Arlen Specter

Mr. SPECTER

Mr. SPECTER. I wish to add my voice and tribute to our distinguished President pro tempore on his magnificent record, and comment about how much I have admired his work as chairman of the Judiciary Committee. When I joined this body after the 1980 elections, a few days after the November election, in 1980, I was sitting in my bed in Philadelphia and the telephone rang and that distinguished southern voice said, ``This is Strom Thurmond calling. I wonder if you would be willing to vote for me for President pro tempore.'' I was really amazed since Senator Thurmond did not need my vote that he would call and ask for my vote. While I served with him on the Judiciary Committee I found him to be very wise. One of the comments he made soon after I joined the committee, when a judge was up for confirmation, was asking the nominee if the nominee promised to be courteous. I thought that was sort of a meaningless question until Senator Thurmond followed up after the nominee said yes by saying, ``The more power a person has the more courteous that person should be.'' There is a lot of wisdom in that short statement. Whenever Senator Thurmond is not present and I am, I make that statement to the nominees. During the first 4 years of my term here, Senator Howard Baker, the majority leader, used to keep us all night, and on many occasions I would join Strom for a bowl of soup for about an hour, and I have listened to some of the most fabulous stories because Senator Thurmond is a legend, having been here when John Kennedy was a Senator, when Lyndon Johnson was a Senator. I shall tell one very brief story. After Senator Thurmond ran on the Dixiecrat ticket in 1948, in the Presidential motorcade Inauguration Day in 1949 Senator Thurmond rode in an open car with his wife. Senator Thurmond tells a story of when he passed by the reviewing stand of President Truman and Vice President Barkley. Senator Thurmond stood up, took his hat off and bowed. And Vice President Barkley started to wave to Governor Thurmond. And I shall not tell the whole story, but President Truman pulled down Vice President Barkley's hand with a comment, which is a remarkable story. I asked Strom on a number of occasions if I could be his biographer. He should have a biographer, if he does not take the time to write his own. It is too bad, on this very busy occasion of the Senate, that there are not more Senators on the floor to hear the remarkable accolades presented by our noted historian and conscience of the Senate, Senator Byrd, and by the senior junior Senator, Senator Hollings, but I wanted to have my words of admiration for Senator Thurmond on this very auspicious occasion.

Mr. SPECTER. I ask unanimous consent I might speak for up to 5 minutes.

Mr. SPECTER

Mr. SPECTER. Mr. President, I have sought recognition to introduce legislation that would reauthorize and expand upon existing Federal mass transit programs. My legislation, the Mass Transit Amendments Act of 1997, is intended to lay the groundwork for the Senate's consideration of mass transit legislation in the context of reauthorizing the 1991 Intermodal Surface Transportation Efficiency Act [ISTEA]. Substantial increases in Federal spending on mass transit are warranted, notwithstanding current budget constraints, because a greater commitment to public transportation is in the national interest. I would note, however, that this legislation is an authorization bill which does not increase the deficit; funds authorized to be spent out of the mass transit account of the highway trust fund would still be subject to the annual appropriations process, which is subject to the discretionary spending caps set in the budget resolution and the 602(b) allocation process. Transit should not be viewed as a partisan issue or a regional issue. This bill recognizes the valuable role transit plays in reducing our energy dependence, protecting our environment, reducing gridlock, and providing access to jobs, schools, and health care facilities for millions of Americans in urban and rural areas throughout the Nation. In particular, I urge my colleagues to review my proposed reverse commute pilot program, which would authorize $250 million annually in new grants targeted at improving access to employment for residents in economically distressed urban areas and rural communities. This bill is intended to encourage the Banking Committee, led by Chairman Alfonse D'Amato and Senator Paul Sarbanes, to report to the Senate legislation which will preserve much of the ISTEA transit program but at increased funding levels which reflect the importance of mass transit to our economy, quality of life, and environment. I look forward to working with Senator D'Amato, Senator Sarbanes, and others on the Banking Committee and Appropriations Committee who want to improve the Nation's transit systems through the ISTEA reauthorization process. This legislation takes into account the transit industry consensus proposal put forth by the American Public Transit Association (APTA), which represents transit systems, large and small, in all 50 States. I am pleased to note that APTA's new president is Bill Millar, whom I had the pleasure of working with for a number of years when he was the executive director of the Port Authority of Allegheny County. In preparation for the ISTEA reauthorization process and the annual appropriations process, I have met with many individuals in an effort to learn more about the needs of transit systems, the towns and cities in which they operate, and the riders they are trying to serve. In recent months, I have discussed strategies to increase transit funding with Gov. Tom Ridge, Senator Rick Santorum, and Chairman Bud Shuster. In addition, I have visited with Jack Leary, the general manager of the Southeastern Pennsylvania Transportation Authority (SEPTA), Mayor Tom McGroarty of Wilkes-Barre, and representatives of the Pennsylvania Public Transportation Association. I have also met with transit system officials during my regular visits to Pennsylvania's 67 counties. I am particularly pleased to be introducing this bill with my distinguished colleague from Pennsylvania, Rick Santorum, who has joined with me regularly to increase support for public transportation, such as when we unsuccessfully offered an amendment to the fiscal year 1996 Transportation appropriations bill to restore $40 million in Federal operating assistance. Both Senator Santorum and Gov. Tom Ridge recognize the vital role mass transit plays in Pennsylvania and have worked with me to maximize the Federal resources available to urban and rural transit systems in our State. I am also pleased that Senator Frank Lautenberg has joined in this bipartisan effort. For two years, Senator Lautenberg has joined me in co-chairing an informal Senate transit coalition, which has served as an information clearinghouse for Senate transit supporters and their staffs and which will play an even greater role, I hope, during the reauthorization process. For some time, I have addressed an ongoing threat to our Nation's security and prosperity, a threat with dual roots--in the precarious Middle East and right here at home. As I stated in a speech on the Senate floor on January 30, 1997, I am very concerned by our nation's increased reliance on potentially unstable foreign sources of oil and believe it is critical that during the 105th Congress, we focus on increasing energy conservation. I have been troubled that United States imports of foreign oil continue to increase from the current 50-percent level, with 20 percent of our purchases coming from the Arab countries of the Organization of Petroleum Exporting Countries [OPEC]. According to the American Petroleum Institute, we import more than 9 million barrels per day, with a 6-percent increase in 1996 alone. This is a huge jump from the 6 million barrels imported per day in 1973. Further, if these trends continue, analysts say in ten years we will look overseas for two- thirds of our energy needs. In part because of the ready availability of less expensive sources of foreign oil, it has not been cost-effective for U.S. energy companies to increase domestic production. Further, the effectiveness of the strategic petroleum reserve has dwindled because it only holds an amount comparable to 75 days of foreign imports, a situation that was not helped by the Clinton administration's decision last year to sell off approximately 25 million barrels of petroleum from the reserve to generate revenues. The timing for selling our reserves was less than prudent, particularly considering the state of affairs in the Middle East today. Saudi Arabia, in particular, poses unique cause for concern. If a hostile nation seized Saudi oil wells, the largest reserve in the world, the American economy and world markets could tumble. The deplorable June 25, 1996, terrorist attack at the Khobar Towers facility in Dharhan, which resulted in the murders of 19 airmen and the wounding of more than 400 United States personnel, also gives cause for concern because there is a strong possibility of links to internal domestic struggles in Saudi Arabia. Pressure is mounting from politically activist and conservative Islamic movements to undermine the ruling monarchy, who are viewed by some to be too liberal and western. If American access to Persian Gulf oil cannot be guaranteed, then the United States must reduce its dependence on foreign oil. While reducing our dependence on foreign oil is a difficult task, we can achieve meaningful reductions in energy consumption by promoting the use of public transportation. On the significant link between energy consumption and our transportation infrastructure, a Department of Transportation study of the 50 largest urban areas in the United States suggests that nearly 4 billion gallons of gasoline a year are wasted due to traffic congestion--approximately 94 million barrels of oil. There is much at stake, for the annual economic loss to businesses in the United States caused by traffic congestion is estimated at $40 billion by the Federal Transit Administration. Mass transit has developed to include traditional bus and subway lines, commuter rail, cable cars, monorails, water taxis, and several other modes of shared transportation. Public transportation is a lifeline for millions of Americans and deserves substantial funding for that reason alone. However, it deserves even greater funding when one considers that public transportation saves 1.5 billion gallons of fuel consumption annually in the United States and that each commuter who switches from driving alone to using public transportation saves 200 gallons of gasoline per year, according to government and private studies. Transit also does much to protect our environment. For example, on May 12, I visited the site of the proposed Frankford Intermodal Center in Philadelphia, which will be built on the site of the existing Bridge-Pratt terminal. At present, the terminal serves 40,000 El passengers daily, translating into 17,600 fewer cars on the road each day and mitigating the release of 16,500 pounds of pollutants into the city's air. The new facility is expected to attract new ridership, taking more cars off the streets and reducing pollution even further. But, without increases in transit capital assistance programs, projects such as the Frankford Center will be difficult to get off the drawing boards. There are ample other reasons to increase our commitment to transit funding. In our States, citizens and communities depend on good public transportation for mobility, access to jobs, environmental control, and economic stability. Public transportation lets the elderly visit their health care providers, shops, or friends. In rural areas, buses are essential to reduce isolation and ensure economic development. Also, children use public transportation to go to school. Without affordable mass transit, people in America's inner cities can't get to work. Under the welfare reform law enacted last year, there are expectations that most individuals receiving welfare benefits will find gainful employment. If they can't afford to get to work, or bus routes are cut, we are just making it that much harder for them to get off welfare. It should also be noted that millions of Americans have jobs in the transit industry, operating and maintaining buses and subways, manufacturing vehicles, and constructing new facilities. I am troubled that some have proposed freezing Federal transit spending around $4.4 billion. Transit systems depend to a great degree on Federal assistance in order to remain viable. A survey by my staff of 18 Pennsylvania transit operators shows that they receive an average of 26.7 percent of their total operating and capital funding from the Federal Transit Administration. In addition, SEPTA receives 15 percent of its overall funding from the Federal Government--55 percent of its capital funds--and the Port Authority of Allegheny County receives 32.9 percent from FTA. Reductions in Federal operating and capital support cannot necessarily be made up by local sources. Further, if the systems must cut routes, increase fares, and let their facilities fall into disrepair, they will lose the critical mass of riders needed to sustain operation. The Department of Transportation has calculated that $13 billion in annual transit capital spending is needed just to preserve current conditions--$7 billion more than current capital expenditures-- demonstrating the great need to increase, rather than freeze, Federal support. Responding to this need, my legislation includes several provisions to strengthen our transit systems and enable them to respond to our society's growing need for efficient and affordable public transportation. First, the bill reauthorizes transit programs for 5 years at a total of $34.4 billion through fiscal year 2002. For fiscal year 1997, total transit appropriations are $4.3 billion. Under my bill, the fiscal year 1998 authorization would be $6.5 billion and this figure would be adjusted up for inflation through fiscal year 2002. The authorization is based on calculations of available gasoline tax receipts in the mass transit account of the highway trust fund, considering past surpluses and the additional revenue stream that would be created by diverting a portion of the 4.3 cent per gallon gas tax increase from 1993 into this account. While the $6.5 billion figure may seem substantial to some, I would note that Congress enacted in ISTEA in 1991 a $7.45 billion authorization for fiscal year 1997 in recognition of the importance of investing in public transportation. We have been remiss in not meeting the ISTEA authorization levels. We must do better under its successor legislation. Under my proposal, discretionary capital grants for new starts, rail modernization, bus acquisitions, and bus facility construction would rise from the current $1.9 billion to $2.5 billion in fiscal year 1998. Formula capital grants would rise from current $2.2 billion to $3.5 billion in fiscal year 1998, meaning more funds for urbanized areas, rural areas, and elderly and disabled program needs. My legislation also preserves operating assistance within the formula program for all areas, unlike pending proposals to eliminate it in fiscal year 1998. The bill's truth in taxation provision redistributes the 4.3 cent per gallon gasoline tax which is currently going to deficit reduction in the following manner: 0.76 cents to the mass transit account of highway trust fund, 0.5 cents to a new intercity passenger rail trust fund that would serve as a dedicated source of revenue for Amtrak and is identical to the legislation introduced by Senator Roth (S. 436), and the remaining 3.04 cents to the highway trust fund. I have long argued that gas tax receipts should be used for the transportation infrastructure purposes for which the tax was enacted and that to do otherwise is comparable to the crime of fraudulent conversion, which I used to prosecute as District Attorney in Philadelphia. When people pay Federal taxes at the gas station, they are under the impression that their funds will be used to improve highways and roads and other forms of transportation infrastructure. Accordingly, it is time to redirect the 1993 gas tax increase to its traditional purposes. As I noted earlier, a new proposal for a reverse commute pilot program is also included in my bill. In order to stimulate economic development and help individuals in both urban and rural areas obtain meaningful employment and job training, the bill authorizes a new $250 million per year discretionary grant program for the Secretary of Transportation to provide funds to States, local governments, and transit systems for pilot projects providing access to suburban jobs and job training to residents of distressed urban areas with a population of over 50,000 and for pilot projects involving access to employment in rural areas as well. Funding uses could include, but are not limited to, grants to employers to purchase/lease a van or bus dedicated to shuttling employees from inner cities to suburban workplaces. Grants could also fund additional reverse commute bus routes or commuter rail operations. Such grants are intended to serve as seed money that will generate self-sustaining commute options for years to come. 954 distressed urban areas currently meet the definition contained in the bill. This program would not come at the expense of transit core formula and discretionary programs. The reverse commute pilot program would be a separate program and as a member of the Transportation Appropriations Subcommittee, given the importance of helping increase mobility for Americans seeking good jobs, I would urge my colleagues to fund it above and beyond the traditional formula and discretionary grant programs, for which there is already a great need for funds. My legislation also includes several technical program changes that will benefit transit systems of all sizes. My bill would allow the use of capital grants for maintenance of capital assets, such as buses, subways, which is currently not allowed. It would allow the smallest urban and rural transit systems complete flexibility between use of capital and operating assistance for various needs. It would also allow transit systems that sell capital assets--bought in part with Federal funds--to keep the proceeds and reinvest in new capital assets, rather than returning some small share of the proceeds to the Federal Transit Administration. This is intended to stimulate acquisitions of new equipment and vehicles by such systems. In conclusion, I urge my colleagues to consider supporting this authorizing legislation, which would spend out funds accumlating in the mass transit account of the highway trust fund, subject to the appropriations process and not in a manner that increases the deficit. I hope that this bill will stimulate debate in the Senate on the need to increase our commitment to mass transit and I look forward to the opportunity to work with the Banking Committee and the Appropriations Committee in the coming months. I ask unanimous consent to include in the Record a brief summary of the bill and four letters in support of the Mass Transit Amendments Act of 1997 from Mr. William W. Millar, president of the American Public Transit Association, Mr. Armando V. Greco of the Lehigh and Northampton Transportation Authority, Mr. Paul Skoutelas, executive director of the Port Authority of Allegheny County, and Mr. Sonny Hall, international president of the Transport Workers Union of America.

Mr. SPECTER

Mr. SPECTER. Mr. President, I have sought recognition to introduce legislation that would reauthorize and expand upon existing Federal mass transit programs. My legislation, the Mass Transit Amendments Act of 1997, is intended to lay the groundwork for the Senate's consideration of mass transit legislation in the context of reauthorizing the 1991 Intermodal Surface Transportation Efficiency Act [ISTEA]. Substantial increases in Federal spending on mass transit are warranted, notwithstanding current budget constraints, because a greater commitment to public transportation is in the national interest. I would note, however, that this legislation is an authorization bill which does not increase the deficit; funds authorized to be spent out of the mass transit account of the highway trust fund would still be subject to the annual appropriations process, which is subject to the discretionary spending caps set in the budget resolution and the 602(b) allocation process. Transit should not be viewed as a partisan issue or a regional issue. This bill recognizes the valuable role transit plays in reducing our energy dependence, protecting our environment, reducing gridlock, and providing access to jobs, schools, and health care facilities for millions of Americans in urban and rural areas throughout the Nation. In particular, I urge my colleagues to review my proposed reverse commute pilot program, which would authorize $250 million annually in new grants targeted at improving access to employment for residents in economically distressed urban areas and rural communities. This bill is intended to encourage the Banking Committee, led by Chairman Alfonse D'Amato and Senator Paul Sarbanes, to report to the Senate legislation which will preserve much of the ISTEA transit program but at increased funding levels which reflect the importance of mass transit to our economy, quality of life, and environment. I look forward to working with Senator D'Amato, Senator Sarbanes, and others on the Banking Committee and Appropriations Committee who want to improve the Nation's transit systems through the ISTEA reauthorization process. This legislation takes into account the transit industry consensus proposal put forth by the American Public Transit Association (APTA), which represents transit systems, large and small, in all 50 States. I am pleased to note that APTA's new president is Bill Millar, whom I had the pleasure of working with for a number of years when he was the executive director of the Port Authority of Allegheny County. In preparation for the ISTEA reauthorization process and the annual appropriations process, I have met with many individuals in an effort to learn more about the needs of transit systems, the towns and cities in which they operate, and the riders they are trying to serve. In recent months, I have discussed strategies to increase transit funding with Gov. Tom Ridge, Senator Rick Santorum, and Chairman Bud Shuster. In addition, I have visited with Jack Leary, the general manager of the Southeastern Pennsylvania Transportation Authority (SEPTA), Mayor Tom McGroarty of Wilkes-Barre, and representatives of the Pennsylvania Public Transportation Association. I have also met with transit system officials during my regular visits to Pennsylvania's 67 counties. I am particularly pleased to be introducing this bill with my distinguished colleague from Pennsylvania, Rick Santorum, who has joined with me regularly to increase support for public transportation, such as when we unsuccessfully offered an amendment to the fiscal year 1996 Transportation appropriations bill to restore $40 million in Federal operating assistance. Both Senator Santorum and Gov. Tom Ridge recognize the vital role mass transit plays in Pennsylvania and have worked with me to maximize the Federal resources available to urban and rural transit systems in our State. I am also pleased that Senator Frank Lautenberg has joined in this bipartisan effort. For two years, Senator Lautenberg has joined me in co-chairing an informal Senate transit coalition, which has served as an information clearinghouse for Senate transit supporters and their staffs and which will play an even greater role, I hope, during the reauthorization process. For some time, I have addressed an ongoing threat to our Nation's security and prosperity, a threat with dual roots--in the precarious Middle East and right here at home. As I stated in a speech on the Senate floor on January 30, 1997, I am very concerned by our nation's increased reliance on potentially unstable foreign sources of oil and believe it is critical that during the 105th Congress, we focus on increasing energy conservation. I have been troubled that United States imports of foreign oil continue to increase from the current 50-percent level, with 20 percent of our purchases coming from the Arab countries of the Organization of Petroleum Exporting Countries [OPEC]. According to the American Petroleum Institute, we import more than 9 million barrels per day, with a 6-percent increase in 1996 alone. This is a huge jump from the 6 million barrels imported per day in 1973. Further, if these trends continue, analysts say in ten years we will look overseas for two- thirds of our energy needs. In part because of the ready availability of less expensive sources of foreign oil, it has not been cost-effective for U.S. energy companies to increase domestic production. Further, the effectiveness of the strategic petroleum reserve has dwindled because it only holds an amount comparable to 75 days of foreign imports, a situation that was not helped by the Clinton administration's decision last year to sell off approximately 25 million barrels of petroleum from the reserve to generate revenues. The timing for selling our reserves was less than prudent, particularly considering the state of affairs in the Middle East today. Saudi Arabia, in particular, poses unique cause for concern. If a hostile nation seized Saudi oil wells, the largest reserve in the world, the American economy and world markets could tumble. The deplorable June 25, 1996, terrorist attack at the Khobar Towers facility in Dharhan, which resulted in the murders of 19 airmen and the wounding of more than 400 United States personnel, also gives cause for concern because there is a strong possibility of links to internal domestic struggles in Saudi Arabia. Pressure is mounting from politically activist and conservative Islamic movements to undermine the ruling monarchy, who are viewed by some to be too liberal and western. If American access to Persian Gulf oil cannot be guaranteed, then the United States must reduce its dependence on foreign oil. While reducing our dependence on foreign oil is a difficult task, we can achieve meaningful reductions in energy consumption by promoting the use of public transportation. On the significant link between energy consumption and our transportation infrastructure, a Department of Transportation study of the 50 largest urban areas in the United States suggests that nearly 4 billion gallons of gasoline a year are wasted due to traffic congestion--approximately 94 million barrels of oil. There is much at stake, for the annual economic loss to businesses in the United States caused by traffic congestion is estimated at $40 billion by the Federal Transit Administration. Mass transit has developed to include traditional bus and subway lines, commuter rail, cable cars, monorails, water taxis, and several other modes of shared transportation. Public transportation is a lifeline for millions of Americans and deserves substantial funding for that reason alone. However, it deserves even greater funding when one considers that public transportation saves 1.5 billion gallons of fuel consumption annually in the United States and that each commuter who switches from driving alone to using public transportation saves 200 gallons of gasoline per year, according to government and private studies. Transit also does much to protect our environment. For example, on May 12, I visited the site of the proposed Frankford Intermodal Center in Philadelphia, which will be built on the site of the existing Bridge-Pratt terminal. At present, the terminal serves 40,000 El passengers daily, translating into 17,600 fewer cars on the road each day and mitigating the release of 16,500 pounds of pollutants into the city's air. The new facility is expected to attract new ridership, taking more cars off the streets and reducing pollution even further. But, without increases in transit capital assistance programs, projects such as the Frankford Center will be difficult to get off the drawing boards. There are ample other reasons to increase our commitment to transit funding. In our States, citizens and communities depend on good public transportation for mobility, access to jobs, environmental control, and economic stability. Public transportation lets the elderly visit their health care providers, shops, or friends. In rural areas, buses are essential to reduce isolation and ensure economic development. Also, children use public transportation to go to school. Without affordable mass transit, people in America's inner cities can't get to work. Under the welfare reform law enacted last year, there are expectations that most individuals receiving welfare benefits will find gainful employment. If they can't afford to get to work, or bus routes are cut, we are just making it that much harder for them to get off welfare. It should also be noted that millions of Americans have jobs in the transit industry, operating and maintaining buses and subways, manufacturing vehicles, and constructing new facilities. I am troubled that some have proposed freezing Federal transit spending around $4.4 billion. Transit systems depend to a great degree on Federal assistance in order to remain viable. A survey by my staff of 18 Pennsylvania transit operators shows that they receive an average of 26.7 percent of their total operating and capital funding from the Federal Transit Administration. In addition, SEPTA receives 15 percent of its overall funding from the Federal Government--55 percent of its capital funds--and the Port Authority of Allegheny County receives 32.9 percent from FTA. Reductions in Federal operating and capital support cannot necessarily be made up by local sources. Further, if the systems must cut routes, increase fares, and let their facilities fall into disrepair, they will lose the critical mass of riders needed to sustain operation. The Department of Transportation has calculated that $13 billion in annual transit capital spending is needed just to preserve current conditions--$7 billion more than current capital expenditures-- demonstrating the great need to increase, rather than freeze, Federal support. Responding to this need, my legislation includes several provisions to strengthen our transit systems and enable them to respond to our society's growing need for efficient and affordable public transportation. First, the bill reauthorizes transit programs for 5 years at a total of $34.4 billion through fiscal year 2002. For fiscal year 1997, total transit appropriations are $4.3 billion. Under my bill, the fiscal year 1998 authorization would be $6.5 billion and this figure would be adjusted up for inflation through fiscal year 2002. The authorization is based on calculations of available gasoline tax receipts in the mass transit account of the highway trust fund, considering past surpluses and the additional revenue stream that would be created by diverting a portion of the 4.3 cent per gallon gas tax increase from 1993 into this account. While the $6.5 billion figure may seem substantial to some, I would note that Congress enacted in ISTEA in 1991 a $7.45 billion authorization for fiscal year 1997 in recognition of the importance of investing in public transportation. We have been remiss in not meeting the ISTEA authorization levels. We must do better under its successor legislation. Under my proposal, discretionary capital grants for new starts, rail modernization, bus acquisitions, and bus facility construction would rise from the current $1.9 billion to $2.5 billion in fiscal year 1998. Formula capital grants would rise from current $2.2 billion to $3.5 billion in fiscal year 1998, meaning more funds for urbanized areas, rural areas, and elderly and disabled program needs. My legislation also preserves operating assistance within the formula program for all areas, unlike pending proposals to eliminate it in fiscal year 1998. The bill's truth in taxation provision redistributes the 4.3 cent per gallon gasoline tax which is currently going to deficit reduction in the following manner: 0.76 cents to the mass transit account of highway trust fund, 0.5 cents to a new intercity passenger rail trust fund that would serve as a dedicated source of revenue for Amtrak and is identical to the legislation introduced by Senator Roth (S. 436), and the remaining 3.04 cents to the highway trust fund. I have long argued that gas tax receipts should be used for the transportation infrastructure purposes for which the tax was enacted and that to do otherwise is comparable to the crime of fraudulent conversion, which I used to prosecute as District Attorney in Philadelphia. When people pay Federal taxes at the gas station, they are under the impression that their funds will be used to improve highways and roads and other forms of transportation infrastructure. Accordingly, it is time to redirect the 1993 gas tax increase to its traditional purposes. As I noted earlier, a new proposal for a reverse commute pilot program is also included in my bill. In order to stimulate economic development and help individuals in both urban and rural areas obtain meaningful employment and job training, the bill authorizes a new $250 million per year discretionary grant program for the Secretary of Transportation to provide funds to States, local governments, and transit systems for pilot projects providing access to suburban jobs and job training to residents of distressed urban areas with a population of over 50,000 and for pilot projects involving access to employment in rural areas as well. Funding uses could include, but are not limited to, grants to employers to purchase/lease a van or bus dedicated to shuttling employees from inner cities to suburban workplaces. Grants could also fund additional reverse commute bus routes or commuter rail operations. Such grants are intended to serve as seed money that will generate self-sustaining commute options for years to come. 954 distressed urban areas currently meet the definition contained in the bill. This program would not come at the expense of transit core formula and discretionary programs. The reverse commute pilot program would be a separate program and as a member of the Transportation Appropriations Subcommittee, given the importance of helping increase mobility for Americans seeking good jobs, I would urge my colleagues to fund it above and beyond the traditional formula and discretionary grant programs, for which there is already a great need for funds. My legislation also includes several technical program changes that will benefit transit systems of all sizes. My bill would allow the use of capital grants for maintenance of capital assets, such as buses, subways, which is currently not allowed. It would allow the smallest urban and rural transit systems complete flexibility between use of capital and operating assistance for various needs. It would also allow transit systems that sell capital assets--bought in part with Federal funds--to keep the proceeds and reinvest in new capital assets, rather than returning some small share of the proceeds to the Federal Transit Administration. This is intended to stimulate acquisitions of new equipment and vehicles by such systems. In conclusion, I urge my colleagues to consider supporting this authorizing legislation, which would spend out funds accumlating in the mass transit account of the highway trust fund, subject to the appropriations process and not in a manner that increases the deficit. I hope that this bill will stimulate debate in the Senate on the need to increase our commitment to mass transit and I look forward to the opportunity to work with the Banking Committee and the Appropriations Committee in the coming months. I ask unanimous consent to include in the Record a brief summary of the bill and four letters in support of the Mass Transit Amendments Act of 1997 from Mr. William W. Millar, president of the American Public Transit Association, Mr. Armando V. Greco of the Lehigh and Northampton Transportation Authority, Mr. Paul Skoutelas, executive director of the Port Authority of Allegheny County, and Mr. Sonny Hall, international president of the Transport Workers Union of America.

Mr. SPECTER

Mr. SPECTER. Mr. President, I am voting against the amendments offered by Senator Feinstein and Senator Daschle because I believe those amendments are so broad as to negate the purpose of the bill. In my judgment, as detailed below, once the child is partially out of the mother's womb, it is no longer abortion. It is infanticide. As a legal matter, infanticide would be justified only by analogy to self-defense to save another life--the life of the mother. That legal conclusion is based on the judgment that infanticide is not warranted for the lesser values of averting ``serious adverse health consequences to the woman''--Senator Feinstein's amendment--or avoiding ``grievious injury to her physical health''--Senator Daschle's amendment. I adhere to the fuller statement of my views set forth in my floor statement of September 26, 1996: This is among the most difficult of the 6,003 votes I have cast in the Senate because it involves a decision of life and death on the line between when a woman may choose abortion and what constitutes infanticide. In my legal judgment, the issue is not over a woman's right to chose within the constitutional context of Roe versus Wade or Planned Parenthood versus Casey. If it were, Congress could not legislate. Congress is neither competent to micromanage doctors' decisions nor constitutionally permitted to legislate where the life or health of the mother is involved in an abortion. In my legal judgment, the medical act or acts of commission or omission in interfering with, or not facilitating the completion of a live birth after a child is partially out of the mother's womb constitute infanticide. The line of the law is drawn, in my legal judgment, when the child is partially out of the womb of the mother. It is no longer abortion; it is infanticide. This vote does not affect my basic views on the pro-choice/ pro-life issue. While I am personally opposed to abortion, I do not believe it can be controlled by the Government. It is a matter for women and families with guidance from ministers, priests, and rabbis. If partial-birth abortions are banned, women will retain the right to choose during most of pregnancy and doctors will retain the right to act to save the life of the mother.

Mr. SPECTER

Mr. SPECTER. Mr. President, I am pleased that the supplemental appropriations bill will include an amendment that I introduced to assist our Nation's dairy farmers. The amendment, which was cosponsored by Senators Santorum, Feingold, and Kohl, would require the Secretary of Agriculture to collect and disseminate statistically reliable information from milk manufacturing plants on prices received for bulk cheese and would require the Secretary to report to Congress on the rate of reporting compliance. Dairy prices set an all-time high in 1996, with an average price of $13.38 per hundredweight for the year. The price reached its peak in September at $15.37 per hundredweight, then dropped to $14.13 per hundredweight in October. The market experienced its largest drop in history during November, falling to $11.61 per hundredweight, which represents a 26-percent decline. During this same period, the cost of dairy production reached a record high due to a 30- to 50-percent increase in grain costs. On November 22, 1996, I joined with 19 of my Senate and House colleagues in writing to Agriculture Secretary Glickman, urging him to take action to help raise dairy prices. Secretary Glickman responded on January 7, 1997, by announcing several short-term actions to stabilize milk prices. While these actions did have a small positive effect in increasing dairy prices, they did not provide adequate relief to our Nation's dairy farmers. In order to hear the problems that dairy farmers are facing first hand, I asked Secretary Glickman to accompany me to northeastern Pennsylvania, which he did, on February 10. We met a crowd of approximately 500 to 750 angry farmers who complained about the precipitous drop in the price of milk. During the course of my analysis of the pricing problem, I had found that the price of milk depends on a number of factors, one of which is the price of cheese. For every 10 cents the price of cheese is raised, the price of milk would be raised by $1 per hundredweight. Then I found that the price of cheese was determined by the National Cheese Exchange in Green Bay, WI. At least according to a survey made by the University of Wisconsin, there was an issue as to whether the price of cheese established by the Green Bay exchange was accurate. The authors of the report used a term as tough as manipulation. Whether that is so or not, there was a real question as to whether that price was accurate. Therefore, 3 days after the hearing at Keystone College, I introduced a sense-of-the-Senate resolution with Senators Santorum, Feingold, Kohl, Jeffords, Leahy, Wellstone, Snowe, Collins, and Grams. The resolution, which passed by a vote of 83 to 15, stated that the Secretary of Agriculture should consider acting immediately to replace the National Cheese Exchange as a factor to be considered in setting the basic formula price for dairy. In my discussions with Secretary Glickman, I found he had the power to raise the price of milk unilaterally by establishing a different price of cheese. Therefore, on March 10, I wrote to Secretary Glickman and urged him to take immediate action to establish a price floor at $13.50/cwt on a temporary, emergency, interim basis until he completes action on delinking the National Cheese Exchange from the basic formula price. This subject was aired during the course a special hearing before the appropriations subcommittee on March 13. At that time, Secretary Glickman said that they had ascertained the identity of 118 people or entities who had cheese transactions that could establish a different price of cheese. He told me they had written to the 118 and were having problems getting responses. I suggested it might be faster to telephone those people. Secretary Glickman provided my staff with the list of people, and we telephoned them and found, after reaching approximately half of them, that the price of cheese was, in fact, 16 cents higher by those individuals than otherwise. On March 19, I again wrote Secretary Glickman and informed him of the results of my staff's survey, explaining that there is a $.164 difference in the price of cheese and the price from the National Cheese Exchange. This translates to a $1.64 per hundredweight addition to the price of milk. Moreover, on April 17, I introduced two pieces of legislation to revise our laws so that they better reflect current conditions and provide a fair market for our Nation's dedicated and hard-working farmers. The legislation goes to two points. One is to amend the Agriculture Market Transition Act to require the Secretary to use the price of feed grains and other cash expenses in the dairy industry as factors that are used to determine the basic formula for the price of milk and other milk prices regulated by the Secretary. Simply stated, the Government should use what it costs for production to establish the price of milk, so that if farmers are caught with rising prices of feed and other rising costs of production, they can have those rising costs reflected in the cost of milk. The second piece of legislation would require the Secretary of Agriculture to collect and disseminate statistically reliable information from milk manufacturing plants on prices received for bulk cheese and provide the Secretary with the authority to require reporting by such manufacturing plants throughout the United States on the prices of cheese, butter, and nonfat dry milk. On Tuesday, May 6, 1997, the Department of Agriculture announced that they were replacing the National Cheese Exchange in Green Bay, WI with a survey of cheddar cheese manufacturers in the United States in order to determine the price of cheese for use in setting the basic formula price for dairy. Currently, the Department of Agriculture is relying on the voluntary compliance of cheese manufacturers to obtain information for their newly announced survey. My amendment requires the Secretary to report to Congress 150 days after the date of enactment of this bill the rate of reporting compliance by cheese manufacturers. The amendment further allows the Secretary to submit legislative recommendations to improve the rate of reporting compliance. The amendment also protects the pricing information provided to the Secretary of Agriculture. This information shall be kept confidential, and shall be used only to report general industry price figures which do not identify the information provided by any individual company. This amendment takes a significant step toward ensuring that our Nation's dairy farmers receive a fair price for their milk. However, we still have much work ahead of us as the Department of Agriculture and Congress work together to reform the entire milk pricing system. I will continue to work in this area to ensure that the voices of dairy farmers in Pennsylvania and throughout the Nation are heard, and to ensure that any change in Federal dairy policy is fair and provides the necessary support for our Nation's milk industry.

Mr. SPECTER

Mr. SPECTER. I thank my distinguished colleague from Vermont for yielding me time. I have sought recognition to support the nomination of Ms. Alexis M. Herman for Secretary of Labor, and I am glad to see we are finally moving to the confirmation process here because we need a Secretary of Labor in place to move ahead on the budget process and the appropriations process. I serve as chairman of the appropriations subcommittee which has jurisdiction over the Department of Labor. It has an $11 billion budget, and obviously we have not been able to hear from the Secretary of Labor so far because we have not had a Secretary of Labor. When Ms. Herman's status was held up early on, I met with her and had a long talk with her back in early February. I found that she had a good academic background and had a good work record. Some questions had been raised on a number of items, but it was my sense at that time that she was entitled to a hearing by the Labor Committee. I am delighted that Senator Jeffords and the committee have held that hearing and have reported her nomination out favorably so that we are now in a position to move ahead and to confirm her today. It is my sense that she will receive an overwhelming vote of support, perhaps even a unanimous vote. That remains to be seen. Apparently she will not receive a unanimous vote, from a signal from the Presiding Officer, and that is within the discretion of every Senator, to vote as he or she sees fit. I do express a concern about the nexus or the linkage of Ms. Herman to the Executive order and to other collateral matters. I have been around here long enough to understand that that is not an unusual proceeding, but it is my hope that we can decide these matters on the merits one by one. But whatever one's position might be in that connection, we at least are reaching the point where we will have a vote at 5 o'clock today on Alexis Herman to see whether or not, up or down, she is qualified, in the view of the Senate, to be the next Secretary of Labor. I might say that there is considerable concern about the treatment of Ms. Herman in my home State of Pennsylvania. We had a remarkable event over last Sunday, Monday, and Tuesday, April 27, 28, and 29, in Philadelphia on the volunteer summit. We had four Presidents--quite an impressive showing. Somebody in the holding room said, ``Mr. President'' and everyone turned his head. Some who were not present turned their head, including Vice President Gore and maybe some others. But there was another summit, a citizen summit some blocks away in a square in Philadelphia--Philadelphia is famous for its squares--and a number of people who appeared at the Presidents' volunteer summit also appeared at the citizen summit. Mayor Rendell, who presided over the summit for Philadelphia and did an excellent job, appeared in both places as did Rev. Jesse Jackson, Congressman Fattah, and I as well. When I was at the citizen summit there was a lot of concern as to what was going to happen to Ms. Alexis Herman in the line of fair play, whether she was going to be treated fairly and appropriately. So I am glad to see our process has worked. I think Ms. Herman is qualified to be Secretary of Labor based on her academic record, her work experience, her general demeanor and general qualifications, and the appropriate committee has taken up the issues which were raised as question marks and has answered them to the satisfaction of the committee. I look forward to voting for her and look forward to her confirmation, even if it is not unanimous, but I make this prediction, that it will probably be in the 90's. I thank the Chair and yield the floor. Mr. WELLSTONE addressed the Chair.

Mr. SPECTER

Mr. SPECTER. I thank my colleague from Delaware for yielding the time. Mr. President, on the pending issue, having studied the conditions as to what is sought here by way of preliminary action by Russia before ratification should occur by the United States, it is my strong view that we really ought not to play Gaston and Alphonse with the Russians to require them, as article C does, for Russia to deposit their ratification before the United States ratifies. I think that that sets up a condition which is just not reasonable. If they took the same position, as Alphonse and Gaston, no one would ever enter the door. With respect to the other conditions which are set forth here, all of the substantive matters would be superseded by the Chemical Weapons Convention, that the requirements set forth in this treaty would impose more obligations on Russia than are contained in these instruments. And under instrument A, where it is talked about, an agreement between the United States and Russia, that was never formalized into an agreement because all terms were never agreed to by the parties, so that this is not a condition which adds any measure of safety to the United States since all of the requirements imposed on Russia in these collateral arrangements would be superseded and more stringent requirements would be added by the Chemical Weapons Convention. Mr. President, I compliment my colleagues on both sides for what I believe has been a very, very constructive debate in the highest tradition of the U.S. Senate. I compliment the distinguished chairman of this committee, Senator Helms, for his determination. And it is noted that some 28 of the 33 conditions have been agreed to. Even beyond those conditions, the President today, in writing to the distinguished majority leader, has articulated further safeguards which would be present so that in sum total we have an agreement which, while not perfect, advances the interest of arms control. In my capacity as the chairman of the Senate Veterans Committee, I have chaired hearings on the issue of the gulf war syndrome where there is evidence that our veterans in the gulf were damaged by chemical substances, not conclusively, but that is the indication, and that had such a treaty been in effect, again, not conclusive, but a strong indication, that our troops might have been saved to some extent. And certainly if we intend to take a firm stand on a moral plane, the United States has to be a part of this covenant to try to reduce chemical weapons. And this treaty goes a substantial way. And the search and seizure provisions are adequate to protect constitutional rights, a field I have had substantial experience with as a district attorney, so that there will have to be a criminal standard of probable cause. Taken as a whole, with the additions by the President today--even though it had been made a part of the Record, I ask unanimous consent that, following my comments, the President's letter to Senator Lott be printed in the Record.

Mr. SPECTER. All factors considered, this is a treaty which ought to receive Senate ratification. Exhibit 1 The White House, Washington, April 24, 1997. Hon. Trent Lott, Majority Leader, U.S. Senate, Washington, DC. Dear Mr. Leader: During Senate ratification proceedings on the Chemical Weapons Convention (CWC), concerns have been raised over Article X, which provides for certain types of defensive assistance in the event that a State that has joined the treaty and renounced any chemical weapons (CW) capability is threatened with or suffers a chemical weapons attack, and Article XI, which encourages free trade in non- prohibited chemicals among states that adhere to the CWC. Some have suggested that these Articles could result in the CWC promoting, rather than stemming, CW proliferation despite States Parties' general obligation under Article I ``never under any circumstances . . . to assist, encourage or induce, in any way, anyone to engage in any activity prohibited to a State Party under this Convention.'' To respond to these concerns, the Administration has worked closely with the Senate to develop conditions relating to both Articles that have now been incorporated in the resolution of ratification (Agreed Conditions #7 and 15). These two conditions would substantially reinforce and strengthen the treaty by: Prohibiting the United States under Article X from (a) providing the CWC organization with funds that could be used for chemical weapons defense assistance to other States Parties; and (b) giving certain states that might join the treaty any assistance other than medical antidotes and treatment. Requiring the President to (a) certify that the CWC will not weaken the export controls established by the Australia Group and that each member of the Group intends to maintain such controls; (b) block any attempt within the Group to adopt a contrary position; and (c) report annually as to whether Australia Group controls remain effective. With respect to the latter condition, I am pleased to inform you that we have now received official confirmations from the highest diplomatic levels in each of the 30 Australia Group nations that they agree that the Group's export control and nonproliferation measures are compatible with the CWC and that they are committed to maintain such controls in the future. While supporting these guarantees and safeguards, you expressed the concern on Sunday that nations might still try to use Article X or XI to take proscribed actions that could undercut U.S. national security interests, notwithstanding the best efforts of U.S. diplomacy to prevent such actions. I am, therefore, prepared to provide the following specific assurance related to these two Articles: In the event that a State Party or States Parties to the Convention act contrary to the obligations under Article I by: (A) using Article X to justify providing defensive CW equipment, material or information to another State Party that could result in U.S. chemical protective equipment being compromised so that U.S. warfighting capabilities in a CW environment are significantly degraded; (B) using Article XI to justify chemical transfers that would make it impossible for me to make the annual certification that the Australia Group remains a viable and effective mechanism for controlling CW proliferation; or (C) carrying out transfers or exchanges under either Article X or XI which jeopardize U.S. national security by promoting CW proliferation: I would, consistent with Article XVI of the CWC, regard such actions as extraordinary events that have jeopardized the supreme interests of the United States and therefore, in consultation with the Congress, be prepared to withdraw from the treaty. Sincerely, Bill Clinton.

Mr. SPECTER

Mr. SPECTER. Mr. President, I have sought recognition for the purpose of introducing legislation captioned the Minority and Women Capital Formation Act of 1997. I am introducing this legislation which is designed to be an economic stimulus to promote jobs and economic opportunity. Unquestionably, small minority and women-owned businesses can and must play an integral role in expanding our economy, but they cannot do so unless we are able to close the great capital gap facing these businesses. This bill, captioned the Minority and Women Capital Formation Act of 1997, would close this gap by providing targeted tax incentives for investors to invest equity capital in minority and women-owned small businesses, as well as venture capital funds which are dedicated to investing in minority and/or women-owned businesses. As long as the Internal Revenue Code continues tax incentives to promote specified business activities, then I believe this legislation is warranted. If we were to adopt a flat or modified flat tax which I favor, and have proposed, then I would be willing to forgo the tax incentive because I believe sufficient additional capital would be available for the purpose without the specific incentive. Small businesses in general face limited access to capital. In many instances, this lack of access amounts to a failure of many such businesses to succeed. But unlike other small businesses owned by minorities or women which have traditionally faced greater barriers in addressing private capital for startups, these businesses have been unable to achieve such funding. Candidly, many of these barriers are founded in racism and sexism, two subjects we do not like to talk about but two subjects which are very important and really very pervasive in our society. While the United States has benefited from civil rights laws, we have not yet moved ahead on the business front to provide the kinds of capitalization which we need. The ``capital gap'' is a phrase adopted by the U.S. Commission on Minority Business Development. In its 1990 interim report, the Commission found that the availability of capital is probably the single most important variable affecting minority business. As stated by the Commission ``the problem is twofold: Lack of access to capital and credit and the need for development of alternatives to conventional financial instruments and intermediaries.'' In its 1992 final report, the Commission said: ``Without timely access to capital, you can't start or grow a business, particularly growth firms being weaned off solely Government business.'' In 1988, the House Committee on Small Business, in its report, New Economic Realties, The Rise of Women Entrepreneurs, also noted the barriers which women face in accessing capital and the need for the Federal Government to take into account alternative development financing institutions and eliminating or circumventing such barriers. Mr. President, this legislation is designed to focus our attention on critical elements of a national strategy for providing access to capital and credit from minorities and women in business. The bill provides investors, and others who invest equity, capital in a small minority or women-owned businesses or venture capital for minorities, African-Americans, Hispanics, et cetera, will have tax breaks of, first, the option to elect either a tax deduction or a tax credit subject to certain annual and lifetime caps and, second, a partial capital gains exclusion of limited deferral of the remaining capital gain if it is reinvested in another minority or women-owned small business. Mr. Robert Johnson, president of Black Entertainment Holdings, a minority-controlled enterprise publicly traded on the New York Stock Exchange, testified in 1992 before the Banking Committee on the availability of capital to minority businesses. He stated: ``The urgency of the problem requires more adventuresome kinds of policies. Policies that are designed to deal with a specific problem should be problem specific in their solution.'' Mr. President, I note that in the 1981 to 1990 timeframe, the venture capital resources increased from approximately $5.8 billion to some $36 billion but less than one-half of 1 percent of the capital raised by the majority venture capital industry was invested in minority- or women-operated businesses, which demonstrates the need for legislation of this type and incentives. I believe minority and women small business development is critical to urban revitalization, job creation, and long-term economic growth. No one denies the need for urban revitalization and job creation to facilitate a sustained economic recovery. And no one should deny the role that women and minority business owners must have in this effort. During the 102d Congress as a member of the Banking Committee, I heard many firsthand accounts concerning the lack of access to capital for minority- and women-owned businesses. In some cases the cause is outright discrimination; in other instances investor or lender ignorance of the marketplace; in other fear. Whatever the cause, we are facing an emergency that requires Congress' and the President's immediate attention. To avoid abuse, the bill also imposes minimum holding periods of 5 years for such investments and contains recapture provisions for instances where the minority- or women-owned business or venture capital fund fails to remain qualified within the meaning of the legislation. Admittedly, my proposal may not be inexpensive. To address the cost issue, perhaps the bill should be limited to a tax credit, or perhaps to the capital gains benefit. In any event, I am willing to work with the estimators, my colleagues, and others to modify my bill as necessary to achieve the ultimate goal of eliminating the capital gap confronting minority- and women-owned businesses. Some may question the use of tax policy in the manner I am proposing. However, just as we use tax policy to foster development of housing, jobs, and research and development, so too should we utilize tax policy to foster economic empowerment of minority and women business owners who will provide jobs and generate tax revenues. Stated differently, this bill is really a Federal investment strategy for such businesses. The proposed tax expenditures represent seed capital to help develop greater self-sufficiency in the long term. In this regard, the bill recognizes that capital targeted to women and minority business is an essential, but often overlooked component of economic development. In my judgment, it is a very creative tool to spur business growth and job creation, particularly in distressed communities. Another very important feature of the bill is the provision of similar tax incentives for those who invest in venture capital funds dedicated to investing in minority- and/or women-owned businesses. Prior to 1970, the Federal Government had no dedicated sources of financing for disadvantaged businesses. In 1971, however, Congress authorized the creation of the specialized small business investment company [SSBIC] program administered by the Small Business Administration. For the last 20 years SSBIC's have been the primary source of capital for disadvantaged businesses. In the face of tremendous obstacles SSBIC's and the minority venture capital industry have made a real difference. For example, according to the National Association of Investment Companies [NAIC], over the last decade they have raised and invested nearly $1 billion in disadvantaged businesses. In sum, Mr. President, there remains a need to facilitate the development of minority- and women-owned small business. We cannot allow the capital gap to grow. If we are to remain a productive and competitive nation, we must eliminate it. Moreover, there is no substitute for equity capital. Federal policies should not focus exclusively on debt financing. With targeted tax incentives, such as those that I am proposing, we can cause greater investment of equity in businesses that traditionally have not been able to access it to any significant degree. I believe this capital formation bill will take us a long way toward achieving this goal. I, therefore, encourage my colleagues to join my efforts to enact this much needed legislation. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. SPECTER

Mr. SPECTER. Mr. President, I thank my colleague from Delaware for yielding me this time. I have sought recognition to voice my support for the pending treaty and to give my reasons. Long before the current debate on chemical weapons, in my college thesis, which I wrote back at the University of Pennsylvania in 1951, on United States-Soviet relations, I was convinced by Prof. Hans Morganthau's dictum that ``the objectives of foreign policy must be defined in terms of the national interest and must be supported with adequate power.'' As a U.S. Senator, I have long advocated a strong national defense and have worked to shape a comprehensive arms control agenda for the United States as one arrow in our overall defense quiver. Ten years ago, in 1987, in Geneva, Switzerland, I was an observer to the U.S.-USSR nuclear disarmament talks. That year I debated extensively with many of my colleagues in the Chamber the need for a broad interpretation of the Anti-Ballistic Missile Treaty, ABM. Many of those whom I opposed at that time I now side with on the current issue. I still believe that the approach for a broad interpretation to give the United States additional power, an approach advocated by President Reagan, was necessary and still remains necessary to provide security for our Nation. From my experience on the Senate Defense Appropriations Subcommittee, I have observed that strength is the best guarantor of peace and that prudent arms control can provide an important basis for such strength. From my work as chairman of the Senate Intelligence Committee, I have seen the wisdom of President Reagan's view that verification not trust is the realistic basis for arms control. Verification is an important issue in this treaty. It is true that this treaty does not guarantee verification and no treaty has or can guarantee absolute certainty on verification. However, ratifying this treaty gives us far greater opportunity to verify through inspections, data collection, and establishing a norm for chemical arms reduction. Mr. President, I adhere to my position on the need to secure a strong defense for America. It is my belief that the Chemical Weapons Convention will complement the existing components of our foreign policy which includes our arms control treaties. As we continue to work to protect our troops abroad and our citizens at home from the threat of weapons of mass destruction, arms control is an important ingredient of a sound foreign policy. Critics of the Chemical Weapons Convention say the treaty provides a false sense of security. On the contrary, no Senator has ever suggested that a single treaty standing alone would adequately deter aggressor nations. The Chemical Weapons Convention is not perfect but we can build on it as a parameter for dialog. Ratification certainly does not mean that we are going to rest on our laurels. The United States did not stop moving forward with strengthening our national defense while we negotiated arms control agreements with the Russians such as the ABM Treaty, SALT I, and SALT II. In this combined approach we were successful. The nuclear threat today is dramatically lower than it was a decade or two decades ago, and arms control agreements are a critical part of that strategy. Similarly, we must not stop at mere ratification of the Chemical Weapons Convention in our quest to destroy existing and prevent the production of new chemical and biological weapons. One area of the treaty critics often point to as being particularly detrimental to the United States is the search and seizure provisions of the Chemical Weapons Convention which they claim is unconstitutional. This is a subject that I have worked on extensively since Mapp versus Ohio came down in 1961 imposing the burden on States not to admit evidence seized as a result of an unconstitutional search and seizure. At a time when I was an assistant district attorney in Philadelphia and later as district attorney of Philadelphia, I worked on these issues very, very extensively. Under this treaty, an international inspection team would be allowed to search a U.S. facility to determine whether or not a chemical agent is being diverted to use in noncompliance with the treaty. Similarly, that obligation, that inspection would be available for other nations. After careful review of the provisions of the treaty, I am personally confident that the language does not conflict with the fourth amendment of the U.S. Constitution but, rather, is in accord with that amendment. The language on search and seizure as negotiated by the administration and Members of the Senate states that in cases where the search is challenged, the U.S. Government will first obtain a criminal search warrant based upon probable cause. So that in any situation of challenge, the search will have to measure up to the tough criminal standard. In cases of routine inspection, the U.S. Government will obtain an administrative search warrant from a U.S. magistrate judge. Through the months preceding this debate, opponents have raised a number of issues. These include suggestions that the treaty plays into the hands of rogue nations like Libya and North Korea, that it facilitates the transfer of military chemical technology to aggressive countries and prohibits our troops from the use of riot control agents. There is now agreement on these issues among all the parties involved in negotiating the set of conditions now contained in the proposed resolution of ratification. The Chemical Weapons Convention will actually make it more difficult for rogue states to make chemical weapons. The treaty has prohibitions in place to prevent industrial espionage. Concerning riot control agents, the treaty sets sound guidelines on what agents may be used and when such agents may be used. As we debate the merits of the treaty and consider the outstanding amendments, I remind my colleagues of the importance of bipartisanship in foreign affairs. We have traditionally said that politics stop at the water's edge and bipartisanship in foreign affairs is of critical continuing importance. It is the role of Senators to shape a climate of bipartisan support for treaties of this magnitude. To work with the administration and our colleagues to craft an agreement that will serve the needs of the United States in both the long and short terms. Two of our noteworthy predecessors, giants in the Senate, one Republican and one Democrat, Senator Arthur Vandenberg and Senator Scoop Jackson exemplify how bipartisanship can work to the betterment of our country. Their willingness to look beyond the confines of partisan politics provides the model for us today as Republicans to support the ratification of the Chemical Weapons Convention. And I note, Mr. President, the statement today made by our former majority leader, Senator Robert Dole, in support of the treaty. There is another much more recent example of why ratification of the treaty falls outside traditional partisan politics and that is the potential use of chemical agents against U.S. troops. This is an issue about which I am all too familiar. As former chairman of the Senate Intelligence Committee and as the current chairman of the Veterans' Affairs Committee, I have chaired several hearings on gulf war syndrome. I have traveled extensively throughout Pennsylvania and have heard from gulf war veterans who have been unable to explain the cause of their illnesses. And many gulf war veterans across the Nation echo similar complaints. Believe me when I say that their suffering is very real. Last year, this issue was addressed in great detail at a joint hearing of the Senate Intelligence Committee and the Veterans' Affairs Committee. This year a number of hearings have been held both in Washington and across Pennsylvania. And more recently, a few days ago, on April 17, Gen. Colin Powell testified before the Veterans' Affairs Committee on this important matter. While we can still not verify the cause of these illnesses, there are indicators that American troops may have been exposed to chemical agents. During the course of the hearing with General Powell, I asked him what effect if any the Chemical Weapons Convention would have had on Iraq if the United States had ratified the treaty before the gulf war and the treaty would have been in effect. We will never know with certainty the answer to that question. Iraq is a rogue nation, and it is difficult to imagine them as signatories. But General Powell was quick to point out that the Chemical Weapons Convention works to strengthen America's hand. He noted, ``In the future, when we deal with rogue states or with signatory states, we will be speaking from the position not of unilateral American action, but with the support of most of the nations of the world.'' I suggest to my colleagues that it is a matter of considerable importance in protecting American troops from the ravages of chemical warfare, which the gulf war troops may have been exposed to. Now, we must ask ourselves, if we had this treaty in place beforehand, would we have at least averted or minimized the effects of chemical agents on our troops? We will never know the answer to this question with certainty, but we owe it to our Nation to reach out for every possible means of reducing the threat of chemical and biological weapons. United States ratification of the Chemical Weapons Convention, however, may certainly constrain the further development of chemical weapons by countries like Iraq. Mr. President, it is obviously impossible to craft a comprehensive treaty that meets the satisfaction of all people. I respect those who have spoken against the treaty. I disagree with them, but I respect the sincerity of their views. Yet, with the appropriate assurances given about some of the finer points of the treaty on objections which have been raised by opponents, most of which have been satisfied, on issues such as constitutional rights, we as a Nation, I submit, should take the moral high ground. We should ratify the treaty, or we will be categorized with the likes of Iraq and Libya. I am not advocating that we ratify the Chemical Weapons Convention instead of pursuing other forms of protection. But it is one important point of protection. The Chemical Weapons Convention is just one more tool for the United States as we work toward a more vigilant defense for our Nation. We have come a long way in making this treaty work for the best interests of the United States of America. I urge my colleagues in the Senate to vote to ratify this convention. (The remarks of Mr. Specter pertaining to the introduction of the legislation are located in today's Record under ``Statements on Introduced Bills and Joint Resolutions.'')

Mr. SPECTER

Mr. SPECTER. Mr. President, I have sought recognition for the purpose of introducing legislation captioned the Minority and Women Capital Formation Act of 1997. I am introducing this legislation which is designed to be an economic stimulus to promote jobs and economic opportunity. Unquestionably, small minority and women-owned businesses can and must play an integral role in expanding our economy, but they cannot do so unless we are able to close the great capital gap facing these businesses. This bill, captioned the Minority and Women Capital Formation Act of 1997, would close this gap by providing targeted tax incentives for investors to invest equity capital in minority and women-owned small businesses, as well as venture capital funds which are dedicated to investing in minority and/or women-owned businesses. As long as the Internal Revenue Code continues tax incentives to promote specified business activities, then I believe this legislation is warranted. If we were to adopt a flat or modified flat tax which I favor, and have proposed, then I would be willing to forgo the tax incentive because I believe sufficient additional capital would be available for the purpose without the specific incentive. Small businesses in general face limited access to capital. In many instances, this lack of access amounts to a failure of many such businesses to succeed. But unlike other small businesses owned by minorities or women which have traditionally faced greater barriers in addressing private capital for startups, these businesses have been unable to achieve such funding. Candidly, many of these barriers are founded in racism and sexism, two subjects we do not like to talk about but two subjects which are very important and really very pervasive in our society. While the United States has benefited from civil rights laws, we have not yet moved ahead on the business front to provide the kinds of capitalization which we need. The ``capital gap'' is a phrase adopted by the U.S. Commission on Minority Business Development. In its 1990 interim report, the Commission found that the availability of capital is probably the single most important variable affecting minority business. As stated by the Commission ``the problem is twofold: Lack of access to capital and credit and the need for development of alternatives to conventional financial instruments and intermediaries.'' In its 1992 final report, the Commission said: ``Without timely access to capital, you can't start or grow a business, particularly growth firms being weaned off solely Government business.'' In 1988, the House Committee on Small Business, in its report, New Economic Realties, The Rise of Women Entrepreneurs, also noted the barriers which women face in accessing capital and the need for the Federal Government to take into account alternative development financing institutions and eliminating or circumventing such barriers. Mr. President, this legislation is designed to focus our attention on critical elements of a national strategy for providing access to capital and credit from minorities and women in business. The bill provides investors, and others who invest equity, capital in a small minority or women-owned businesses or venture capital for minorities, African-Americans, Hispanics, et cetera, will have tax breaks of, first, the option to elect either a tax deduction or a tax credit subject to certain annual and lifetime caps and, second, a partial capital gains exclusion of limited deferral of the remaining capital gain if it is reinvested in another minority or women-owned small business. Mr. Robert Johnson, president of Black Entertainment Holdings, a minority-controlled enterprise publicly traded on the New York Stock Exchange, testified in 1992 before the Banking Committee on the availability of capital to minority businesses. He stated: ``The urgency of the problem requires more adventuresome kinds of policies. Policies that are designed to deal with a specific problem should be problem specific in their solution.'' Mr. President, I note that in the 1981 to 1990 timeframe, the venture capital resources increased from approximately $5.8 billion to some $36 billion but less than one-half of 1 percent of the capital raised by the majority venture capital industry was invested in minority- or women-operated businesses, which demonstrates the need for legislation of this type and incentives. I believe minority and women small business development is critical to urban revitalization, job creation, and long-term economic growth. No one denies the need for urban revitalization and job creation to facilitate a sustained economic recovery. And no one should deny the role that women and minority business owners must have in this effort. During the 102d Congress as a member of the Banking Committee, I heard many firsthand accounts concerning the lack of access to capital for minority- and women-owned businesses. In some cases the cause is outright discrimination; in other instances investor or lender ignorance of the marketplace; in other fear. Whatever the cause, we are facing an emergency that requires Congress' and the President's immediate attention. To avoid abuse, the bill also imposes minimum holding periods of 5 years for such investments and contains recapture provisions for instances where the minority- or women-owned business or venture capital fund fails to remain qualified within the meaning of the legislation. Admittedly, my proposal may not be inexpensive. To address the cost issue, perhaps the bill should be limited to a tax credit, or perhaps to the capital gains benefit. In any event, I am willing to work with the estimators, my colleagues, and others to modify my bill as necessary to achieve the ultimate goal of eliminating the capital gap confronting minority- and women-owned businesses. Some may question the use of tax policy in the manner I am proposing. However, just as we use tax policy to foster development of housing, jobs, and research and development, so too should we utilize tax policy to foster economic empowerment of minority and women business owners who will provide jobs and generate tax revenues. Stated differently, this bill is really a Federal investment strategy for such businesses. The proposed tax expenditures represent seed capital to help develop greater self-sufficiency in the long term. In this regard, the bill recognizes that capital targeted to women and minority business is an essential, but often overlooked component of economic development. In my judgment, it is a very creative tool to spur business growth and job creation, particularly in distressed communities. Another very important feature of the bill is the provision of similar tax incentives for those who invest in venture capital funds dedicated to investing in minority- and/or women-owned businesses. Prior to 1970, the Federal Government had no dedicated sources of financing for disadvantaged businesses. In 1971, however, Congress authorized the creation of the specialized small business investment company [SSBIC] program administered by the Small Business Administration. For the last 20 years SSBIC's have been the primary source of capital for disadvantaged businesses. In the face of tremendous obstacles SSBIC's and the minority venture capital industry have made a real difference. For example, according to the National Association of Investment Companies [NAIC], over the last decade they have raised and invested nearly $1 billion in disadvantaged businesses. In sum, Mr. President, there remains a need to facilitate the development of minority- and women-owned small business. We cannot allow the capital gap to grow. If we are to remain a productive and competitive nation, we must eliminate it. Moreover, there is no substitute for equity capital. Federal policies should not focus exclusively on debt financing. With targeted tax incentives, such as those that I am proposing, we can cause greater investment of equity in businesses that traditionally have not been able to access it to any significant degree. I believe this capital formation bill will take us a long way toward achieving this goal. I, therefore, encourage my colleagues to join my efforts to enact this much needed legislation. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. SPECTER

Mr. SPECTER. Mr. President, I have sought recognition to introduce two pieces of legislation which will respond to a very serious problem on the falling prices of milk which have occurred in Pennsylvania, especially in northeastern Pennsylvania, and across the country. In introducing this legislation, I am pleased to have a chance to address this issue in the presence of the distinguished Senator from Kansas, who was the chairman of the House Agriculture Committee, and is making quite an addition to the U.S. Senate. It is not inappropriate to note that Senator Roberts is from Kansas, as I am a native of Kansas. I was born in Wichita, grew up in Russell, and worked on a farm as a teenager and have some appreciation of the problems of the farmers. During my tenure in the U.S. Senate, I have been on the Agriculture Subcommittee of the Appropriations Committee. There are more people living in rural Pennsylvania than live in the rural part of any State in the Union. Mr. President, my colleague from Kansas, we have 2\1/2\ million people living in rural Pennsylvania. When I last looked, which is a while ago, there were not 2\1/2\ million people living in all of Kansas, let alone 2 million people--slightly reduced--when I moved into Pennsylvania. So I approach this issue with some due regard for the expert presiding over the U.S. Senate. Having discussed this issue with him before, I am not sure he agrees with me on all aspects. I am of the firm opinion that something needs to be done to help the milk farmers. I say that because the price of milk has fallen precipitously from almost $16 per hundredweight down to $11 per hundredweight. It has gone back up a little, but not a great deal. In responding to that problem, I asked the distinguished Secretary of Agriculture, Dan Glickman, also a Kansan, to accompany me to northeastern Pennsylvania, which he did, on February 10. We met a crowd of approximately 500 to 750 angry farmers who complained about the precipitous drop in the price of milk. During the course of my analysis of this pricing problem, I found that the price of milk depended upon a number of factors, one of which was the price of cheese. For every 10 cents the price of cheese was raised, the price of milk would be raised by $1 per hundredweight. Then I found that the price of cheese was determined by the National Cheese Exchange in Green Bay, WI. At least according to a survey made by the University of Wisconsin, there was an issue as to whether the price of cheese established by the Green Bay exchange was accurate or not. The authors of the report used a term as tough as manipulation. Whether that is so or not, there was a real question as to whether that price was accurate. Since this controversy has arisen--perhaps it brought the matter to a head, perhaps not; perhaps it would have happened anyway--it has been announced that the Green Bay exchange will close and will be replaced by a new commodity market on May 1. In any event, in my discussions with Secretary Glickman, I found he had the power to raise the price of milk unilaterally by establishing a different price of cheese. This subject was aired during the course of his testimony when he came before the appropriations subcommittee. It is a very good time to find a more-agreeable-than-usual Cabinet officer when a Cabinet officer comes in for the appropriations process for his Department's budget. During the course of that hearing, we could not explore fully the issue of the price of milk and the price of cheese, so our distinguished chairman, Senator Cochran, agreed to have a special hearing, which we had a couple of weeks later. At that time, Secretary Glickman said that they had ascertained the identity of 118 people or entities who had cheese transactions that could establish a different price of cheese. He told me they had written to the 118 and were having problems getting responses. I suggested it might be faster to telephone those people. Secretary Glickman provided my staff and me with the list of people, and we telephoned them and found, after reaching approximately half of them, that the price of cheese was, in fact, 16 cents higher by those individuals than otherwise. I have been pressing Secretary Glickman since. If he has C-SPAN2, or if he knows someone who has C-SPAN2 or if he talks to someone who has C-SPAN2, my staff has been exhorting his staff daily to act on it, and I am going to send him a fax letter before the day is up to try to get a determination on this issue, because I am on my way to northeastern Pennsylvania again next Monday on a routine trip to the Wilkes-Barre/ Scranton area. The Presiding Officer knows what that is like. There will be people who want answers to questions, and I shall answer with due diligence, which I think I have. I hope the Secretary of Agriculture will note this different price of cheese and act accordingly to raise the price of milk. The legislation which I am introducing today goes to two points. One is to amend the Agriculture Market Transition Act to require the Secretary to use the price of feed grains and other cash expenses in the dairy industry as factors that are used to determine the basic formula for the price of milk and other milk prices regulated by the Secretary. Simply stated, the Government should use what it costs for production to establish the price of milk, so that if the farmers are caught with rising prices of feed and other rising costs of production, they can have those rising costs reflected in the cost of milk. The second piece of legislation would require the Secretary of Agriculture to collect and disseminate statistically reliable information from milk manufacturing plants on prices received for bulk cheese and provide the Secretary with the authority to require reporting by such manufacturing plants throughout the United States on the prices for cheese, butter, and nonfat dry milk. Frankly, I am reluctant to impose this obligation anywhere, but I think it is a fair request to make since the Secretary told the Subcommittee on Agriculture of the Appropriations Committee that the Secretary could not get this information on a voluntary basis. People would not comply. My staff found that corroborated when we telephoned the individuals who had these transactions. Burdensome as it is, I think it is fair to give the Secretary the authority to require this reporting. Mr. President, I am authorized to say that the distinguished Senator from Wisconsin, Senator Feingold, wishes to cosponsor the piece of legislation requiring the information to be collected.

Mr. SPECTER. Mr. President, I ask unanimous consent that the full text of the bills be printed in the Record.

Mr. SPECTER

Mr. SPECTER. I thank the Chair. (The remarks of Mr. Specter pertaining to the introduction of S. 603 and S. 604 are located in today's Record under ``Statements on Introduced Bills and Joint Resolutions.'')

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

Mr. SPECTER. Mr. President, I ask unanimous consent that I may proceed in morning business for a period up to 7 minutes.

Mr. SPECTER

Mr. SPECTER. Mr. President, I ask unanimous consent that the full text of the bills be printed in the Record.

Mr. SPECTER. Mr. President, I have sought recognition to introduce two pieces of legislation which will respond to a very serious problem on the falling prices of milk which have occurred in Pennsylvania, especially in northeastern Pennsylvania, and across the country. In introducing this legislation, I am pleased to have a chance to address this issue in the presence of the distinguished Senator from Kansas, who was the chairman of the House Agriculture Committee, and is making quite an addition to the U.S. Senate. It is not inappropriate to note that Senator Roberts is from Kansas, as I am a native of Kansas. I was born in Wichita, grew up in Russell, and worked on a farm as a teenager and have some appreciation of the problems of the farmers. During my tenure in the U.S. Senate, I have been on the Agriculture Subcommittee of the Appropriations Committee. There are more people living in rural Pennsylvania than live in the rural part of any State in the Union. Mr. President, my colleague from Kansas, we have 2\1/2\ million people living in rural Pennsylvania. When I last looked, which is a while ago, there were not 2\1/2\ million people living in all of Kansas, let alone 2 million people--slightly reduced--when I moved into Pennsylvania. So I approach this issue with some due regard for the expert presiding over the U.S. Senate. Having discussed this issue with him before, I am not sure he agrees with me on all aspects. I am of the firm opinion that something needs to be done to help the milk farmers. I say that because the price of milk has fallen precipitously from almost $16 per hundredweight down to $11 per hundredweight. It has gone back up a little, but not a great deal. In responding to that problem, I asked the distinguished Secretary of Agriculture, Dan Glickman, also a Kansan, to accompany me to northeastern Pennsylvania, which he did, on February 10. We met a crowd of approximately 500 to 750 angry farmers who complained about the precipitous drop in the price of milk. During the course of my analysis of this pricing problem, I found that the price of milk depended upon a number of factors, one of which was the price of cheese. For every 10 cents the price of cheese was raised, the price of milk would be raised by $1 per hundredweight. Then I found that the price of cheese was determined by the National Cheese Exchange in Green Bay, WI. At least according to a survey made by the University of Wisconsin, there was an issue as to whether the price of cheese established by the Green Bay exchange was accurate or not. The authors of the report used a term as tough as manipulation. Whether that is so or not, there was a real question as to whether that price was accurate. Since this controversy has arisen--perhaps it brought the matter to a head, perhaps not; perhaps it would have happened anyway--it has been announced that the Green Bay exchange will close and will be replaced by a new commodity market on May 1. In any event, in my discussions with Secretary Glickman, I found he had the power to raise the price of milk unilaterally by establishing a different price of cheese. This subject was aired during the course of his testimony when he came before the appropriations subcommittee. It is a very good time to find a more-agreeable-than-usual Cabinet officer when a Cabinet officer comes in for the appropriations process for his Department's budget. During the course of that hearing, we could not explore fully the issue of the price of milk and the price of cheese, so our distinguished chairman, Senator Cochran, agreed to have a special hearing, which we had a couple of weeks later. At that time, Secretary Glickman said that they had ascertained the identity of 118 people or entities who had cheese transactions that could establish a different price of cheese. He told me they had written to the 118 and were having problems getting responses. I suggested it might be faster to telephone those people. Secretary Glickman provided my staff and me with the list of people, and we telephoned them and found, after reaching approximately half of them, that the price of cheese was, in fact, 16 cents higher by those individuals than otherwise. I have been pressing Secretary Glickman since. If he has C-SPAN2, or if he knows someone who has C-SPAN2 or if he talks to someone who has C-SPAN2, my staff has been exhorting his staff daily to act on it, and I am going to send him a fax letter before the day is up to try to get a determination on this issue, because I am on my way to northeastern Pennsylvania again next Monday on a routine trip to the Wilkes-Barre/ Scranton area. The Presiding Officer knows what that is like. There will be people who want answers to questions, and I shall answer with due diligence, which I think I have. I hope the Secretary of Agriculture will note this different price of cheese and act accordingly to raise the price of milk. The legislation which I am introducing today goes to two points. One is to amend the Agriculture Market Transition Act to require the Secretary to use the price of feed grains and other cash expenses in the dairy industry as factors that are used to determine the basic formula for the price of milk and other milk prices regulated by the Secretary. Simply stated, the Government should use what it costs for production to establish the price of milk, so that if the farmers are caught with rising prices of feed and other rising costs of production, they can have those rising costs reflected in the cost of milk. The second piece of legislation would require the Secretary of Agriculture to collect and disseminate statistically reliable information from milk manufacturing plants on prices received for bulk cheese and provide the Secretary with the authority to require reporting by such manufacturing plants throughout the United States on the prices for cheese, butter, and nonfat dry milk. Frankly, I am reluctant to impose this obligation anywhere, but I think it is a fair request to make since the Secretary told the Subcommittee on Agriculture of the Appropriations Committee that the Secretary could not get this information on a voluntary basis. People would not comply. My staff found that corroborated when we telephoned the individuals who had these transactions. Burdensome as it is, I think it is fair to give the Secretary the authority to require this reporting. Mr. President, I am authorized to say that the distinguished Senator from Wisconsin, Senator Feingold, wishes to cosponsor the piece of legislation requiring the information to be collected.

Mr. SPECTER

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

Mr. SPECTER. I yield the floor and, in the absence of any other Senator on the floor, suggest the absence of a quorum.

Mr. SPECTER

Mr. SPECTER. Mr. President, I have sought recognition today to introduce the Flat Tax Act of 1997. This is legislation modeled after the legislation which I introduced in the 104th Congress, in March 1995, which was the first Senate introduction of flat tax legislation. This bill is modeled after proposals by two distinguished professors of law from Stanford University, Professor Hall and Professor Rabushka. This bill would eliminate all deductions, like the Hall-Rabushka plan, with the modification in my legislation to allow deductions for interest on home interest mortgages up to borrowings of $100,000 and contributions to charity up to $2,500. The Hall-Rabushka plan would provide for a flat tax rate of 19 percent to be revenue neutral. My proposal raises that rate by 1 percent to 20 percent to allow for the deductions for home interest mortgages, which would cost $35 billion a year, and the charitable deduction, which would cost $13 billion a year. Mr. President, the advantages of the flat tax are very, very substantial. First, in the interest of simplicity, a tax return could be filled out on a simple postcard. And this is a tax return which I hold in my hand which could take 15 minutes to fill out. It requires simply that the taxpayer list the gross revenue, list his taxable income, carry forward the deductions for his family, any deductions on interest, any deduction on a home mortgage, the balance of the taxable items, multiplied by 20 percent. Taxpayers in the United States today, Mr. President, spend some 5,400,000 hours at a cost of some $600 billion a year. The flat tax taxes income only once and thereby eliminates the tax on capital gains. It eliminates the tax on estates, eliminates the tax on dividends, all of which have already been taxed once. The flat tax is frequently challenged as being regressive, but the fact of the matter is that a taxpayer of a family of four would pay no taxes on the first $27,500 in income; and as it graduates up the scale, a taxpayer earning $35,000 would pay $1,219 less in tax than is paid under the current plan. It is frequently thought that the flat tax would be regressive and place a higher tax burden on lower income families, but that simply is not true. And the reason that we can have a win-win situation is because the flat tax provides for savings on compliance in the range of some $600 billion a year. This is a very progrowth proposition. And the economists have projected that over a 7-year period the gross national product could be increased by some $2 trillion. That is over $7,000 for every man, woman, and child in America. The great advantages of simplicity would especially be appreciated, Mr. President, on this particular day, April 16, because yesterday was the final day for filing the tax returns without any extension. And I have chosen the first day of the new tax period for symbolic reasons-- April 16--as a day to reintroduce the flat tax to try to give us some momentum because it is my firm view that if Americans really understood the import of the flat tax, its simplicity, its growth, and its savings, that it would be widely heralded. Mr. President as I stated, 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. I testified with House Majority Leader Richard Armey before the Senate Finance and House Ways and Means Committees, as well as the Joint Economic Committee and the House Small Business Committee on the tremendous benefits of flat tax reform. As I traveled around the country and held open-house town 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: My copy of the Constitution and my 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 plan for a flat tax with limited deductions for home mortgage interest and charitable contributions. Well before he entered the 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 Republican Presidential primary began to embrace similar versions of either a flat tax or a consumption-based tax system. Unfortunately, the politics of the 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. In this new period of opportunity as we commence the 105th session of Congress, I am optimistic that public support for flat tax reform will enable us to move forward and adopt this critically important and necessary legislation. That is why I am again introducing my Flat Tax Act of 1997, with some slight modifications to reflect inflation- adjusted increases in the personal allowances and dependent allowances. My flat tax legislation will fundamentally revise the present Tax Code, with its myriad rates, deductions, and instructions. Instead, this legislation would institute a simple, flat 20 percent 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 not cast in stone, but is intended to move the debate forward by focusing attention 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 this 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; and made the already unpleasant obligation of paying taxes a real nightmare for many Americans. Well before I introduced my flat tax bill early in the 104th Congress, I had discussions with Congressman Richard Armey, now the House majority leader, about his flat tax proposal. 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. The 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. With a simple 20 percent flat tax rate in effect, the average person can easily see the impact of any additional Federal spending proposal on his or her own paycheck. 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, but experience under that Code has 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 Profs. 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 limited deductions for home mortgage interest on up to $100,000 in borrowing and charitable contributions up to $2,500 in the legislation. 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- percent rate, is based on a well documented model founded on reliable governmental statistics. My legislation raises that rate from 19- to 20-percent to accommodate retaining limited home mortgage interest and charitable deductions. A preliminary estimate last 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 myriad 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 a rising 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. Last, my bill is designed to be revenue neutral, and thus will not undermine our vital efforts to balance the Nation's budget. The estimate of revenue neutrality is based on the Hall-Rabushka analysis together with preliminary projections supplied by the Joint Committee on Taxation on the modifications proposed in this bill. The key advantages of this flat tax plan are threefold: 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. By contrast, there will be a contraction of the IRS if this proposal is enacted. 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. These personal allowances have been adjusted upward to reflect inflation increases for 1995 and 1996. Thus, the new 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 commencing in 1997. 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 1996, the standard deduction is $4,000 for a single taxpayer, $5,900 for a head of household, and $6,700 for a married couple filing jointly, while the personal exemption for individuals and dependents is $2,550. Thus, under the current Tax Code, a family of four which does not itemize deductions would pay tax on all income over $16,900--personal exemptions of $10,400 and a standard deduction of $6,700. 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 retax the same moneys 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. Simplicity 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 12,000 pages and which, according to the Tax Foundation, have grown from 744,000 words in 1955 to 5.6 million words in 1994. The Internal Revenue Code annotations alone fill 21 volumes of mind-numbing detail and minutiae. 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 printouts 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, instructions, and delete literally millions of words from the Internal Revenue Code. Instead of tens of millions of hours of nonproductive 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. The postcard would look like this: form 1 Individual Wage Tax 1997 Your first name and initial (if joint return, also give spouse's name and initial). Your social security number. Home address (number and street including apartment number or rural route). Spouse's social security number. City, town, or post office, state, and ZIP code. 1. Wages, salary, pension and retirement benefits. 2. Personal allowance (enter only one): --$17,500 for married filing jointly; --$10,000 for single; --$15,000 for single head of household. 3. Number of dependents, not including spouse, multiplied by $5,000. 4. Mortgage interest on debt up to $100,000 for owner- occupied home. 5. Cash or equivalent charitable contributions (up to $2,500). 6. Total allowances and deductions (lines 2, 3, 4 and 5). 7. Taxable compensation (line 1 less line 6, if positive; otherwise zero). 8. Tax (20% of line 7). 9. Tax withheld by employer. 10. Tax or refund due (difference between lines 8 and 9). Filing a tax return would become a manageable chore, not a seemingly endless nightmare, for most taxpayers. Cutting Back Government 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 redtape 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, businesses will spend over $150 billion complying with the Federal tax laws, and individuals will spend an additional $74 billion, for a total of nearly $225 billion. Fortune magazine estimates a much higher cost of compliance--nearly $600 billion per year. 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. Economic Growth 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 7-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 interrelated, for 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, et cetera-- and that constitutes the real seed of future prosperity. The statistics here are daunting. In the 1960's, the net U.S. national savings rate was 8.2 percent, but it has fallen to a dismal 1.5 percent. In recent international comparisons, the United States has the lowest savings rate of any of the G-7 countries. We 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 expansions 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 money 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 larger pool of savings created by a flat tax will also help to reduce our dependence on foreign investors to finance both our Federal budget deficits and our private sector economic activity. Currently, of the publicly held Federal debt--that is, the portion not held by various Federal trust funds like Social Security--nearly 20 percent is held by foreigners--the highest level in our history. By contrast, in 1965 less than 5 percent of publicly held national debt was foreign owned. We are paying over $40 billion in annual interest to foreign governments and individuals, and this by itself accounts for roughly one-third of our whole international balance of payments deficit. These massive interest payments are one of the principal sources of American capital flowing abroad, a factor which then enables foreign investors to buy up American businesses. During the period 1980-91, the gross value of U.S. assets owned by foreign businesses and individuals rose 427 percent, from $543 billion to $2.3 trillion. The substantial level of foreign ownership of our national debt creates both political and economic problems. On the political level, there is at least the potential that some foreign nation may assume a position where its level of investment in U.S. debt gives it disproportionate leverage over American policy. Economically, increasing foreign investment in Treasury debt furthers our national shift from a creditor to a debtor nation, weakening the dollar and undercutting our international trade position. A recent Congressional Research Service report put it succinctly: ``To pay for today's capital inflows, tomorrow's economy will have to ship more abroad in exchange for fewer foreign products. These payments will be a consequence in part of heavy Federal borrowing since 1982.'' With a flat tax in place, America's own supply of capital can be replenished, and we can return to our historic position as an international creditor nation rather than a debtor. 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. Fairness 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. A variety of specific cases illustrate the fairness and simplicity of this flat tax: Case No. 1--Married couple with two children, rents home, yearly income $35,000 Under Current Law: Income........................................................$35,000 Four personal exemptions......................................$10,200 Standard deduction..............................................6,700 Taxable income................................................$18,100 Tax due under current rates....................................$2,719 Marginal rate (percent)..........................................15.0 Effective tax rate (percent)......................................7.8 Under Flat Tax: Personal allowance............................................$17,500 Two dependents................................................$10,000 Taxable income.................................................$7,500 Tax due under flat tax.........................................$1,500 Effective tax rate (percent)......................................4.3 Savings of $1,219 Case No. 2--Single individual, rents home, yearly income $50,000 Under Current Law: Income........................................................$50,000 One personal exemption.........................................$2,550 Standard deduction.............................................$4,000 Taxable income................................................$43,450 Tax due under current rates....................................$9,053 Marginal rate (percent)..........................................28.0 Effective rate (percent).........................................18.1 Under Flat Tax: Personal allowance............................................$10,000 Taxable income................................................$40,000 Tax due under flat tax.........................................$8,000 Effective rate (percent).........................................16.0 Savings of $1,053 Case No. 3--Married couple with no children, $150,000 mortgage at 9%, yearly income $75,000 Under Current Law: Income........................................................$75,000 Two personal exemptions........................................$5,100 Home mortgage deduction.......................................$13,500 State and local taxes..........................................$3,000 Charitable deduction...........................................$1,500 Taxable income................................................$51,900 Tax due under current rates....................................$9,326 Marginal rate (percent)........................................... 28 Effective tax rate (percent).....................................12.4 Under Flat Tax: Personal allowance............................................$17,500 Home mortgage deduction........................................$9,000 Charitable deduction...........................................$1,500 Taxable income................................................$47,000 Tax due under flat tax.........................................$9,400 Effective tax rate (percent).....................................12.5 Slight Increase of $74 Case No. 4--Married couple with three children, $250,000 mortgage at 9%, yearly income $125,000 Under Current Law: Income.......................................................$125,000 Five personal exemptions......................................$12,750 Home mortgage deduction.......................................$22,500 State and local taxes..........................................$5,000 Retirement fund deductions.....................................$6,000 Charitable deductions..........................................$2,500 Taxable income................................................$76,250 Tax due under current rates...................................$16,130 Marginal rate (percent)........................................... 31 Effective tax rate (percent).....................................12.9 Under Flat Tax: Personal allowance............................................$17,500 Three dependents..............................................$15,000 Home mortgage deduction........................................$9,000 Charitable deduction...........................................$2,500 Taxable income................................................$81,000 Tax due under flat tax........................................$16,200 Effective tax rate (percent)...................................... 13 Slight Increase of $70 Case No. 5--Married couple, no children, $1,000,000 mortgages at 9% on 2 homes, $500,000 income Under Current Law: Income.......................................................$500,000 Personal exemptions at this level................................. $0 Home mortgage deductions......................................$90,000 State and local taxes.........................................$40,000 Retirement deductions.........................................$50,000 Charitable deductions.........................................$30,000 Taxable income...............................................$290,000 Tax due under current rates...................................$91,949 Marginal rate (percent)..........................................39.6 Effective tax rate (percent).....................................18.4 Under Flat Tax: Personal allowance............................................$17,500 Mortgage deduction.............................................$9,000 Charitable deduction...........................................$2,500 Taxable income...............................................$471,000 Tax due under flat tax........................................$94,200 Effective tax rate (percent).....................................18.8 $2,251 higher taxes 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 percent for families with incomes under about $30,000 to roughly 20 percent for the highest income groups:

Mr. SPECTER

Mr. SPECTER. Mr. President, I have sought recognition today to introduce the Flat Tax Act of 1997. This is legislation modeled after the legislation which I introduced in the 104th Congress, in March 1995, which was the first Senate introduction of flat tax legislation. This bill is modeled after proposals by two distinguished professors of law from Stanford University, Professor Hall and Professor Rabushka. This bill would eliminate all deductions, like the Hall-Rabushka plan, with the modification in my legislation to allow deductions for interest on home interest mortgages up to borrowings of $100,000 and contributions to charity up to $2,500. The Hall-Rabushka plan would provide for a flat tax rate of 19 percent to be revenue neutral. My proposal raises that rate by 1 percent to 20 percent to allow for the deductions for home interest mortgages, which would cost $35 billion a year, and the charitable deduction, which would cost $13 billion a year. Mr. President, the advantages of the flat tax are very, very substantial. First, in the interest of simplicity, a tax return could be filled out on a simple postcard. And this is a tax return which I hold in my hand which could take 15 minutes to fill out. It requires simply that the taxpayer list the gross revenue, list his taxable income, carry forward the deductions for his family, any deductions on interest, any deduction on a home mortgage, the balance of the taxable items, multiplied by 20 percent. Taxpayers in the United States today, Mr. President, spend some 5,400,000 hours at a cost of some $600 billion a year. The flat tax taxes income only once and thereby eliminates the tax on capital gains. It eliminates the tax on estates, eliminates the tax on dividends, all of which have already been taxed once. The flat tax is frequently challenged as being regressive, but the fact of the matter is that a taxpayer of a family of four would pay no taxes on the first $27,500 in income; and as it graduates up the scale, a taxpayer earning $35,000 would pay $1,219 less in tax than is paid under the current plan. It is frequently thought that the flat tax would be regressive and place a higher tax burden on lower income families, but that simply is not true. And the reason that we can have a win-win situation is because the flat tax provides for savings on compliance in the range of some $600 billion a year. This is a very progrowth proposition. And the economists have projected that over a 7-year period the gross national product could be increased by some $2 trillion. That is over $7,000 for every man, woman, and child in America. The great advantages of simplicity would especially be appreciated, Mr. President, on this particular day, April 16, because yesterday was the final day for filing the tax returns without any extension. And I have chosen the first day of the new tax period for symbolic reasons-- April 16--as a day to reintroduce the flat tax to try to give us some momentum because it is my firm view that if Americans really understood the import of the flat tax, its simplicity, its growth, and its savings, that it would be widely heralded. Mr. President as I stated, 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. I testified with House Majority Leader Richard Armey before the Senate Finance and House Ways and Means Committees, as well as the Joint Economic Committee and the House Small Business Committee on the tremendous benefits of flat tax reform. As I traveled around the country and held open-house town 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: My copy of the Constitution and my 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 plan for a flat tax with limited deductions for home mortgage interest and charitable contributions. Well before he entered the 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 Republican Presidential primary began to embrace similar versions of either a flat tax or a consumption-based tax system. Unfortunately, the politics of the 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. In this new period of opportunity as we commence the 105th session of Congress, I am optimistic that public support for flat tax reform will enable us to move forward and adopt this critically important and necessary legislation. That is why I am again introducing my Flat Tax Act of 1997, with some slight modifications to reflect inflation- adjusted increases in the personal allowances and dependent allowances. My flat tax legislation will fundamentally revise the present Tax Code, with its myriad rates, deductions, and instructions. Instead, this legislation would institute a simple, flat 20 percent 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 not cast in stone, but is intended to move the debate forward by focusing attention 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 this 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; and made the already unpleasant obligation of paying taxes a real nightmare for many Americans. Well before I introduced my flat tax bill early in the 104th Congress, I had discussions with Congressman Richard Armey, now the House majority leader, about his flat tax proposal. 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. The 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. With a simple 20 percent flat tax rate in effect, the average person can easily see the impact of any additional Federal spending proposal on his or her own paycheck. 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, but experience under that Code has 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 Profs. 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 limited deductions for home mortgage interest on up to $100,000 in borrowing and charitable contributions up to $2,500 in the legislation. 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- percent rate, is based on a well documented model founded on reliable governmental statistics. My legislation raises that rate from 19- to 20-percent to accommodate retaining limited home mortgage interest and charitable deductions. A preliminary estimate last 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 myriad 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 a rising 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. Last, my bill is designed to be revenue neutral, and thus will not undermine our vital efforts to balance the Nation's budget. The estimate of revenue neutrality is based on the Hall-Rabushka analysis together with preliminary projections supplied by the Joint Committee on Taxation on the modifications proposed in this bill. The key advantages of this flat tax plan are threefold: 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. By contrast, there will be a contraction of the IRS if this proposal is enacted. 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. These personal allowances have been adjusted upward to reflect inflation increases for 1995 and 1996. Thus, the new 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 commencing in 1997. 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 1996, the standard deduction is $4,000 for a single taxpayer, $5,900 for a head of household, and $6,700 for a married couple filing jointly, while the personal exemption for individuals and dependents is $2,550. Thus, under the current Tax Code, a family of four which does not itemize deductions would pay tax on all income over $16,900--personal exemptions of $10,400 and a standard deduction of $6,700. 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 retax the same moneys 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. Simplicity 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 12,000 pages and which, according to the Tax Foundation, have grown from 744,000 words in 1955 to 5.6 million words in 1994. The Internal Revenue Code annotations alone fill 21 volumes of mind-numbing detail and minutiae. 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 printouts 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, instructions, and delete literally millions of words from the Internal Revenue Code. Instead of tens of millions of hours of nonproductive 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. The postcard would look like this: form 1 Individual Wage Tax 1997 Your first name and initial (if joint return, also give spouse's name and initial). Your social security number. Home address (number and street including apartment number or rural route). Spouse's social security number. City, town, or post office, state, and ZIP code. 1. Wages, salary, pension and retirement benefits. 2. Personal allowance (enter only one): --$17,500 for married filing jointly; --$10,000 for single; --$15,000 for single head of household. 3. Number of dependents, not including spouse, multiplied by $5,000. 4. Mortgage interest on debt up to $100,000 for owner- occupied home. 5. Cash or equivalent charitable contributions (up to $2,500). 6. Total allowances and deductions (lines 2, 3, 4 and 5). 7. Taxable compensation (line 1 less line 6, if positive; otherwise zero). 8. Tax (20% of line 7). 9. Tax withheld by employer. 10. Tax or refund due (difference between lines 8 and 9). Filing a tax return would become a manageable chore, not a seemingly endless nightmare, for most taxpayers. Cutting Back Government 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 redtape 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, businesses will spend over $150 billion complying with the Federal tax laws, and individuals will spend an additional $74 billion, for a total of nearly $225 billion. Fortune magazine estimates a much higher cost of compliance--nearly $600 billion per year. 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. Economic Growth 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 7-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 interrelated, for 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, et cetera-- and that constitutes the real seed of future prosperity. The statistics here are daunting. In the 1960's, the net U.S. national savings rate was 8.2 percent, but it has fallen to a dismal 1.5 percent. In recent international comparisons, the United States has the lowest savings rate of any of the G-7 countries. We 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 expansions 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 money 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 larger pool of savings created by a flat tax will also help to reduce our dependence on foreign investors to finance both our Federal budget deficits and our private sector economic activity. Currently, of the publicly held Federal debt--that is, the portion not held by various Federal trust funds like Social Security--nearly 20 percent is held by foreigners--the highest level in our history. By contrast, in 1965 less than 5 percent of publicly held national debt was foreign owned. We are paying over $40 billion in annual interest to foreign governments and individuals, and this by itself accounts for roughly one-third of our whole international balance of payments deficit. These massive interest payments are one of the principal sources of American capital flowing abroad, a factor which then enables foreign investors to buy up American businesses. During the period 1980-91, the gross value of U.S. assets owned by foreign businesses and individuals rose 427 percent, from $543 billion to $2.3 trillion. The substantial level of foreign ownership of our national debt creates both political and economic problems. On the political level, there is at least the potential that some foreign nation may assume a position where its level of investment in U.S. debt gives it disproportionate leverage over American policy. Economically, increasing foreign investment in Treasury debt furthers our national shift from a creditor to a debtor nation, weakening the dollar and undercutting our international trade position. A recent Congressional Research Service report put it succinctly: ``To pay for today's capital inflows, tomorrow's economy will have to ship more abroad in exchange for fewer foreign products. These payments will be a consequence in part of heavy Federal borrowing since 1982.'' With a flat tax in place, America's own supply of capital can be replenished, and we can return to our historic position as an international creditor nation rather than a debtor. 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. Fairness 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. A variety of specific cases illustrate the fairness and simplicity of this flat tax: Case No. 1--Married couple with two children, rents home, yearly income $35,000 Under Current Law: Income........................................................$35,000 Four personal exemptions......................................$10,200 Standard deduction..............................................6,700 Taxable income................................................$18,100 Tax due under current rates....................................$2,719 Marginal rate (percent)..........................................15.0 Effective tax rate (percent)......................................7.8 Under Flat Tax: Personal allowance............................................$17,500 Two dependents................................................$10,000 Taxable income.................................................$7,500 Tax due under flat tax.........................................$1,500 Effective tax rate (percent)......................................4.3 Savings of $1,219 Case No. 2--Single individual, rents home, yearly income $50,000 Under Current Law: Income........................................................$50,000 One personal exemption.........................................$2,550 Standard deduction.............................................$4,000 Taxable income................................................$43,450 Tax due under current rates....................................$9,053 Marginal rate (percent)..........................................28.0 Effective rate (percent).........................................18.1 Under Flat Tax: Personal allowance............................................$10,000 Taxable income................................................$40,000 Tax due under flat tax.........................................$8,000 Effective rate (percent).........................................16.0 Savings of $1,053 Case No. 3--Married couple with no children, $150,000 mortgage at 9%, yearly income $75,000 Under Current Law: Income........................................................$75,000 Two personal exemptions........................................$5,100 Home mortgage deduction.......................................$13,500 State and local taxes..........................................$3,000 Charitable deduction...........................................$1,500 Taxable income................................................$51,900 Tax due under current rates....................................$9,326 Marginal rate (percent)........................................... 28 Effective tax rate (percent).....................................12.4 Under Flat Tax: Personal allowance............................................$17,500 Home mortgage deduction........................................$9,000 Charitable deduction...........................................$1,500 Taxable income................................................$47,000 Tax due under flat tax.........................................$9,400 Effective tax rate (percent).....................................12.5 Slight Increase of $74 Case No. 4--Married couple with three children, $250,000 mortgage at 9%, yearly income $125,000 Under Current Law: Income.......................................................$125,000 Five personal exemptions......................................$12,750 Home mortgage deduction.......................................$22,500 State and local taxes..........................................$5,000 Retirement fund deductions.....................................$6,000 Charitable deductions..........................................$2,500 Taxable income................................................$76,250 Tax due under current rates...................................$16,130 Marginal rate (percent)........................................... 31 Effective tax rate (percent).....................................12.9 Under Flat Tax: Personal allowance............................................$17,500 Three dependents..............................................$15,000 Home mortgage deduction........................................$9,000 Charitable deduction...........................................$2,500 Taxable income................................................$81,000 Tax due under flat tax........................................$16,200 Effective tax rate (percent)...................................... 13 Slight Increase of $70 Case No. 5--Married couple, no children, $1,000,000 mortgages at 9% on 2 homes, $500,000 income Under Current Law: Income.......................................................$500,000 Personal exemptions at this level................................. $0 Home mortgage deductions......................................$90,000 State and local taxes.........................................$40,000 Retirement deductions.........................................$50,000 Charitable deductions.........................................$30,000 Taxable income...............................................$290,000 Tax due under current rates...................................$91,949 Marginal rate (percent)..........................................39.6 Effective tax rate (percent).....................................18.4 Under Flat Tax: Personal allowance............................................$17,500 Mortgage deduction.............................................$9,000 Charitable deduction...........................................$2,500 Taxable income...............................................$471,000 Tax due under flat tax........................................$94,200 Effective tax rate (percent).....................................18.8 $2,251 higher taxes 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 percent for families with incomes under about $30,000 to roughly 20 percent for the highest income groups:

Mr. SPECTER

Mr. SPECTER. Mr. President, I have sought recognition to acknowledge John ``Jack'' Pidgeon's 40th anniversary as headmaster of the Kiski School in Saltsburg, PA. John is well known to many Pennsylvanians for his excellent career in education and also is the proud husband of Pennsylvania's State treasurer, Barbara Hafer. Forty years ago, John Pidgeon left a position at the Deerfield Academy to assume the position of headmaster of the Kiski School. In 1957, he became the youngest headmaster in the United States. Today, he is the longest serving headmaster in the country. In this capacity, he has worked to stabilize the school's finances, develop the campus, and build upon its outstanding academic reputation. When John first arrived at the Kiski School, the institution's infrastructure was suffering and its deficit was rising. Under his direction, the school raised funds for a campus face lift, built a strong financial foundation, and stabilized enrollment. Throughout his career, he has emphasized the value of courtesy, ethics, discipline, high moral standards, and quality of education. By establishing a philosophy that combined these values in the school's education program, he has prepared Kiski boys to meet the challenges and opportunities they will face in the future. I ask that the text of an article in the September, 1996 Kiski Bulletin be printed in the Record. The article follows: Kiski--The School that Jack Built Forty years ago, John ``Jack'' Pidgeon left a secure job at Deerfield Academy to become the Headmaster of The Kiski School. As the new headmaster, he not only ran the School, taught classes, and coached sports, but also initiated a major face-lift of the deteriorating campus. Along with no entrance road and few athletic fields, the school had no desks or chairs in some dormitory rooms, lacked water for days at a time, and suffered a $200,000 deficit. The students willingly pitched in to paint and clean up the school grounds. Before 1957, Kiski never received a donation larger than $10,000. Today, the 350 acre campus is the envy of both independent schools and liberal arts colleges. Under the direction of the Headmaster, the School has completed over a dozen substantial fund-raising campaigns and added: Daub Hall, 1961. The Field House, 1962. Heath Clark Classroom Building, 1967. The Indoor Swimming Pool, 1967. McClintock Hall, 1968. Vlahos Hall, 1968. The Dining Hall and Infirmary, 1976. Sheesley Hall, 1978. The S.W. Jack Sports Center, 1983. The Stephen C. Rogers Fine Arts Center, 1984. Schoenbaum Center, 1985. The John A. Pidgeon Library, 1993. Six faculty homes. A new dormitory in planning for 1997. Today, campus buildings are worth over $5 million, and the School has an endowment of $20 million. The campus enrollment is 250 boys, 225 boarders and 25 area day students. Over the past decade, ``Jack's Boys'' have come from six continents, 30 countries and 28 states of the U.S. Jack Pidgeon came to Kiski as the youngest headmaster in the United States. Today his forty years of service make him the longest serving headmaster in the country. In addition to building a school with a superb physical plant, a sound financial basis, and a stable enrollment, Jack Pidgeon prides himself on placing high value on courtesy, ethics, discipline, morals, and a quality educational program. ``Kiski Boys'' are prepared to meet the challenges and opportunities they will face in the real world. The man who played in the same backfield with actor Jack Lemmon and the same field with President George Bush at Phillips Andover Academy left a secure job teaching Latin at Deerfield Academy and took the leap of faith in coming to Kiski. He has, in his dynamic years as headmaster, built a school that has had a positive effect on the lives of thousands of young men. Every year, these young men receive a personally signed birthday card from the man who cared enough about their future that he risked his own on their behalf.

Mr. SPECTER

Mr. SPECTER. Mr. President, I am pleased to submit a resolution which would recognize the service and dedication of America's former prisoners of war [POW's]. The resolution would designate April 9, 1997, and April 9, 1998, as National Former Prisoner of War Recognition Day. April 9 is the anniversary of the fall of Bataan in 1942. On that day more Americans became POW's than any other day in our history. Every American who wears the uniform of our country makes a unique commitment of service and duty to our country and to our fellow citizens. Perhaps no American veterans have been called upon to honor their commitment to our country under circumstances more difficult than those endured by our former POW's. For many, their experience was one of malnutrition, torture, and nonexistent medical care, combined with the burden of watching comrades die under terrible conditions. Even under the best possible conditions, the POW experience places American service members in the position of being dependent upon our Nation's enemies for every scrap of food, every bandage, every human need. In such circumstances, the reward for treason, or even cooperation, is high. The penalty for resistance and loyalty is immediate, frequently painful and sometimes fatal. This resolution recognizes the sacrifice and loyalty of the POW's who maintained their commitment of service to our country. In so doing, it helps fulfill the duty we have to former POW's, derived from their faithful discharge of duty to our nation. Mr. President, this resolution commemorates the service of former POW's who sustained their commitment to our country under circumstances that few of us can imagine, and none would willingly endure. I ask this body to honor the memory of those who have already died and express our gratitude to those still alive.