William Roth

Mr. ROTH

Mr. ROTH. Mr. President, America's most valuable economic resource is the spirit of enterprise that moves in our people. This spirit is reflected in men and women and families that build businesses on dreams, personal risk, and good ideas. It is reflected in the strength of our communities, communities held together by commerce. It is reflected in the strong economic status our Nation enjoys, indeed, in our superpower status. And it is reflected in the security and opportunity we enjoy as individuals. The responsibility of Congress, of Government in general, is to help promote an environment where this spirit can flourish, especially among America's small business men and women. How important is it that we succeed in this endeavor? Consider that there are 22 million small business owners in America today, and that each year another 800,000 new small startups are created. Consider that nearly 6 out of 10 Americans get their paychecks from small businesses and that small business represents 99.8 percent of all American businesses. They contribute more than half of our sales in our country. They provide more than half of our economy's output and 55 percent of all new innovations each year. Consider, Mr. President, that of the 25 million future jobs that will be needed to provide employment for Americans, 75 percent will come from small business. Recently, I heard that the majority of small businesses today are being created by women. With these trends in mind, we can see how important it is that we succeed in passing a small business bill that meets the real needs of America's entrepreneurs, a bill that unleashes enterprise and rewards risk taking. Toward this end, Senator Moynihan and I have spent a great deal of time taking comments from our colleagues pertaining to this small business bill. We have consulted with the leadership on both sides of the aisle. We believe we have developed an amendment that addresses the requests and comments we received. Before turning my attention to the managers' and leaders' amendment, however, I would like to address the tax provisions to the small business bill that are proposed by the Finance Committee. For small business, the only thing worse than excessive taxation is a visit from the people at ``60 Minutes.'' Frankly, Mr. President, I know several small business men and women who would rather face Mike Wallace. Excessive taxes are the sludge that binds the gears of small business, and we must do something about them. The tax provisions proposed by the Finance Committee represents a good start. They lift some of the burden that is borne by small businesses. They make it easier for small business men and women to hire, to expand, to modernize. Our tax provisions facilitate the ability of small businesses to offer retirement plans for their employees. They allow businesses to bring more employees into pension plans. Beyond all of this, we make both undergraduate and graduate education more affordable for employees by extending the tax-free treatment of employer-provided education assistance. These are incentives that will go a long way toward creating an environment for growth, job creation, economic security, and real opportunity for Americans. Legislation with similar tax incentives passed the House by a vote of 414-10. Specifically, what this bill does is provide an increase in the expensing of small business equipment from the current $17,500 annual amount to $25,000 by the year 2003. It offers a package of subchapter S corporation reforms that will improve the ability of small business men and women to use this corporate status. Among a number of reforms, the principal changes include increasing the number of subchapter S corporation shareholders, easing the use of subchapter S corporations in the area of estate planning, broadening the access of subchapter S corporations for small banks, employee stock ownership plans and charities, and granting greater flexibility in the use of multiple subchapter S corporations. Additionally, the reforms will permit taxpayers to keep subchapter S corporation status, and allow corrections for inadvertent mistakes. Our bill also contains pension simplification proposals, including spousal IRA's and a new kind of pension plan for small business. Our purpose here is to increase access to the pension system for the millions of small business employees who currently do not have this important security. One of my major objectives is that spouses be treated equally when it comes to pension benefits and individual retirement accounts. Currently, a homemaker can only contribute up to $250 to an IRA. Under our plan, they would be able to invest up to $2,000, the same amount contributed by their spouses. In addition, our package permits tax-exempt organizations to set up section 401(k) opportunities for their employees, and it simplifies pension rules for employers who currently offer pension plans. Beyond this, we offer a package of proposals that extend tax benefits that have expired. These important benefits include the tax credit for research and development which keeps us competitive in the global economic community. They include credits for the very expensive costs associated with the development and testing of drugs for rare diseases. These are often referred to as ``orphan drugs''--orphans because their limited demand makes it otherwise cost prohibitive to research, develop, and market them. Included in the package of extenders is an extension of the section 29 alternative fuels credit. This credit provides an incentive for the production of clean and environmentally friendly energy sources. Mr. President, in the last 5 years, small businesses have created 9 out of 10 new jobs. In fact, small business provided all the net new jobs from 1987 to 1992. Mr. President, 9 out of 10 of these firms have fewer than 20 employees. They are, indeed, the heroes on the front line. With these changes to the tax law, these small business men and women will have greater incentives and resources to move our economy forward. Should anyone doubt how stalwart these men and women are compared to those in other countries, should anyone doubt that Government policies have consequences on their ability to succeed, I refer to a recent article from the London Sunday Telegraph. According to that paper, The United States has created 30 times more new private- sector jobs in the European Union over the last 20 years. . . The British Treasury reported that the EU created fewer than 1 million net jobs, compared with more than 31 million produced by the more deregulated American economy. The stark Treasury figures paint a much grimmer picture than the Foreign Office' recent White Paper on Europe, which claimed that the EU had created 8 million jobs over the same period. Compiled from independent figures, the Treasury tracks detailed employment patterns between the two trading blocks for 1974-1994. With roughly similar populations during that period of around 250 million, they show the United States created 31,306,000 net new jobs in the private sector to Europe's 823,000. . . Speaking in London on Friday. . . the French commissioner for a single currency, admitted that overzealous EU regulation had taken its toll on job creation. Mr. President, taxation and regulation do have profound influences on the ability of nations to create jobs. What we propose is to take some of the burden off the backs of American small business men and women. My hope is that this is only a beginning, but it is a good beginning. Now, our tax provision to the Small Business Job Protection Act of 1996 passed the committee unanimously. There is no reason why we cannot see similar success here on the floor. Mr. President, I now turn our attention to the managers' and leaders' amendment. In developing this amendment, I believe we have maintained the goals that were set out in crafting the campaign finance reform bill. Our objectives were, first, to retain the bipartisan spirit of the bill. Second, to stay with two basic themes: To create incentives for small business and economic growth; and to extend many of the important tax provisions that have either expired or are set to expire. Our third objective sought to refrain from opening up controversial issues, issues that would divide Republicans and Democrats here on the floor. Amendment No. 4436 (Purpose: To provide additional amendments.)

Mr. ROTH. The Senator is correct.

Mr. ROTH

Mr. ROTH. Mr. President, first of all, I want to express my appreciation to the distinguished senior Senator from New York for contributions he has made in bringing this tax legislation to a successful conclusion. I can say in all honesty, it would not have happened without his wise counsel, his advice and willingness to work across the aisle. I greatly appreciate it. I also wish to express my appreciation to the many staff people who worked so hard to bring this legislation to the Senate floor. While many of us were back home, perhaps working hard there in local offices, or celebrating our Nation's birthday, we had many, many staff members from Senator Moynihan's office, the staff of the two leaders, as well as mine, dedicating long hours to trying to bring this legislation that we have just voted on to conclusion. I would like to especially mention Lindy Paull, Frank Polk, Mark Prater, Rosemary Becchi, Sam Olchyk, Doug Fisher, Lori Peterson, Brig Gulya, Tom Roesser, as well as Mark Patterson, Jon Talisman, Patti McClanahan, and Maury Passman for their excellent work. For the managers' amendment, I would like to express my thanks to Annette Guarisco and Susan Connell, of Senator Lott's office. From Senator Daschle's office: Larry Stein, Alexandra Deane Thorton, Glenn Ivey, Leslie Kramerich. Again, I thank Senator Moynihan and his very excellent staff for their help and cooperation. Mr. MOYNIHAN addressed the Chair.

Mr. ROTH. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. ROTH

Mr. ROTH. Mr. President, I rise to address the NATO study proposed by my colleagues Senator Hutchison and Senator Nunn. I very much value and encourage their efforts to address core issues of European security, particularly those concerning the future role and membership of NATO. Indeed, their initiative today addresses questions and issues that do need to be debated and examined here in Congress. These concern the ramifications that NATO enlargement poses for the Alliance's military strategy and force structure and the geopolitical and financial benefits and costs to the transatlantic community that enlargement will and already does entail. As a longstanding supporter of NATO and the extension of NATO membership to the new democracies of Central and Eastern Europe, I was initially concerned that the tone and language of their amendment initiating this study risked sending absolutely the wrong signal. I was concerned that it would signal that this body, the U.S. Senate, opposes NATO enlargement. That is clearly not the sentiment that has been expressed by this Chamber in the recent past. This Chamber has voted repeatedly in support of NATO enlargement. It voted in support of the NATO Participation Acts and its amendments in 1994 and 1995. And, these acts received the support of bi- partisan majorities. I am very gratified to hear that Senator Nunn and Senator Hutchison are open to suggestions and recommendations concerning the wording of their amendment. The proposed modification now before us, I believe, addresses my concern. The new wording cannot be misinterpreted as a vote against enlargement. Moreover, the modification does inject one very important benefit to our efforts here in Congress. It is no secret that the polarizing and partisan tendencies of election-year politics can even undermine how we address strategically central foreign policy issues such as NATO enlargement. The proposed modification to the NATO study includes the establishment of a bipartisan commission of experts to address the same issues upon which we wish the President to report concerning NATO enlargement. This will be a healthy injection of bipartisanship into our foreign policy process. I am a longstanding supporter of NATO enlargement, and I want to reinforce what I see as an already strong bipartisan consensus on this issue. I strongly believe that we need to extend membership in the transatlantic community to the nascent democracies of Central and Eastern Europe. That's why I call upon my colleagues to accept this proposed modification. I want to ensure that we address this issue of NATO enlargement here in Congress in a manner that reinforces the optimism and drive that brought democracy and peace to Central and Eastern Europe. These new democracies observe closely how we approach those factors affecting their integration into the transatlantic community. The proposed modification to the Hutchison-Nunn amendment transforms their well-intentioned initiative into an objective effort that not only addresses significant and difficult strategic issues but does so in a manner that communicates our commitment to the independence and security of Central and Eastern Europe's new democracies. The proposed modification is consistent with our desire to see these new democracies fully integrated into the institutional fabric of the transatlantic community.

Mr. ROTH

Mr. ROTH. Mr. President, we have been waiting for 2 months to move forward on critical health insurance reform legislation. During this time, Republicans have compromised again and again, each time in response to concerns raised by the White House and by some of my colleagues on the other side of the aisle about medical savings accounts. Mr. President, we have been negotiating in good faith. We have addressed our colleagues' concerns about MSA on both the structure of the insurance plan and the structure of the savings account. We have limited the number of people eligible for the tax-free MSA. We have put forward proposals that are small enough to be considered demonstration projects. We have reduced the maximum contribution that can be made to an MSA. We have reduced the top range of the high deductible. In short, we have bent over backwards to accommodate the White House and some of our Democratic colleagues. Millions of Americans are counting on us to reach an agreement, counting on us to work together to get the job done here in Washington. Americans with preexisting conditions, Americans who are unable to afford health insurance, small businesses that cannot afford to offer their employees health insurance, millions of Americans need this bill, and they do not have the luxury of time in waiting through more games and more rhetoric. Legislating is about compromise. Americans want us to compromise and work together to get this legislation signed into law. We have compromised significantly. We do not have much time remaining for legislative business this year, and we have even less time for partisan games on this critical issue. So let us get together and work this out today or in the very immediate future. I yield the floor. Mr. WARNER addressed the Chair.

Mr. ROTH

Mr. ROTH. I, too, join in congratulating our new Senator from Kansas. We are particularly proud to have two distinguished women Senators from Kansas. I only wish that we could look forward to both of them continuing to serve that State.

Mr. ROTH

Mr. ROTH. Madam President, it has been stated countless times that the American people want three things: real welfare reform, a balanced budget, and compromise, if necessary to get the job done. Yesterday, the Finance Committee approved S. 1795, the Personal Responsibility and Work Opportunity Act of 1996. This legislation reflects the will of the American people on all three of these issues. Let me first address bipartisanship and compromise. This past February, the Nation's Governors gathered in Washington and approved two resolutions dealing with welfare reform and Medicaid. Their efforts were lauded across the country, including by President Clinton. For more than 3 years, President Clinton has been saying that, ``what keeps people on welfare is the cost of health care and child care for their kids.'' Under S. 1795, we are providing more child care funding than under current law and more mandatory child care funding than President Clinton has proposed. This legislation will help families make that all important transition into the work force. When the Democratic and Republican Governors were working together on welfare and Medicaid reform, he did not tell the Governors to abandon their efforts because he would not sign Medicaid reform. In fact, he encouraged them. On the eve of the NGA proposal, the President encouraged the bipartisan Governors' group to ``try to reach agreement on a number of issues that are important to your people and to us here in Washington, including Medicaid and welfare * * *''. In order to protect the President from his own words, many Democrats are now demanding that welfare be separated from Medicaid. The Governors understand there is no real welfare reform without Medicaid reform. The compromise forged last February was supported by the most liberal Governor and the most conservative Governor and everyone in between. No one liked everything, but there was something for everyone in these resolutions. That is the essence of bipartisanship. On May 22, I introduced S. 1795, the Personal Responsibility and Work Opportunity Act of 1996. An identical bill was introduced in the House of Representatives by Chairman Archer and Chairman Bliley. My colleagues in the House and I made every effort to meet the goals adopted by the Democratic and Republican Governors. Last week, members of the Finance Committee submitted 163 amendments to S. 1795. There were 53 Republican amendments and 110 Democrat amendments. Based on the Finance Committee work, S. 1795, as amended, includes more than 50 Democratic amendments. Nearly half of the Democratic amendments offered are included in this legislation. Turning to the subject of welfare reform itself, it is critical to not lose sight of the overall goal of this legislation. That goal is to replace a system which has failed the very people it was intended to serve. The Governors understand that there is no real welfare reform without also restructuring Medicaid. Democratic and Republican Governors alike understand that Medicaid reform is a critical component of moving families from welfare to work. More than 3 years ago, President Clinton told the Nation's Governors that, * * * many people stay on welfare not because of the checks * * * they do it solely because they do not want to put their children at risk of losing health care or because they do not have the money to pay for child care * * *. This is precisely the purpose of S. 1795. Madam President, there is plenty of talk coming from the other side of the aisle that the Governors and State legislatures cannot wait to abandon the children in their State. That is nonsense. If a family stays on welfare, that family will bet both a welfare check and Medicaid. Under this reform proposal, the States have greater incentives to expand Medicaid coverage and help prevent families from being forced onto the welfare rolls in the first place. Reform is a critical component of getting those now on welfare off of cash assistance. The Governors also understand that under current law, Medicaid is an all or nothing proposition. The current system contains built-in incentives for families to impoverish themselves in order to qualify for Medicaid. The Governors also understand that under today's all or nothing scheme, a lot of low-income working families get nothing. As if to add insult to injury, many low-income families are paying for the benefits a welfare family is getting while their own children go without coverage. Medicaid is an important program for our elderly citizens in terms of long-term care coverage. But the current system is far from perfect in serving our senior citizens. The current system forces elderly citizens into poverty even before any benefits can be provided. Our senior citizens often do not receive the most appropriate services because the current system, run under rules dictated by the Federal Government, is not flexible enough. What is good for the bureaucracy is not necessarily good for the individual. S. 1795 will give the States greater flexibility to redesign benefits so that our senior citizens can be better served. The Clinton administration is scaring the elderly and hiding behind children. The very idea that the current system must remain in place in order to protect our vulnerable citizens from their Governors and State legislators is not only insulting. It is wrong. More than half of the money being spent on Medicaid is there solely because the States have chosen to provide optional benefits and extend optional coverage to a greater number of people. The administration is trying to scare people with a convoluted argument that S. 1795 lacks a Federal guarantee. This argument is completely hollow. As Secretary Shalala acknowledged to the Finance Committee earlier this month, the States could take nearly $70 billion today out of the current Medicaid system without needing her approval. S. 1795 did not create the linkage between welfare and Medicaid. That was done more than 30 years ago when Medicaid was created. This legislation meets the four primary goals of the NGA Medicaid resolution: First, the basic health care needs of the Nation's most vulnerable populations must be guaranteed. S. 1795 guarantees coverage and benefits for poor children, children in foster care, pregnant women, senior citizens, persons with disabilities, and families on welfare. If anything, the legislation goes beyond the NGA resolution in terms of setting guarantees. Yesterday we extended those Medicaid guarantees even further to phase-in coverage of children ages 13 to 18. We also extended coverage to families leaving welfare. The modification also requires states to provide health coverage under the new Medicaid program for 1 year to families leaving welfare to go into the work force. Second, the growth in health care expenditures must be brought under control. While slowing the rate of growth, the Federal commitment to Medicaid remains intact. Even after reform, Medicaid spending will rise faster than Social Security. The Federal Government will spend an estimated $827.1 billion between 1996 and 2002 on Medicaid, an average annual increase of approximately 6 percent. We have met the President halfway in terms of Medicaid savings. The difference between us is less than 2 percent of total Federal cost of Medicaid. That is a difference of about two dimes a day per beneficiary. The American people should fully understand that the critical difference between President Clinton and this legislation is not about the level of spending. The difference between us is who controls the spending. The fundamental issue is whether or not the Governors and State legislators and judges can do a better job in running the $2.4 trillion welfare system than the bureaucracy in Washington. The essence of the administration's opposition to S. 1795 is that the States cannot be trusted. The Clinton plan is built on the premise that Washington must control the decision making. This goal of the Governors also goes directly to issue of a balanced budget, the third major issue of concern to the American people. Simply put, the Federal budget cannot be balanced without Medicaid reform. It is the third largest domestic program in the Federal budget. It costs more than AFDC, food stamps, and SSI combined. Medicaid reform is also critical to balancing State budgets and priorities. One out of every $5 spent by the State goes to Medicaid. The National Association of State Budget Officers reports that Medicaid surpassed higher education as the second largest program in 1990. If nothing changes, Medicaid spending may soon overtake elementary and secondary education spending as well. To those taxpayers who are wondering why there is not more money for schools, to repair roads, and build bridges, a large part of the answer is the uncontrolled spending of Medicaid. Third, States must have maximum flexibility in the design and implementation of cost-effective systems of care. Among a number of provisions in meeting this goal, S. 1795 repeals the Boren amendment as requested by the Governors. It frees the States from Federal restrictions which impede the movement into managed care. Fourth, States must be protected from unanticipated program costs resulting from economic fluctuations in the business cycle, changing demographics, and natural disasters. S. 1795 includes an open-ended supplemental umbrella mechanism to provide additional funds for unexpected growth in guaranteed populations as well as certain specified optional populations. This legislation achieves each of these goals. It will replace a failed welfare system in which dependence is measured in generations and illegitimacy is the norm, with a system that encourages work and helps keep families together. This legislation will return power and flexibility to the states, while retaining guarantee of a safety net for the most vulnerable populations. Thirty-nine months ago, President Clinton promised the Nation's Governors and the American people that he would end welfare as we know it. Nothing happened. He abandoned welfare reform and instead pursued a misguided attempt to take government control over the world's finest health care system. It didn't work. Yesterday, the Finance Committee reported out legislation which will deliver on the promise of welfare reform and expand health coverage to many low income families. After 30 years, we know that Washington does not know how to build strong families. It is time to end the incentives for staying in poverty. It is time to end a system in which welfare pays more than work. Over 5 years, a typical welfare family receives more than $50,000 in tax free benefits. In a number of States, the benefits are significantly higher. It is appropriate to set a time limit on benefits and say enough is enough. There is now little difference between this plan and the President's own plan in terms of Federal spending levels on Medicaid. Secretary Shalala appeared before the Finance Committee earlier this month and acknowledged the President proposed to cut Medicaid by $59 billion. Republican Governors have compromised. Democratic Governors have compromised. The legislation approved by the Finance Committee yesterday is a compromise. There have been ample reference to political motivations launched by the other side of the aisle about the linkage between welfare and Medicaid. It is time to question why, after all of these changes, the President would not sign authentic welfare reform which includes Medicaid. Last January, President Clinton vetoed welfare reform which did not include Medicaid. In doing so, he also veto a bill which provided more support, including child care, for welfare families than his own legislation does. H.R. 4 did not include Medicaid. But it did include the sweeping child support enforcement reform for which millions of American families are waiting. This legislation, again included in S. 1795, goes light years beyond anything the President could ever accomplish solely through administrative actions. How many thousands of children will remain in poverty or under the threat of poverty for at least another 6 months because they will not receive cash assistance and medical insurance of their absent parent as a result of President Clinton's vetoes? Earlier this year, President Clinton declared that the era of big government is over. His action on this legislation will determine whether indeed that time is here. This legislation will be a test to see if President Clinton is truly committed to ending the era of big government. Nothing could demonstrate a true allegiance to this pledge better than to return the responsibility and authority for welfare programs, including Medicaid, to the States.

Mr. ROTH

Mr. ROTH. Mr. President, since the founding of our Republic, the cornerstone of United States international trade policy has been the principle of nondiscrimination. What this principle means is that every country will give equal treatment to all products it imports from any other country. For example, the United States applies the same tariff duty rate on a particular product imported from one country as it applies to imports of the same product from all other countries. However, the principle of nondiscrimination goes beyond just trade in goods. For example, if a foreign company wants to set up a branch in the United States, it is subject to the same rules for establishing and running its operations as companies from all other countries operating in the United States. The traditional term for this principle of nondiscrimination is most- favored-nation treatment, or MFN for short. This term is rooted in a very old concept in international law which states that in trade relations, all countries will receive the same treatment as the most favored nation. While the term ``most-favored-nation'' is very old, it is a misnomer that has created much confusion as to its exact meaning. There is no such thing as a most favored nation--it is merely a hypothetical concept. Yet, many mistakenly believe that a country that has MFN status is being singled out for special status or preferential treatment. Despite its name, however, MFN is not a special trading privilege or reward, nor is it the most favorable trade treatment that the United States gives to its trading partners. Rather, MFN refers to the uniform trade treatment that the United States gives to nearly every country in the world. Because there are only seven countries in the world to which the United States does not give MFN status, MFN denotes the ordinary, not the exceptional, trading relationship. To help correct the misconception created by the term ``most-favored- nation'', Senator Moynihan and Senator Chafee have argued for some time that the term should be changed. I agree with my colleagues that a better term is needed. After working with them and Senator Baucus on this issue, I am now introducing a bill, with the cosponsorship of the entire membership of the Committee on Finance, that would establish a new term--``normal trade relations'' as a more accurate description in U.S. law and regulation of the principle of nondiscrimination. Creating this new term does not in any way alter the international rights and obligations of the United States. Rather, we merely seek to clarify that the principle of nondiscrimination under U.S. law denotes the standard and normal trade relationship that we have with nearly every country in the world. I urge my colleagues to support this modest, but important piece of legislation.

Mr. ROTH

Mr. ROTH. Mr. President, since the founding of our Republic, the cornerstone of United States international trade policy has been the principle of nondiscrimination. What this principle means is that every country will give equal treatment to all products it imports from any other country. For example, the United States applies the same tariff duty rate on a particular product imported from one country as it applies to imports of the same product from all other countries. However, the principle of nondiscrimination goes beyond just trade in goods. For example, if a foreign company wants to set up a branch in the United States, it is subject to the same rules for establishing and running its operations as companies from all other countries operating in the United States. The traditional term for this principle of nondiscrimination is most- favored-nation treatment, or MFN for short. This term is rooted in a very old concept in international law which states that in trade relations, all countries will receive the same treatment as the most favored nation. While the term ``most-favored-nation'' is very old, it is a misnomer that has created much confusion as to its exact meaning. There is no such thing as a most favored nation--it is merely a hypothetical concept. Yet, many mistakenly believe that a country that has MFN status is being singled out for special status or preferential treatment. Despite its name, however, MFN is not a special trading privilege or reward, nor is it the most favorable trade treatment that the United States gives to its trading partners. Rather, MFN refers to the uniform trade treatment that the United States gives to nearly every country in the world. Because there are only seven countries in the world to which the United States does not give MFN status, MFN denotes the ordinary, not the exceptional, trading relationship. To help correct the misconception created by the term ``most-favored- nation'', Senator Moynihan and Senator Chafee have argued for some time that the term should be changed. I agree with my colleagues that a better term is needed. After working with them and Senator Baucus on this issue, I am now introducing a bill, with the cosponsorship of the entire membership of the Committee on Finance, that would establish a new term--``normal trade relations'' as a more accurate description in U.S. law and regulation of the principle of nondiscrimination. Creating this new term does not in any way alter the international rights and obligations of the United States. Rather, we merely seek to clarify that the principle of nondiscrimination under U.S. law denotes the standard and normal trade relationship that we have with nearly every country in the world. I urge my colleagues to support this modest, but important piece of legislation.

Mr. ROTH

Mr. ROTH. Mr. President, I ask that the letter submitted to me by June E. O'Neill, Director of the Congressional Budget Office, regarding CBO's estimate of H.R. 3286, the Adoption Promoting and Stability Act of 1996, be printed in the Record. The letter follows: U.S. Congress, Congressional Budget Office, Washington, DC, June 21, 1996. Hon. William V. Roth, Jr., Chairman, Committee on Finance, U.S. Senate, Washington, DC. Dear Mr. Chairman: The Congressional Budget Office (CBO) has estimated the budgetary effects of Titles, I, II, and IV of H.R. 3286, the Adoption Promotion and Stability Act of 1996, as reported by the Committee on Finance on June 13, 1996. Because H.R. 3286 would affect revenues, the bill would be subject to the pay-as-you go procedures under section 252 of the Balanced Budget and Emergency Deficit Control Act of 1985. The attached table displays the estimated federal budgetary effects of Titles I, II, and IV of H.R. 3286. Title I would establish a new tax credit for adoption expenses that would reduce tax payments beginning in 1997. Title IV would repeal the deduction for bad debt reserves of thrift institutions and reform the income forecast method of determining depreciation deductions, effective beginning with the 1996 tax year. The revenue estimates for Titles I and IV of the bill have been provided by the Joint Committee on Taxation. The bill would result in net revenue increases of $79 million in 1996, $147 million in 1997, and $171 million in 2002, which would be partially offset by net revenue losses in the intervening years. Over the 1996-2002 period, the net revenue increase would total $117 million. CBO estimates that the provisions of Title II that would remove barriers to interethnic adoptions would have a negligible effect on federal outlays in the foster care and adoption assistance programs. Although state governments or other entities that receive federal funds for adoption or foster care placement could pay penalties for failing to follow the provisions of Title II, the penalties are sufficiently large that states would comply with the new provisions, and the penalties collected would be negligible. Titles I and IV contain no intergovernmental mandates, as defined in Public Law 104-4, and would impose no direct costs on state, local, or tribal governments. These titles do, however, contain private-sector mandates, as described in the attached private sector mandate statement. Section 4 of the Unfunded Mandates Reform Act of 1995 excludes from the application of that act legislative provisions that establish or enforce statutory rights that prohibit discrimination on the basis of race, color, or national origin. CBO has determined that the provisions in Title II fit within that exclusion. Should you require additional information on this estimate, we will be pleased to provide it. The staff contacts for H.R. 3286 are Justin Latus (for federal costs), Stephanie Weiner (for federal revenues), and Karen McVey (for state, local, and tribal issues). Sincerely, James L. Blum (For June E. O'Neill, Director). Attachments.

Mr. ROTH

Mr. ROTH. Mr. President, as my distinguished colleagues have already pointed out, we have been waiting for nearly 2 months to move forward on critical health insurance reform legislation. The holdup, we are told by the White House and some of our colleagues on the other side of the aisle, is this provision to create a tax-free medical savings account as a health insurance option for Americans. Tax-free medical savings accounts are something Americans want, although you would never know it from the hyperbole being used by some of my colleagues on the other side of the aisle. A poll released this month shows that 77 percent of working Americans would start a medical savings account if MSA's were available to them. Americans who have MSA's like them, and Americans who do not have MSA's want them. MSA's exist now. They have been tested by thousands of companies with great success. What we want for MSA's is equal tax treatment with other types of employer-provided health insurance for the self-employed, the ability to contribute to a medical savings account and receive a 100- percent deduction for their contribution up to $2,000. This provision would end the current Tax Code discrimination against MSA's by ending the taxation on MSA deposits. Republicans in the House and Senate have been willing to compromise on MSA's. We have addressed many of the administration's and Senator Kennedy's concerns about MSA's. We have put forward proposals that are small, small enough to be considered as demonstration projects. This was one of the often-stated criteria of the White House and some of our Democrat friends. The American Hospital Association this week endorsed our compromise. Both of the latest compromises extending MSA's to companies with either 50 or 100 or fewer employees would extend this tax free status to the segment of the work force that has the highest number of uninsured employees--small businesses. MSA's are of such importance in our effort to address our health concerns that on September 8, 1992, several of my distinguished colleagues signed a letter calling for the introduction of MSA's as part of their bill. Let me quote a portion of that letter. Unlike many standard third-party health coverage plans, medical cost savings accounts would give consumers an incentive to monitor spending carefully because to do otherwise would be wasting their own money. Once a Medical Savings Account is established for an employee, it is fully portable. Money in the account can be used to continue insurance while an employee is between jobs or on strike. Recent studies show that at least 50 percent of the uninsured are uninsured for four months or less. . . . Today, even commonly required small dollar deductibles (typically $250 to $500) create a hardship for the financially stressed individual or family seeking regular, preventative care services. With Medical Savings Accounts, however, that same individual or family would have this critical money in their account to pay for the needed services. Mr. President, these are important arguments that were made for MSA's over 3 years ago. They are equally--if not more--important today. And that letter was signed by Senators Breaux, Boren, Daschle, Lugar, Coats, and Nunn--a formidable bipartisan coalition of Senators taking a necessary stand on a critical issue. Medical savings accounts promote portability. It's that simple. After a few years of relatively low health expenses, the excess funds in an MSA can be available for an unexpectedly high health care cost. Those funds can be available for health care during times of unemployment, and they can provide extended coverage for long-term needs. These, of course, are critical issues when it comes to portability. The MSA is an attractive alternative for families. It gives the American family the greatest flexibility in choosing its own health care provider. With MSA's, you, the patient, are able to select the doctor or provider you desire, without interference by the bureaucracy. And this can be very important to people, especially when confronted with serious illness or disability. MSA's provide flexibility for families to purchase insurance in the event the family loses its job or if it wants to buy long-term health insurance. Under our legislation taxpayers will be able to use money in their medical savings accounts without penalty to make COBRA payments-- to continue their catastrophic health insurance policy in the event they lose their jobs. MSA's allow funds from the account to be used to purchase long-term care insurance. Thus, MSA's help provide nursing home care, which, in turn, helps relieve those costs borne by Medicaid. MSA's will go a long way toward containing health care costs. They will encourage consumers to shop wisely, to reject unnecessary treatment and conserve scarce medical resources. Why? Because with MSA's it's the consumer and not some third party who pays the bills. Medical savings accounts will offer millions of employees and self- employed individuals an affordable health care option. A high- deductible insurance policy coupled with an MSA is less expensive than traditional insurance. The American Academy of Actuaries reports that MSA's will be attractive to small businesses and their employees as well as to self- employed Americans. Many of these individuals do not have health coverage, and MSA's have the potential to increase health insurance coverage among this group. Medical savings accounts are proven. They have been used, and they have been used successfully by hundreds of companies all across America. These companies have found that by empowering their employees to take charge of their own care, spending costs have declined. Unfortunately, the companies currently using MSA's are limited because our tax laws basically penalize employees who choose to be covered by MSA's. Under current law, at the end of the year, employees have to include the full amount of the money deposited into his or her MSA in their taxable income. This is absurd. These people are being hit for being responsible, for being self-reliant, for taking charge of their own health care needs. This must be corrected, Mr. President. In a campaign of disinformation the administration claims that MSA's will be a tax break for the rich. This is not true. Companies that provide MSA's find them to be very popular among their low- and middle-income employees. In fact, the Joint Committee on Taxation reports that 78 percent of MSA users will have incomes of less than $75,000. As Congressmen Torricelli and Jacobs wrote in a letter to the President, dated April 17: You also should know that the current contract of the United Mine workers provides its members with MSA's. We do not believe the UMW qualifies as healthier and wealthier than the general population--a charge leveled by uninformed MSA opponents. The administration predicts that MSA's will discourage preventive care. In fact, Mr. President, many companies with MSA's find the opposite to be true. Medical savings accounts encourage people to get preventative care because they have money in their account to pay for this care. It is interesting to note that many traditional low deductible insurance policies do not cover preventative care. The administration asserts that MSA's will be attractive to the young and, healthy, leaving the less healthy to pay higher insurance premiums. Unfortunately for the administration, this again is not true. The hundreds of companies that offer MSA's to their employees find them to be attractive to workers of all health status. This is because an MSA provides first dollar coverage for many medical expenses not otherwise covered by traditional low-deductible health insurance. Mr. President, it is interesting to note that 12 States and at least 1 city have passed medical savings account legislation and dozens more are moving to pass similar legislation. It is the Federal Government that must now move ahead with this idea. Again, the need to move ahead is nothing new. Three years ago, Senators Daschle, Breaux, Boren, and Nunn joined Senators Lugar and Coats to pass what they firmly believed was a much needed program. Today that program is needed--now more than ever. I urge my Democratic colleagues to end their blockade of health insurance reform, and work with us to make affordable health insurance a reality for more Americans.

Mr. ROTH

Mr. ROTH. Mr. President, I rise today to express my disappointment that the fiscal year 1997 budget resolution alters my sense-of-the- Senate amendment in a way that completely changes the intent of the amendment agreed to by 57 Senators. In February I introduced legislation that would create a dedicated trust fund for Amtrak. As chairman of the Finance Committee, I reported out this legislation with the support of my colleagues on both sides of the isle. On the budget resolution I offered a sense-of-the-Senate amendment that expressed support for this legislation--for direct funding for Amtrak--and it was overwhelmingly approved by the Senate. While my sense-of-the-Senate amendment received strong support in the Senate, my amendment was drastically changed while in conference with the House. My amendment was supported by 57 Senators who voted for direct funding for capital improvements to Amtrak. My legislation would have been offset according to the budget rules, therefore, it would not have had an affect on the deficit. It would fund Amtrak without raising taxes, without increasing the deficit, and without cutting funding for other forms of transportation. Unfortunately, my amendment was modified in conference. The modified version of my amendment would only create an authorization, with no direct spending for Amtrak. These are two different amendments with two different meanings. However, only my amendment was voted on by the full Senate and only my amendment received overwhelming support from this body. Mr. President, the 57 Senators that voted in favor of direct spending knew what they were voting on. These Members know that if Amtrak is to survive, it will need direct spending to make the needed capital improvements and upgrades to equipment and shops. They also know that another authorization will not help Amtrak secure the money needed for long term capital investments. What Amtrak needs and what the Senate voted on is direct funding for capital improvements. I conclude by expressing my profound disappointment that the conference report for the fiscal year 1997 budget resolution does not reflect the will of the Senate on this issue. Let me also point out that my preference for the overall budget resolution would have been the lower discretionary levels as contained in the House-passed version of the budget resolution. Thank you Mr. President and I yield the floor.

Mr. ROTH

Mr. ROTH. Mr. President, it is difficult, if not impossible, to adequately address the congressional career of our departing majority leader in a 5-minute floor statement. His accomplishments in his 35 years as a Congressman and Senator--his successes achieved while serving 11 years as Republican leader--could fill volumes. Indeed, hours could be spent rehearsing Bob Dole's impressive record: His heroism in World War II; his early political career in the Kansas House of Representatives, followed by his successes here in Washington; his efforts in 1964 to secure passage of the Civil Rights Act; his historic work with Senator Moynihan in 1983 to save the Social Security trust fund; his engineering the vote in 1991 to authorize U.S. forces to turn back Saddam Hussein's tyranny in the Middle East; his support for Kemp-Roth and the 22-percent reduction in income taxes that ushered America into the longest peacetime economic expansion in history; his staunch stand against President Clinton's 1993 record-setting $241 billion tax increase. These are only a few of the milestones in Bob Dole's journey from modest beginnings in America's heartland to his noble objective today. Time will not permit us to go beyond a few random milestones. But then again, Mr. President, the truth is that the greatest leaders need the least amount of praise. They have written their stories in the hearts and minds of the people they serve. Senator Bob Dole has done just that. His story is one of courage, persistence, character, discipline, and determination--the determination to overcome odds that would have vanquished a lesser individual. He is a man of deep convictions and proven abilities. And everyone who has had the opportunity to serve with him understands that just as solid as his past record, is his vision for the future. He has outlined that vision in absolute terms. And with Bob Dole there are no surprises. As long as I have known him, his words have been exceeded by his deeds. I believe that at the center of Bob Dole's vision is his economic message, that we ``deal with the deficit, and * * * couple that with tax cuts.'' Toward this end, Senator Dole is both tenacious and pragmatic. He knows the correlation between low taxes and economic growth, and he has proposed serious tax cuts. Bob Dole has been an effective leader during a time when this body addressed some of the most critical issues in history: The need for a balanced budget amendment; the need to strengthen and preserve Medicare; the need to provide effective, portable, and affordable health care coverage for Americans; the need to guarantee the future of Social Security; the need to keep a strong defense--a defense marked by high morale and the best, most effective materiel available. He understands these issues intimately--as well as anyone--and he knows what must be done to see that these need are met. Mr. President, I will miss Bob Dole. And though I wish him all the best in his new endeavors, I will miss his daily leadership here on the Senate floor. I will miss his quick wit; his sense of humor. I will miss his deliberate style, and his uncanny ability to turn assertive and aggressively intellectual into a cohesive team. On a personal note, I am grateful for the chance I have had to serve with Bob Dole. I am grateful for our friendship, for our years working together on this floor. Like other great majority leaders who have gone before, Senator Dole leaves his mark on this institution. As the Congressional Quarterly recently pointed out, `` * * * as majority leader, [Bob Dole] proved a point that badly needed proving * * *. The Senate could be led.''

Mr. ROTH

Mr. ROTH. Mr. President, I rise as a cosponsor of legislation introduced by the majority leader to establish a National Commission on Medicare Reform. According to the Medicare trustees' report released last Wednesday, June 5, the Medicare hospital insurance trust fund will be bankrupt earlier than expected. In fact, the trustees, of which three of the six trustees are members of President Clinton's Cabinet, indicate that the trust fund may run out of money as early as calendar year 2000. Senator Dole's proposal is consistent with the recommendations of the Medicare trustees. The trustees recommend: * * * the establishment of a national advisory group to examine the Medicare Program. The advisory group would collect and disseminate information and help develop recommendations for effective solutions to the long-term financing problem. This work will be of critical importance to the administration, the Congress and the American public in the extensive national discussion that any changes would require. We are now 2 years closer to insolvency of the Medicare trust fund than we were at this time last year. We lost a year trying to address the problem, and the program is 1 more year closer to bankruptcy than we expected. Yet, I regret, we are miles away from reaching an agreement on a solution. Given the very short time that Medicare will remain solvent, and given the large number of baby boomers who will be joining the Medicare Program in just a few years, we cannot afford more delay. It is time to put politics aside and find a solution. What is happening to the Medicare trust fund is pretty basic. The program is paying out more than it is taking in. This simple dynamic, if left unchecked, will lead Medicare to bankruptcy in less than 5 years. And, simply put, bankruptcy of the trust fund means there will not be money to pay the hospital bills of our senior citizens and disabled individuals reliant on Medicare. Again, I believe it is time to put politics aside. A Medicare Reform Commission is an important step in the right direction to bringing together a bipartisan, lasting agreement on resolving Medicare's fiscal crisis. The 1983 National Commission on Social Security Reform was an essential catalyst to resolving the then-looming bankruptcy of Social Security. The 1983 Commission brought together people in a cooperative bipartisan spirit. Ultimately, the work of the Commission laid the ground for a solution to the solvency crisis. I believe a Medicare Reform Commission might be able to do the same today. We are facing a crisis. A crisis requires action. We cannot be a government of empty promises. We must restore Medicare to robust health for our children and our grandchildren.

Mr. ROTH

Mr. ROTH. Mr. President, I rise as a cosponsor of legislation introduced by the majority leader to establish a National Commission on Medicare Reform. According to the Medicare trustees' report released last Wednesday, June 5, the Medicare hospital insurance trust fund will be bankrupt earlier than expected. In fact, the trustees, of which three of the six trustees are members of President Clinton's Cabinet, indicate that the trust fund may run out of money as early as calendar year 2000. Senator Dole's proposal is consistent with the recommendations of the Medicare trustees. The trustees recommend: * * * the establishment of a national advisory group to examine the Medicare Program. The advisory group would collect and disseminate information and help develop recommendations for effective solutions to the long-term financing problem. This work will be of critical importance to the administration, the Congress and the American public in the extensive national discussion that any changes would require. We are now 2 years closer to insolvency of the Medicare trust fund than we were at this time last year. We lost a year trying to address the problem, and the program is 1 more year closer to bankruptcy than we expected. Yet, I regret, we are miles away from reaching an agreement on a solution. Given the very short time that Medicare will remain solvent, and given the large number of baby boomers who will be joining the Medicare Program in just a few years, we cannot afford more delay. It is time to put politics aside and find a solution. What is happening to the Medicare trust fund is pretty basic. The program is paying out more than it is taking in. This simple dynamic, if left unchecked, will lead Medicare to bankruptcy in less than 5 years. And, simply put, bankruptcy of the trust fund means there will not be money to pay the hospital bills of our senior citizens and disabled individuals reliant on Medicare. Again, I believe it is time to put politics aside. A Medicare Reform Commission is an important step in the right direction to bringing together a bipartisan, lasting agreement on resolving Medicare's fiscal crisis. The 1983 National Commission on Social Security Reform was an essential catalyst to resolving the then-looming bankruptcy of Social Security. The 1983 Commission brought together people in a cooperative bipartisan spirit. Ultimately, the work of the Commission laid the ground for a solution to the solvency crisis. I believe a Medicare Reform Commission might be able to do the same today. We are facing a crisis. A crisis requires action. We cannot be a government of empty promises. We must restore Medicare to robust health for our children and our grandchildren.

Mr. ROTH

Mr. ROTH. Mr. President, I rise today with grave concerns that the Medicare hospital insurance trust fund is no longer creeping toward insolvency, but galloping toward it. This is very serious news. Based on the Medicare trustees' report released yesterday, Wednesday, June 5, the Medicare HI trust fund is going bankrupt earlier than expected. In fact, according to the trustees' report, of which three of the six trustees are members of President Clinton's Cabinet, the trust fund may run out of money as early as calendar year 2000. What is happening to the Medicare trust fund is pretty basic. The program is paying out more than it is taking in. This simple dynamic, if left unchecked, will lead Medicare to bankruptcy in less than 5 years. And, simply put, bankruptcy of the trust fund means there will not be money to pay the hospital bills of our senior citizens and disabled individuals reliant on Medicare. Medicare is on a collision course, and we cannot afford not to act. Taking no action to avert Medicare's collision course toward bankruptcy means leaving millions of seniors and disabled beneficiaries with an empty promise. I believe this is wrong. It is time to put politics aside. To address Medicare's financial crisis, it has been suggested appointing a bipartisan commission to develop a solution. I support the establishment of a commission. A commission could facilitate addressing the Medicare crisis. But, I cannot support the idea of establishing a commission if this is a delay tactic or a tactic to avoid addressing the issue. I am concerned because, frankly, the administration's track record in proposing a solution is not good. Last year, the administration ignored the Medicare crisis. President Clinton's fiscal year 1996 budget did not include any proposals to shore up Medicare's fiscal debt, nor did his budget claim there was a problem. We are facing a crisis. A crisis requires action. There is a lot of talk about wanting to get down to business to solve the Medicare trust fund crisis. Didn't anyone notice that we tried that last year? That in the Senate we put forward a proposal that would have truly preserved and protected the Medicare Program, not just through the next 5 years, but for the next generation. Our proposal would have kept our promise to leave a legacy of a robust Medicare program for our children and our grandchildren. And yet, the Clinton administration played politics with Medicare and waged a ``Medi-Scare'' campaign. Yet, again, Democrats now are saying that Republicans are resorting to scare tactics. I do not agree that scare tactics include alerting the public to factual information reported by the Medicare trustees. ``Medi-Scare'' tactics were used last fall as Congress worked to preserve and strengthen the Medicare program. Instead of debating the issues and focusing on the need to preserve Medicare, others resorted to political rhetoric that played on the public's emotions and distorted the truth. Democrats kept talking about Medicare ``cuts'', when not one of the Republican proposals would have cut benefits. The program was not ``cut,'' in fact, spending would have increased every year under the Republican reforms. And, then there was the final emotional play linking changes to the Medicare program to a tax cut. According to the Washington Post last September, even this tactic was refuted: ``The Democrats have fabricated the Medicare-tax cut connection because it is useful politically.'' Now, is the time to put partisanship aside. Time is running short, and we need to work together to avert the crisis. There are three very basic, but crucial facts that we can not avoid-- these three facts are: Fact: if changes are not enacted into law, the trust fund will continue on its course toward bankruptcy and there is no provision in the law allowing for HI expenditures to be made on behalf of Medicare beneficiaries. Fact: according to the Medicare trustees, Medicare will be bankrupt in 2001. Fact: the year 2000--the last year the Trustees believe Medicare will be solvent, is less than five years away. Given the very short time-time Medicare will remain solvent, and given the demographic progression of the Medicare program, we cannot afford more delay. We are already 2 years closer to insolvency because we lost a year to address the problem, and the program is one more year closer to bankruptcy than we expected, yet we are miles away from reaching an agreement on a solution. Demographic trends will continue to increase financial pressure on the trust fund. Today, there are less than 40 million Americans who qualify to receive Medicare. By the year 2010, the number will be approaching 50 million, and by 2020, it will be over 60 million. While these numbers are increasing, the number of workers supporting retirees will decrease. While we have almost four workers per retiree today, we will have about two per retiree by the year 2030. Yet, my friends on the other side of the aisle will point out that the President took action in 1993 to extend the life of the HI Trust Fund--he raised taxes. President Clinton's 1993 budget he enacted into law included two taxes to bail out the trust fund. First, the 1993 Clinton budget increased taxes on workers by taxing all wages earned, and second, the 1993 budget increased the amount Social Security benefits are subject to taxation from 50 percent to 85 percent. Increased taxes were not a solution in 1993, and they will not be a solution in the future. Last year, Republicans proposed to preserve, protect and strengthen the Medicare program. We worked hard to put together a balanced proposal that did not cut Medicare but slowed the rate the cost of the program was expected to grow. Under our plan that was approved by Congress, annual per beneficiary Medicare spending would have increased from average spending of $4,800 in 1995 to more than $7,200 in 2002. Under the original Senate Balanced Budget Act as reported out of Finance Committee, the Medicare program would have remained solvent for about 18 years. According to the CBO estimates, under our proposal, the Medicare HI Trust Fund balance would have totaled $300 billion in 2005. The CBO stated, the HI Trust Fund would meet the Trustees' test of short-range financial adequacy.'' In other words, for the next 10 years, the HI Trust Fund balance, at the end of every year, would have been more than enough to pay Medicare benefits for the following year. More importantly, using the CBO's estimates through 2005, our Finance Committee staff, in consultation with the Office of the Actuary within the Department of Health and Human Services, estimated that the Medicare HI Trust Fund would have been solvent through about the year 2020. That would have meant 10 years after the baby-boom generation begins to retire a quarter of a century from today. We need to preserve and protect the Medicare program. We need to make sure we leave a solid legacy for the next generations. The demographics and the predictions of cost growth confirm that the program is not sustainable. It is no longer time for rhetoric, but time for action. Playing politics with Medicare is simply wrong. Putting off what needs to be done is the cruelest tactic. I suggest the absence of a quorum.

Mr. ROTH

Mr. ROTH. Mr. President, I have long been a supporter of the transatlantic community of nations and its cornerstone institution, NATO. And today I wish to express my support for the NATO Enlargement Facilitation Act of 1996--extremely important legislation which I also cosponsor. This bill is designed specifically to support and foster the careful, gradual extension of NATO membership to the nations of Central and Eastern Europe. If passed, this bill would direct tangible assistance to the efforts of Poland, the Czech Republic, and Hungary to join the alliance. These nations are the most prepared of their region for the responsibilities and burdens of NATO membership. Equally important, it is the intent of the authors of this bill to assist other Central and Eastern European countries whose economies and democracies have sufficiently progressed to move forward toward eventual NATO membership. Such a policy is absolutely necessary to ensure that NATO's acceptance of Polish, Czech, and Hungarian applications for membership not create new divisions in Europe, but is instead part of an inclusive and on-going process that will extend to the entire community of European nations. Extending the alliance's membership to Poland, the Czech Republic and Hungary, will help transform Central and Eastern Europe into a cornerstone of enduring peace and stability in post-cold-war Europe. It would do so for the following reasons: First, the NATO enlargement would project security into a region that has long suffered as a security vacuum in European affairs. History has repeatedly shown us that the strategic vulnerability of Central and Eastern Europe has produced catastrophic consequences--consequences that drew the United States twice this century into world war. Second, NATO enlargement would help facilitate the economic and political integration of Central and Eastern Europe into the transatlantic community of nations. Passage of our NATO enlargement legislation would demonstrate America's commitment to consolidating an enlarged Europe. This would give more incentive to all the nations of the region to continue their political and economic reforms by demonstrating that these reforms do result in tangible geopolitical gains. By projecting stability into Central and Eastern Europe, NATO enlargement would reinforce the regional stability necessary for nations to focus on internal political and economic reform. Mr. President, security is not an alternative to reform, but it is essential for reform to occur. Third, two great European powers, Germany and Russia, are now undergoing very complex and sensitive transformations. Their futures will be significantly shaped by the future of Central and Eastern Europe. Extending NATO membership to nations of this region will reinforce the positive evolutions of these two great powers. In the case of Germany, NATO enlargement would further lock German interests into a transatlantic security structure and further consolidate the extremely positive role Bonn now plays in European affairs. The extension of NATO membership to Central and East European nations would also be of great benefit to Russia. By enhancing and reinforcing stability and peace in Central and Eastern Europe, NATO enlargement would make unrealistic calls by Russia's extremists for the revitalization of the former Soviet Union or the westward expansion of Russian hegemony. Greater stability along Russia frontiers will enable Moscow to direct more of its energy toward the internal challenges of political and economic reform. This point is too often forgotten in this debate. There has been too strong a tendency in United States policy to overreact to outdated Russian sensitivities. This overreaction comes at the expense of strategic realities and objectives central to the interests of the alliance, as well as to the United States. I would also like to note that this NATO enlargement legislation reflects the attitudes of many of our parliamentary counterparts in Europe. The North Atlantic Assembly, a gathering of legislators from the 16 nations of NATO, adopted at the end of 1994, my resolution calling for the extension of membership in the alliance to Poland, the Czech Republic, and Hungary. Mr. President, America's defense and security must be structured to shape a strategic landscape that enhances economic, political, and military stability all across Europe. Careful and gradual extension of NATO membership to nations of Central and Eastern Europe is a critical step toward this end. This is in our national interest. It is action long overdue, and it is the intent of the NATO Enlargement Facilitation Act of 1996. For these reasons, I call upon my colleagues in the Senate, as well as President Clinton and his administration, to embrace this legislation. Mr. President, I yield the floor. Mr. BRADLEY addressed the Chair.

Mr. ROTH. Mr. President, I rise to talk about why I believe every Member of this Chamber should support the unconditional extension of most-favored-nation trading status to the People's Republic of China. As we are all aware, Senator Dole declared his support for unconditional extension of MFN for China sometime ago. More recently, the President announced he would renew China's MFN status unconditionally for another year. Now the matter comes before the Congress. We have to decide whether or not Senator Dole's position and the President's decision deserve our support. The Chinese, of course, have not made this issue easy for us. Their destabilizing nuclear, chemical, and missile sales, their continued nuclear testing, their assertiveness in the South China Sea, their growing trade surplus with the United States, their piracy of our intellectual property, their military threats against Taiwan, their moves to undermine democratic reforms in Hong Kong, and their abuses of human rights, these all demand a stern reply. That is why it is tempting to revoke China's MFN status. But it would be a huge mistake to do so. I say this for four reasons. First, revoking MFN would put at risk hundreds of thousands of American jobs, and billions of dollars worth of American exports and investments. Second, revoking MFN is an ineffective weapon that would not solve any of the problems we have with China. Indeed, revocation may make them worse. Third, more proportional, targeted measures currently available permit a more effective response to these problems. Finally, extending MFN is fundamental to developing a coherent China policy--one that sets priorities and provides a strategic framework for the conduct of our relations with that important country. Mr. President, the United States, East Asia, and the entire world have much to gain from a positive relationship between Washington and Beijing and much to lose from an unnecessarily confrontational one. Before going into more detail about these four points, I believe it necessary to clarify the meaning of the term, ``most-favored-nation trading status.'' That's because the term gives the false impression that MFN is some sort of special privilege or reward. The term even confuses our most prestigious newspapers. In their stories on the President's announcement to renew China's MFN status, the Wall Street Journal, the Washington Post, the New York Times, and the Los Angeles Times all incorrectly described MFN as a ``privilege'' or in some way preferential or favorable. In fact, MFN is not a special privilege or reward. It designates the most ordinary, most normal trading relationship among countries. Specifically, MFN refers to the uniform tariff treatment that the United States applies to virtually every country in the world. For example, if the U.S. tariff on imported clock radios is 5 percent, all clock radios imported from countries with MFN status are subject to a 5-percent tariff. Imports from countries that do not have MFN status--and there are only six countries that fall into this category--are subject to far higher duty rates. Another important point about MFN is that it is not a one-way street. When we give MFN status to a particular country, that country, in return, gives the United States most-favored-nation status. Therefore, because we give Singapore MFN status, the clock radios we import from that country are subject to the same tariff rates as clock radios from Thailand, Spain, or any other country to which we extend MFN. In return, when Singapore imports our computer chips, it imposes the same tariff on United States chips as those imported from Japan, Korea, Great Britain, or any other country to which it extends MFN. What does the United States get out of all this? American companies get to compete on fair and equal terms with their foreign rivals. Let me emphasize again: MFN status does not confer--let alone imply-- special treatment. In fact, when we decide to give special treatment to imports from other countries--as Congress has expressly chosen to do for certain products from over 130 nations--those imports are subject to tariff rates substantially below the MFN rate. Sometimes we even allow specified countries to export products to the United States duty free. In short, MFN status denotes the standard, not the exceptional, trading relationship. Ending this standard trading relationship by revoking MFN is an extreme measure. In fact, because MFN is so fundamental to trade relations among countries, some correctly liken its withdrawal to a declaration of economic war. These are the facts about MFN. Anyone who maintains that we do China a special favor when we renew its MFN status is either misinformed or disingenuous. Because of the confusion created by the phrase, ``most-favored-nation trading status,'' I am working with Senator Moynihan to replace the phrase in U.S. statute with a more suitable term, one that underscores the unexceptional nature of the MFN concept. I believe that if we adopt such a change in terminology, we will all better understand the issue, and our debate will be more constructive. Now, I want to stress that those who favor MFN renewal, such as myself, share most, if not all, of the same goals as those opposed to MFN renewal. We, too, want Beijing to cease its destabilizing nuclear, chemical, and missile sales. We, too, want China to end its nuclear testing. We, too, want China to resolve peacefully its territorial disagreements in the South China Sea. We, too, want China to lower barriers to U.S. exports and reduce its trade surplus with the United States. We, too, want China to end its piracy of our intellectual property. We, too, want China to end its military threats against Taiwan and resolve its differences with Taipei peacefully. We, too, want China to follow faithfully the dictates of the Sino-British Declaration on Hong Kong. We also want China to cooperate with us in addressing serious global concerns such as environmental degradation, transnational crime, and narcotics trafficking. And we, too, want China to respect the basic human rights of its citizens. Where we differ from the opponents of MFN is on how to achieve these goals. The simple fact is that there is absolutely no evidence that the drastic action of withdrawing MFN will force China to satisfy any of our objectives. Indeed, sanctioning China by withdrawing MFN runs the great risk of making that country more belligerent and less cooperative on these and other issues. Keep in mind that experience shows that unilateral trade sanctions generally don't work. The chances of success only improve when sanctions are applied in cooperation with our major allies. However, not one of these allies--not Canada, not the European Union, not Japan, not Australia--is debating whether to withdraw MFN status from China. That's because they all know withdrawal is neither a constructive nor effective option for inducing the Chinese to change their behavior. In addition, they understand the tremendous cost of withdrawing MFN status, a cost we ignore at our peril. Let's be clear on this point. If we revoke MFN for China, Beijing would certainly be hurt, but so, too, would the United States. As a result of withdrawing MFN, United States duties on goods imported from China would immediately rise to the tariff rates established under the highly protectionist, Depression-era Smoot-Hawley tariff law. Chinese imports, which currently face an average tariff rate of 6 to 8 percent, will be subject to an average tariff rate of 40 to 50 percent, with the tariff rates for certain items exceeding 100 percent. Because MFN is provided on a reciprocoal basis, China would respond to higher tariffs on its goods by slapping higher tariffs on United States goods. Such a move will slam the door shut on United States exports to the Chinese market--the fastest growing market in the world. These U.S. exports totaled almost $12 billion in 1995 and supported approximately 200,000 high-skilled, high-wage American jobs in critical sectors such as the aircraft, telecommunications, and automotive equipment industries. Business conducted by United States companies in China will go instead to the Europeans, the Japanese, the Canadians, and firms from all the other countries in the world which continue normal commerical relations with China. In addition to severely damaging United States exporters, the small and large American firms that have invested billions of dollars to penetrate the Chinese market would see their efforts and investments gravely jeopardized. Some claim, of course, that in the event China's MFN status is withdrawn, those billions of dollars of United States investments in China will be brought back to the United States. The reality is, however, that United States companies forced out of China are far more likely to move those investments to other developing countries in Asia or Latin America. The economic fallout from withdrawing China's MFN status is not only going to hit American companies, but also American consumers. Our lowest income citizens, in particular, would suffer from the dramatically higher prices they will have to pay for a variety of basic goods as a direct result of the imposition of substantially higher duties on Chinese imports. Mr. President, some claim that pricing Chinese goods out of our market through higher duties would be beneficial. They maintain that we would eliminate our trade deficit with Beijing because the products we now import from China would be produced in the United States. Let us be realistic. It is a mistake to think that most of what we import from China would be produced in the United States. The truth is that in most cases imports from other developing countries would be substituted for imports from China. Moreover, it does not make any sense to try to reduce the trade deficit by ending all trade, as would likely happen if we revoke China's MFN status. You may get a balance of trade--zero imports and zero exports--but at a cost of hundreds of thousands of good, high- paying U.S. jobs and billions of dollars of U.S. exports. The only way to reduce the trade deficit and retain American jobs and exports is to ensure that United States products have the same access to the Chinese market that Chinese products have to ours. This is not an easy task. But revoking normal trade relations with China would make it impossible. While I believe the threat to United States jobs and exports alone provides a convicing reason to support renewal of China's MFN status, there are other compelling arguments for unconditional renewal. In particular, cutting ourselves off from China by withdrawing its MFN status will end any ability the United States has to directly influence developments in China, including how China treats its citizens and whether it permits the development of a freer society and more democratic political system. United States businesses help advance human rights and civil society in China by being there, not by leaving or by being shut out. United States companies operating in China observe basic worker rights in dealings with their local employees. United States companies provide Chinese citizens with opportunities unheard of before China began to open its economy and society to the outside world in 1978. United States companies teach their Chinese employees the valuable lessons of American business culture, including independent decisionmaking and enterpreneurial skills. Among other reasons, that's why Martin Lee, the Hong Kong legislator and human rights advocate; Hong Kong Gov. Chris Patten and Wei Jingsheng, the prominent Chinese dissident who has suffered for so long from state persecution, all support renewal of MFN for China. Moreover, that is why the Taiwanese--who are not shy about voicing their opinions on China to Members of Congress--have not advocated revoking MFN. And that's why the countries of the Association of Southeast Asian Nations, four of whose members have territorial disputes with China, have not come to Capitol Hill to press the United States to revoke China's MFN status. Mr. President, I think that it is the height of arrogance for opponents of MFN to assert that they know better than Martin Lee, Wei Jingsheng, the Taiwanese, and the countries of ASEAN, how to change China's behavior. Indeed, as they know, there is ample evidence that the mere threat of revoking MFN will make China less cooperative and more confrontational. For example, several weeks ago, China announced for the first time that it would buy several billion dollars worth of passenger jets from the European consortium, Airbus. This action was a deliberate repudiation of Boeing, meant to send us the message that revocation of MFN will result in costly economic retaliation. Shortly thereafter, in an action designed to send us a signal on the security implications of recklessly confronting Beijing, China struck a deal with Russia to develop a long-term strategic partnership. These actions indicate some of the problems and consequences we would face if we use the sledge-hammer approach of revoking MFN. Keep in mind that the President already has specific, measured and targeted tools at his disposal that allow him to address our problems with China without resorting to the indiscriminate and destructive approach of revoking MFN. For example, we are currently preparing to hit China with trade sanctions on $2 billion worth of specified Chinese imports because of Beijing's failure to honor its agreement with the United States to crack down on Chinese companies making pirated knock-offs of American music, movies, and computer software. Similarly, we can invoke targeted section 301 sanctions for other discrete discriminatory and unreasonable Chinese trade practices. When China illegally sells nuclear technology, we can apply sanctions which are specified by the Nuclear Proliferation Prevention Act. We can counter China's threats to Taiwan by considering sales of upgraded defensive weaponry to Taipei, as well as by reaffirming our unwavering commitment to a peaceful resolution of the dispute between Taiwan and China in the context of our one-China policy, a policy which has been supported by each of our last six Presidents. We can rely on international law and the shared interests of the countries of Southeast Asia to counter aggressive Chinese territorial claims. And we can continue to expose and condemn China's repressive human rights record in this Chamber and in organizations around the world. The range of tools available to respond to specific problems with China is considerable. At the same time, however, their breadth reveals a fundamental weakness in our overall approach to our relations with Beijing--the absence of an effective, broadly based, clearly articulated and carefully coordinated China policy that sets priorities and guides our use of these tools. I agree with those who say that the rise of China presents us with a serious foreign policy challenge. But it also presents us with enormous opportunities. We can only respond to that challenge adequately and seize those opportunities through a sensible overall China policy, one that enhances the chance of creating a positive bilateral relationship. The clear objective of that policy should be to encourage China's constructive and responsible behavior and discourage aggressiveness and irresponsibility. The absence of a coherent China policy results in large measure from short-sighted political considerations. For example, the 1992 Clinton campaign rhetoric about coddling dictators in Beijing left the Clinton administration little room to maneuver on China policy. Early on, the President indicated he would link human rights issues to the MFN decision. The following year, however, he was forced to reverse himself and announced the two issues would not be linked. Similarly, in 1994, the Clinton administration refused Taiwan President Li the ability to play a round of golf in Hawaii while in transit to Costa Rica. But in 1995, the administration granted him a visa to visit Cornell University immediately after telling the Chinese it would not do so because such an act would violate our one-China policy. These and other mixed signals from the administration, as well as the cacophony of voices from Capitol Hill on how to deal with China, have left the United States with a dangerously muddled China policy. Without question, if the United States had a better sense of its priorities and aims in the United States-China relationship, and a clearly articulated China policy that reflects those priorities, we would be better able to influence Chinese behavior. Moreover, the tools we currently have available to respond to Chinese misconduct would be more effective when used in the context of a coherent China policy. In brief, I believe such a policy must have four central elements. First, we must expand our economic relationship with Beijing, because a China integrated into the global economy is more likely to behave in ways more compatible with American interests and international norms. Thus, we should seek to encourage China's development and participate in its economic growth. That's why I assign importance to China gaining entry into the World Trade Organization based on commercial considerations and GATT principles. The more China is integrated into the international economy, the more subject Beijing is to the harsh realities of the marketplace. Should China choose a path toward blatant aggression and destabilizing domestic repression, foreign investment will dry up and firms will move to other countries where the risks are lower and the returns are higher. Moreover, we have a better opportunity to influence China to act in ways we prefer when we enmesh it in the sort of economic relationships fostered by most-favored-nation trade status. Renewing MFN thus is absolutely central to an effective China policy. In addition, the economic growth fostered by participation in the global economy almost inevitably leads to greater demands for democratic reforms. Other Asian countries, such as South Korea, Taiwan, and Thailand, have amply demonstrated the political evolution that accompanies economic development. The second element of a coherent China policy is the resumption of high-level, regular dialog with China. I was delighted to see that in his speech on China 2 weeks ago, Secretary Christopher accepted Senator Dole's suggestions on this matter. After all it has been 7 years since an American President went to Beijing for summit talks, and 8 years since a Chinese leader has been in this country for a summit. Mistrust is bound to grow when we do not meet, particularly when the list of critical bilateral, regional, and global issues requiring discussion is so long. Third, we must nurture aspects of the relationship where we share interests and can cooperate for our common good. For example, China played a useful role in bringing relative peace and stability to Cambodia. Moreover, China has the potential to play a key role in settling the serious threat posed by North Korea to the South, as well as the 47,000 American troops we have on the ground there. I cannot envision Beijing cooperating with us on North Korea if we revoke China's most-favored-nation trade status. Indeed, I cannot imagine the Chinese playing a constructive role on any matter of mutual importance--from protecting the environment to controlling transnational crime and narcotics trafficking--if we simply continue to threaten and sanction them. The fourth element of any coherent China policy must include preparedness to deal with China if its participation in world affairs proves disruptive. Strengthening our current array of bilateral security ties in Asia is thus essential. In addition, I believe we must look more closely at the possibility of creating effective regional security arrangements. Closer cooperation on security and diplomatic initiatives with nations in the Asia Pacific that share our interests on China would serve to prod Beijing to accept the moderating influence of global economic integration. It would also provide a hedge in the event Beijing instead chooses a more aggressive path. In sum, continued economic relations with China, high-level dialog, cooperation with China on matters of mutual concern, and strengthened security and diplomatic ties with the rest of Asia should, in my opinion, form the basis of any effective China policy. Mr. President, some claim that the decision we face on renewing MFN can be reduced to a question of whether ``our lust for trade exceed(s) our loathing of tyranny.'' This argument is disingenuous and the question is simply wrong. The right question is whether taking the draconian step of revoking China's MFN status is worth the potentially huge cost to the United States, especially when this action has an extremely remote chance of achieving its aims. I await a response to this question from the opponents of China's MFN renewal. Mr. President, I must stress again that the United States, East Asia, and the entire world have much to gain from Washington and Beijing achieving a positive relationship, and much to lose should bilateral relations further deteriorate unnecessarily. Renewing MFN for China is only a step--but an extraordinarily important one--toward building a fruitful bilateral relationship. Therefore, Mr. President, I urge my colleagues in the strongest possible terms to support unconditional renewal of MFN for China.

Mr. ROTH

Mr. ROTH. Mr. President, I rise to address the Senate on a bill that overwhelmingly passed the House of Representatives this week. The vote was 414 to 10. The bill I refer to is the Small Business Job Protection Act of 1996. The bill is a collection of tax incentives for small businesses. As every Member of this body knows, small businesses create the lion's share of jobs in America. The bill will lift some of the heavy tax burden borne by small businesses. To the extent we lift the tax burden on small businesses, these businesses will be able to continue to create jobs for Americans. Included in the bill are some proposals that were contained in the Balanced Budget Act of 1995. First, an increase in the amount of equipment a small business can expense; the current annual amount of $17,500 would be gradually increased to $25,000. Second, a package of proposals to simplify the pension tax rules. These proposals will bring more small businesses and their workers into the pension system; in addition, these proposals will enhance pension security for millions of American workers and their families. Third, a series of proposals to reform the subchapter S corporation tax rules. Almost 2 million small businesses do business as subchapter S corporations. This package of small business tax incentives is fully paid for. Mr. President, I congratulate Chairman Bill Archer for successfully shepherding this package of much-needed tax relief through the House of Representatives. In recent days, many of my colleagues have asked me about Senate action on this bill. When the bill arrives from the House, I expect the bill to be referred to the Finance Committee. Once referred to the Finance Committee, I anticipate taking action on the bill shortly after the Senate returns from the Memorial Day recess. Mr. President, the Finance Committee, including longstanding members on both sides of the aisle, has a tradition of sensitivity to the needs of small business. I intend to continue that tradition with a Finance Committee imprint on the small business tax bill. In addition, Mr. President, I am also considering adding measures to help create economic growth, promote savings and investment, and enhance economic opportunities for all Americans.

Mr. ROTH

Mr. ROTH. Mr. President, I am disappointed that again today, my colleagues on the other side of the aisle blocked efforts to start to relieve the tax burden on the American people by repealing the 1993 Clinton gas tax increase. I wish we would have been able to repeal this tax today before the American people set off to enjoy the Memorial Day weekend and the beginning of the summer driving season. My colleagues on the other side of the aisle had agreed to pass the gas tax repeal if the House passed the minimum wage bill in a form acceptable to them. Well, Mr. President, the House did pass a clean minimum wage bill. Yet, rather than keep their promise and pass the gas tax repeal, my colleagues on the other side of the aisle have again blocked its passage. Time and again we have tried to accommodate them and time and again they have backed away from their promises. How are we to help the American people if my colleagues on the other side of the aisle continue to renege on their promises? I would like to remind my colleagues, that when President Clinton raised taxes $268 billion in 1993, he said he was raising them on the rich. We knew then that that was not true. Now there is no doubt. President Clinton has raised taxes not only on the middle class but also on low-income families, and now my colleagues on the other side of the aisle are denying these low-income families tax relief. The truth is, Mr. President, that every person who drives a car, who buys groceries, who takes the bus, the train, or a plane has to pay this tax. These aren't all rich Americans. In fact, Americans who are hit the hardest by this regressive tax are people at the lowest income levels, those making less than $10,000 a year. Repeal of this regressive tax, therefore, would benefit all Americans, especially those with modest incomes. It is a well-known fact that the 4.3-cents-per-gallon motor fuels tax not only disproportionately affects low-income people, but it also hits people in rural areas harder than it does those in more metropolitan areas. President Clinton knows this. In February 1993, just months before he signed into law the largest tax increase in history, said, and I quote, ``For years there have been those who say we ought to reduce the deficit by raising the gas tax a whole lot. That's fine if you live in the city and ride mass transit to work. It's not so good if you live in the country and drive yourself to work.'' Despite this statement, the 4.3-cents-per-gallon tax increase was enacted. I agree with President Clinton's 1993 statement. People in rural areas should not be penalized because they live in areas that require them to use their cars and travel longer distances. For example, in my home State of Delaware, which contains many rural areas, the average family pays $463 in gas taxes per year. This figure includes both State and Federal gas taxes. When the 4.3-cents-per-gallon motor fuels tax is repealed, the average Delaware family's tax burden will be reduced by $48--a good first step. The Clinton gas tax increase did not get a single Republican vote because Republicans believe in cutting wasteful Government spending, rather than increasing taxes to pay for more Government spending. So while in the scheme of Government programs the 4.3-cents-per-gallon gas tax may not seem to be a paramount issue, it represents what separates Republicans from the big Government spenders. While the President purports to favor balancing the budget, at best he would do so by matching big spending with high taxes. Our belief is that we should cut spending and lower taxes. Mr. President, it is time to give Americans a break from taxes and big Government. I ask my colleagues on the other side of the aisle to allow the Senate to move forward, and stop blocking tax relief for working Americans.

Mr. ROTH

Mr. ROTH. Mr. President, I move to reconsider the vote.

Mr. ROTH. Mr. President, the Roth resolution simply states that Congress would give Amtrak a secure and reliable source of funding for capital expenditures. The rail trust fund would be funded by transferring revenues from the 0.5-cent excise tax that is currently going into the mass transit account to a newly created rail trust fund. While Amtrak would have $2.8 billion for capital expenditure over 5 years, the existing $5.4 billion surplus in the mass transit account-- the mass transit would continue to have billions of dollars in excess of its anticipated appropriations. Mr. President, I urge my colleagues to support my amendment.

Mr. ROTH. I ask for the yeas and nays.

Mr. ROTH

Mr. ROTH. Mr. President, today is the day we have reached the top of a great divide. We can clearly see both what lies ahead and that which is behind us. Today is the day we decide whether we dare to press forward and change a welfare system that is crippling children and families. Today is a day of contrasts--39 months ago, President Clinton promised the Nation's Governors and the American people that he would end welfare as we know it. Nothing happened. He abandoned welfare reform and instead pursued a misguided attempt to take Government control over the world's finest health care system. It didn't work. Today, the Republicans in the House and Senate are introducing legislation which will deliver on the promise of welfare reform and which will protect the health benefits of needy families as they move from welfare to work. Today we are introducing welfare and Medicaid reform based on the bipartisan recommendations of the Nation's Governors. While the Clinton administration has pursued policies of national control from Washington, we believe the future of these programs belong in the States. Without even having seen our proposal, President Clinton labeled Medicaid reform a ``poison pill.'' We think it is good medicine. Under our proposal, Federal spending for the Medicaid program will total $371 billion over the next 6 years. This represents an average annual growth rate of 6.5 percent between 1996 and 2002 while still achieving savings of $72 billion compared to current law. But $371 billion represents many important things in addition to how much the Federal Government will choose to spend on the third largest domestic program in the Federal budget. It represents bipartisan compromise. It represents the future of how Government will work to help families escape welfare dependency. And it represents the future of governmental relationships in our constitutional system of federalism. First, $371 billion represents an important element of compromise in the political process. In the budget negotiations with President Clinton last December, the Republican leadership recommended Medicaid savings of $85 billion. During the negotiations, President Clinton wanted to reduce the savings level for Medicaid to $59 billion. At that time, there was a recognition by the administration that Medicaid spending indeed was out of control. For example, between 1994 and 1995, total Federal outlays grew by 3 percent. But Medicaid spending grew nearly three times as fast. On a number of occasions, the administration has indicated that the President intends to reduce Medicaid spending by $59 billion. The President's fiscal year 1997 budget released in March includes saving of $55 billion. Thus, by setting Medicaid spending at $371 billion, we are meeting President Clinton halfway. The difference between us is now $13 billion. This is less than 2 percent of the total Federal Medicaid spending over the next 6 years. This is a difference of 16 cents per Medicaid recipient per day. When President Clinton vetoed the Balanced Budget Act of 1995, he argued that the Medicaid budget savings cut too deeply. The adoption of today's budget resolution and the introduction of this legislation clearly demonstrates that the debate over Medicaid is not about spending. The issue is, who will control the spending, Washington, or the States? In February, the Nation's Governors unanimously adopted a proposal to restructure the Medicaid Program. Democratic and Republican Governors alike have called upon the President and Congress to dramatically change the Medicaid Program. The Medicaid proposal we are introducing reflects the Governors' policies, including guarantees for children, pregnant women, the elderly, and persons with disabilities. Together, the Democratic and Republican Governors have testified before Congress that budget savings should be between $59 and $85 billion. The Republican proposal of $72 billion in savings reflects this spirit of bipartisan compromise and is the midpoint of these savings figures. The Medicaid debate therefore is about policy, not budget. Medicaid is the largest welfare program and must be part of the solution for moving families from welfare to work. It costs more than the AFDC, Food Stamp, and SSI Programs combined. The growths in the welfare programs are intimately linked to Medicaid. Medicaid is the nucleus of authentic welfare reform. The Nation's Governors support reform and share the common goal to end the status quo. Democratic and Republican Governors have forged a bipartisan blueprint for reform. Our legislation reflects the principles and framework of the Governors' proposals and meets their goals. Nearly everyone, including President Clinton, recognizes that the welfare system is broken and must be fixed. The Governors, Democratic and Republican alike, know that Medicaid and welfare were in the same car wreck and both require major reconstructive surgery as soon as possible. The Governors understand there are major problems in the Medicaid Program. To begin with, Medicaid is an all-or-nothing proposition. A person either qualifies for all Medicaid benefits or no Medicaid benefits. There is no flexibility in the current system to provide benefits tailored to a family's needs. As such, the welfare system often creates disincentives to work and gross inequities for low-income working families, many of whom have no other way to provide health care for their children. For the individual, the current Medicaid program is often self- defeating as it encourages dependency. Many proud families can describe what they are forced to do to acquire and maintain Medicaid coverage. If a family's income rises above the eligibility level by just $1, the entire Medicaid package is taken away. Medicaid performs as it was designed 30 years ago--$731 billion therefore represents a new opportunity to refocus our welfare programs to help the present and future generations to escape dependency. Governors know that Medicaid is a critical link in moving families from welfare to work. They understand it can be difficult to convince a family that work pays more than welfare if the price includes the loss of their health insurance. The Medicaid current program discourages expansion of coverage and innovation. There is little flexibility or reward for the States to experiment with ways of improving access to care. The Governors have testified how their ideas to cover more families have been stopped cold by Federal rules and regulations. The bureaucracy often thwarts targeting of benefits which, for example, could be more effective in lowering infant mortality rates. Medicaid lags far behind the private sector in adopting progressive managed care strategies which have saved employers and working families billions of dollars. Two-thirds of the people covered by employer-sponsored health plans today are enrolled in some type of managed care plan. In contrast, only about one-quarter of the Medicaid recipients are in any form of managed care. Medicaid contains a number of barriers to managed care. For example, Florida is facing major disruptions in its entire Medicaid system because two of its best HMO's do not meet Medicaid's ``75/25'' requirements. Freed from the choke hold of the Federal bureaucracy, States will be able to harness their enormous purchasing power to improve the delivery of services at lower costs. The central issue of the pending Medicaid debate is who can best design a State's public health insurance program--the Federal bureaucracy or the States? The idea that the children and elderly citizens in a State must be protected from their Governor and State legislators is not only wrong. Mr. President, it is insulting. Finally, slowing the rate of growth represents a fundamental decision about the future of federalism. Our elected State officials are hostages to the demands of the current Medicaid Program. The Federal- State partnership cannot survive the skyrocketing cost of the Medicaid Program which ricochets throughout State budgets. For example, in 1990, Medicaid replaced higher education as the second largest State spending category, exceeded only by elementary and secondary education. In 1987, elementary and secondary education accounted for 22.8 percent of State spending. Medicaid took 10.2 percent of State spending. According to the latest report issued by the National Association of State Budget Officers, the share of State spending for elementary and secondary education has declined to 20.9 percent while Medicaid's share has nearly doubled to 19.2 percent. If present trends continue, Medicaid will soon pass elementary and secondary education as the largest item in State budgets. Medicaid has seized the power of decisionmaking from State officials. It is simply draining resources from other priorities. As summarized by the State budget officers' report, ``Medicaid * * * continues to limit the ability of decisonmakers to use the budget as a tool for implementing public policy.'' Last January, President Clinton proclaimed an end to big government. Nothing could demonstrate a true allegiance to this pledge better than to return the responsibility and authority for welfare programs to the States. In sum, the critical difference between President Clinton and the Republicans is not about the level of Medicaid spending. Mr. President, the difference lies in the vision of the proper roles of Government and in the faith of the American people to govern themselves.