions for us? Are the people really so ignorant that only the politicians and bureaucrats can make these delicate decisions for them? Today, if a drug shows promise for treating a serious illness and both patient and doctor would like to try it on an experimental basis, permission can be given only by the FDA and only after much begging. Permission frequently is not granted, even if the dying patient is pleading to take the risk. The Government is not anxious to give up any of its power to make these decisions. People in Government think that is what they are supposed to do for the good of the people. Free choice is what freedom is all about and it means freedom to take risks, as well. As a physician deeply concerned about the health of all Americans, I am convinced that the Government encroachment into the health care choices has been very detrimental. There are many areas where the Federal Government has been involved when they should not have and created more problems than it solved. There is no evidence that the Federal Government has improved education or medicine in spite of the massive funding and mandates of the last 40 years, yet all we hear is a call for increased spending and more mandates. How bad will it get before we reject the big government approach is anybody's guess. Welfarism and government interventionism are failed systems and always lead to ever more intrusive government. The issue of privacy is paramount. Most Americans and Members of Congress recognize the need to protect everyone's privacy. But the loss of privacy is merely the symptom of an authoritarian government. Effort can and should be made, even under today's circumstances, to impede the Government's invasion of privacy. But we must realize that our privacy and our liberty will always be threatened as long as we instruct our Government to manage a welfare state and to operate a foreign policy as if we are the world's policemen. If the trends we have witnessed over the past 70 years are not reversed, our economic and political system will soon be transposed into a fascist system. The further along we go in that direction, the more difficult it becomes to reverse the tide without undue suffering. This cannot be done unless respect for the rule of law is restored. That means all public officials must live up to their promise to follow the written contract between the people and the Government, the U.S. Constitution. For far too long, we have accepted the idea that government can and should take care of us. But that is not what a free society is all about. When government gives us something, it does two bad things. First, it takes it from someone else; second, it causes dependency on government. A wealthy country can do this for long periods of time, but eventually the process collapses. Freedom is always sacrificed and eventually the victims rebel. As needs grow, the producers are unable or unwilling to provide the goods the government demands. Wealth then hides or escapes, going underground or overseas, prompting even more government intrusion to stop the exodus from the system. This only compounds the problem. Endless demands and economic corrections that come with the territory will always produce deficits. An accommodating central bank then is forced to steal wealth through the inflation tax by merely printing money and creating credit out of thin air. Even though these policies may work for awhile, eventually they will fail. As wealth is diminished, recovery becomes more difficult in an economy operating with a fluctuating fiat currency and a marketplace overly burdened with regulation, taxes and inflation. The time to correct these mistakes is prior to the bad times, before tempers flare. Congress needs to consider a new economic and foreign policy. Why should any of us be concerned about the future, especially if prosperity is all around us? America has been truly blessed. We are involved in no major military conflicts. We remain one of the freest nations on Earth. Current economic conditions have allowed for low unemployment and a strong dollar, with cheap purchases from overseas further helping to keep price inflation in check. Violent crimes have been reduced; and civil disorder, such as we saw in the 1960s, is absent. We have good reason to be concerned for our future. Prosperity can persist, even after the principles of a sound market economy have been undermined; but only for a limited period of time. Our economic, military, and political power, second to none, has perpetuated a system of government no longer dependent on the principles that brought our Republic to greatness. Private-property rights, sound money and self-reliance have been eroded; and they have been replaced with welfarism, paper money, and collective management of property. The new system condones special-interest cronyism and rejects individualism, profits and voluntary contracts. Concern for the future is real, because it is unreasonable to believe that the prosperity and relative tranquility can be maintained with the current system. Not being concerned means that one must be content with the status quo and that current conditions can be maintained with no negative consequences. That, I maintain, is a dream. There is growing concern about our future by more and more Americans. They are especially concerned about the moral conditions expressed in our movies, music and television programs. Less concern is expressed regarding the political and economic system. A nation's moral foundation inevitably reflects the type of government and, in turn, affects the entire economic and political system. In some ways I am pleasantly surprised by the concern expressed about America's future, considering the prosperity we enjoy. Many Americans sense a serious problem in general, without specifically understanding the economic and political ramifications. Inflation, the erosion of the dollar, is always worse than the government admits. It may be that more Americans are suffering than generally admitted. Government intrusion in our lives is commonplace. Some unemployed are not even counted. Lower middle-class citizens have not enjoyed an increase in the standard of living others have. The fluctuation in the stock market may have undermined confidence. Most Americans still believe everyone has a right to a free education, but they don't connect this concept to the evidence: That getting a good education is difficult; that drugs are rampant in public schools; that safety in public schools is a serious problem; and that the cost is amazing for a system of free education if one wants a real education. The quality of medical care is slipping and the benefits provided by government are seen by more and more people to not really be benefits at all. This trend does not make Americans feel more confident about the future of health care. Let there be no doubt, many Americans are concerned about their future, even though many still argue that the problem is only that government has not done enough. I have expressed concern that our policies are prone to lead to war, economic weakness, and social discord. Understanding the cause of these problems is crucial to finding a solution. If we opt for more government benevolence and meddling in our lives, along with more military adventurism, we have to expect an even greater attack on the civil liberties of all Americans, both rich and poor. America continues to be a great country, and we remain prosperous. We have a system of freedom and opportunities that motivate many in the world to risk their lives trying to get here. The question remains, though, can we afford to be lax in the defense of liberty at this juncture in our history? I do not think so. The problems are not complex, and even the big ones can be easily handled if we pursue the right course. Prosperity and peace can be continued, but not with the current system that permeates Washington. To blindly hope our freedom will remain intact without any renewed effort in its defense or to expect that the good times will automatically continue places our political system in great danger. Basic morality, free markets, sound money, and living within the rule of law, while clinging to the fundamental precepts that made the American Republic great, are what we need. And it is worth the effort.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I have asked for this time to spend a little bit of time talking about the assessment of our American Republic. Mr. Speaker, the beginning of the 21st century lends itself to a reassessment of our history and gives us an opportunity to redirect our country's future course, if deemed prudent. The main question before the new Congress and the administration is, are we to have gridlock, or cooperation? Today we refer to cooperation as bipartisanship. Some argue that bipartisanship is absolutely necessary for the American democracy to survive. The media never mentions a concern for the survival of the Republic, but there are those who argue that left-wing interventionism should give no ground to right-wing interventionism, that too much is at stake. The media are demanding the Bush administration and the Republican Congress immediately yield to those insisting on higher taxes and more Federal Government intervention for the sake of national unity because our government is neatly split between two concise philosophic views. But if one looks closely, one is more likely to find only a variation of a single system of authoritarianism, in contrast to the rarely mentioned constitutional non-authoritarian approach to government. The big debate between the two factions in Washington boils down to nothing more than a contest over power and political cronyism, rather than any deep philosophic differences. The feared gridlock anticipated for the 107th Congress will differ little from the other legislative battles in recent Congresses. Yes, there will be heated arguments regarding the size of budgets, local versus Federal control, private versus government solutions; but a serious debate over the precise role for government is unlikely to occur. I do not expect any serious challenge to the 20th century consensus of both major parties that the Federal Government has a significant responsibility to deal with education, health care, retirement programs, or managing the distribution of the welfare-state benefits. Both parties are in general agreement on monetary management, environmental protection, safety and risk, both natural and man-made. Both participate in telling others around the world how they must adopt a democratic process similar to ours as we police our worldwide financial interests. We can expect most of the media-directed propaganda to be designed to speed up and broaden the role of the Federal Government in our lives and in the economy. Unfortunately, the token opposition will not present a principled challenge to big government, only an argument that we must move more slowly and make an effort to allow greater local decision-making. Without presenting a specific philosophic alternative to authoritarian intervention from the left, the opposition concedes that the principle of government involvement per se is proper, practical, and constitutional. The cliche ``the third way'' has been used to define the so-called compromise between the conventional wisdom of the conservative and liberal firebrands. This nice-sounding compromise refers not only to the noisy rhetoric we hear in the United States Congress, but also in Britain, Germany, and other nations as well. The question, though, remains, is there really anything new being offered? The demand for bipartisanship is nothing more than a continuation of the third-way movement of the last several decades. The effort always is to soften the image of the authoritarians who see a need to run the economy and regulate people's lives, while pretending not to give up any of the advantages of the free market or the supposed benefits that come from compassionate welfare or a socialist government. It is nothing more than political, have-your-cake-and-eat-it-too, deception. Many insecure and wanting citizens cling to the notion that they can be taken care of through government benevolence without sacrificing the free market and personal liberty. Those who anxiously await next month's government check prefer not to deal with the question of how goods and services are produced and under what political circumstances they are most efficiently provided. Sadly, whether personal freedom is sacrificed in the process is a serious concern for only a small number of Americans. The third way, a bipartisan compromise that sounds less confrontational and circumvents the issue of individual liberty, free markets and production is an alluring, but dangerous, alternative. The harsh reality is that it is difficult to sell the principles of liberty to those who are dependent on government programs, and this includes both the poor beneficiaries as well as the self-serving, wealthy elites who know how to benefit from government policies. The authoritarian demagogues are always anxious to play on the needs of people made dependent by a defective political system of government intervention, while perpetuating their own power. Anything that can help the people to avoid facing the reality of the shortcomings of the welfare-warfare state is welcomed. Thus, our system is destined to perpetuate itself until the immutable laws of economics bring it to a halt at the expense of liberty and prosperity. The third-way compromise or bipartisan cooperation can never reconcile the differences between those who produce and those who live off others. It will only make it worse. Theft is theft, and forced redistribution of wealth is just that. The third way, though, can deceive and perpetuate an unworkable system when both major factions endorse the principle. In the last session of the Congress, the majority party, with bipartisan agreement, increased the Labor, Health and Human Services and Education appropriation by 26 percent over the previous year, nine times the rate of inflation. The Education Department alone received $44 billion, nearly double Clinton's first educational budget of 1993. The Labor, HHS and Education appropriation was $34 billion more than the Republican budget had authorized. Already, the spirit of bipartisanship has prompted a new administration to request another $10 billion along with more mandates on public schools. This is a far cry from the clear constitutional mandate that neither the Congress nor the Federal courts have any authority to be involved in public education. The argument that this bipartisan approach is a reasonable compromise between the total free market of local government or local government approach, and that of a huge activist centralized government approach may appeal to some, but it is fraught with great danger. Big government clearly wins. Limited government and the free market lose. Any talk of the third way is nothing more than propaganda for big government. It is no compromise at all. The principle of Federal Government control is fully endorsed by both sides, and the argument that the third way might slow growth of big government falls flat. Actually, with bipartisan cooperation, government growth may well accelerate. How true bipartisanship works in Washington is best illustrated by the way a number of former Members of Congress make a living after leaving Congress. They find it quite convenient to associate with other former members of the opposing party and start a lobbying firm. What might have appeared to be contentious differences when in office are easily put aside to lobby their respective party members. Essentially, no philosophic differences of importance exist; it is only a matter of degree and favors sought, since both parties must be won over. The differences they might have had while they were voting Members of Congress existed only for the purpose of appealing to their different constituencies, not serious differences of opinion as to what the role of government ought to be. This is the reality of bipartisanship. Sadly, our system handsomely rewards those who lobby well and in a bipartisan fashion. Congressional service too often is a training ground or a farm system for the ultimate government service: lobbying Congress for the benefit of powerful and wealthy special interests. It should be clearly evident, however, that all the campaign finance reform and lobbying controls conceivable will not help the situation. Limiting the right to petition Congress or restricting people's right to spend their own money will always fail and is not morally acceptable and misses the point. As long as government has so much to offer, public officials will be tempted to accept the generous offers of support from special interests. Those who can benefit have too much at stake not to be in the business of influencing government. Eliminating the power of government to pass out favors is the only real solution. Short of that, the only other reasonable solution must come from Members' refusal to be influenced by the pressure the special interest money can exert. This requires moral restraint by our leaders. Since this has not happened, special interest favoritism has continued to grow. The bipartisanship of the last 50 years has allowed our government to gain control over half of the income of most Americans. Being enslaved half the time is hardly a good compromise, but supporters of the political status quo point out that in spite of the loss of personal freedom, the country continues to thrive in many ways. But there are some serious questions that we as a people must answer. Is this prosperity real? Will it be long-lasting? What is the true cost in economic terms? Have we sacrificed our liberties for government security? Have we undermined the very system that has allowed productive effort to provide a high standard of living for so many? Has this system in recent years excluded some from the benefits that Wall Street and others have enjoyed? Has it led to needless and dangerous U.S. interventions overseas and created problems that we are not yet fully aware of? Is it morally permissible in a country that professes to respect individual liberty to routinely give handouts to the poor and provide benefits to the privileged and rich by stealing the fruits of labor from hard-working Americans? As we move into the next Congress, some worry that gridlock will make it impossible to get needed legislation passed. This seems highly unlikely. If big government supporters found ways to enlarge the government in the past, the current evenly-split Congress will hardly impede this trend and may even accelerate it. With a recession on the horizon, both sides will be more eager than ever to cooperate on expanding Federal spending to stimulate the economy, whether the fictitious budget surplus shrinks or not. In this frantic effort to take care of the economy, promote education, save Social Security, and provide for the medical needs of all Americans, no serious discussion will take place on the political conditions required for a free people to thrive. If not, all efforts to patch the current system together will be at the expense of personal liberty, private property, and sound money. If we are truly taking a more dangerous course, the biggest question is, how long will it be before a major political economic crisis engulfs our land? That, of course, is not known, and certainly not necessary, if we as a people and especially the Congress understand the nature of the crisis and do something to prevent the crisis from undermining our liberties. We should, instead, encourage prosperity by avoiding any international conflict that threatens our safety or wastefully consumes our needed resources. Congressional leaders do have a responsibility to work together for the good of the country, but working together to promote a giant interventionist state dangerous to us all is far different from working together to preserve constitutionally protected liberties. Many argue that the compromise of bipartisanship is needed to get even a little of what the limited government advocates want, but this is a fallacious argument. More freedom can never be gained by giving up freedom, no matter the rationale. If liberals want $46 billion for the Department of Education and conservatives argue for $42 billion, a compromise of $44 billion is a total victory for the advocates of Federal Government control of public education. Saving $2 billion means nothing in the scheme of things, especially since the case for the constitutional position of zero funding was never even entertained. When the budget and government controls are expanding each year, a token compromise in the proposed increase means nothing. And those who claim it to be a legitimate victory do great harm to the cause of liberty by condoning the process. Instead of it being a third-way alternative to the two sides arguing over minor details of how to use government force, the three options instead are philosophically the same. A true alternative must be offered if the growth of the state is to be contained. Third-way bipartisanship is not the answer. However, if, in the future, the constitutionalists argue for zero funding for the Education Department and the liberals argue to increase it to $50 billion and finally $25 billion is accepted as a compromise, progress will have been made. But this is not what is being talked about in D.C. When an effort is made to find a third way, both sides are talking about expanding government and neither side questions the legitimacy of the particular program involved. Unless the moral and Constitutional debate changes, there can be no hope that the trend toward bigger government with a sustained attack on personal liberty will be reversed. It must become a moral and constitutional issue. Budgetary tokenism hides the real issue. Even if someone claims to have just saved the taxpayer a couple billion dollars, the deception does great harm in the long run by failure to emphasize the importance of the Constitution and the moral principles of liberty. It instead helps to deceive the people into believing something productive is being done, but it is really worse than that, because neither party makes an effort to cut the budget. The American people must prepare themselves for ever more spending and taxes. A different approach is needed if we want to protect the freedoms of all Americans, to perpetuate prosperity, and to avoid a major military confrontation. All three options in reality represents only a variation of the one based on authoritarian and interventionist principles. Nothing should be taken for granted, neither our liberties, nor our material well-being. Understanding the nature of a free society and favorably deciding on its merits are required before true reform can be expected. If, however, satisfaction and complacency with the current trend toward bigger and more centralized government remain the dominant view, those who love liberty more than promised security must be prepared for an unpleasant future. Those alternative plans will surely vary from one to another. Tragically, for some it will contribute to the violence that will surely come when promises of government security are not forthcoming. We can expect further violations of civil liberties by a government determined to maintain order when difficult economic and political conditions develop. But none of this needs occur if the principles that underpin our Republic, as designed by the Founders, can be resurrected and reinstituted. Current problems that we now confront are government- created and can be much more easily dealt with when government is limited to its proper role of protecting liberty, instead of promoting a welfare-fascist state. There are reasons to be optimistic that the principles of the Republic, the free market, and respect for private property can be restored. However, there remains good reason, as well, to be concerned that we must confront the serious political and economic firestorm seen on the horizon before that happens. My concerns are threefold: the health of the economy, the potential for war, and the coming social discord. If our problems are ignored, they will further undermine the civil liberties of all Americans. The next decade will be a great challenge to all Americans. The booming economy of the last 6 years has come to an end. The only question remaining is how bad the slump will be. Although many economists express surprise at the sudden and serious shift in sentiment, others have been warning of its inevitability. Boom times built on central bank credit creation always end in recession or depression. But central planners, being extremely optimistic, hope that this time it will be different, that a new era has arrived. For several years we have heard the endless nostrum of a technology and productivity-driven paradigm that would make the excesses of the 1990s permanent and real. Arguments that productivity increases made the grand prosperity of the last 6 years possible were accepted as conventional wisdom, although sound free-market analysts warned otherwise. We are now witnessing an economic downturn that will, in all likelihood, be quite serious. If our economic planners pursue the wrong course, they will make it much worse and prolong the recovery. Although computer technology has been quite beneficial to the economy, in some ways these benefits have been misleading by hiding the ill effects of central bank manipulation of interest rates and by causing many to believe that the usual business-cycle correction could be averted. Instead, delaying a correction that is destined to come only contributes to greater distortions in the economy, thus requiring an even greater adjustment. It seems obvious that we are dealing with a financial bubble now deflating. Certainly, most observers recognize that the NASDAQ was grossly overpriced. The question remains, though, as to what is needed for the entire economy to reach equilibrium and allow sound growth to resume. Western leaders for most of the 20th century have come to accept a type of central planning they believe is not burdened by the shortcomings of true socialist-type central planning. Instead of outright government ownership of the means of production, the economy was to be fine-tuned by fixing interest rates, that is, Fed funds rates, subsidizing credit, government-sponsored enterprises, stimulating sluggish segments of the economy, farming and the weapons industry, aiding the sick, Medicaid and Medicare, federally managing education, the Department of Education, and many other welfare schemes. The majority of Americans have not yet accepted the harsh reality that this less threatening, friendlier type of economic planning is minimally more efficient than that of the socialist planners with their 5-year economic plans. We must face the fact that the business cycle, with its recurring recessions, wage controls, wealth transfers, and social discord, is still with us, and will get worse unless there is a fundamental change in economic and monetary policy. Regardless of the type, central economic planning is a dangerous notion. In an economic downturn, a large majority of our political leaders believe that recession's ill effects can be greatly minimized by monetary and fiscal policy. Although cutting taxes is always beneficial, spending one's way out of a recession is no panacea. Even if some help is gained by cutting taxes, or temporary relief given by an increase in government spending, they distract from the real cause of the downturn: previously pursued faulty monetary policy. The consequences of interest rate manipulation in a recession, along with tax-and-spending changes, are unpredictable and do not always produce the same results each time they are used. This is why interest rates of less than 1 percent and massive spending programs have not revitalized Japan's economy or her stock market. We may well be witnessing the beginning of a major worldwide economic downturn, making even more unpredictable the consequence of conventional western-style central banking tinkering. There is good reason to believe that Congress and the American people ought to be concerned and start preparing for a slump that could play havoc with our Federal budget and the value of the American dollar. Certainly the Congress has a profound responsibility in this area. If we ignore the problems or continue to endorse the economic myths of past generations, our prosperity will be threatened. But our liberties could be lost as well if expanding the government's role in the economy is pursued as the only solution to the crisis. It is important to understand how we got ourselves into this mess. The blind faith that wealth and capital can be created by the central bank's creating money and credit out of thin air, using government debt as its collateral, along with fixing short-term interest rates, is a myth that must one day be dispelled. All the hopes of productivity increases in a dreamed-about new era economy cannot repeal eternal economic laws. The big shift in sentiment of the past several months has come with a loss of confidence in the status of the new paradigm. If we are not careful, the likely weakening of the U.S. dollar could lead to a loss of confidence in America and all her institutions. U.S. political and economic power has propped up the world economy for years. Trust in the dollar has given us license to borrow and spend way beyond our means. But just because world conditions have allowed us greater leverage to borrow and inflate the currency than otherwise might have been permitted, the economic limitations of such a policy still exist. This trust, however, did allow for a greater financial bubble to develop and dislocations to last longer, compared to similar excesses in less powerful nations. There is one remnant of the Bretton Woods gold exchange standard that has aided U.S. dominance over the past 30 years. Gold was once the reserve all central banks held to back up their currencies. After World War II, the world central banks were satisfied to hold dollars, still considered to be as good as gold, since internationally the dollar could still be exchanged for gold at $35 an ounce. When the system broke down in 1971 and we defaulted on our promises to pay in gold, chaos broke out. By default, the dollar maintained its status as the reserve currency of the world. This is true even to this day. The dollar still represents approximately 77 percent of all world central bank reserves. This means that the United States has a license to steal. We print the money and spend it overseas, while world trust continues because of our dominant economic and military power. This results in a current account and trade deficit so large that almost all economists agree that it cannot last. The longer and more extensive the distortions in the international market, the greater will be the crisis when the market dictates a correction. That is what we are starting to see. When the recession hits full force, even the extraordinary power and influence of Alan Greenspan and the Federal Reserve, along with all other central banks of the world, will not be enough to stop the powerful natural economic forces that demand equilibrium. Liquidation of unreasonable debt and the elimination of the overcapacity built into the system and a return to trustworthy money and trustworthy government will be necessary. Quite an undertaking. Instead of looking at the real cost and actual reasons for the recent good years, politicians and many Americans have been all too eager to accept the newfound wealth as permanent and deserved, as part of a grand new era. Even with a national debt that continued to grow, all the talk in Washington was about how to handle the magnificent budget surpluses. Since 1998, when it was announced that we had a budgetary surplus to deal with, the national debt has nevertheless grown by more than $230 billion, albeit at a rate less than in the past, but certainly a sum that should not be ignored. But the really big borrowing has been what the U.S. as a whole has borrowed from foreigners to pay for the huge deficit we have in our current account. We are now by far the largest foreign debtor in the world and in all of history. The convenient arrangement has allowed us to live beyond our means, and according to long-understood economic laws must end. A declining dollar confirms that our ability to painlessly borrow huge sums will no longer be cheap or wise. During the past 30 years, in the post-Bretton Woods era, worldwide sentiment has permitted us to inflate our money supply and get others to accept the dollar as if it were as good as gold. This convenient arrangement has discouraged savings, which are now at an historic low. Savings in a capitalist economy are crucial for furnishing capital and establishing market interest rates. With negative savings and with the Fed fixing rates by creating credit out of thin air and calling it capital, we have abandoned a necessary part of free market capitalism, without which a smooth and growing economy is not sustainable. No one should be surprised when recessions hit, or bewildered as to their cause or danger. The greater surprise would be the endurance of an economy fine-tuned by a manipulative central bank and a compulsively interventionist Congress. But the full payment for our last economic sins may now be required. Let us hope we can keep the pain and suffering to a minimum. The most recent new era of the 1990s appeared to be an answer to all politicians' dreams: a good economy, low unemployment, minimal price inflation, a skyrocketing stock market, with capital gains tax revenues flooding the Treasury, thus providing money to accommodate every special-interest demand. But it was too good to be true. It was based on an inflated currency and massive corporate, personal and government borrowing. A recession was inevitable to pay for the extravagance that many knew was an inherent part of the new era, understanding that abundance without a commensurate amount of work was not achievable. The mantra now is for the Fed to quickly lower short-term interest rates to stimulate the economy and alleviate a liquidity crisis. This policy may stimulate a boom and may help in a mild downturn, but it does not always work in a bad recession. It actually could do great harm since it could weaken the dollar, which in turn would allow market forces instead to push long-term interest rates higher. Deliberately lowering interest rates is not even necessary for the dollar to drop, since our policy has led to a current account deficit of a magnitude that demands the dollar eventually readjust and weaken. A slumping stock market will also cause the dollar to decline and interest rates to rise. Federal Reserve Board central planning, though, through interest rate control, is not a panacea. It is, instead, the culprit that produces the business cycle. Government and Fed officials have been reassuring the public that no structural problems exist, citing no inflation and a gold price that reassures the world that the dollar is indeed still king. The Fed can create excess credit, but it cannot control where it goes as it circulates throughout the economy, nor can it dictate value. Claiming that a subdued government-rigged CPI and PPI proves that no inflation exists is pure nonsense. It is well established that, under certain circumstances, new credit inflation can find its way into the stock or real estate market, as it did in the 1920s, while consumer prices remained relatively stable. This does not negate the distortions inherent in a system charged with artificially low interest rates. Instead, it allows the distortion to last longer and become more serious, leading to a bigger correction. If gold prices reflected the true extent of the inflated dollar, confidence in the dollar specifically and in paper more generally would be undermined. It is a high priority of the Fed and all central banks of the world for this not to happen. Revealing to the public the fraud associated with all paper money would cause loss of credibility of all central banks. This knowledge would jeopardize the central bank's ability to perform the role of lender of last resort, and to finance and monetize government debt. It is for this reason that the price of gold, in their eyes, must be held in check. From 1945 to 1971, the United States literally dumped nearly 500 million ounces of gold at $35 an ounce in an effort to do the same thing by continuing the policy of printing money at will, with the hopes that there would be no consequences to the value of the dollar. That all ended in 1971, when the markets overwhelmed the world central bankers. A similar effort continues today, with central banks selling and loaning gold to keep the price in check. It is working and does convey false confidence, but it cannot last. Most Americans are wise to the government statistics regarding prices and the no-inflation-exists rhetoric. Everyone is aware that the prices of oil, gasoline, natural gas, medical care, repairs, houses, and entertainment have all been rapidly rising. The artificially low gold price has aided the government's charade, but it has also allowed a bigger bubble to develop. This policy cannot continue. Economic law dictates a correction that most Americans will find distasteful and painful. Duration and severity of the liquidation phase of the business cycle can be limited by proper responses, but it cannot be avoided and could be made worse if the wrong course is chosen. Recent deterioration of the junk bond market indicates how serious the situation is. Junk bonds are now paying 9 to 10 percent more than short-term government securities. The quality of business loans is suffering, while more and more corporate bonds are qualifying for junk status. The Fed tries to reassure us by attempting to stimulate the economy with low, short-term Fed fund rates at the same time interest rates for businesses and consumers are rising. There comes a time when Fed policy is ineffective, much to everyone's chagrin. Micromanaging an economy effectively for a long period of time, even with the power a central bank wields, is an impossible task. The good times are ephemeral and eventually must be paid for by contraction and renewed real savings. There is much more to inflation than rising prices. Inflation is defined as the increase in the supply of money and credit. Obsessively sticking to the ``rising prices'' definition conveniently ignores placing the blame on the responsible party: The Federal Reserve. The last thing central banks, or the politicians who need a backup for all their spending mischief, want is for the government to lose its power for creating money out of thin air, which serves political and privileged financial interests. When the people are forced to think only about rising prices, government-doctored price indexes can dampen concerns for inflation. Blame then can be laid at the doorstep of corporate profiteers, price gougers, labor unions, oil sheiks, or greedy doctors. But it is never placed at the feet of the highly paid athletes or entertainers. It would be economically incorrect to do so, but it is political correctness that does not allow some groups to be vilified. Much else related to artificially low interest rates goes unnoticed. An overpriced stock market, overcapacity in certain industries, excesses in real estate markets, artificially high bond prices, general mal-investments, excessive debt and speculation all result from the generous and artificial credit the Federal Reserve pumps into the financial system. These distortions are every bit, if not more, harmful than rising prices. As the economy soars from the stimulus effect of low interest rates, growth and distortions compound themselves. In a slump, the reverse is true and the pain and suffering is magnified as the adjustment back to reality occurs. The extra credit in the 1990s has found its way especially into the housing market like never before. Government Sponsored Enterprises, in particular Freddie Mac and Fannie Mae, have gobbled up huge sums to finance a booming housing market. GSE securities enjoy implicit government guarantees that have allowed for a generous discount on most housing loans. They have also been the vehicles used by consumers to refinance and borrow against their home equity to use these funds for other purposes, such as investment in the stock market. This has further undermined savings by using the equity that builds with price inflation that homeowners enjoy when money is debased. In addition, the Federal Reserve now buys and holds GSE securities as collateral in their monetary operations. These securities are then literally used as collateral for printing Federal Reserve notes. This is a dangerous precedent. If monetary inflation merely raised prices and all prices and labor costs moved up at the same rate and it did not cause disequilibrium in the market, it would be of little consequence. But inflation is far more than rising prices. Creating money out of thin air is morally equivalent to counterfeiting. It is fraud and theft, because it steals purchasing power from the savers and those on fixed incomes. That in itself should compel all nations to prohibit it, as did the authors of our Constitution. Inflation is socially disruptive in that the management of fiat money, as all today's currencies are, causes great hardships. Unemployment is a direct consequence of the constantly recurring recessions. Persistent rising costs impoverish many as the standard of living of unfortunate groups erodes. Because the pain and suffering that comes from monetary debasement is never evenly distributed, certain segments of society actually benefit. In the 1990s, Wall Streeters thrived while some low-income, non- welfare, non-homeowners suffered with rising costs for fuel, rent, repairs, and medical care. Generally, one should expect the middle class to suffer and to literally be wiped out in severe inflation. When this happens, as it did in many countries throughout the 20th century, social and political conflicts become paramount when finger-pointing becomes commonplace by those who suffer, looking for scapegoats. Almost always, the hostility is inaccurately directed. There is a greater threat from the monetary mischief than just the economic harm it does. The threat to liberty resulting when economic strife hits and finger-pointing increases should concern us most. We should never be complacent about monetary policy. We must reassess the responsibility Congress has in maintaining a sound monetary system. In the 19th century, the constitutionality of a central bank was questioned and challenged. Not until 1913 were the advocates of a strong federalist system able to foist a powerful central bank on us, while destroying the gold standard. This banking system, which now serves as the financial arm of Congress, has chosen to pursue massive welfare spending and a foreign policy that has caused us to be at war for much of the 20th century. Without the central bank creating money out of thin air, our welfare state and worldwide imperialism would have been impossible to finance. Attempts at economic fine-tuning by monetary authorities would have been impossible without a powerful central bank. Propping up the stock market as it falters would be impossible as well. But the day will come when we will have no choice but to question the current system. Yes, the Fed does help to finance the welfare state. Yes, the Fed does come to the rescue when funds are needed to fight wars and for us to pay the cost of maintaining our empire. Yes, the Fed is able to stimulate the economy and help create what appears to be good times. But it is all built on an illusion. Wealth cannot come from a printing press. Empires crumble and a price is eventually paid for arrogance toward others. And booms inevitably turn into busts. Talk of a new era these past 5 years has had many believing, including Greenspan, that this time it really would be different. And it may indeed be different this time. The correction could be an especially big one, since the Fed-driven distortion of the past 10 years, plus the lingering distortion of the past decades, have been massive. The correction could be made big enough to challenge all of our institutions, the entire welfare state, Social Security, foreign intervention, and our national defense. This will only happen if the dollar is knocked off its pedestal. No one knows if that is going to happen sooner or later. But when it does, our constitutional system of government will be challenged to the core. Ultimately, the solution will require a recommitment to the principles of liberty, including a belief in sound money, when money once again will be something of value rather than pieces of paper or mere blips from a Federal Reserve computer. In spite of the grand technological revolution, we are still having trouble with a few simple, basic tasks: counting votes, keeping the lights on, or even understanding the sinister nature of paper money. Mr. Speaker, I will continue this special order tomorrow.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days within which to revise and extend their remarks and include extraneous material on the subject of the special order by the gentleman from Indiana (Mr. Pence) today.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I move that the House do now adjourn.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I am pleased to join the sponsors of the H. Res. 28 in honoring the success of Catholic Schools in providing a quality education to millions of children around the country. However, I am concerned that this resolution also contains language that violates the sprit, if not the letter, of the establishment clause of the first amendment, thus insulting the millions of religious Americans who are struggling to educate their children free from federal control and endangering religious liberty. The success of Catholic schools has been remarkable. Catholic schools operating in the inner-city have been able to provide an excellent education to students written off by the educational establishment as ``unteachable.'' Contrary to the claims of its critics, Catholic schools do not turn away large numbers of children in order to limit their enrollment to the ``best and the brightest.'' In fact, a few years ago the Archdiocese of New York offered to enroll all students who had been expelled from New York's public schools! Mr. Speaker, I have introduced legislation, the Family Education Freedom Act (H.R. 368) which would help more parents afford to send their children to Catholic, or other religious schools, by providing them with a $3,000 tax credit for K-12 education expenses. While I join with the sponsors of this legislation in praising Catholic schools, I am disturbed by the language explicitly endorsing the goals of the United States Catholic Conference. The Catholic Conference is an organization devoted to spreading and advancing Catholicism. While the Conference may advance other social goods through its work, those purposes are secondary to its primary function of advancing the Catholic faith. This is especially true in the case of Catholic schools which were founded and are operated with the explicit purpose of intergrating Catholic doctrine into K-12 education. Therefore, even though Congress intends to honor the ways Catholic schools help fulfill a secular goal, the fact is Congress cannot honor Catholic schools without endorsing efforts to promulgate the Catholic faith. By singling out one sect over another, Congress is playing favors among religions. While this does not compare to the type of religious persecution experienced by many of the founders of this country, it is still an example of the type of federal favoritism among religions that the first amendment forbids. What is the superintendent of a Baptist private school or a Pentecostal home schooler going to think when reading this resolution? That Congress does not think they provide children with an excellent education or that Congress does not deem their religious goals worthy of federal endorsement? In a free republic, the legislature should not be in the business of favoring one religion over another. I would also like to point out the irony of considering government favoritism of religion in the context of praising the Catholic schools, when early in this century Catholic schools where singled out for government- sanctioned discrimination because they were upholding the teachings of the Catholic Church. Allowing Congress to single out certain religions for honors not only insults those citizens whose faith is not recognized by Congress, it also threatens the religious liberty of those honored by Congress. This is because when the federal government begins evaluating religious institutions, some religious institutions may be tempted to modify certain of their teachings in order to curry favor with political leaders. I will concede that religious institutions may not water down their faith in order to secure passage of ``Sense of Congress resolutions,'' however, the belief that it is proper to judge religious institutions by how effectively they fulfill secular objectives is at the root of the proposals to entangle the federal government with state-approved religions by providing taxpayer dollars to religious organizations in order to preform various social services. Providing taxpayer money to churches creates the very real risk that a church may, for example, feel the need to downplay its teaching against abortion or euthanasia in order to maintain favor with a future pro- abortion administration and thus not lose its federal funding. Of course, the idea that politicians should bestow favors on religions based on how well they fulfill the aims of the politicians is one that should be insulting to all believers no matter their faith. After all, despite what a few of my colleagues seem to think, Mr. Speaker, we in Congress are neither omnipotent nor divine. In conclusion, Mr. Speaker, I join the sponsors of H. Res. 28 in their admiration for the work of Catholic schools. However, I also have reservations about the language singling out the religious goals of one faith for praise.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I rise to introduce the Teacher Tax Cut Act. This bill provides every teacher in America with a $1,000 tax credit, thus raising every teacher's take-home pay without increasing federal spending. Passage of this bill is a major first step toward treating those who have dedicated their lives to educating America's children with the respect they deserve. Compared to other professionals teachers are underappreciated and underpaid. This must change if America is to have the finest education system in the world! Quality education is impossible without quality teaching. If we want to ensure that the teaching profession attracts the very best people possible we must make sure that teachers receive the compensation they deserve. For too long now, we have seen partisan battles and displays of heightened rhetoric about who wants to provide the most assistance to education distract us from our important work of removing government-imposed barriers to educational excellence. Since America's teachers are underpaid because they are overtaxed, the best way to raise teacher take-home pay is to reduce their taxes. Simply by raising teacher's take-home pay via a $1,000 tax credit we can accomplish a number of important things. First, we show a true commitment to education. We also let America's teachers know that the American people and the Congress respect their work. Finally, and perhaps most importantly, by raising teacher take-home pay, the Teacher Tax Cut Act encourages highly-qualified professionals to enter, and remain in, the teaching profession. In conclusion, Mr. Speaker, I once again ask my colleagues to put aside partisan bickering and unite around the idea of helping educators by supporting the Teacher Tax Cut Act.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I thank the chairman for yielding me this time. I too want to express my deep sympathy and sorrow for those people in India who are suffering. It was truly a devastating natural disaster and certainly the concern of all Americans goes out to all these people. I do have some concerns about how we respond so often to disasters like this because we believe that we can solve all our problems by just going to the taxpayers. I know that this does not seem like the appropriate time to raise the question, but there was a time in our history when we did not assume that it was a constitutional approach to tax poor people in America to help people in other parts of the world. We have always resorted to charities and volunteer approaches, and I still believe that is proper. I do not think there is evidence to show that aid to governments is necessarily the most efficient manner of helping other people. There is also the moral question. We talk about what we are giving today, and it is substantial amounts, and we are substantially increasing it. It could be $10 million. It could be $100 million. But nobody talks about could it cost something. Well, there is a cost to it and it might hurt some innocent people in this country; the people who we do not know about. Somebody might not be able to build a house or get medical care. There may be somebody who will lose a job. There may be an increase in inflation. But we will never see those victims, so they are not represented. I think that if we were more determined to follow the rule of law and do this only in a voluntary manner we would not always place a burden on some innocent people in this country. It was ironic that today, although there was talk earlier about sending some goods and surpluses, that actually the ambassador today sadly said he was not interested in any surpluses; he just wanted the dollars to come over there. And there may be a good reason for this, for efficiency sake or whatever. But in a way, I think if we have some surplus in food or something, we should be able to provide that. Mr. Speaker, I thank you for the opportunity to express my sympathy for victims of the recent earthquake in the State of Gujarat, India and, at the same time, my concern for American taxpayers who, once again, will see their constitution ignored and their pockets raided by their representatives in Washington--it is, of course, easy to express sympathy with other people's money. Without so much as a hearing in the International Relations committee, this bill comes to the floor and, while laudably expressing deep sympathy for victims of this terrible natural disaster in India, regrettably expresses support for (a) the World Bank; (b) ``substantially'' increasing the amount of U.S. taxpayer-funded, disaster assistance; and (c) future economic assistance to rebuild the state of Gujarat, India. Setting aside for the moment that nowhere in Article I, Sec. 8 (the enumerated powers clause) of the Federal Constitution can authority be found to take money from U.S. taxpayers for this purpose, additional problems result from passage of this resolution as well as those actions certain to follow as a consequence of the bill's passage. First, the notion of taxing the fruits of financially struggling Americans with no constitutional authority only to send it to foreign governments is reprehensible. One of the problems with such aid is that it ultimately ends up in the hands of foreign bureaucrats who merely use it to advance their own foreign government agendas thus making it less likely to get to those most deserving. One need only compare the success of private charities in this country with those government relief efforts to clearly see government's profound and inherently inept record. Secondly, forced ``contributions'' erode any satisfaction that comes from being a charitable individual. Without the personal choice of giving or not giving to charitable relief efforts, the decision to be charitable and the moral reward of so doing is completely eroded by the force-based government. Lastly, as a result of such actions as these, participation dwindles worldwide for the most efficient means of dealing with such catastrophes, that is, private disaster insurance. When disaster costs are socialized, greater catastrophic results are encouraged as more people ignore the costs of living in riskier areas. At the same time, these same actors ignore the cost savings and other benefits of living in safer areas. Governments acting to socialize these costs actually stimulates the eventual death and destruction of more people and their property. (This, of course, is a lesson that the United States should learn to apply domestically, as well.) While I truly do extend my heartfelt sympathy to those victims of the recent natural disaster in India, my duty remains to protect the U.S. taxpayer and uphold the constitutional limits of our Federal Government. For this reason and each of those detailed above, I must oppose this resolution.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I rise to introduce the Education Improvement Tax Cut Act. This act, a companion to my Family Education Freedom Act, takes a further step toward returning control over education resources to private citizens by providing a $3,000 tax credit for donations to scholarship funds to enable low-income children to attend private schools. It also encourages private citizens to devote more of their resources to helping public schools, by providing a $3,000 tax credit for cash or in-kind donations to public schools to support academic or extra curricular programs. I need not remind my colleagues that education is one of, if not the, top priority of the American people. After all, many members of Congress have proposed education reforms and a great deal of time is spent debating these proposals. However, most of these proposals either expand federal control over education or engage in the pseudo- federalism of block grants. Many proposals that claim to increase local control over education actually extend federal power by holding schools ``accountable'' to federal bureaucrats and politicians. Of course, schools should be held accountable for their results, but under the United States Constitution, they should be held accountable to parents and school boards not to federal officials. Therefore, I propose we move in a different direction and embrace true federalism by returning control over the education dollar to the American people. One of the major problems with centralized control over education funding is that spending priorities set by Washington-based Representatives, staffers, and bureaucrats do not necessarily match the needs of individual communities. In fact, it would be a miracle if spending priorities determined by the wishes of certain politically powerful Representatives or the theories of Education Department functionaries match the priorities of every community in a country as large and diverse as America. Block grants do not solve this problem as they simply allow states and localities to choose the means to reach federally-determined ends. Returning control over the education dollar for tax credits for parents and for other concerned citizens returns control over both the means and ends of education policy to local communities. People in one community may use this credit to purchase computers, while children in another community may, at last, have access to a quality music program because of community leaders who took advantage of the tax credit contained in this bill. Children in some communities may benefit most from the opportunity to attend private, parochial, or other religious schools. One of the most encouraging trends in education has been the establishment of private scholarship programs. These scholarship funds use voluntary contributions to open the doors of quality private schools to low- income children. By providing a tax credit for donations to these programs, Congress can widen the educational opportunities and increase the quality of education for all children. Furthermore, privately- funded scholarships raise none of the concerns of state entanglement raised by publicly-funded vouchers. There is no doubt that Americans will always spend generously on education, the question is, ``who should control the education dollar-- politicians and bureaucrats or the American people?'' Mr. Speaker, I urge my colleagues to join me in placing control of education back in the hands of citizens and local communities by sponsoring the Education Improvement Tax Cut Act.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I rise today to introduce the Family Education Freedom Act, a bill to empower millions of working and middle-class Americans to choose a non-public education for their children, as well as making it easier for parents to actively participate in improving public schools. The Family Education Freedom Act accomplishes it goals by allowing American parents a tax credit of up to $3,000 for the expenses incurred in sending their child to private, public, parochial, other religious school, or for home schooling their children. The Family Education Freedom Act returns the fundamental principal of a truly free economy to America's education system: what the great economist Ludwig von Mises called ``consumer sovereignty''. Consumer sovereignty simply means consumers decide who succeeds or fails in the market. Businesses that best satisfy consumer demand will be the most successful. Consumer sovereignty is the means by which the free market maximizes human happiness. Currently, consumers are less than sovereign in the education ``market.'' Funding decisions are increasingly controlled by the federal government. Because ``he who pays the piper calls the tune,'' public, and even private schools, are paying greater attention to the dictates of federal ``educrats'' while ignoring the wishes of the parents to an ever-greater degree. As such, the lack of consumer sovereignty in education is destroying parental control of education and replacing it with state control. Loss of control is a key reason why so many of America's parents express dissatisfaction with the educational system. According to a study by The Polling Company, over 70% of all Americans support education tax credits! This is just one of numerous studies and public opinion polls showing that Americans want Congress to get the federal bureaucracy out of the schoolroom and give parents more control over their children's education. Today, Congress can fulfill the wishes of the American people for greater control over their children's education by simply allowing parents to keep more of their hard-earned money to spend on education rather than force them to send it to Washington to support education programs reflective only of the values and priorities of Congress and the federal bureaucracy. The $3,000 tax credit will make a better education affordable for millions of parents. Mr. Speaker, many parents who would choose to send their children to private, religious, or parochial schools are unable to afford the tuition, in large part because of the enormous tax burden imposed on the American family by Washington. The Family Education Freedom Act also benefits parents who choose to send their children to public schools. Parents of children in public schools may use this credit to help improve their local schools by helping finance the purchase of educational tools such as computers or to ensure their local schools can offer enriching extracurricular activities such as music programs. Parents of public school students may also wish to use the credit to pay for special services, such as tutoring, for their children. Increasing parental control of education is superior to funneling more federal tax dollars, followed by greater federal control, into the schools. According a recent Manhattan Institute study of the effects of state policies promoting parental control over education, a minimal increase in parental control boosts students' average SAT verbal score by 21 points and students' SAT math score by 22 points! The Manhattan Institute study also found that increasing parental control of education is the best way to improve student performance on the National Assessment of Education Progress (NAEP) tests. Clearly, enactment of the Family Education Freedom Act is the best thing this Congress could do to improve public education. furthermore, a greater reliance on parental expenditures rather than government tax dollars will help make the public schools into true community schools that reflect the wishes of parents and the interests of the students. The Family Education Freedom Act will also aid those parents who choose to educate their children at home. Home schooling has become an increasingly popular, and successful, method of educating children. Home schooled children out-perform their public school peers by 30 to 37 percentile points across all subjects on nationally standardized achievement exams. Home schooling parents spend thousands of dollars annually, in addition to the wages forgone by the spouse who forgoes outside employment, in order to educate their children in the loving environment of the home. Ultimately, Mr. Speaker, this bill is about freedom. Parental control of child rearing, especially education, is one of the bulwarks of liberty. No nation can remain free when the state has greater influence over the knowledge and values transmitted to children than the family. By moving to restore the primacy of parents to education, the Family Education Freedom Act will not only improve America's education, it will restore a parent's right to choose how best to educate one's own child, a fundamental freedom that has been eroded by the increase in federal education expenditures and the corresponding decrease in the ability of parents to provide for their children's education out of their own pockets. I call on all my colleagues to join me in allowing parents to devote more of their resources to their children's education and less to feed the wasteful Washington bureaucracy by supporting the Family Education Freedom Act.

Mr. PAUL

Mr. PAUL. Mr. Speaker, today I introduce the Identity Theft Prevention Act. This act protects the American people from government- mandated uniform identifiers which facilitate private crime as well as the abuse of liberty. The major provision of the Identity Theft Prevention Act halts the practice of using the Social Security number as an identifier by requiring the Social Security Administration to issue all Americans new Social Security numbers within five years after the enactment of the bill. These new numbers will be the sole legal property of the recipient and the Social Security Administration shall be forbidden to divulge the numbers for any purposes not related to Social Security Administration. Social Security numbers issued before implementation of this bill shall no longer be considered valid federal identifiers. Of course, the Social Security Administration shall be able to use an individual's original Social Security number to ensure efficient administration of the Social Security system. Mr. Speaker, Congress has a moral responsibility to address this problem as it was Congress which transformed the Social Security number into a national identifier. Thanks to Congress, today no American can get a job, open a bank account, get a professional license, or even get a drivers' license without presenting their Social Security number. So widespread has the use of the Social Security number become that a member of my staff had to produce a Social Security number in order to get a fishing license! One of the most disturbing abuses of the Social Security number is the congressionally-authorized rule forcing parents to get a Social Security number for their newborn children in order to claim them as dependents. Forcing parents to register their children with the state is more like something out of the nightmares of George Orwell than the dreams of a free republic which inspired this nation's founders. Congressionally-mandated use of the Social Security number as an identifier facilitates the horrendous crime of identity theft. Thanks to the Congressionally-mandated use of the Social Security number as an uniform identifier, an unscrupulous person may simply obtain someone's Social Security number in order to access that person's bank accounts, credit cards, and other financial assets. Many Americans have lost their life savings and had their credit destroyed as a result of identity theft--yet the federal government continues to encourage such crimes by mandating use of the Social Security number as a uniform ID! This act also forbids the federal government from creating national ID cards or establishing any identifiers for the purpose of investigating, monitoring, overseeing, or regulating private transactions between American citizens, as well as repealing those sections of the Health Insurance Portability and Accountability Act of 1996 that require the Department of Health and Human Services to establish a uniform standard health identifier. By putting an end to government-mandated uniform IDs, the Identity Theft Prevention Act will prevent millions of Americans from having their liberty, property and privacy violated by private-and-public sector criminals. In addition to forbidding the federal government from creating national identifiers, this legislation forbids the federal government from blackmailing states into adopting uniform standard identifiers by withholding federal funds. One of the most onerous practices of Congress is the use of federal funds illegitimately taken from the American people to bribe states into obeying federal dictates. Mr. Speaker, of all the invasions of privacy proposed in the past decade, perhaps the most onerous is the attempt to assign every American a ``unique health identifier''--an identifier which could be used to create a national database containing the medical history of all Americans. As an OB/GYN with more than 30 years in private practice, I know well the importance of preserving the sanctity of the physician-patient relationship. Oftentimes, effective treatment depends on a patient's ability to place absolute trust in his or her doctor. What will happen to that trust when patients know that any and all information given to their doctor will be placed in a government accessible data base? Many of my colleagues will claim that the federal government needs these powers to protect against fraud or some other criminal activities. However, monitoring the transactions of every American in order to catch those few who are involved in some sort of illegal activity turns one of the great bulwarks of our liberty, the presumption of innocence, on its head. The federal government has no right to treat all Americans as criminals by spying on their relationship with their doctors, employers, or bankers. In fact, criminal law enforcement is reserved to the state and local governments by the Constitution's Tenth Amendment. Other members of Congress will claim that the federal government needs the power to monitor Americans in order to allow the government to operate more efficiently. I would remind my colleagues that in a constitutional republic the people are never asked to sacrifice their liberties to make the job of government officials a little bit easier. We are here to protect the freedom of the American people, not to make privacy invasion more efficient. Mr. Speaker, while I do not question the sincerity of those members who suggest that Congress can ensure citizens' rights are protected through legislation restricting access to personal information, the only effective privacy protection is to forbid the federal government from mandating national identifiers. Legislative ``privacy protections'' are inadequate to protect the liberty of Americans for several reasons. First, it is simply common sense that repealing those federal laws that promote identity theft is more effective in protecting the public than expanding the power of the federal police force. Federal punishment of identity thieves provides cold comfort to those who have suffered financial losses and the destruction of their good reputation as a result of identity theft. Federal laws are not only ineffective in stopping private criminals, they have not even stopped unscrupulous government officials from accessing personal information. Did laws purporting to restrict the use of personal information stop the well-publicized violation of privacy by IRS officials or the FBI abuses by the Clinton and Nixon administrations? Second, the federal government has been creating property interests in private information for Perhaps the most outrageous example of phony privacy protection is the Clinton Administration's so-called ``medical privacy'' proposal, which allow medical researchers, certain business interests, and law enforcement officials' access to health care information, in complete disregard of the Fifth Amendment and the wishes of individual patients! Obviously, ``privacy protection'' laws have proven greatly inadequate to protect personal information when the government is the one providing or seeking the information. The primary reason why any action short of the repeal of laws authorizing privacy violations is insufficient is because the federal government lacks constitutional authority to force citizens to adopt a universal identifier for health care, employment, or any other reason. Any federal action that oversteps constitutional limitations violates liberty because it ratifies the principle that the federal government, not the Constitution, is the ultimate judge of its own jurisdiction over the people. The only effective protection of the rights of citizens is for Congress to follow Thomas Jefferson's advice and ``bind (the federal government) down with chains of the Constitution.'' Mr. Speaker, those members who are unpersuaded by the moral and constitutional reasons for embracing the Identity Theft Prevention Act should consider the overwhelming opposition of the American people toward national identifiers. The overwhelming public opposition to the various ``Know-Your-Customer'' schemes, the attempt to turn drivers' licenses into National ID cards, the Clinton Administration's Medical Privacy proposal, as well as the numerous complaints over the ever- growing uses of the Social Security number show that American people want Congress to stop invading their privacy. Congress risks provoking a voter backlash if we fail to halt the growth of the surveillance state. In conclusion, Mr. Speaker, I once again call on my colleagues to join me in putting an end to the federal government's unconstitutional use of national identifiers to monitor the actions of private citizens. National identifiers threaten all Americans by exposing them to the threat of identity theft by private criminals and abuse of their liberties by public criminals. In addition, national identifiers are incompatible with a limited, constitutional government. I, therefore, hope my colleagues will join my efforts to protect the freedom of their constituents by supporting the Identity Theft Prevention Act.

Mr. PAUL

Mr. PAUL. Mr. Speaker, more and more people now are talking about an oncoming recession. I tend to agree. I think we are moving into a recession, and for good reasons. But already the question that comes up so often among politicians is, who will get blamed? Will the current President be blamed for the recession or will the next President be blamed? Will the current Congress be blamed for the recession or the next Congress? I do not believe either should be blamed. I think we should deal with the real cause of the business cycle, and that is the Federal Reserve system. The Federal Reserve system causes and brings about a boom period in a cycle, but it also brings about the bust. Because the bust, the correction, is inevitable consequence of the boom caused by unduly inflating the money supply. Soon we will hear from many, we have already heard some from the financial circles as well as from politicians, to lower interest rates. This will keep the economy from turning down. It will prevent the recession from coming. And if we do have a recession, it is always said, what you do is you lower the interest rates. But dwelling on the interest rates and not talking about what it takes to lower interest rates I think is a serious mistake. The only way the Federal Reserve can lower interest rates is by inflating the money supply, increasing the money supply, which is the cause of our problems. So if the cause of our problem is the inflation, increasing the money supply which causes a boom, we can hardly solve our problems by further inflating. And then, too, there is a period of time in the business cycle where inflating the money supply or lowering interest rates do not get the response that many people hope for. Take, for instance, what is happening in Japan today. There is no response whatsoever. They take interest rates down below one percent, and they cannot generate economic activity to really get them out of their slump. The other irony of all this is that when we have an economic boom, another reason given for raising interest rates to slow up the economy is to stop the inflation. This is fallacious thinking because the inflation comes from the money supply. The idea that economic growth and prosperity and productivity causes inflation, that is the price type of inflation, is wrong. If we have good productivity, prices go down, they do not go up. So the whole notion that we have to slow up the economy in order to prevent inflation is absolutely incorrect. The problem I see is that Congress for too long has conceded too much of their authority over control of the monetary system to the Federal Reserve system, which acts in secrecy. It is something that is directly stated in the Constitution that the Congress shall have the responsibility over the money supply, not a Federal Reserve system. Quite frankly, the Federal Reserve system is not even authorized by the Constitution. Now, if in the midst of a recession the Federal Reserve decides that they want to lower interest rates but the dollar is also dropping and we lower interest rates, we cause the dollar to go down and price inflation will occur because of that. So it is not quite so simple as saying, well, let us just tell the Fed what to do, lower the interest rates and it will solve our problems. We have the problem of the international debt. We, as Americans, now owe more than any other country in the world. We owe $1.7 trillion. Our current account deficit is over $400 billion a month. We borrow well over $100 billion a day to support the international debt. The reason we should be concerned about this more so than we are is the fact that, when we are in a recession, revenues go crashing down. The inflation that occurred over these past 10 years, which was artificially created, giant revenues from capital gains from this artificially high stock market. Well that is all being reversed now, so revenues are going to go down now, and we will have to deal with this in the next Congress. Unfortunately, there are some who are concerned about this who say there is going to be gridlock and the two sides will not get together and the Government is now divided, the House and the Senate and the Presidency is undecided and therefore there will be gridlock. Quite frankly, I do not think that will happen. I sort of would hope that we would have some gridlock. What I think is going to happen is that once the recession sets in and there is a need for additional spending and there will be no longer a concern at all about the deficit; and that is when the Congress will spend, the Federal Reserve will inflate. And it may temporarily help, but in the long-run it does not do the trick. It is not the way we gain economic prosperity out of a printing press. We just cannot allow a Federal Reserve to believe it creates capital by creating credit out of thin air. We will soon be hearing a lot about interest rates. There will be a loud clamor from all quarters for the Fed to lower interest rates. It will be argued that it is necessary in order to help stop the stock market slide/crash and also to stimulate a sagging economy. What we must remember though, is that every time someone pressures the Fed to lower interest rates, they are saying to the Fed that the money supply must be inflated. The only tool The Fed has for lowering interest rates is to increase the supply of money. They are arguing the case for further systematic and deliberate debasement of the U.S. dollar. Those who chant for lower interest rates are literally attacking the dollar. And yet, depending on many variables, a deliberate attempt by the Federal Reserve to lower interest rates may instead lead to higher interest rates and precipitate a period of accelerating price inflation. Instead of boosting the stock market, this effort can do the opposite by producing conditions that will lower the stock market and do nothing to avert the economic slump that more people are now worried about. Congress should be prepared for some surprises in the not-to-distance future. A slumping economy or definite recession will obviously lower revenues. This will reverse the illusion of the grand surpluses that everyone has been anxious to spend. Instead of expenditures being held under control, expect them to rise rapidly. Many are starting to talk now about a legislative stalemate with no clear majority in the House and the Senate and the Presidency being uncertain. This concern about a stalemate is overblown. Not that the problem isn't serious, but I am certain that under the conditions that we are about to experience, the Congress and the President will be all too willing to deal with the deteriorating conditions with increased spending and with a concerted bipartisan effort to pressure the Federal Reserve to further inflate the currency in pursuing the fiction that the Federal Reserve can prevent a ``hard landing'' by merely increasing the money supply in an effort to dictate short-term Fed funds rates. Although this will not be the impasse that many anticipate, the actual capitulation by both parties to deal with the oncoming economic slowdown will actually be more harmful than gridlock because Congress will undoubtedly do more harm than good to the economy. For decades now the Federal Reserve has followed a policy of ``fine- tuning'' and economy and with the relative success of the recent boom cycle, it has been deceived into believing its ability is more than it actually is. But in this effort to fine-tune the economy the Federal Reserve, since the middle of 1999 until May of this year, has systematically raised the Fed's fund rates from 4.75% to 6.5%. The explanation was that economic growth, when not controlled, leads to price inflation and therefore the economy had to be ``cooled.'' A healthy free market economy should never have to be cooled, it should only be encouraged. Ironically it's argued that the deliberate raising of the cost of borrowing money for everyone is that this will hold prices in check. Yet consumers and businesses suffer from this additional cost--pushing all prices upward. But even more ironic is the claim that they now care about ``inflation'' after a decade of massive monetary inflation--the real culprit--while ignoring the fact that the monetary supply is key to money policy not admitting the damage has already been done. Signs of economic slowdown are now all around with the seriously slumping stock market being the most visible and eliciting the most concern. As the slowdown spreads and accelerates the politicians will be anxious to advise the Chairman of the Federal Reserve, Alan Greenspan. Politicians from both sides of the aisle will become deeply and especially concerned when the evidence is clear that the revenues are plummeting and the ``surplus'' is disappearing. Since this will challenge the ability of the politician to continue the spending spree many will become deeply and vocally concerned. The big debate--already started--in the financial and political circles is when, how much, and how quickly the Federal Reserve should lower interest rates. Indeed all will clamor to lower rates to revive the economy again. With the signs of rising prices in many sectors, especially energy, and in spite of the weak economy we can expect the Federal Reserve chairman to issue precautionary statements. He will reiterate that he must watch out for the resurgence of (price) inflation. In spite of his statements about concerns for inflation, if the stock market slump and the economic slowdown are significant enough regardless of what he says, we can be certain of one thing, the money supply will continue to grow rapidly in an attempt to keep interest rates low. But Mr. Greenspan will never admit that inflating is exactly what he's been generously doing for the past 13 years. A short time after Chairman Greenspan took over the reigns of the Federal Reserve the stock market crash of 1987 prompted him to alleviate concerns with a heavy dose of monetary inflation. Once again, the slump of 1991 and 1992, he again re-ignited the financial bubble by more monetary inflation. There was no hesitation on Mr. Greenspan's part to inflate as necessary to alleviate the conditions brought about by the Mexican financial crisis, the Asian crisis, the Russian ruble crisis, and with the Long-Term Capital Management crisis. Just one year ago the non-existent Y2K crisis prompted huge, unprecedented monetary inflation by the Federal Reserve. All these efforts kept interest rates below the market rate and contributed to the financial bubble that is now starting to deflate. But, there is no doubt that this monetary inflation did maintain an economy that seemed like it would never quit growing. Housing markets thrived, the stock market and bond market thrived, and in turn, the great profits made in these areas, especially gains made by stock market transactions, produced profits that inflated greatly the revenues that flowed into the Treasury. The serious problem that we now face, a collapsing stock market and a rapidly weakening economy, was caused by inflating the money supply along with artificially low interest rates. More inflation and continuing the policy of artificially low interest rates can't possibly be the solution to the dilemma we face. We should never blame economic growth as the culprit. But artificial growth, mal-investment, overcapacity, speculation, and excessive debt that comes from systematic monetary inflation should be blamed, since these are all a result of Federal Reserve Board policy. Let there be no doubt political and financial leaders will demand lower interest rates in order to alleviate the conditions that are developing. But just because a boom can come from generous Fed credit, it doesn't mean the bubble economy can be maintained or re-inflated by easy credit once a correction sets in. Besides, Alan Greenspan knows full well that the scenario we are now experiencing can be made worse by lowering interest rates. Under the conditions we are facing it's very likely the dollar will weaken and deliberately lowering interest rates will accelerate this trend. Price inflation, which the Fed claims it is so concerned about, will not necessarily go away even with a weak economy. And the one thing we will come to realize that even the best of all central bankers, Alan Greenspan will not be able to determine interest rates at all times of the business cycle. Inflation premiums, confidence, the value of the dollar, and political conditions all can affect interest rates and these are out of the control of the Federal Reserve Board. Congress definitely should be concerned about these matters. Budgetary planning will get more difficult as the revenues spiral downward and spending does the opposite. Interest on the national debt will continue and will rise as interest rates rise. The weak dollar, lower stock markets and inflation can affect every fixed income citizen, especially the Social Security beneficiaries. We can expect the World Trade organization managed trade war will actually get much worse under these conditions. Military conflict is not out of the question under the precarious conditions, that are developing. Oil supplies are obviously not secure and as we have seen the run up of prices to dangerously high levels. The question is what should one expect the Federal Reserve Board to eventually do? We can expect it to continue to inflate as they have always chosen with every crisis. There's no evidence that Alan Greenspan would choose to do anything else regardless of this expression of concern about inflation and the value of the dollar. Greenspan still believes he can control the pain, produce a weakened economy that will not get out of control. But there's no way that he can guarantee that the United States might not slip into a prolonged lethargy, similar to what Japan is now experiencing. We can be certain that Congress will accommodate with whatever seems to be necessary for bailing out a weakened financial sector. But all this will be done at the expense of the dollar. This is a dangerous process and makes our entire economic and financial system vulnerable. We must someday recognize that neither Congress nor the Fed is supposed to ``run'' the economy. Yet we still live with the belief that the Administration, our Presidents, our Congress and the Federal Reserve should run the economy. This is a dangerous concept and always leads to the painful corrections to so-called the good times for which everyone is anxious to take credit. Congress does have responsibility for maintaining a sound dollar and a free market and not much else. Unfortunately this responsibility that is clearly stated in the Constitution is ignored. A major financial crisis is possible since the dollar is the reserve currency of the world, held in central banks as if it were gold itself. The current account deficit for the United States continues to deteriorate, warning us of danger ahead. Our foreign debt or $1.7 trillion continues to grow rapidly and it will eventually have to be paid. Action by the Congress and the Federal Reserve will most likely make the correction that is now starting much worse. Also, under conditions such as these, personal liberty is always vulnerable by the advocates of big government. It is well known that during the times of military wars personal liberties are in endangered. Social wars such as the war on drugs are notorious for undermining the principles of liberty. So too, under economic conditions that are difficult to understand and deal with, personal liberty comes under attack. This should concern us all.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I rise in opposition to the James Madison Commemoration Commission Act secure in the belief that were James Madison on the floor today, he would share my opposition to this bill. Congress has no constitutional authority to use taxpayer funds to promote the life and thought of any individual. Congressional actions exceeding the limitations on congressional power contained in Article 1, Section 8 of the Constitution undermine the very principles of limited government to which James Madison devoted his life. In fact, few have been as eloquent in pointing out how liberty is threatened when Congress exceeds its enumerated powers: If Congress can do whatever in their discretion can be done by money, and will promote the General Welfare, the Government is no longer a limited one, possessing enumerated powers, but an indefinite one, subject to particular exceptions.--Letter to Edmund Pendleton, January 21, 1792 (Madison, 1865, I, page 546) Of course, Mr. Speaker, I wholeheartedly endorse the goals of promoting public awareness and appreciation of, the life and thought of James Madison. In fact, through my work with various educational organizations, I have probably done as much as any member to promote the thought of James Madison and the other Founding Fathers. James Madison's writings provide an excellent guide to the principles underlying the true nature of the American government. In addition, Madison's writings address many issues of concern to friends of limited government today, such as the need for each branch of government to respect the Separation of Powers, the threat posed to individual liberty by an interventionist foreign policy, and the differences between a Republic and a pure Democracy. However, the continuing growth of the federal government and Congress' refusal to abide by its constitutional limits suggest that the people most in need of familiarization with the thought of James Madison are those who would support this bill. Mr. Speaker, S. 3137 exceeds the constitutional limits on Congressional power, and thus violates the principles of limited government upon which our constitutional system was based. Therefore, I urge my colleagues to pay appropriate tribute to James Madison by rejecting this unconstitutional bill.

Mr. PAUL

Mr. PAUL. Mr. Speaker, today we are faced with a decision to do the right thing for the wrong reasons or the wrong thing for the wrong reasons. We have heard proponents of this FSC bill argue for tax breaks for U.S. exporters, which, of course, should be done. Those proponents, however, argue that this must be done to move the United States into compliance with a decision by the WTO tribunal. Alternatively, opponents of the bill, argue that allowing firms domiciled in the United States to keep their own earnings results in some form of subsidy to the ``evil'' corporations. If we were to evaluate this legislation based upon the floor debated, we would be left with the choice of abandoning U.S. sovereignty in the name of WTO compliance or denying private entities freedom from excess taxation. Setting aside the aforementioned false choice of globalism or oppression by taxation, there are three reasons to consider voting against this bill. First, it perpetuates an international trade war. Second, this bill is brought to the floor as a consequence of a WTO ruling against the United States. Number three, this bill gives more authority to the President to issue Executive Orders. Although this legislation deals with taxes and technically actually lowers taxes, the reason the bill has been brought up has little to do with taxes per se. To the best of my knowledge there has been no American citizen making any request that this legislation be brought to the floor. It was requested by the President to keep us in good standing with the WTO. We are now witnessing trade war protectionism being administered by the World (Government) Trade Organization--the WTO. For two years now we have been involved in an ongoing trade war with Europe and this is just one more step in that fight. With this legislation the U.S. Congress capitulates to the demands of the WTO. The actual reason for this legislation is to answer back to the retaliation of the Europeans for having had a ruling against them in favor of the United States on meat and banana products. The WTO obviously spends more time managing trade wars than it does promoting free trade. This type of legislation demonstrates clearly the WTO is in charge of our trade policy. The Wall Street Journal reported on 9/5/00, ``After a breakdown of talks last week, a multi-billion-dollar trade war is now about certain to erupt between the European Union and the U.S. over export tax breaks for U.S. companies, and the first shot will likely be fired just weeks before the U.S. election.'' Already, the European Trade Commissioner, Pascal Lamy, has rejected what we're attempting to do here today. What is expected is that the Europeans will quickly file a new suit with the WTO as soon as this legislation is passed. They will seek to retaliate against United States companies and they have already started to draw up a list of those products on which they plan to place punitive tariffs. The Europeans are expected to file suit against the United States in the WTO within 30 days of this legislation going into effect. This legislation will perpetuate the trade war and certainly support the policies that have created the chaos of the international trade negotiations as was witnessed in Seattle, Washington. The trade war started two years ago when the United States obtained a favorable WTO ruling and complained that the Europeans refused to import American beef and bananas from American owned companies. The WTO then, in its administration of the trade war, permitted the United States to put on punitive tariffs on over $300 million worth of products coming into the United States from Europe. This only generated more European anger who then objected by filing against the United States claiming the Foreign Sales Corporation tax benefit of four billion dollars to our corporations was ``a subsidy.'' On this issue the WTO ruled against the United States both initially and on appeal. We had been given till November 1st to accommodate our laws to the demands of the WTO. H.R. 4986 will only anger the European Union and accelerate the trade war. Most likely within two months, the WTO will give permission for the Europeans to place punitive tariffs on hundreds of millions of dollars of U.S. exports. These trade problems will only worsen if the world slips into a recession when protectionist sentiments are strongest. Also, since currency fluctuations by their very nature stimulate trade wars, this problem will continue with the very significant weakness of the EURO. The United States is now rotating the goods that are to receive the 100 to 200 percent tariff in order to spread the pain throughout the various corporations in Europe in an effort to get them to put pressure on their governments to capitulate to allow American beef and bananas to enter their markets. So far the products that we have placed high tariffs on have not caused Europeans to cave in. The threat of putting high tariffs on cashmere wool is something that the British now are certainly unhappy with. The Europeans are already well on their way to getting their own list ready to ``scare'' the American exporters once they get their permission in November. In addition to the danger of a recession and a continual problem with currency fluctuation, there are also other problems that will surely aggravate this growing trade war. The Europeans have already complained and have threatened to file suit in the WTO against the Americans for selling software products over the Internet. Europeans tax their Internet sales and are able to get their products much cheaper when bought from the United States thus penalizing European countries. Since the goal is to manage things in a so-called equitable manner the WTO very likely could rule against the United States and force a tax on our international Internet sales. Congress has also been anxious to block the Voice Stream Communications planned purchase by Deutsche Telekom, a German government-owned phone monopoly. We have not yet heard the last of this international trade fight. The British also have refused to allow any additional American flights into London. In the old days the British decided these problems, under the WTO the United States will surely file suit and try to get a favorable ruling in this area thus ratcheting up the trade war. Americans are especially unhappy with the French who have refused to eliminate their farm subsidies--like we don't have any in this country. The one group of Americans that seem to get little attention are those importers whose businesses depend on imports and thus get hit by huge tariffs. When 100 to 200 percent tariffs are placed on an imported product, this virtually puts these corporations out of business. The one thing for certain is this process is not free trade; this is international managed trade by an international governmental body. The odds of coming up with fair trade or free trade under WTO are zero. Unfortunately, even in the language most commonly used in the Congress in promoting ``free trade'' it usually involves not only international government managed trade but subsidies as well, such as those obtained through the Import/Export Bank and the Overseas Private Investment Corporation and various other methods such as the Foreign Aid and our military budget. Lastly, despite a Constitution which vests in the House authority for regulating foreign commerce (and raising revenue, i.e. taxation), this bill unconstitutionally delegates to the President the ``authority'' to, by Executive order, suspend the tax break by designating certain property ``in short supply.'' Any property so designated shall not be treated as qualifying foreign trade property during the period beginning with the date specified in the Executive order. Free trade should be our goal. We should trade with as many nations as possible. We should keep our tariffs as low as possible since tariffs are taxes and it is true that the people we trade with we are less likely to fight with. There are many good sound, economic and moral reasons why we should be engaged in free trade. But managed trade by the WTO does not qualify for that definition.

Mr. PAUL

Mr. PAUL. Mr. Speaker, the financial markets are now nervously watching the impasse now reached in the Presidential election. Many commentators have already claimed the most recent drop in the market is a consequence of the uncertainty about the outcome of the election. Although it would be a mistake to totally dismiss the influence of the election uncertainty as a factor in the economy, it must be made clear that the markets and the economy are driven by something much more basic. We know that the markets have been off significantly for the past several months, and this drop was not related in any way to the Presidential election. Confidence is an important factor in the way markets work, and certainly the confusion in the Presidential election does not convey confidence to investors and to the rest of the world. Mises, the great 20th century economist, predicted decades before the fall of the Soviet system that socialism was unworkable and would collapse upon itself. Although he did not live to see it, he would not have been surprised to witness the events of 1989 with the collapse of the entire Communist-Soviet system. Likewise, the interventionist- welfare system endorsed by the West, including the United States, is unworkable. Even without the current problems in the Presidential election, signs of an impasse within our system were evident. Inevitably, a system that decides almost everything through pure democracy will sharply alienate two groups, the producers and the recipients of the goods distributed by the popularly elected congresses. Our system is not only unfairly designed to take care of those who do not work, it also rewards the powerful and influential who can gain control of the government apparatus. Control over government contracts, the military industrial complex and the use of our military to protect financial interests overseas is worth great sums of money to the special interests in power. Even though it is argued that there are huge budget surpluses in Washington, instead of budget compromise, a stalemate results. Each side wants even a greater share of the loot being distributed by the politicians. Even with the windfall revenues, no serious suggestion is made in Washington for cuts in spending. Instead of moving toward a market economy and less dependency on the Federal Government in the midst of this so-called ``prosperity,'' we continue to go in the other direction by internationalizing the interventionist-welfare system. Planning-by-government has gone international as the political power is delivered to organizations like the United Nations, the World Trade Organization, the International Monetary Fund and the World Bank. Although in the early stages of interventionism and government planning, especially when a great deal of wealth is available for redistribution, it seems to enhance prosperity while prolonging the financial bubble on which the economy is dependent. The monetary system, both our domestic system as well as the international fiat system, plays a key role in the artificial prosperity based on inflated currencies as well as debt and speculation. The pretended goal of the economic planners has been economic fairness through redistribution of wealth, politically correct social consciousness, and an all-intrusive government which becomes a responsibility for personal safety, health and education while personal responsibility is diminished. The goal of liberty has long been forgotten. The concentrated effort has been to gain power through the control of wealth with a scheme that pretends to treat everybody fairly. An impasse was destined to come, and already signs are present in our system of welfarism. This election in many ways politically demonstrates this economic reality. The political stalemate reflects the stalemate that is developing in the economy. Both will eventually cause deep division and hardship. The real problem, the preserving of the free market and private property rights, if ignored, will only make things worse, because the only solution that will be offered in Washington will be more government intervention, increased spending, increase in monetary inflation, more debt, greater military activity throughout the world, and priming the economic pump with more expenditures for weapons we do not need. We have already seen signs of economic troubles ahead. Although the Fed plans for only a slight slow down and a so-called ``soft landing,'' the correction from the monetary mischief of the last 10 years has already been determined. Although the dollar currently remains strong, because other currencies are so weak, there is a limitation on how long we can create new dollars without them being devalued. A weaker dollar will surely come in our not too distant future. Our huge current account deficit and trade imbalances warn us of that day. Government statistics continue to tell us that price inflation is not a problem, and when an inflation statistic comes out it does not like, it drops out food and energy and claims the number is totally benign. Ask any housewife, and they will tell you that the cost of living is going up steadily and much more rapidly than the government will admit. We in the Congress should be prepared for lower revenues in the future since the revenues received in the last couple of years were artificially created by a stock market that had skyrocketed due to the credit expansion by the Federal Reserve. These capital gains tax revenues will soon disappear. The savings rates of the American people are now negative. Without savings, true capital investment cannot be maintained. Creation of credit out of thin air by the Fed was the original problem so it surely can't be the solution. Even in the midst of our great imaginary budgetary surpluses, there has been no effort to cut. Once the economy tends to slow and more problems are apparent, expenditures are going to soar not only because of future problems but because of the new programs recently initiated. A huge financial bubble has been created by the GSEs, such as Fannie Mae and Freddie Mac. The $33 billion of shareholder equities in these two organizations has been leveraged into $1.07 trillion worth of assets--a bubble waiting to be pricked. The Congress has reacted to all these events irresponsibly by increasing spending, increasing spending, increasing tax revenues, doing nothing to reduce regulations and being totally apathetic toward the dollar and monetary policy. We in the Congress have a moral and constitutional obligation to protect the value of the dollar and to understand why it is so important to the economy that a central bank not be given the unbelievable power of inflating a currency at will and pretending that it knows how to find tune an economy through this counterfeit system of money. Rising interest rates in the high yield bond market is giving us an indication that a serious problem is just around the bend. Commercial debt was but $50 billion in 1994 and is now ten times higher now at $551 billion. The money supply is now growing at greater than a 10% rate and the derivatives market, although difficult to calculate, probably exceeds $75 trillion. We also have consumer debt, which is at record highs and has not yet shown signs of slowing. The Dow Jones Industrial Average stocks are now 5 times book value, the highest in over a hundred years. There will come a day when most people come to realize the fraud associated with Social Security and the inability for it to continue as currently managed. Rising oil and natural gas prices, it is argued, are not inflationary, yet they are playing havoc with the pocketbooks of most Americans. The economies of Asia, and in particular Japan, will not offer any assistance in dealing with the approaching storm in this country. Our foreign policy, which continues to obligate our support around the world, shows no signs of changing and will contribute to the crisis and possibly our bankruptcy. What must we do? We should develop more sensible priorities. We must restore confidence in freedom and recognize how free markets can solve our problems. We must have more respect for the Rule of Law and demand that Congress, the Courts, and the President live within the Rule of Law and stop arbitrarily flaunting the Constitution. If the Constitution is to be changed, it should be changed slowly and deliberately as is permitted, but never by fiat. We must eventually reconsider the notion of the original constitutional Republic as designed by our Founders. The monolithic centralized state was not the design nor is it supported by the Constitution. We were meant to have loose knit individual states with the states themselves managing their own affairs. The political impasse we now see with the election process along with the divisions in the House and Senate is surely related to the economic and budgetary impasse that plagues Washington. Since interventionism (the planned welfare state) is unworkable and will fail, the surprising developments in this presidential election will accelerate its demise. The two are obviously related.

Mr. PAUL

Mr. PAUL. Mr. Speaker, H.R. 2614 contains some very laudable tax cut measures which I strongly support. However, the bill also contains some very troubling provisions, provisions which have no place in what ought to be purely tax relief legislation. As a result, this bill represents an eleventh-hour political compromise which makes politicians feel good but does more harm than good for the American people. Many Members, including myself, have worked hard to bring some measure of tax relief to American families this year. We worked to pass meaningful bills which would have eliminated the marriage penalty and eliminated the harmful estate tax. We worked to increase deductions for health care expenses. We worked to increase the tax-deductible amounts individuals can contribute to their IRA and pension plans. We worked for these tax cuts because we know that American families pay too much in taxes. Tax relief has been, and should be, our guiding principle. Accordingly, I strongly endorse many of the provisions in this bill. I fully support the increased IRA and pension plan deduction amounts, which will benefit virtually all Americans. Tax-deductible and tax- deferred savings incentives represent the very best kind of tax reforms this Congress can make. Not only do Americans pay less in taxes with an increased deduction, they also have an increased incentive to accumulate retirement savings. Another worthwhile portion of this bill addresses the needs of rural hospitals, which were unfairly singled out for excessive reductions in Medicare reimbursements by the Balanced Budget Act of 1997. While Congress deserves a share of the blame, most of the problems experienced by rural health care providers are the result of flawed implementation of the Act by the Health Care Financing Administration (HCFA). This administration has decimated rural health care in order to artificially prolong the life of the Medicare trust fund, while avoiding reforms that would give seniors more control over their health care decisions. The administration should not play political games with Medicare trust funds at the expense of rural hospitals. By doing so, it has violated the promise of quality health care made to senior taxpayers in rural areas. Mr. Speaker, I also am pleased that this bill extends the Medical Savings Accounts (MSA) program created in 1996. MSAs and generous health care tax deductions are critical to preserving health care freedom. Federal policies removing consumer control over health care dollars inevitably have led to increased decision making by HMOs and federal bureaucrats. We must restore individual control over health care dollars, and MSAs coupled with health care tax credits and deductions are an important step in the right direction. MSAs and health care tax deductions lower health care costs without sacrificing quality by motivating patients to negotiate for the highest quality care at a reasonable price. Similarly, today's small business tax relief measures are commendable. We place a huge regulatory and tax burden on our nation's small employers, many of which find it difficult simply to comply with the tax laws. I support any efforts to reduce taxes and regulations on our small entrepreneurial employers. Unfortunately, these positive tax relief provisions are outweighed by other measures in today's mixed bag legislation, measures which have been agreed to only because many Members want to claim they have passed a ``tax relief'' bill before they go home. The administration has thwarted many of our tax relief efforts through the veto process, and we apparently have decided to take whatever tax measures we can get, regardless of the price. So now we find ourselves in a position where we cobble together some less sweeping tax relief proposals which the administration will accept, and we put them in a larger bill which contains some very bad measures favored by the administration. Before we tout today's bill, however, we ought to be honest with our constituents about the real nature of this last-minute compromise. The small business tax relief in this bill is more than outweighed by the provisions raising the federally-mandated minimum wage. While I certainly understand the motivation to help lower wage workers, the reality is that a minimum wage hike hurts lower income Americans the most. When an employer cannot afford to pay a higher wage, the employer has no choice but to hire less workers. As a result, young people with fewer skills and less experience find it harder to obtain an entry- level job. Raising the minimum wage actually reduces opportunities and living standards for the very people the administration claims will benefit from this legislation! It's time to stop fooling ourselves about the basic laws of economics, and realize that Congress cannot legislate a higher standard of living. Congress should not allow itself to believe that the package of small business tax cuts will fully compensate businesses and their employees for the damage inflicted by a minimum wage hike. Congress is not omnipotent; we cannot pretend to strike a perfect balance between tax cuts and wage mandates so that no American businesses or workers are harmed. It may make my colleagues feel good to raise the minimum wage, but the real life consequences of this bill will be felt by those who can least afford diminished job opportunities. We also make a mistake when we rush to change our domestic tax laws to comply with the ruling of an international body. Nobody in Congress or the administration wants to talk about it, but this is the first time in the history of our nation that we have changed our laws because an international body told us to do so. We are not considering this legislation because American citizens or corporations lobbied for it. We are considering it solely because of the demands of the WTO appellate panel, which agreed with EU complaints about our corporate income tax laws. We created the Foreign Sales Corporation rules back in the 1980s, but now the EU has decided our law exempting a small portion of foreign source income from corporate taxes represents a ``subsidy.'' We have plenty of federal subsidies in this country, but the FSC tax treatment assuredly is not one of them. FSCs do not receive a subsidy-- no tax dollars are collected from taxpayers and given to FSCs. The FSC rules simply permit the parent corporation to pay less taxes on its foreign income. Most EU countries don't tax their corporations on foreign income at all! So the EU complaint that the FSC represents a subsidy is ridiculous. This measure clearly demonstrates how our membership in the WTO undermines our national sovereignty. I have warned this body that the WTO does not promote true free trade, but rather enforces politically influenced ``managed trade.'' I warned this body that our agreement to abide by WTO rulings would force us to change our domestic laws. I warned this body that our participation in the WTO was unconstitutional. Yet Members scoffed at this idea. Members of the Ways and Means committee said it was ``unthinkable'' that the U.S. Congress would change our nation's laws because of an order by the WTO. We were told that we had to join or else we would lose the international ``trade wars.'' Today we see our sovereignty clearly undermined, and at the same time we stand on the brink of a retaliatory trade war by the EU. So the WTO has given us the worst of all worlds. We should not change our tax laws at the behest of any body other than the U.S. Congress. If we want to help American businesses, we should simply stop taxing foreign source income. Today's FSC measure will not appease the EU; they already have indicated that the House version of this bill is unsatisfactory to them. Worst of all, this measure gives the President further unconstitutional executive order powers to make changes when demanded by the WTO in the future. Never mind that the legislative power is supposed to reside solely with Congress. We simply cede our legislative authority to the WTO when we pass this measure, and it's shameful that it likely will go unnoticed by the American people. We ought to tell them exactly what we are doing to national sovereignty when we pass this last-minute mixed bag of tax measures. Mr. Speaker, I would like to commend the leadership for bringing this conference report to the floor. This conference report includes many important provisions to spur individual retirement savings. Most importantly, the report includes language that increases the IRA contribution limit, a proposal I have worked on for several years. The popularity of this issue is evidenced by the more than 222 bipartisan members who cosponsored my IRA legislation. For years, millions of Americans have relied on Individual Retirement Accounts to help save for a secure retirement. However, despite their past success, IRAs are in danger of becoming obsolete because inflation is destroying much of their value. Since 1981 the limit on IRAs has been frozen. Had it simply kept pace with inflation, Americans would now be able to contribute $5,068 instead of only $2,000. If IRAs are to continue to be a real help for people as they plan for their retirement years, it is past time for the federal government to allow higher contributions.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I urge my colleagues to reject the National Science Act (H.R. 4271), which violates the limits on congressional power found in Article 1, section 8 and the 10th amendment to the Constitution by using tax monies unjustly taken from the American people to promote the educational objectives favored by a few federal politicians and bureaucrats. As an OB-GYN, I certainly recognize the importance of increasing the quality of science education as well as undertaking efforts to interest children in the sciences. However, while I share the goals of the drafters of this legislation, I recognize that Congress has no constitutional authority to single out any one academic discipline as deserving special emphasis. Instead, the decision about which subjects to emphasize should be made by local officials, educators and parents. H.R. 4271 not only singles out science for special emphasis, certain positions of the bill will lead to a national science curriculum. For instance, the bill calls for the Department of Education and the National Science Foundation to coordinate and disseminate information on ``standard'' math and science curricula as well as licensing requirements for teachers of math, science, engineering or technology. While local school districts are not forced to adopt these standards, local schools will be pressured to adopt these standards because they are the ones favored by their DC-based overlords. I would also ask the drafters of this bill what purpose is served by spending taxpayer moneys to create and disseminate a model curriculum at the federal level if their intent is not to have local schools adopt the federally- approved model? I also object to the provision of this bill providing special assistance to science teachers for training and professional development as well as grants for so-called ``Master Teachers.'' Of course, I recognize that, like other citizens, teachers are underpaid because they are overtaxed. This is why I have introduced the Teacher Tax Cut Act (H.R. 937) which provides all teachers with a $1,000 tax credit. H.R. 937 effectively raises teacher salaries by lowering their taxes. In contrast H.R. 4271 raises the salaries of certain congressionally-favored educators by effectively cutting the pay of engineers, doctors, truck drivers, waiters, and even their fellow educators. Mr. Speaker, I cannot find any constitutional nor moral justification for Congress to redistribute money to any favorite class of professionals. If the steady decline of America's education system over the past thirty years has shown us anything, it is that centralizing control leads to a declining education system. In fact, according to a recent Manhattan Institute study of the effects of state policies promoting parental control over education, a minimal increase in parental control boosts students' average SAT verbal score by 21 points and students' SAT math score by 22 points! The Manhattan Institute study also found that increasing parental control of education is the best way to improve student performance on the National Assessment of Education Progress (NAEP) tests. Clearly, the drafters of the Constitution knew what they were doing when they forbade the Federal Government from meddling in education. In order to put education resources back into the hands of the American people I have introduced the Family Education Freedom Act (H.R. 935). This act provides a $3,000 per child tax credit for parents to help cover K-12 education expenses. I have also introduced the Education Improvement Tax Cut Act (H.R. 936), which provides a $3,000 tax deduction for contributions to K-12 education scholarships as well as for cash or in-kind donations to private or public schools. HRs 935 and 936 move control of education resources back into the hands of the American people and help ensure parents can provide their children an excellent education. In fact, since the tax credits contained in H.R. 935 and H.R. 936 may be used to help finance the purchase of items necessary for a science education, such as labs equipment and computers, these bills will particularly benefit those citizens who wish to improve science education. I therefore urge my colleagues to reject the failed, unconstitutional command-and-control approach of H.R. 4271 and instead embrace my legislation to return control of education resources to the American people.