Arlen Specter

Mr. SPECTER

Mr. SPECTER. Mr. President, I formally withdraw the amendment.

Mr. SPECTER. Mr. President, reserving the right to object.

Mr. SPECTER. I ask unanimous consent that following the disposition of the McCain amendment, I be recognized to offer an amendment on dairy compacts.

Mr. SPECTER. Mr. President, if I may respond to the distinguished majority leader, I have been trying to get this amendment up. In order to get it sequenced, I have asked unanimous consent to bring up an amendment on dairy compacts. A number of Senators intend to discuss it briefly and not to press it to a vote because it is legislation on an appropriations bill, but we think it important to consider the matter so it may be taken up in conference.

Mr. SPECTER

Mr. SPECTER. Mr. President, I will speak very briefly on the introduction of legislation for the random selection of judges. I had thought when cases were assigned in the Federal courts they were assigned in a random fashion, unless they were related to some other case where a specific judge had jurisdiction and that judge would have the case by a related case assignment. During the course of the past week there has come to light a situation in the District of Columbia where the chief judge assigned specific judges to two very high-profile cases, one involving Mr. Webster Hubbell as a defendant and the other involving Mr. Charlie Trie as a defendant. My understanding of the practice has been that cases would be assigned on a random basis. In checking the specifics, I have found that the Judicial Conference, which is the policy-making body for the Federal Judiciary, only recommends that Federal courts randomly assign cases. It has not become a mandate to do so. I believe that public policy warrants having it as a mandate. It is customary for the Congress to legislate on matters of administration. For example, Congress has set a time limit under the speedy trial rule in the criminal courts. For another example, Congress has established time limits on Federal court habeas corpus cases where death penalty cases are appealed into the Federal courts. This is not a matter where we are talking about the discretion or judgment of an individual judge on how to decide a case, where judicial independence mandates that nobody make any suggestion to the judge as to how an individual case is to be decided. But as a matter of administrative policy it is entirely appropriate for the Congress to set the rules, one of which I think should be the random assignment of judges. In March of this year the Judicial Conference even rescinded its 28- year-old policy that recommended giving the chief judges, the assigning judge, latitude to make special assignments of ``protracted, difficult, or wildly publicized cases,'' so such latitude is no longer recommended by the Judicial Conference. The chief judge of the District of Columbia has responded to the Associated Press article in a letter to the Washington Times dated August 2. I ask unanimous consent to have printed in the Record a copy of the newspaper article from the Washington Times, together with a copy of the response by the chief judge to the newspaper article.

Mr. SPECTER. In the reply, the chief judge says this: This A.P. article alleges that I ``bypassed the traditional random assignment system'' to assign certain criminal cases to judges appointed by President Clinton, singling out the criminal case against Yah Lin ``Charlie'' Trie, which was assigned to Judge Paul L. Friedman, and the criminal case against Webster Hubbell, which was assigned to Judge James Robertson. The article implies that these cases were assigned to these judges based on political motivations. The unsubstantiated assertion could not be further from the truth. Now, I do not question the statements made by the chief judge in denying any portion of partiality or impropriety, but I do believe that when this case is called to widespread public attention the Congress ought to act. That is why I am introducing this legislation today on behalf of myself and Senator Hatch, chairman of the Judiciary Committee. The reasons for this legislation are articulated by Columbia University law professor H. Richard Uviller, who said: As far as assigning a recently appointed judge of the same party, it's dangerous, it's risky, it's hazardous because the outcome might support the cynical view that the judge did not decide the matter on the merits even though that may be the furthest thing from the truth. A similar statement was made by New York University law professor Steven Gillers, who said: If the case is high-profile, that should increase the presumption in favor of random selection. This issue of random selection is one that I feel particularly strongly about based on my experience as district attorney in the Philadelphia criminal courts. When high-profile or politically-tinged cases were filed in the criminal courts of Philadelphia during my tenure as district attorney, I routinely asked for a jury trial because I wanted the facts decided by an impartial fact finder. At the outset of that tenure in January of 1966, the Commonwealth was a party to the proceeding and, like the defendant, had a right to demand a jury trial. I did demand jury trials because I found that the assignment to specific judges was not random and did on some occasions have inappropriate motivations. During the course of my tenure as district attorney, the State supreme court made a change in the criminal rules and took away the right of the district attorney to demand a jury trial. That was recently reinstated by a constitutional amendment so that the experience I have seen requires a very heavy emphasis on the random selection. During my tenure as district attorney, we reformed the entire minor judiciary of Philadelphia known as magistrates because of widespread corruption and inappropriate practices in that judicial system. While this in no way reflects upon the Federal courts of the United States, which I think are of uniformly high quality, I do believe that the principle of random selection of judges is a very important principle. I do believe there ought to be an exception if there is a related case; that is, where a judge was assigned a case on a random basis and another matter comes in where there are very similar, if not identical, questions of fact and questions of the parties. But this legislation removes at least the appearance and the question that there may be some collateral motivation. To reiterate, I seek recognition today to introduce the Random Selection of Judges Act of 1999, a bill which will require that cases in Federal court be assigned to judges randomly, by means of a computer program. I believe that only the random assignment of cases to judges will ensure blind justice in our courts. This power to assign cases creates the potential for abuse. An assigning judge who is so inclined could attempt to alter the outcome of a case by assigning it to a judge who, in the opinion of the chief judge, holds a ``correct'' view on the issue at hand. A story recently in the news clearly demonstrates the potential for abuse under the current system. Over the weekend, the Associated Press reported that Judge Norma Holloway Johnson, Chief Judge of the District Court for the District of Columbia, bypassed the traditional random computer assignment system in her court and instead directly assigned criminal cases against certain presidential friends to judges appointed by President Clinton. Specifically, the campaign finance case against Charlie Trie was assigned to Judge Paul L. Friedman, and the tax cases against Webster Hubbell were assigned to Judge James Robertson. According to the news reports, Judge Johnson's decision to abandon random assignment in these high profile cases raised concerns among several other judges on her court. It was also reported that these judges raised concerns because Judge Robertson is friends with Vernon Jordan, who played a role in the Hubbell affair, and Judge Friedman is friends with Reid Weingarten, who represents the defendants in two fundraising cases before Friedman. According to the Associated Press article, it has been asserted by some that Judge Johnson assigned these cases to Clinton appointees because they would be more sympathetic to the President and his friends than Republican appointees who may have gotten the cases through random assignment. Judge Johnson has denied any political or other improper motive in a letter to the Washington Times. The fact is that Judge Johnson herself issued a number of rulings against President Clinton, including her rulings rejecting privilege claims by White House lawyer Bruce Lindsey and the Secret Service. But no matter what Judge Johnson's motives, her actions make quite clear that, under the current system, the potential for abuse does exist. Currently, the Judicial Conference, which is the policymaking body for the federal judiciary, recommends that Federal courts randomly assign cases. In fact, in March the conference even rescinded its 28- year-old policy that recommended giving chief judges latitude to make special assignments of ``protracted, difficult, or widely publicized cases.'' But there is still no requirement that Federal courts randomly assign cases. The problem with mere recommendations is that they can be ignored. If we believe that cases should be randomly assigned, then we must require that cases be randomly assigned. My bill imposes such a requirement. Under my bill, the chief judges of the Federal district and circuit courts must assign cases by means of an automated random assignment program. Recognizing that there are some instances in which it would serve the interests of efficiency to allow the chief judges to directly assign cases to specific judges, my bill includes two important exceptions to the random assignment requirement. First, chief judges will be permitted to directly assign a case to a judge who has already heard a related case. A related case is defined as one which involves substantially the same facts, individuals and/or property as a case previously before the court. For instance, a case against a defendant in a bank robbery could be directly assigned to a judge who already heard the case against another defendant in the same bank robbery. Secondly, chief judges will be permitted to directly assign a technical case to a judge who is already familiar with the subject matter at issue. Technical cases are defined as those which involve specialized, unusually complex facts or subject matter and which would demand a great deal of time to master. For example, an asbestos liability case could be directly assigned to a judge who has already developed an expertise in handling asbestos liability cases. While Congress should not micro-manage the Courts, the legislation I introduce today is reasonable, limited, and well within our power. Article 1, Section 8, Clause 9 of the Constitution gives Congress the power to ``constitute Tribunals inferior to the supreme Court.'' Pursuant to this power, Congress established the Federal circuits and originally assigned Supreme Court justices to ride these circuits. Under this power, Congress eventually established the Federal district courts and outlined their jurisdiction. The sections of the Federal Code I seek to amend today--which permit the assignment of judges in accordance with court rules--were themselves Congressional enactments. Even in recent years, Congress has imposed restrictions on the procedures of the courts. For example, the Anti-Terrorism Bill of 1996 contained a provision I authored to reform habeas corpus. This provision imposes strict time limits on both the filing of habeas corpus petitions and the response by the courts to such petitions. Likewise, many bills we pass include requirements that certain cases be heard by the Courts on an expedited basis. Mr. President, I feel strongly that my bill should not become a partisan issue. As I mentioned before, one's opinion of Judge Johnson and her actions is entirely beside the point. Judge Johnson's reported actions merely make us aware of the potential for abuse in our current system and the need to rectify it. I hope my colleagues will join me in supporting this necessary, common-sense legislation. I ask unanimous consent that the bill be printed.

Mr. SPECTER. Mr. President, I have sought recognition to introduce a bill reauthorizing the John Heinz Senate Fellowship Program. This Congressional fellowship program, created in 1992, is a fitting tribute to my late colleague and dear friend, United States Senator John Heinz. Senator Heinz dedicated his life and much of his Congressional career to improving the lives of senior citizens. He believed that Congress has a special responsibility to serve as a guardian for those who cannot protect themselves. This fellowship program, which focuses on aging issues, honors the life and continues the legacy of Senator John Heinz. During his 20 years in the Congress, John Heinz compiled an enviable record of accomplishments. While he was successful in many areas, he built a national reputation for his strong commitment to improving the quality of life of our nation's elderly. Pennsylvania, with nearly 2 million citizens aged 65 or older--over 15% of the population--houses the second largest elderly population nationwide. As John traveled throughout the state, he listened to the concerns of this important constituency and came back to Washington to address their needs through policy and legislation. Senator Heinz led the fight against age discrimination by championing legislation to eliminate the requirement that older Americans must retire at age 65, and by ensuring full retirement pay for older workers employed by factories forced to close. During his Chairmanship of the Senate Special Committee on Aging from 1981-1986 and his tenure as Ranking Minority Member from 1987-1991, Senator Heinz used his position to improve health care accessibility and affordability for senior citizens and to reduce fraud and abuse within Federal health care programs. Congress enacted his legislation to provide Medicare recipients a lower cost alternative to fee-for-service medicine, as well as his legislation to add a hospice benefit to the Medicare program. John also recognized the great need for nursing home reforms. He was successful in passing legislation mandating that safety measures be implemented in nursing homes and ensuring that nursing home residents cannot be bound and tied to their beds or wheelchairs. Mr. President, the John Heinz Senate Fellowship Program will help continue the efforts of Senator Heinz to give our nation's elderly the quality of life they deserve. The program encourages the identification and training of new leadership in aging policy by awarding fellowships to qualified candidates to serve in a Senate office or with a Senate Committee staff. The goal of this program is to advance the development of the public policy in issues affecting senior citizens. Administered by the Heinz Family Foundation in conjunction with the Secretary of the Senate, the program allows fellows to bring their firsthand experience in aging issues to the work of Congress. Heinz fellows who are advocates for aging issues spend a year to help us learn about the effects of Federal policies on our elderly citizens, those who are social workers help us find better ways to protect our nation's elderly from abuse and neglect, and those who are health care providers help us to build a strong health care system that addresses the unique needs of our seniors. As fellows, senior citizen advocates and aging policy experts not only have the opportunity to use their expertise to facilitate national debate about issues concerning senior citizens, they also prepare themselves to make future contributions to their local communities. The Heinz fellowship enables us to train new leaders in senior citizen advocacy and aging policy. The fellows return to their respective careers with a new understanding about how to work effectively with government, so they may better fulfill their goals as senior citizen advocates. The John Heinz Fellowship Program has been a valuable tool for Congress and our communities since its establishment in 1992. The continuation of this vital program will signal a sustained commitment to our nation's elderly. I urge my colleagues to join me in cosponsoring this resolution, and urge its swift adoption. I ask unanimous consent that the text of the legislation be printed in the Record.

Mr. SPECTER

Mr. SPECTER. Mr. President, I will speak very briefly on the introduction of legislation for the random selection of judges. I had thought when cases were assigned in the Federal courts they were assigned in a random fashion, unless they were related to some other case where a specific judge had jurisdiction and that judge would have the case by a related case assignment. During the course of the past week there has come to light a situation in the District of Columbia where the chief judge assigned specific judges to two very high-profile cases, one involving Mr. Webster Hubbell as a defendant and the other involving Mr. Charlie Trie as a defendant. My understanding of the practice has been that cases would be assigned on a random basis. In checking the specifics, I have found that the Judicial Conference, which is the policy-making body for the Federal Judiciary, only recommends that Federal courts randomly assign cases. It has not become a mandate to do so. I believe that public policy warrants having it as a mandate. It is customary for the Congress to legislate on matters of administration. For example, Congress has set a time limit under the speedy trial rule in the criminal courts. For another example, Congress has established time limits on Federal court habeas corpus cases where death penalty cases are appealed into the Federal courts. This is not a matter where we are talking about the discretion or judgment of an individual judge on how to decide a case, where judicial independence mandates that nobody make any suggestion to the judge as to how an individual case is to be decided. But as a matter of administrative policy it is entirely appropriate for the Congress to set the rules, one of which I think should be the random assignment of judges. In March of this year the Judicial Conference even rescinded its 28- year-old policy that recommended giving the chief judges, the assigning judge, latitude to make special assignments of ``protracted, difficult, or wildly publicized cases,'' so such latitude is no longer recommended by the Judicial Conference. The chief judge of the District of Columbia has responded to the Associated Press article in a letter to the Washington Times dated August 2. I ask unanimous consent to have printed in the Record a copy of the newspaper article from the Washington Times, together with a copy of the response by the chief judge to the newspaper article.

Mr. SPECTER. In the reply, the chief judge says this: This A.P. article alleges that I ``bypassed the traditional random assignment system'' to assign certain criminal cases to judges appointed by President Clinton, singling out the criminal case against Yah Lin ``Charlie'' Trie, which was assigned to Judge Paul L. Friedman, and the criminal case against Webster Hubbell, which was assigned to Judge James Robertson. The article implies that these cases were assigned to these judges based on political motivations. The unsubstantiated assertion could not be further from the truth. Now, I do not question the statements made by the chief judge in denying any portion of partiality or impropriety, but I do believe that when this case is called to widespread public attention the Congress ought to act. That is why I am introducing this legislation today on behalf of myself and Senator Hatch, chairman of the Judiciary Committee. The reasons for this legislation are articulated by Columbia University law professor H. Richard Uviller, who said: As far as assigning a recently appointed judge of the same party, it's dangerous, it's risky, it's hazardous because the outcome might support the cynical view that the judge did not decide the matter on the merits even though that may be the furthest thing from the truth. A similar statement was made by New York University law professor Steven Gillers, who said: If the case is high-profile, that should increase the presumption in favor of random selection. This issue of random selection is one that I feel particularly strongly about based on my experience as district attorney in the Philadelphia criminal courts. When high-profile or politically-tinged cases were filed in the criminal courts of Philadelphia during my tenure as district attorney, I routinely asked for a jury trial because I wanted the facts decided by an impartial fact finder. At the outset of that tenure in January of 1966, the Commonwealth was a party to the proceeding and, like the defendant, had a right to demand a jury trial. I did demand jury trials because I found that the assignment to specific judges was not random and did on some occasions have inappropriate motivations. During the course of my tenure as district attorney, the State supreme court made a change in the criminal rules and took away the right of the district attorney to demand a jury trial. That was recently reinstated by a constitutional amendment so that the experience I have seen requires a very heavy emphasis on the random selection. During my tenure as district attorney, we reformed the entire minor judiciary of Philadelphia known as magistrates because of widespread corruption and inappropriate practices in that judicial system. While this in no way reflects upon the Federal courts of the United States, which I think are of uniformly high quality, I do believe that the principle of random selection of judges is a very important principle. I do believe there ought to be an exception if there is a related case; that is, where a judge was assigned a case on a random basis and another matter comes in where there are very similar, if not identical, questions of fact and questions of the parties. But this legislation removes at least the appearance and the question that there may be some collateral motivation. To reiterate, I seek recognition today to introduce the Random Selection of Judges Act of 1999, a bill which will require that cases in Federal court be assigned to judges randomly, by means of a computer program. I believe that only the random assignment of cases to judges will ensure blind justice in our courts. This power to assign cases creates the potential for abuse. An assigning judge who is so inclined could attempt to alter the outcome of a case by assigning it to a judge who, in the opinion of the chief judge, holds a ``correct'' view on the issue at hand. A story recently in the news clearly demonstrates the potential for abuse under the current system. Over the weekend, the Associated Press reported that Judge Norma Holloway Johnson, Chief Judge of the District Court for the District of Columbia, bypassed the traditional random computer assignment system in her court and instead directly assigned criminal cases against certain presidential friends to judges appointed by President Clinton. Specifically, the campaign finance case against Charlie Trie was assigned to Judge Paul L. Friedman, and the tax cases against Webster Hubbell were assigned to Judge James Robertson. According to the news reports, Judge Johnson's decision to abandon random assignment in these high profile cases raised concerns among several other judges on her court. It was also reported that these judges raised concerns because Judge Robertson is friends with Vernon Jordan, who played a role in the Hubbell affair, and Judge Friedman is friends with Reid Weingarten, who represents the defendants in two fundraising cases before Friedman. According to the Associated Press article, it has been asserted by some that Judge Johnson assigned these cases to Clinton appointees because they would be more sympathetic to the President and his friends than Republican appointees who may have gotten the cases through random assignment. Judge Johnson has denied any political or other improper motive in a letter to the Washington Times. The fact is that Judge Johnson herself issued a number of rulings against President Clinton, including her rulings rejecting privilege claims by White House lawyer Bruce Lindsey and the Secret Service. But no matter what Judge Johnson's motives, her actions make quite clear that, under the current system, the potential for abuse does exist. Currently, the Judicial Conference, which is the policymaking body for the federal judiciary, recommends that Federal courts randomly assign cases. In fact, in March the conference even rescinded its 28- year-old policy that recommended giving chief judges latitude to make special assignments of ``protracted, difficult, or widely publicized cases.'' But there is still no requirement that Federal courts randomly assign cases. The problem with mere recommendations is that they can be ignored. If we believe that cases should be randomly assigned, then we must require that cases be randomly assigned. My bill imposes such a requirement. Under my bill, the chief judges of the Federal district and circuit courts must assign cases by means of an automated random assignment program. Recognizing that there are some instances in which it would serve the interests of efficiency to allow the chief judges to directly assign cases to specific judges, my bill includes two important exceptions to the random assignment requirement. First, chief judges will be permitted to directly assign a case to a judge who has already heard a related case. A related case is defined as one which involves substantially the same facts, individuals and/or property as a case previously before the court. For instance, a case against a defendant in a bank robbery could be directly assigned to a judge who already heard the case against another defendant in the same bank robbery. Secondly, chief judges will be permitted to directly assign a technical case to a judge who is already familiar with the subject matter at issue. Technical cases are defined as those which involve specialized, unusually complex facts or subject matter and which would demand a great deal of time to master. For example, an asbestos liability case could be directly assigned to a judge who has already developed an expertise in handling asbestos liability cases. While Congress should not micro-manage the Courts, the legislation I introduce today is reasonable, limited, and well within our power. Article 1, Section 8, Clause 9 of the Constitution gives Congress the power to ``constitute Tribunals inferior to the supreme Court.'' Pursuant to this power, Congress established the Federal circuits and originally assigned Supreme Court justices to ride these circuits. Under this power, Congress eventually established the Federal district courts and outlined their jurisdiction. The sections of the Federal Code I seek to amend today--which permit the assignment of judges in accordance with court rules--were themselves Congressional enactments. Even in recent years, Congress has imposed restrictions on the procedures of the courts. For example, the Anti-Terrorism Bill of 1996 contained a provision I authored to reform habeas corpus. This provision imposes strict time limits on both the filing of habeas corpus petitions and the response by the courts to such petitions. Likewise, many bills we pass include requirements that certain cases be heard by the Courts on an expedited basis. Mr. President, I feel strongly that my bill should not become a partisan issue. As I mentioned before, one's opinion of Judge Johnson and her actions is entirely beside the point. Judge Johnson's reported actions merely make us aware of the potential for abuse in our current system and the need to rectify it. I hope my colleagues will join me in supporting this necessary, common-sense legislation. I ask unanimous consent that the bill be printed.

Mr. SPECTER

Mr. SPECTER. Mr. President, on Friday, August 6, 1999 John Bradley completes a two year assignment to the Senate Committee on Veterans' Affairs. In view of his outstanding performance and contributions to the Committee and our country's veterans, I am taking this occasion to recognize John. In mid 1997, the Committee was without a professional staff member with expertise in veterans' health care delivery system. I turned to the Department of Veterans Affairs for the temporary assignment of such a person. In truth, I anticipated retaining whoever was assigned only until such time as my Staff Director was able to interview and propose a permanent professional staff member. VA's then Acting Secretary Herschel Gober agreed to the detailing of John Bradley since John had served a similar assignment to this Committee in the 103rd Congress. John Bradley turned out to be the consummate professional and the search for a permanent professional staff member was halted. A veteran of the Vietnam conflict and a career employee of the VA with over 25 years of service, primarily with the Veterans Health Administration, John made an immediate impact. With the Committee's legislative agenda completed, he directed with great professional skill the rigors of staff conferencing with his House counterparts. It also soon became apparent that John was not a bureaucrat or intent on maintaining the status quo. In fact, he is an intellectual and innovative thinker who is willing to explore new ideas to advance the cause of veterans health care. During his assignment to the Committee, John played a major role in shaping the following legislation: the Veterans' Health Care Improvements Act of 1998, the Persian Gulf War Veterans Act of 1998, and the Veterans Compensation Cost of Living Adjustment Act of 1998. Additionally, John has spent many hours this year working on S. 1076, the Veterans Benefits Improvements Act of 1999 which I hope will pass the Senate soon. Upon his departure and on behalf of the Committee, I extend my deep appreciation to John for his courage, his innovation, his professionalism and, above all, his enduring concern for veterans. He shall be missed.

Mr. SPECTER

Mr. SPECTER. Mr. President, I urge my colleagues to support this flat tax amendment realistically as a protest against the complicated Tax Code which now numbers some 7.5 million words, costs $600 billion in compliance, and takes 5.4 billion hours to comply. This amendment is supported by Senator Lott, Senator Nickles, Senator Craig, and others. In a very shorthand statement, this is a tax return under the flat tax. It is a postcard, and it can be filled out in 15 minutes. It eliminates taxes on capital gains, on estates, and on dividends, all of which have been taxed before. It is not regressive. There is no tax for a family of four up to $27,500 in earnings, which is 53 percent of Americans. There is a reduction in tax for $1,000 up to $35,000. It is even at $75,000. An affirmative vote will signal a protest to urge the Finance Committee and Ways and Means to give serious consideration to this important reform.

Mr. SPECTER. Mr. President, I call up amendment No. 1386.

Mr. SPECTER. Mr. President, under the applicable provision, I move to waive the provision as to germaneness, and I ask for the yeas and nays.

Mr. SPECTER

Mr. SPECTER. I thank the Chairman. Mr. President, I have sought recognition to talk about my flat tax amendment which will be voted on by the Senate either this evening or tomorrow. The most dramatic way to show what the flat tax is, is to hold up a postcard which is an income tax return on the flat tax. This postcard will take 15 minutes to fill out. Here is an enlargement of the flat tax which lists the identity of the taxpayer, the total compensation, personal allowance, number of dependents, two deductions allowed, mortgage interest up to $100,000, charitable contributions up to $2,500, and then a flat 20-percent tax. It will take 15 minutes on tax simplification to fill out this return. Contrast that, if you will, with the fact that we have a Tax Code with 7.5 million words; a Pledge of Allegiance which has 31 words; the Gettysburg Address which has 267 words; the Declaration of Independence, about 1,300 words; the Bible with 1,773,000 words; and the U.S. Tax Code with 7.5 million words with the pending legislation, which I have in my hand, which is another thick book of 443 pages to be added. In offering an amendment on the flat tax, I have no illusion about its passing because the train is in operation to have a tax cut. The flat tax would be a total substitute on a comprehensive tax bill which would do great things for America. First of all, the flat tax would eliminate double taxation so there would be no tax on estates. They have already been taxed; all the money is going into the estate. There would be no tax on dividends; that has all been taxed before it gets into earned surplus. There would be no tax on capital gains; that has already been taxed. This is a win-win situation for America because it lowers the tax burden on the taxpayers in the lower brackets. For example in the 1998 tax year, the standard deduction is $4,250 for a single taxpayer, $6,250 for a head of household and $7,100 for a married couple filing jointly, while the personal exemption for individuals and dependents is $2,700. Thus, under the current tax code, a family of four which does not itemize deductions would pay taxes on all income over $17,900--that is personal exemptions of $10,800 and a standard deduction of $7,100. By contrast, under my flat tax bill, that same family would receive a personal exemption of $27,500, and would pay tax on only income over that amount. A family of four with $35,000 in income would owe $2,569 in taxes under current law, but would only owe $1,500 under this flat tax--that is a savings of $1,065. A family of four with $50,000 would have a saving of $752. Why is this possible? It is possible because the tax loopholes enable write-offs to save some $393 billion a year. What is eliminated under the flat tax are the loopholes, the deductions in this complicated code which can be deciphered, interpreted, and found really only by the $500-an-hour lawyers. That money is lost to the taxpayers. $120 billion would be saved by the elimination of fraud because of the simplicity of the Tax Code, the taxpayer being able to find out exactly what they owe. This bill is modeled after legislation organized and written by two very distinguished professors of law from Stanford University, Professor Hall and Professor Rabushka. Their model was first introduced in the Congress in the fall of 1994 by Majority Leader Richard Armey. I introduced the flat tax bill--the first one in the Senate--on March 2, 1995, Senate bill 488. I reintroduced the bill in the 105th Congress, and re-reintroduced the bill in this Congress on April 15, 1999--income tax day--in a bill denominated S. 822. So the bill has been well thought out, has been well documented, as being revenue neutral by Professors Hall and Rabushka at 19 percent. My bill has added two deductions--one for interest on home mortgages for borrowing up to $100,000 for middle-income Americans and a deduction for charitable contributions for up to $2,500. These two deductions have been obtained because of the practical impossibility of having a Tax Code which eliminates those two deductions which is really the mainstay of America. But aside from those two modest deductions, it is a flat tax. One percent has been added on my bill to the Hall-Rabushka formula to accommodate $35 billion in losses due to the home interest deduction and $13 billion in tax losses due to the deduction on interest on charitable contributions. So we have a system which is tax neutral. Another major advantage of the flat tax is that it would vastly increase productivity because people would no longer be looking to what they could save on tax loopholes. Instead, Americans would be devising their affairs on what would be most productive, because it would not do one any good to construct a tax loophole, diverting a lot of energy to try to save taxes, but, instead, the energies of productive Americans would be devoted to what is productive and what can be accomplished. This model, under Hall-Rabushka, projects that these savings --which would be tremendously increased--would far outweigh for the individual taxpayer any of the benefits that they would receive at the present time. Professors Hall and Rabushka project there would be an increase in the gross national product of some $2 trillion within 7 years, which would be an enormous boon to America. As I say, this tax bill is well on the road. The train has left the station; and it is not to be derailed by any substitute measure. But I do ask my colleagues to seriously consider the flat tax and, if nothing more, to cast a protest vote against the existing Tax Code which has 75 million pages, and the current bill which would add 443 pages to that mountainous monstrosity. The flat tax is enormously popular with the American people. The polls show that 61 percent of Americans favor a flat tax. I can personally attest to the fact that in my open house town meetings, the reference to the flat tax and the display of this postcard tax return is the only applause item in my speech. You might attribute that to the dull balance of the speech, but the flat tax is an applause producer. When people think about the time they spend on their tax returns, and the regulatory system, and the complexity of the tax returns, the fact that Americans spend 5.4 billion hours filling out tax returns, this is an enormously attractive matter. I do not believe that the Senate has voted on a flat tax proposal yet. We Senators always hear that this group or that group is going to be watching a specific vote, and it is going to be a recorded vote on the scorecard. I suggest that a vote on the flat tax is going to be a vote on the big scorecard for America. People do know what the flat tax is. They do have an idea about it. It is overwhelmingly popular. 61 percent of the public favors it; leaving only 39 percent, most of whom probably do not know about it. Anybody who knows about the flat tax, that they could get their tax return done on a postcard in 15 minutes, would be very proud to have his or her Senator vote in favor of this flat tax. In essence, the flat tax would vastly simplify the code. It would eliminate most of the 117,000 IRS Internal Revenue Service employees, would save most of the $7 billion now spent on the Internal Revenue Service, and would be a very strong signal to the Finance Committee in the Senate to take up the flat tax seriously. That has not been done. It would be a strong signal to the Ways and Means Committee of the House of Representatives to take a good look at the flat tax. Because Americans will see that they could fill out their tax return on a postcard, save the laborious hours and the complications and all those letters from the IRA saying, you owe $19.14 cents--which taxpayers like myself would rather pay but you can't do that; you have to go back through all of your records--the release in productivity, the elimination of the capital gains tax, the estate tax, the tax on dividends, all of which has been paid.

Mr. SPECTER. I thank the Chair. In conclusion--the two most popular words of any speech--I believe that America ought to be governed from the center; America needs to be governed from the center; and America wants to be governed from the center. Where we have the competing proposals--the one which was defeated yesterday, the Democratic proposal at $295 billion; the competing proposal of $792 billion--the $500 billion figure will provide more flexibility for other needs of America, will move to the center, will give better assurances that adequate funding will be available to protect Social Security, to provide Medicare reform, to provide important programs such as prescription drugs, to provide for the kinds of funding necessary for the National Institutes of Health, the other important items yet to be resolved under an arrangement with the White House on the pending appropriations bills. I join my colleagues in urging adoption of the Chafee-Breaux proposal.

Mr. SPECTER. In the balance of my allotted time, I will speak briefly about another amendment which will be voted on, probably tomorrow. That is an investment tax credit for the biotechnology equipment industry. In my capacity as chairman of the Senate Subcommittee on Health and Human Services, my distinguished ranking member, Senator Harkin, and I have the job of allocating funds for the National Institutes of Health. They are the crown jewel of the Federal Government--perhaps the only jewel of the Federal Government. We are facing an extraordinarily difficult time in allocating funding because of the allocation for the subcommittee which is far under what is necessary to provide the $2 billion which we allocated in increase last year. In consulting with the biotechnology industry, the one item which could bridge the gap would be a 10 percent investment tax credit which would stimulate Biotech and would do a tremendous amount for the health of Americans. In the course of the past few months, stem cells have been discovered by Biotech which is a veritable fountain of youth, holding a promise for a cure for cancer, Alzheimer's, Parkinson's, and other maladies. So I urge my colleagues to take a close look at the investment tax credit for the Biotech industry when it comes up. I thank the Chair and thank the chairman for yielding me this time from the bill and yield the floor.

Mr. SPECTER. I thank my colleague from Louisiana. Mr. President, I join in cosponsoring this centrist approach. In my view, the tax proposal to cut $792 billion over 10 years is too much. It may be that the United States would be best served by not having any tax cut at all, but it appears we are headed for some tax cut. And a group of centrists, so-called moderates, have joined together on the proposal which is now on the floor for a tax cut of some $500 billion. This same group, in substantial measure, was assembled 2 weeks ago on the so-called Patients' Bill of Rights, where the centrists had an alternative proposal to the more extreme proposals on the right and on the left. We have rounded up the so-called ``usual suspects,'' but we have a few more; and I think there is some chance that this bill, this proposal, this amendment will be adopted, if not today, then perhaps ultimately. At the outset, I acknowledge the proposition which has been advanced by the Chairman of the Federal Reserve, Alan Greenspan: that the Government of the United States would be best served if there were to be no tax cut at all. The projections of the surpluses are highly speculative. If you change the interest rate a bit, or if you change the unemployment rate a bit, those surpluses would change very dramatically. There is a strong argument for the proposition that we would be best advised to pay down the national debt. The national debt now stands in excess of $5.5 trillion. When the Presiding Officer and I came to the Senate, after the 1980 election, the national debt was slightly under $1 trillion. Notwithstanding the so-called ``Reaganomics'' of the administration of President Reagan, by the time he had left office, the national debt was in the range of $3 trillion, and it has gone up. To reduce the national debt would reduce the carrying costs on the interest, and there is a great deal to be said for that. But my sense is the temper of the times is that we are going to be looking at a tax cut to some extent. If we ameliorate, or reduce the tax cut from the proposed $792 billion to $500 billion, then we have more assurances that we can take care of other needs of America. There is a consensus that the Social Security fund ought to remain inviolate, ought to be preserved at all costs. I believe that it is true that the Social Security fund will be secure under any of the pending proposals. But you can't be entirely certain of that because that significant measure depends on the economic forecasts, the unemployment rate, and the interest rate. Beyond Social Security, there is a commitment to preserve Medicare. A lesser tax cut would provide a better guarantee that funds will be available for Medicare. Then we have the issue of prescription drugs where, again, there is a growing sense that this is an issue which has to be taken into account. Again, a lesser tax cut gives more flexibility for prescription drugs. So when we look at the imponderables and the problems, there is much to recommend a lesser tax cut, so that a figure in the $500 billion range appears preeminently reasonable. Earlier today, about an hour ago, the Senator from Minnesota, Mr. Wellstone, said he did not think the majority of the country favored any tax cut. Well, it is hard to assess where the majority of the country is. What is going to happen in the course of the next 6 weeks, probably, presumably, likely, is that a tax cut will come out of the Republican Congress. The plan is, if this tax cut is adopted, the Senate and House will go to conference, and there will be a resolution of the issue by the end of next week, before we start the August recess. Then there will be an opportunity for Americans to digest the positions taken by the Republican Congress, contrasted with the position taken by the President's Administration and what the Democrats have in mind. I believe if the Senate were to enact this amendment on the $500 billion tax cut, we would be in the position to have some realistic negotiations. It is perfectly obvious, at this stage of the proceeding, that the aura of politics is very heavy in this Chamber, very heavy in the House Chamber, very heavy over all of America--less heavy, frankly, outside the beltway. During the August recess, as I undertake my open-house town meetings, I am anxious to get guidance as to what the Congress ought to do from the prevailing wisdom of Pennsylvanians and the wisdom of men and women outside of the beltway. But I think a tax bill coming out of the Senate at $500 billion would set the stage for some serious discussions with the White House, and an important aspect of those discussions will be what is going to happen to the appropriations bills. We are now operating under the 1997 Balanced Budget Act. Speaking for my subcommittee, which has jurisdiction over three major Departments-- the Department of Education, the Department of Health and Human Services, and the Department of Labor--the allocation of $80 billion is totally insufficient when we look at what we had appropriated last year, what the inflation rate has been--however small, it is a factor. Looking at the financing of the National Institutes of Health, which have made such dramatic achievements; the financing for Head Start, Healthy Start, and worker safety; that is a matter which has to be reconciled, has to be negotiated with the White House during September, before we go into October where we have the highly publicized possibility of the so-called train wreck. But those are factors which have to be taken into account. There again, an approach of $500 billion leaves greater flexibility to accommodate other pressing needs of the Government. Later during the consideration of this tax bill, I will have an opportunity to speak about an amendment which I have pending, which is the flat tax. That is a proposal to simplify taxes in America so they could be filed on a single postcard. I regret that this measure has not received greater attention, notwithstanding the fact that it was introduced in the House of Representatives by Majority Leader Armey in the fall of 1994, and I introduced it--the first bill in the Senate--in March of 1995, which really provides some very substantial relief on simplicity and breaks for the American people. That is not to be, but I will have an opportunity a little later to explain, in some detail, the flat tax proposal. Mr. President, inquiry as to how much time I have remaining of the 10 minutes allotted.

Mr. SPECTER. Mr. President, I have sought recognition to introduce my flat tax legislation as an amendment to S. 1429, the Tax Reconciliation bill. I had reintroduced this legislation on April 15th, 1999 to provide for a flat 20 percent tax on individuals and businesses. In the 104th Congress, I was the first Senator to introduce flat tax legislation and the first Member of Congress to set forth a deficit- neutral plan for dramatically reforming our nation's tax code and replacing it with a flatter, fairer plan designed to stimulate economic growth. My flat tax legislation was also the first plan to retain limited deductions for home mortgage interest and charitable contributions. As I traveled around the country and held town hall meetings across Pennsylvania and other states, the public support for fundamental tax reform was overwhelming. I would point out in those speeches that I never leave home without two key documents: (1) my copy of the Constitution; and (2) a copy of my 10-line flat tax postcard. I soon realized that I needed more than just one copy of my flat tax postcard--many people wanted their own postcard so that they could see what life in a flat tax world would be like, where tax returns only take 15 minutes to fill out and individual taxpayers are no longer burdened with double taxation on their dividends, interest, capital gains and estates. Support for the flat tax is growing as more and more Americans embrace the simplicity, fairness and growth potential of flat tax reform. An April 17, 1995, edition of Newsweek cited a poll showing that 61 percent of Americans favor a flat tax over the current tax code. Significantly, a majority of the respondents who favor the flat tax preferred my flat tax plan with limited deductions for home mortgage interest and charitable contributions. Well before he entered the 1996 Republican presidential primary, publisher Steve Forbes opined in a March 27, 1995, Forbes editorial about the tremendous appeal and potency of my flat tax plan. Congress was not immune to public demand for reform. Jack Kemp was appointed to head up the National Commission on Economic Growth and Tax Reform and the Commission soon came out with its report recognizing the value of a fairer, flatter tax code. Mr. Forbes soon introduced a flat tax plan of his own, and my fellow candidates in the 1996 Republican presidential primary began to embrace similar versions of either a flat tax or a consumption-based tax system. Unfortunately, the politics of that Presidential campaign denied the flat tax a fair hearing and momentum stalled. On October 27, 1995, I introduced a Sense of the Senate Resolution calling on my colleagues to expedite Congressional adoption of a flat tax. The Resolution, which was introduced as an amendment to pending legislation, was not adopted. I reintroduced this legislation in the 105th Congress with slight modifications to reflect inflation-adjusted increases in the personal allowances and dependent allowances. While my flat tax proposal was favorably received at town hall meetings in Pennsylvania, Congress failed to move forward on any tax reform during the 105th Congress. I tried repeatedly to raise the issue with leadership and the Finance Committee to no avail. I think the American people want this debate to move forward and I think the issue of tax reform is ripe for consideration. In this period of opportunity as we commence the 106th Session of Congress, I am optimistic that public support for tax reform will enable us to move forward and adopt this critically important and necessary legislation. My flat tax legislation will fundamentally revise the present tax code, with its myriad rates, deductions, and instructions. This legislation would institute a simple, flat 20% tax rate for all individuals and businesses. It will allow all taxpayers to file their April 15 tax returns on a simple 10-line postcard. This proposal is based on three key principles which are critical to an effective and equitable taxation system: simplicity, fairness and economic growth. Over the years and prior to my legislative efforts on behalf of flat tax reform, I have devoted considerable time and attention to analyzing our nation's tax code and the policies which underlie it. I began the study of the complexities of the tax code 40 years ago as a law student at Yale University. I included some tax law as part of my practice in my early years as an attorney in Philadelphia. In the spring of 1962, I published a law review article in the Villanova Law Review, ``Pension and Profit Sharing Plans: Coverage and Operation for Closely Held Corporations and Professional Associations,'' 7 Villanova L. Rev. 335, which in part focused on the inequity in making tax-exempt retirement benefits available to some kinds of businesses but not others. It was apparent then, as it is now, that the very complexities of the Internal Revenue Code could be used to give unfair advantage to some. Before I introduced my flat tax bill early in the 104th Congress, I had discussions with Congressman Richard Armey, the House Majority Leader, about his flat tax proposal. In fact, I testified with House Majority Leader Richard Armey before the Senate Finance and House Ways & Means Committees, as well as the Joint Economic Committee and the House Small Business Committee on the tremendous benefits of flat tax reform. Since then, and both before and after introducing my original flat tax bill, my staff and I have studied the flat tax at some length, and have engaged in a host of discussions with economists and tax experts, including the staff of the Joint Committee on Taxation, to evaluate the economic impact and viability of a flat tax. Based on those discussions, and on the revenue estimates supplied to us, I have concluded that a simple flat tax at a rate of 20 percent on all business and personal income can be enacted without reducing federal revenues. A flat tax will help reduce the size of government and allow ordinary citizens to have more influence over how their money is spent because they will spend it--not the government. By creating strong incentives for savings and investment, the flat tax will have the beneficial result of making available larger pools of capital for expansion of the private sector of the economy--rather than more tax money for big government. This will mean more jobs and, just as important, more higher-paying jobs. As a matter of federal tax policy, there has been considerable controversy over whether tax breaks should be used to stimulate particular kinds of economic activity, or whether tax policy should be neutral, leaving people to do what they consider best from a purely economic point of view. Our current tax code attempts to use tax policy to direct economic activity. Yet actions under that code have demonstrated that so-called tax breaks are inevitably used as the basis for tax shelters which have no real relation to solid economic purposes, or to the activities which the tax laws were meant to promote. Even when the government responds to particular tax shelters with new and often complex revisions of the regulations, clever tax experts are able to stay one or two steps ahead of the IRS bureaucrats by changing the structure of their business transactions and then claiming some legal distinctions between the taxpayer's new approach and the revised IRS regulations and precedents. Under the massive complexity of the current IRS Code, the battle between $500-an-hour tax lawyers and IRS bureaucrats to open and close loopholes is a battle the government can never win. Under the flat tax bill I offer today, there are no loopholes, and tax avoidance through clever manipulations will become a thing of the past. The basic model for this legislation comes from a plan created by Professors Robert Hall and Alvin Rabushka of the Hoover Institute at Stanford University. Their plan envisioned a flat tax with no deductions whatever. After considerable reflection, I decided to include in the legislation limited deductions for home mortgage interest for up to $100,000 in borrowing and charitable contributions up to $2,500. While these modifications undercut the pure principle of the flat tax by continuing the use of tax policy to promote home buying and charitable contributions, I believe that those two deductions are so deeply ingrained in the financial planning of American families that they should be retained as a matter of fairness and public policy--and also political practicality. With those two deductions maintained, passage of a modified flat tax will be difficult, but without them, probably impossible. In my judgment, an indispensable prerequisite to enactment of a modified flat tax is revenue neutrality. Professor Hall advised that the revenue neutrality of the Hall-Rabushka proposal, which uses a 19% rate, is based on a well documented model founded on reliable governmental statistics. My legislation raises that rate from 19% to 20% to accommodate retaining limited home mortgage interest and charitable deductions. A preliminary estimate in the 104th Congress by the Committee on Joint Taxation places the annual cost of the home interest deduction at $35 billion, and the cost of the charitable deduction at $13 billion. While the revenue calculation is complicated because the Hall-Rabushka proposal encompasses significant revisions to business taxes as well as personal income taxes, there is a sound basis for concluding that the 1 percent increase in rate would pay for the two deductions. Revenue estimates for tax code revisions are difficult to obtain and are, at best, judgment calls based on projections from fact situations with a myriad of assumed variables. It is possible that some modification may be needed at a later date to guarantee revenue neutrality. This legislation offered today is quite similar to the bill introduced in the House by Congressman Armey and in the Senate late in 1995 by Senator Richard Shelby, which were both in turn modeled after the Hall-Rabushka proposal. The flat tax offers great potential for enormous economic growth, in keeping with principles articulated so well by Jack Kemp. This proposal taxes business revenues fully at their source, so that there is no personal taxation on interest, dividends, capital gains, gifts or estates. Restructured in this way, the tax code can become a powerful incentive for savings and investment--which translates into economic growth and expansion, more and better jobs, and raising the standard of living for all Americans. In the 104th Congress, we took some important steps toward reducing the size and cost of government, and this work is ongoing and vitally important. But the work of downsizing government is only one side of the coin; what we must do at the same time, and with as much energy and care, is to grow the private sector. As we reform the welfare programs and government bureaucracies of past administrations, we must replace those programs with a prosperity that extends to all segments of American society through private investment and job creation--which can have the additional benefit of producing even lower taxes for Americans as economic expansion adds to federal revenues. Just as Americans need a tax code that is fair and simple, they also are entitled to tax laws designed to foster rather than retard economic growth. The bill I offer today embodies those principles. My plan, like the Armey-Shelby proposal, is based on the Hall- Rabushka analysis. But my flat tax differs from the Armey-Shelby plan in four key respects: First, my bill contains a 20 percent flat tax rate. Second, this bill would retain modified deductions for mortgage interest and charitable contributions (which will require a 1 percent higher tax rate than otherwise). Third, my bill would maintain the automatic withholding of taxes from an individual's paycheck. Lastly, my bill is designed to be revenue neutral, and thus will not undermine our vital efforts to balance the nation's budget. The key advantages of this flat tax plan are three-fold: First, it will dramatically simplify the payment of taxes. Second, it will remove much of the IRS regulatory morass now imposed on individual and corporate taxpayers, and allow those taxpayers to devote more of their energies to productive pursuits. Third, since it is a plan which rewards savings and investment, the flat tax will spur economic growth in all sectors of the economy as more money flows into investments and savings accounts, and as interest rates drop. Under this tax plan, individuals would be taxed at a flat rate of 20 percent on all income they earn from wages, pensions and salaries. Individuals would not be taxed on any capital gains, interest on savings, or dividends--since those items will have already been taxed as part of the flat tax on business revenue. The flat tax will also eliminate all but two of the deductions and exemptions currently contained within the tax code. Instead, taxpayers will be entitled to ``personal allowances'' for themselves and their children. The personal allowances are: $10,000 for a single taxpayer; $15,000 for a single head of household; $17,500 for a married couple filing jointly; and $5,000 per child or dependent. These personal allowances would be adjusted annually for inflation after 1999. In order to ensure that this flat tax does not unfairly impact low income families, the personal allowances contained in my proposal are much higher than the standard deduction and personal exemptions allowed under the current tax code. For example in the 1998 tax year, the standard deduction is $4,250 for a single taxpayer, $6,250 for a head of household and $7,100 for a married couple filing jointly, while the personal exemption for individuals and dependents is $2,700. Thus, under the current tax code, a family of four which does not itemize deductions would pay tax on all income over $17,900 (personal exemptions of $10,800 and a standard deduction of $7,100). By contrast, under my flat tax bill, that same family would receive a personal exemption of $27,500, and would pay tax only on income over that amount. My legislation retains the provisions for the deductibility of charitable contributions up to a limit of $2,500 and home mortgage interest on up to $100,000 of borrowing. Retention of these key deductions will, I believe, enhance the political salability of this legislation and allow the debate on the flat tax to move forward. If a decision is made to eliminate these deductions, the revenue saved could be used to reduce the overall flat tax rate below 20 percent. With respect to businesses, the flat tax would also be a flat rate of 20 percent. My legislation would eliminate the intricate scheme of complicated depreciation schedules, deductions, credits, and other complexities that go into business taxation in favor of a much- simplified system that taxes all business revenue less only wages, direct expenses and purchases--a system with much less potential for fraud, ``creative accounting'' and tax avoidance. Businesses would be allowed to expense 100 percent of the cost of capital formation, including purchases of capital equipment, structures and land, and to do so in the year in which the investments are made. The business tax would apply to all money not reinvested in the company in the form of employment or capital formation--thus fully taxing revenue at the business level and making it inappropriate to re-tax the same monies when passed on to investors as dividends or capital gains. Let me now turn to a more specific discussion of the advantages of the flat tax legislation I am reintroducing today. The first major advantage to this flat tax is simplicity. According to the Tax Foundation, Americans spend approximately 5.3 billion hours each year filling out tax forms. Much of this time is spent burrowing through IRS laws and regulations which fill 17,000 pages and have grown from 744,000 words in 1955 to 5.6 million words in 1995. Whenever the government gets involved in any aspect of our lives, it can convert the most simple goal or task into a tangled array of complexity, frustration and inefficiency. By way of example, most Americans have become familiar with the absurdities of the government's military procurement programs. If these programs have taught us anything, it is how a simple purchase order for a hammer or a toilet seat can mushroom into thousands of words of regulations and restrictions when the government gets involved. The Internal Revenue Service is certainly no exception. Indeed, it has become a distressingly common experience for taxpayers to receive computerized print-outs claiming that additional taxes are due, which require repeated exchanges of correspondence or personal visits before it is determined, as it so often is, that the taxpayer was right in the first place. The plan offered today would eliminate these kinds of frustrations for millions of taxpayers. This flat tax would enable us to scrap the great majority of the IRS rules, regulations and instructions and delete most of the five million words in the Internal Revenue Code. Instead of tens of millions of hours of non-productive time spent in compliance with, or avoidance of, the tax code, taxpayers would spend only the small amount of time necessary to fill out a postcard-sized form. Both business and individual taxpayers would thus find valuable hours freed up to engage in productive business activity, or for more time with their families, instead of poring over tax tables, schedules and regulations. The flat tax I have proposed can be calculated just by filling out a small postcard which would require a taxpayer only to answer a few easy questions. Filing a tax return would become a manageable chore, not a seemingly endless nightmare, for most taxpayers. Along with the advantage of simplicity, enactment of this flat tax bill will help to remove the burden of costly and unnecessary government regulation, bureaucracy and red tape from our everyday lives. The heavy hand of government bureaucracy is particularly onerous in the case of the Internal Revenue Service, which has been able to extend its influence into so many aspects of our lives. In 1995, the IRS employed 117,000 people, spread out over countless offices across the United States. Its budget was in excess of $7 billion, with over $4 billion spent merely on enforcement. By simplifying the tax code and eliminating most of the IRS' vast array of rules and regulations, the flat tax would enable us to cut a significant portion of the IRS budget, including the bulk of the funding now needed for enforcement and administration. In addition, a flat tax would allow taxpayers to redirect their time, energies and money away from the yearly morass of tax compliance. According to the Tax Foundation, in 1996, the private sector spent over $150 billion complying with federal tax laws. According to a Tax Foundation study, adoption of flat tax reform would cut pre-filing compliance costs by over 90 percent. Monies spent by businesses and investors in creating tax shelters and finding loopholes could be instead directed to productive and job- creating economic activity. With the adoption of a flat tax, the opportunities for fraud and cheating would also be vastly reduced, allowing the government to collect, according to some estimates, over $120 billion annually. The third major advantage to a flat tax is that it will be a tremendous spur to economic growth. Harvard economist Dale Jorgenson estimates adoption of a flat tax like the one offered today would increase future national wealth by over $2 trillion, in present value terms, over a seven year period. This translates into over $7,500 in increased wealth for every man, woman and child in America. This growth also means that there will be more jobs--it is estimated that the $2 trillion increase in wealth would lead to the creation of 6 million new jobs. The economic principles are fairly straightforward. Our current tax system is inefficient; it is biased toward too little savings and too much consumption. The flat tax creates substantial incentives for savings and investment by eliminating taxation on interest, dividends and capital gains--and tax policies which promote capital formation and investment are the best vehicle for creation of new and high paying jobs, and for a greater prosperity for all Americans. It is well recognized that to promote future economic growth, we need not only to eliminate the federal government's reliance on deficits and borrowed money, but to restore and expand the base of private savings and investment that has been the real engine driving American prosperity throughout our history. These concepts are related--the federal budget deficit soaks up much of what we have saved, leaving less for businesses to borrow for investments. It is the sum total of savings by all aspects of the U.S. economy that represents the pool of all capital available for investment--in training, education, research, machinery, physical plant, etc.--and that constitutes the real seed of future prosperity. The statistics here are daunting. In the 1960s, the net U.S. national savings rate was 8.2 percent, but it has fallen to a dismal 1.5 percent. Americans save at only one-tenth the rate of the Japanese, and only one-fifth the rate of the Germans. This is unacceptable and we must do something to reverse the trend. An analysis of the components of U.S. savings patterns shows that although the federal budget deficit is the largest cause of ``dissavings,'' both personal and business savings rates have declined significantly over the past three decades. Thus, to recreate the pool of capital stock that is critical to future U.S. growth and prosperity, we have to do more than just get rid of the deficit. We have to very materially raise our levels of private savings and investment. And we have to do so in a way that will not cause additional deficits. The less money people save, the less money is available for business investment and growth. The current tax system discourages savings and investment, because it taxes the interest we earn from our savings accounts, the dividends we make from investing in the stock market, and the capital gains we make from successful investments in our homes and the financial markets. Indeed, under the current law these rewards for saving and investment are not only taxed, they are overtaxed--since gains due solely to inflation, which represent no real increase in value, are taxed as if they were profits to the taxpayer. With the limited exceptions of retirement plans and tax free municipal bonds, our current tax code does virtually nothing to encourage personal savings and investment, or to reward it over consumption. This bill will change this system, and address this problem. The proposed legislation reverses the current skewed incentives by promoting savings and investment by individuals and by businesses. Individuals would be able to invest and save their money tax-free and reap the benefits of the accumulated value of those investments without paying a capital gains tax upon the sale of these investments. Businesses would also invest more as the flat tax allowed them to expense fully all sums invested in new equipment and technology in the year the expense was incurred, rather than dragging out the tax benefits for these investments through complicated depreciation schedules. With greater investment and a larger pool of savings available, interest rates and the costs of investment would also drop, spurring even greater economic growth. Critics of the flat tax have argued that we cannot afford the revenue losses associated with the tremendous savings and investment incentives the bill affords to businesses and individuals. Those critics are wrong. Not only is this bill carefully crafted to be revenue neutral, but historically we have seen that when taxes are cut, revenues actually increase, as more taxpayers work harder for a larger share of their take-home pay, and investors are more willing to take risks in pursuit of rewards that will not get eaten up in taxes. As one example, under President Kennedy when individual tax rates were lowered, investment incentives including the investment tax credit were created and then expanded and depreciation rates were accelerated. Yet, between 1962 and 1967, gross annual federal tax receipts grew from $99.7 billion to $148 billion--an increase of nearly 50 percent. More recently after President Reagan's tax cuts in the early 1980's, government tax revenues rose from just under $600 billion in 1981 to nearly $1 trillion in 1989. In fact, the Reagan tax cut program helped to bring about one of the longest peacetime expansion of the U.S. economy in history. There is every reason to believe that the flat tax proposed here can do the same--and by maintaining revenue neutrality in this flat tax proposal, as we have, we can avoid any increases in annual deficits and the national debt. In addition to increasing federal revenues by fostering economic growth, the flat tax can also add to federal revenues without increasing taxes by closing tax loopholes. The Congressional Research Service estimates that for fiscal year 1995, individuals sheltered more than $393 billion in tax revenue in legal loopholes, and corporations sheltered an additional $60 billion. There may well be additional monies hidden in quasi-legal or even illegal ``tax shelters.'' Under a flat tax system, all tax shelters will disappear and all income will be subject to taxation. The growth case for a flat tax is compelling. It is even more compelling in the case of a tax revision that is simple and demonstrably fair. By substantially increasing the personal allowances for taxpayers and their dependents, this flat tax proposal ensures that poorer taxpayers will pay no tax and that taxes will not be regressive for lower and middle income taxpayers. At the same time, by closing the hundreds of tax loopholes which are currently used by wealthier taxpayers to shelter their income and avoid taxes, this flat tax bill will also ensure that all Americans pay their fair share. The flat tax legislation that I am offering will retain the element of progressivity that Americans view as essential to fairness in an income tax system. Because of the lower end income exclusions, and the capped deductions for home mortgage interest and charitable contributions, the effective tax rates under my bill will range from 0% for families with incomes under about $30,000 to roughly 20% for the highest income groups. My proposed legislation demonstrably retains the fairness that must be an essential component of the American tax system. The proposal that I make today is dramatic, but so are its advantages: a taxation system that is simple, fair and designed to maximize prosperity for all Americans. A summary of the key advantages are: Simplicity: A 10-line postcard filing would replace the myriad forms and attachments currently required, thus saving Americans up to 5.3 billion hours they currently spend every year in tax compliance. Cuts government: The flat tax would eliminate the lion's share of IRS rules, regulations and requirements, which have grown from 744,000 words in 1955 to 5.6 million words and 12,000 pages currently. It would also allow us to slash the mammoth IRS bureaucracy of 117,000 employees. Promotes economic growth: Economists estimate a growth of over $2 trillion in national wealth over seven years, representing an increase of approximately $7,500 in personal wealth for every man, woman and child in America. This growth would also lead to the creation of 6 million new jobs. Increases efficiency: Investment decisions would be made on the basis of productivity rather than simply for tax avoidance, thus leading to even greater economic expansion. Reduces interest rates: Economic forecasts indicate that interest rates would fall substantially, by as much as two points, as the flat tax removes many of the current disincentives to savings. Lowers compliance costs: Americans would be able to save up to $224 billion they currently spend every year in tax compliance. Decreases fraud: as tax loopholes are eliminated and the tax code is simplified, there will be far less opportunity for tax avoidance and fraud, which now amounts to over $120 billion in uncollected revenue annually. Reduces IRS costs: Simplification of the tax code will allow us to save significantly on the $7 billion annual budget currently allocated to the Internal Revenue Service. Professors Hall and Rabushka have projected that within seven years of enactment, this type of a flat tax would produce a 6 percent increase in output from increased total work in the U.S. economy and increased capital formation. The economic growth would mean a $7,500 increase in the personal income of all Americans. No one likes to pay taxes. But Americans will be much more willing to pay their taxes under a system that they believe is fair, a system that they can understand, and a system that they recognize promotes rather than prevents growth and prosperity. The legislation I introduce today will afford Americans such a tax system. Mr. President, I ask unanimous consent that the charts and exhibits be printed in the Record.

Mr. SPECTER

Mr. SPECTER. I address the Chair on a subject that is critical to the veterans of the armed forces of our nation, and to the Committee on Veterans' Affairs, which I am privileged to chair: the budget for the health care system of the Department of Veterans Affairs. Mr. President, I come to the floor of the United States Senate today to draw attention to a sure crisis in VA health care. Congress and the Administration must ask ourselves: what is the crisis, and what may be the acceptable remedy? It seems that the Department of Veterans Affairs must choose among difficult options of providing care for fewer veterans--that is, ``disenroll'' veterans already expecting care from a VA provider or plan; increase waiting times; cut VA staff; lower quality of care; close and consolidate numerous facilities, or Congress must increase VA's budget. For my money, Mr. President, the choice is clear and simple: we must act to increase VA's appropriation, and we must do so now. Yesterday after years of denial, the Director of the Office of Management and Budget, Mr. Jacob Lew made an amazing discovery--that there are problems in the VA health care system due to funding shortfalls. I ask unanimous consent that the text of OMB Director Jacob Lew's letter of July 26, 1999 be printed in the Record.

Mr. SPECTER. OMB postures--implausibly--that much has changed since January 1999, but veterans organizations in their Independent Budget have been warning Congress and the Administration for the past three years running that VA health care is in dire straits. On April 30 of this year, 50 of my colleagues joined Senator Rockefeller and me in signing a letter to the Chairman and Ranking Member of the Appropriations Committee, requesting that VA health care be supplemented with $1.7 billion for Fiscal Year 2000. My discussions with VA officials lead me to believe that, while such a supplement will not eliminate VA's problems, these funds will go a long way to easing its crisis and will back-fill gaps that we have permitted to occur based solely on resource shortages. In his July 26 letter, Director Lew refers to the need for $100 million in new health-related construction; as Chairman of the authorizing committee for VA major construction, I cannot reply, not having seen a proposal for sites or specific justifications. He also admits that so-called ``category 7'' veterans cannot continue to be enrolled in VA care for fear that quality of care for higher priority poor and service-disabled veterans will suffer. While I concur with Director Lew's premise that we do no harm to those already enrolled in VA health care, I must reserve judgment until I see the basis for this conclusion about the middle class veteran. The Administration is proposing $1 billion is emergency funding, but I believe, as I have since last year, that this level still would be insufficient overall. Mr. President, as to more recent developments even than OMB's late- coming realization of need, I appreciate the work of the House Appropriations Sub-Committee last evening to add $1 billion in additional spending to the VA health care appropriation for the new year. Like my counterparts in the House, I want to help the system help veterans, as we all do. I want to do so with great care, as we all do. However, as I said earlier about the Administration's $1 billion, I say that the House's $1 billion is only enough to push the problem down the road a little further. We need to solve the problem, not push it down the road. We can do that with a substantial increase of $1.7 billion in the Medical Care appropriation for Fiscal Year 2000--a supplement that would take VA health care funding to the unprecedented level of $19 billion--and let us join together to see what kind of sustained funding level VA truly needs to carry out its important and vital mission for America's veterans. I proposed then, and remind the Senate now, that $1.7 billion is needed to keep VA's head above water. America's veterans put a human face on freedom. Veterans agreed to put their lives on the line, or certainly they were prepared to do so, to defend the very freedoms all of us enjoy. Most of them sought nothing in return. They served honorably, then returned to civilian life. However, some of these veterans whom we turned to for assistance in our time of need have now turned to the nation in their time of need. I am referring specifically to those who were disabled during their service to the nation and those who for one reason or another have been left behind in this competitive economy and cannot sustain themselves. For these people in particular we established the Department of Veterans Affairs and its many programs for veterans and their families. We have given VA a mission, one most astutely described by President Abraham Lincoln during his second inaugural address when the President said, the Nation's mission was ``. . . to care for him who shall have borne the battle and for his widow and his orphan.'' Lincoln's eloquent words describe VA's success for most of its existence. It is a system whose sole purpose is to recognize that veterans make a special contribution to society, and therefore deserve special status and attention by a grateful nation. It saddens me to report to the Senate that this Administration is failing our veterans. But I do not intend to sit idly by and allow veterans' needs to go unnoticed and unmet. In Fiscal Year 1999, Congress appropriated $17.3 billion to fund the health care activities of the Department of Veterans Affairs. I know that many of my colleagues have heard while traveling throughout your respective states that this amount was barely enough to allow VA to provide decent care for veterans. Earlier this year, the President sent Congress a budget that requested precisely the same amount for next year. Mr. President, that request is completely unacceptable to me, and I know it is for all my colleagues here. The VA, under the leadership of the most recent Under Secretary for Health, Dr. Kenneth Kizer, made remarkable changes in the way health care is provided to eligible and enrolled veterans. The VA launched a veritable revolution in its delivery system by changing the basic structure of care delivery from one that treated patients in a so- called ``sickness model,'' a mostly reactive stance that was premised on a veteran seeking care for a specific ailment, to one of a functioning health care system that offers a basic benefits package of services to enrolled veterans, including preventive medical treatment, primary care, alternatives to institutionalization, pharmaceuticals and limited long term care programs, all premised on maintining a veteran's health. Further, according to testimony given before the Committee on Veterans' Affairs, VA has opened hundreds of local community-based outpatient clinics, reduced the number of days patients must spend in hospitals and, according to testimony by the Secretary of Veterans Affairs, still treats any veteran who arrives at VA's doorstep. Unfortunately, both the Secretary and the President of the United States have failed to recognize that this system, like any health care system, needs sufficient funding to function properly. It is impossible to increase the quality of care provided, increase the number of places at which care can be obtained and increase the number of people who can receive care without providing any additional resources. This is impossible on its face, Mr. President--impossible. The budget the President sent to Congress would not even permit the VA to maintain the current services it provides to veterans today. In fact, in order to maintain today's level of service, the budget admits that VA must ``streamline'' itself to the tune of $1.14 billion in FY 2000. But we already know that VA cannot maintain the status quo. There are so many challenges facing the system and the veterans it treats that we as a Congress, and the President as Chief Executive, must address. For example, the package of benefits available to our veterans today does not include basic emergency care services. Today, if a veteran must visit a private hospital emergency room for treatment, in most cases payment is out-of-pocket, or through a third party insurance claim, Medicare or Medicaid, that may cover this care. The only exception to this policy is for service connected conditions in limited emergency situations, for which VA will reimburse expenses. A bill recently reported out of my Committee would correct this injustice and mandate that any veteran enrolled in VA care be provided basic, covered emergency services if they are needed. The Congressional Budget Office estimates that this provision will cost $80 million in the first year and approximately $400 million over five years. Emergency care is just the tip of the VA's health care ``iceberg.'' For example, another very important issue is one that dramatically affects Vietnam veterans. According to a recent VA survey, nearly 18% of veterans in VA care could be afflicted with the disease hepatitis C. Hepatitis C is a serious disease that has been associated with battlefield injuries, blood transfusions and intravenous drug use. Hepatitis C causes liver damage and, as one can imagine, ultimately hepatitis C can be fatal. Fortunately, there are a number of new drug therapies available that will help control or arrest the progress of hepatitis C. However, treatment is expensive. VA estimates that they need approximately $135 million in FY 2000 to screen, test and car for veterans suffering from hepatitis C, and much more in the future. This special funding for hepatitis C would be in addition to the amount needed to maintain the status quo in VA health care that the President has otherwise proposed. Frankly, Mr. President and colleagues, the most difficult challenge facing the Department into the foreseeable future is its ability to care for our aging veteran population. Many World War II and Korean War veterans are nearing the end of life. But hundreds of thousands of them need long term care services, and the numbers grow dramatically while the overall veteran population declines. VA maintains over 120 nursing homes now, and has thousands of contracts with private nursing facilities and other long term care providers. If the VA is going to do more than simply maintain these programs--which I argue may be exceedingly difficult to do, given other challenges--rather than expand them to fit the changing demographic face of VA's patient population, additional resources will be needed. There is no question about this fact, Mr. President, and no real choice but to do it, in my view. Until yesterday, in response to all of these challenges, the Administration proposed to make one major move to address the crisis situation: cut health care off. As incredible as it may seem, VA is proposing employee ``buyout'' authority for the Veterans Health Administration. Based on my analysis of this request and its implications, I concluded that buyout legislation was really a sell out, offering a golden handshake to those whom really needed to stay. It is the wrong move, and I am most pleased to say so. VA proposes to buy out--that means reduce--its current workforce by about 15,000 staff over a five-year period, by use of a voluntary separation incentive payment of up to $25,000 to each such employee who leaves by retiring. I think most of you would agree that health care is an enterprise that needs, above all else, trained staff. So, as I mentioned earlier, VA says it strives to increase quality, access and the number of patients enrolled, but would do so without additional financial resources and with a greatly reduced work force. I cannot foresee how these kinds of results are at all possible. How could it be so? A retirement bonus is a fine gesture, but how does it help veterans? The VA buyout proposal was accompanied by a weak ``strategic plan.'' VA cannot say with any degree of confidence how it could continue to provide care to all of the veterans the Secretary has admitted to the system with his ``open door'' policies, if the staff were so severely reduced. In fact, it appeared to me that what VA intended to do in its ``real'' strategic plan--a plan that is yet to be revealed to us--was simply to increase waiting time which already is at unacceptably high levels in many places across the country. As but one small example, Mr. President, let me review for you the most recent facts on VA waiting times from VA medical centers in the Commonwealth of Pennsylvania. These statistics deal only with primary care appointments, not specialty care: 34 days of waiting in Altoona; 31-60 days in Lebanon; up to 54 days in Pittsburgh; up to 64 days at the Sayre clinic; and up to 94 days of waiting in Wilkes-Barre. Looking at a medical specialty that is crucial for aging veterans, let me report to my colleagues waiting times for VA urology clinics in Pennsylvania: 85 days in Altoona; 90 days in Philadelphia; up to 95 days in Pittsburgh. I know that the distinguished Ranking Member of my Committee, Senator Rockefeller, has been very concerned about waiting times at VA hospitals in West Virginia; Senator Campbell is alarmed about the situation at the Medical Center in Fort Lyon, Colorado and has said so; and Senator Murray has relayed her concerns about the status of VA facilities in the state of Washington. But these problems are everywhere, Mr. President. These kinds of delays in care are not acceptable for our veterans. In fact, I would argue that a waiting time of 60 days for an outpatient primary care appointment or an enrolled veteran constitutes nothing; such a patient is not really receiving care from VA. I ask my colleagues: is this a situation that you are comfortable in defending? I am not, and I am not willing to remain silent while veterans receive nothing from a grateful nation. VA needs these funds, and this need is clear. Let the United States Senate not shrink from its duty. Let us do the right thing for America's veterans by providing an emergency supplement of $1.7 billion in funding in Fiscal Year 2000 to help VA help our veterans.

Mr. SPECTER

Mr. SPECTER. Mr. President, I ask unanimous consent that the Senate disagree to the amendments of the House, request a conference on the disagreeing votes, and the Chair be authorized to appoint conferees on the part of the Senate.

Mr. SPECTER. Mr. President, I ask that the Chair lay before the Senate a message from the House of Representatives on (S. 900). The PRESIDING OFFICER (Mr. Voinovich) laid before the Senate the amendments of the House of Representatives to the bill (S. 900) to enhance competition in the financial services industry by providing a prudential framework for the affiliation of banks, securities firms, insurance companies, and other financial service providers, and for other purposes, as follows:

Mr. SPECTER

Mr. SPECTER. Mr. President, if there is no further business to come before the Senate, I now ask unanimous consent that the Senate stand in adjournment under the previous order.

Mr. SPECTER

Mr. SPECTER. Mr. President, I further ask unanimous consent that the cloture vote on the motion to proceed to H.R. 1501 occur at 5:30 p.m. on Monday.

Mr. SPECTER

Mr. SPECTER. I thank the Chair. (The remarks of Mr. Specter pertaining to the introduction of S. 1425 are located in today's Record under ``Statements on Introduced Bills and Joint Resolutions.'')