Pete Stark

Mr. STARK

Mr. STARK. Mr. Chairman, the reconciliation bill before us today is an affront to American standards of fairness and decency. Of course the American people want to see the deficit reduced, but they do not want to do it by gutting Medicare, Medicaid, the earned income tax credit, child nutrition, student loans, and a host of other valuable Government programs; and they especially do not want to do it while giving huge tax cuts to those who do not need it. The Democratic staff of the Joint Economic Committee looked into who is likely to get the tax cuts and who is likely to suffer from the presumed cuts the Republicans are proposing. The results are stunning. The poorest 20 percent of American families, those making $13,000 a year or less, those whose income represent only 3.5 percent of the total income in this country, will bear one-half the cuts in programs that help people directly. The poorest 20 percent get half the cuts of benefits, and they are going to get no tax cut whatsoever. Instead, they will see their taxes go up because of the change in the earned income tax credit. Most middle-income American families get a bad deal as well. Some will get a tax cut, but many will lose benefits worth much more. What is going to be left is they are going to be holding the bag when the Medicaid money is no longer available. They get a net cut, if there is a tax cut, in their gross benefits of $500 a year. But under the Republican plan for deficit reduction, the richest 20 percent of American families come out way ahead. They are slated to get two-thirds of the tax cuts, and their tax breaks exceed their losses in program benefits. They get fewer program benefit cuts and more of the tax cuts. Mr. Chairman, the shared sacrifice in reducing the deficit would look very different if we had a Democratic plan. I urge Members to oppose the obscene reconciliation package.

Mr. STARK

Mr. STARK. Mr. Speaker, today, a minimum wage worker who work full- time, year round, does not earn enough money to keep a family of two out of poverty. For decades prior to the late 1980s, that was not the case. Actually, until the early 1980s, the minimum wage was high enough to keep the average three-person family out of poverty. The staff of the Joint Economic Committee has taken a close look at the effects of raising the minimum wage. Their report convinces me that raising the minimum wage is the right thing to do, and will help low- wage workers. Those most likely to be helped are women, because disproportionate shares of women are harmed by the low value of the minimum wage. I think that is important to note, given the majority's attacks on Medicaid, the earned income tax credit, and food stamps--all programs that help working-poor women. There is general agreement that there would be no job loss for adults who make up the majority of all minimum wage workers. The only debate is whether and how many teenagers would lose jobs if the minimum wage is hidden. During the Joint Economic Committee's two hearings on the minimum wage, witnesses confronted members with reports showing both negative and positive effects of increasing the minimum wage. The Employment Policies Institute Foundation supported most of the witnesses claiming a negative effect from raising the minimum wage. During the hearings, we uncovered the fact that, from the beginning, the institute has been headed by Richard Berman, who continued to serve as a registered lobbyist for the restaurant and fast-food industry until recently. The same man was a supporter of the Speaker's so-called college course only after winning apparent assurance of having an influence on the course's content favorable to low-wage jobs. However, I had a substantive problem with the witnesses from the Employment Policies Institute Foundation. No one argued that, when we increase the minimum wage, all those low wage teenagers making less than the new minimum wage would be thrown out of work. Instead, the debate was over whether a 10-percent increase in the minimum wage caused a 1 or 2 percent reduction in employment for teenagers. An economist invited by the Republicans, and who had done work for the Employment Policies Institute Foundation, wrote in a recent paper for an academic journal, that there were no significant net employment effects of increasing the minimum wage. So, the worse we were told was that 98 or 99 percent of teenage low-wage workers would not lose their jobs when they got a 10-percent pay increase. Why is that bad? Further, how is that possible? If those workers were not worth a 10-percent raise, why do only 1 percent of them lose their jobs? Could it be that their lower wage was unfair? The report of the Joint Economic Committee staff suggests that the low wage of minimum wage workers is much more the result of where they work, than the quality of their work. The study uses a set of jobs whose wages change with the minimum wage, more than with changes in other wages in the economy. Workers in those jobs are said to be on the minimum wage contour. The harm in holding down the value of the minimum wage is that the wages of those workers also are held down. By asking a different question than, ``Can we count job losses or job gains after the minimum wage is increased?'' the staff sought to answer the basic question of what would be a fair wage. By answering that question, they could show that workers on the minimum wage contour are not so low skilled that they could not hold other jobs. Unless we take as a matter of faith that the world always works just like the diagrams in an elementary economics textbook, the question of how changes in the minimum wage affect employment and earnings among low income workers is an empirical one. This study's major finding-- that workers whose skills and other characteristics seem similar to those in minimum wage contour jobs, but who have non-minimum wage jobs, make around 30 percent more--calls into question simple textbook analyses of low-wage labor markets. Why is that important? Because it means that there is some reason, not related to the ability to produce, that explains the lower wages of minimum wage contour workers. A reason could be that minimum wage workers have fewer options to give them bargaining power with their employers. Because the ranks of the minimum wage work force are disproportionately female, in an economy slanted by gender discrimination, seeing why these workers may have less bargaining power than workers in other jobs is easy. So when we raise the minimum wage, we are restoring some balance to the equation. The net effect would be to increase economic efficiency and make low-wage workers better off. We have heard those in the majority scoff at such a notion. They snicker that if raising the minimum wage helps the economy, why not set it at a really high level. However, that is not what this research suggests. It shows that the gap in the wages of minimum wage and other similar workers is larger than the proposed increase in the minimum wage. So a modest rise in the minimum wage can be helpful. The JEC staff study shows that when we increased the minimum wage from $3.35 in 1989 to $4.25 in 1991, the wage gap between minimum wage contour and nonminimum wage workers shrank. Also, the gap between the wages of women and men shrank. Further, the study showed that many young workers with a high school education, or less, suffered a substantial loss in relative wages between 1986 and 1991 because some of their earnings' history was in a minimum contour job. Most Americans agree on one way to approach falling wages. More than three-fourths of Americans in recent polls favor the raise in the minimum wage proposed by President Clinton. I might add that 64 percent of those who said they voted for Republican Members of Congress support the President on this. If we are going to listen to the voters, we must listen to the voters on this issue. Why do they favor raising the minimum wage? Because, most minimum wage workers are adults. Because, minimum wage workers provide an average of over half their family's weekly earnings. Because there is a direct relation between the minimum wage and keeping families out of poverty. In 1979, when the minimum wage was worth almost $6 an hour in today's terms, almost 1.4 million Americans were working full time, year round living below poverty. Today, during an economic recovery, with the minimum wage at $4.25, the number of full time, year round workers living below poverty is more than 2 million. Americans know that having an increase in the number of people working full-time year round living below poverty is not right. Americans know that having almost 20 million workers being paid less today, in real terms than we legally allowed in 1979, is not right. Prof. Daniel Hamermesh was one of two economists the Republicans called as a witness who had not done research sponsored by the Employment Policies Institute Foundation. When I asked him whether we should raise the minimum wage, his answer was yes. Earlier this month, we learned that a large number of other economists agree with him. I thank the gentleman for yielding me this time. We should listen to voters. But we should also study proposals to best serve the public's needs. I think the JEC staff study helps us know that raising the minimum wage would be the right thing to do. So I am happy to support your efforts in getting this bill to the floor.

Mr. STARK

Mr. STARK. Mr. Chairman, will the gentleman yield?

Mr. STARK. Mr. Chairman, I wish to inform the gentleman that in the district of the gentleman from Pennsylvania [Mr. Greenwood] there will be $128 cut from hospitals over the next 7 years.

Mr. STARK

Mr. STARK. Mr. Chairman, I thank the gentleman for yielding me this time. Mr. Chairman, Medicare is one of the finest achievements of the U.S. Government, and for 30 years, hundreds of millions of seniors have been provided quality health care at a reasonable cost, in an efficient manner, under the guidance of the Federal Government. Now one Republican, in a messianic grab for power, seeks to destroy Medicare. With reckless disregard for the seniors, these leaders on the Republican side bribed the American Medical Association with a $300 million pay raise. The seniors are paying for that $300 million bribe to the doctors by being denied cancer treatment in mammograms and colorectal screening. The same Republicans, on the same day the bribe was given, voted to cut cancer screening for seniors, to repay political contributors of over $1 million by the Golden Rule Insurance Co. alone. Medical savings accounts have been delivered. They cost $3 billion. Who pays for them? The seniors, by having their part B premiums doubled. Seniors are denied the free choice under the Republican bill of doctors and are forced to join managed care plans run by the likes of Prudential Insurance Co., a company convicted of defrauding its customers of over $3 billion. Why should we vote to have our parents' health care entrusted to crooks like Prudential Insurance Co., just so the same rich executives who run that company can share in $245 billion in tax cuts? It is immoral, it is un-American. It is what the Republicans are doing, unknowingly, at the direction of one person. Not a person on that side of the aisle knows what is in this bill. No subcommittee ever met to consider the bill. It was written by one person in the bowels of this Capital to destroy Medicare, and that is what they are doing. This same leader destroys any protection from fraud and abuse and shoddy care in nursing homes, all in the name of less government. Every congressional district in this country under this Republican plan will see hospital payments cut by an average of $300 million. Go home and tell your hospital administrator that for the next 7 years they get $300 million less. Ask they which emergency room they are gong to close, which senior citizen they are going to deny care. Unfortunately, nothing is so likely to sway the Republicans as honesty and decency. But these cuts they propose will hurt, and hurt badly, real people. Hard-working Americans, who paid into Medicare for years will not get community health care centers, they will not get safety net systems to provide them Medicare. For 30 years we have working successfully to uphold the one true Contract with America, and that is Medicare. We have not and will not agree to breaking that contract in order to finance Republican tax cuts for the wealthiest Americans. We must do everything to defeat this reckless Republican plan. I urge a ``no'' vote.

Mr. STARK

Mr. STARK. Mr. Speaker, I would like to enter in the Record an op ed from today's New York Times entitled ``A Giant Leap Backward'' written by Emory University Professor Melvin Konner. [From the New York Times, Oct. 13, 1995] A Giant Leap Backward (By Melvin Konner) Now it's official. The Republican House plans to cut a total of $452 billion out of Medicare and Medicaid over the next seven years. Medicaid would lose $182 billion, even though it covers a disproportionately large number of children as well as elderly people who have spent themselves into destitution to qualify for it. Later this month, the measure is to be voted on as part of the budget reconciliation package, and Speaker Newt Gingrich plans to block a Presidential veto by forcing the country to the verge of default on our national debt. International markets await news of this potential disaster with thousands of pairs of hands poised over keyboards. Default would be only the latest step in the third worldization of America. The gap between rich children and poor children here is larger than in Switzerland, France or any of the 15 other industrial nations examined in a report this year by the Luxembourg Income Study, a non-profit group. Not only that, we have a health care delivery system that overtreats the well-to-do--not actually a good thing for them--while all but withholding treatment from 43 million uninsured citizens. Where will the savings from health care cutbacks go? Republicans argue that the money will insure that Medicare and Medicaid remain solvent. But they are also pressing for a huge tax cut for the middle class and well-to-do; presumably that money has to come from somewhere. And of course nothing Republicans do will be allowed to slow profit-taking in the health care industry, whose profits outpace national corporate averages by far. Characteristically, the American Medial Association came out in support of the Republican plan only after payments to doctors were carefully protected. Few people may realize that our much praised health care system, about to be made worse, is already an international disgrace. The most scientifically advanced medicine in the world has limited practical or moral value when nearly a fifth of the population cannot get to it. During the past few years, while the spirit of health-care reform was being born and then started dying, the throng of the uninsured swelled from 37 million to 43 million. This trend will only worsen. Cutbacks are closing emergency rooms and clinics, and the great public hospitals are being sold off or destroyed in New York, Los Angeles and other cities. Does anyone care where the poor will go? Republican leaders say they have a mandate to cut costs. But only about 38 percent of eligible voters went to the polls in 1994 and only slightly more than half of those voted Republican. The result is perfectly democratic, but it is not a mandate. Sixty percent of voters currently say they are dissatisfied with Congress. Time will tell whether the voters of 1994 were indulging in conservatism or merely in volatility. Mr. Gingrich says he wants to renew America, but the only thing he is likely to renew is the frustration and anger of people who can only gape at the good life, and good health care, without hope of having it themselves. Senator Phil Gramm, a Presidential candidate, invokes the Second Coming on the campaign trail. Which Second Coming? The one brought on by Armageddon, or the one that many Christians believe grows gradually in the world through the imitation of Jesus Christ? Deep in the Judeo-Christian tradition are such sentiments as ``Do justice to the poor and fatherless; deal righteously with the afflicted and destitute.'' A modern politician who transfers wealth from the suffering to the comfortable and cuts off poor people's access to decent medical care might wonder how he would stand in a Second Coming. America is taking a great step backward. All other industrial countries seem to know something we don't: having no place to take a sick child does not encourage people to identify with their country or its interests. Americans have always been torn between self-reliance and compassion. Those who think that conservatism is now set in stone should study American history; they are only watching part of the arc of a pendulum swing. Compassion, fairness, cooperation--these are the forces that will stop this swing, whether in one year, five or seven. In the meanwhile, millions will suffer and some will die, needlessly, for want of decent medical care.

Mr. STARK

Mr. STARK. Mr. Speaker, I would like to include in the Record the following column by Rick Horowitz from the Palm Beach Post of September 29, 1995, describing the House majority leader's comments on the flat tax proposal. According to the columnist, the gentleman from Texas admitted that his taxes as a Member of Congress would be lower under his flat tax than under current law, but that personal gain was not his motivation in proposing a flat tax: Rep. Armey insisted that personal gain wasn't the motivation for his plan; he truly didn't know who would do better or who would do worse, or even whether the plan was revenue-neutral or would lead to major funding gaps. In fact--well, these are the words he used: I don't care what it does--I like the concept. Mr. Speaker, that pretty much sums up the Republican agenda this year. I don't know what it does, but it is a new idea and we like the concept. You can see it in the medical savings account idea in the Medicare Reconciliation bill--which CBO insists will cost the program money, not save money like the ideologies of the right proclaim. You can see it in the Members who've introduced bills to permit more CFCs, because most of the world's scientists are probably wrong when they say CFCs are destroying the ozone layer. You can see it in the family cap in the welfare bill, because teenagers will quit having sex if you starve the babies they have. Concepts are wonderful, Mr. Speaker. Too bad the real world awaits. [From the Palm Beach Post, Sept. 29, 1995] The GOP Revolution in a Nutshell (By Rick Horowitz) Such a reasonable question--two questions, really. And such an interesting reply. At last week's annual convention of the National Conference of Editorial Writers in San Antonio, it was conversation pretty much nonstop, with the occasional break for food and beverage, or to hear from some outside force with something to say: the majority leader of the House of Representatives for instance. Dick Armey came home to Texas to share a meal, tell a few jokes, make a few points. He brought the latest news from Washington, where the dismantling of the welfare state was proceeding with vigor. Rep. Armey methodically set out the accomplishments of the Republican Congress--the hardest-working, most effective, most revolutionary Congress in memory, he claimed--and the outlook for the closing days of the session. He fired the requisite shots across the already listing Democratic bow. He talked philosophy. How the market, freed from government interference, can perform miracles. How, beyond a few insignificant exceptions, what a person earns in life squares almost exactly with how hard a person has worked. How, given their respective contributions to society, the high school football coach deserves to be paid more than the high school English teacher. And he pushed one of his pet ideas: the ``flat tax.'' Why should Taxpayer X and Taxpayer Y be treated differently by the IRS just because they earn different incomes? Let everyone pay the same rate--17 percent of wages, salaries and pensions, in Rep. Armey's version. People could figure their taxes in minutes. They could file their returns on postcards. What could be wrong with that? Then came the post-speech Q&A--a clarification, here, a prediction there--and then one David Bowman was standing at an audience microphone. Mr. Bowman, the editorial-page editor of the Huntsville (Ala.) News, wondered if Rep. Armey might possibly tell the crowd how much he paid in taxes under the current laws. Rep. Armey, momentarily flustered, offered up an estimate. Mr. Bowman then asked Rep. Armey whether he'd be paying more or less than that under his flat-tax proposal. Rep. Armey said he didn't know. Was there a pocket calculator in the house? (Nope.) Could anybody divide his congressional salary by 17 percent? Finally, he grabbed a pen and did some quick math himself, right there on his speech text. And what do you know? Under the flat tax, his taxes would go down plenty--what a pleasant surprise! As the giggles spread in the cheap seats, Rep. Armey insisted that personal gain wasn't the motivation for his plan; he truly didn't know who would do better and who would do worse, or even whether the plan was revenue-neutral or would lead to major funding gaps. In fact--well, these are the words he used: ``I don't care what it does--I like the concept.'' Ladies and gentlemen, the Republican revolution in a nutshell. Concepts. Theories. A straight line on a piece of graph paper. Neat. Clean. Simple. Sterile. In the real world--the messy, sloppy real world--``what it does'' matters. ``What it does'' affects actual human beings, whether ``it'' is a new tax system or massive welfare reform, the overhaul of Medicare or the dismantling of environmental protections. Somebody might get hurt out here. Somebody might want to pay attention to that. ``I don't care what it does,'' says the majority leader of the House of Representatives. ``I like the concept.''

Mr. STARK

Mr. STARK. Mr. Speaker, this Sunday, Kaiser Permanente Health Plan will celebrate its 50th birthday. Although Kaiser dates back to 1933, it was on October 1, 1945, that the plan was opened to public membership in the San Francisco Bay area. Back in 1933, Dr. Sidney Garfield, the founding physician of Kaiser Permanente Health Plan, developed the principles of modern prepaid medical care in southern California when he provided health care to 5,000 workers who were building the aqueduct to carry water from the Colorado River to Los Angeles. Five years later, Henry J. Kaiser was leading a consortium of companies building the Grand Coulee Dam in Washington State when he realized that labor unions were unhappy with the fee-for-service care being provided to the 10,000 workers and their families. Kaiser's son, Edgar, who was directing the project, invited Dr. Garfield to come to Washington and form a medical group to furnish health care to the workers and their families. In 1942, Henry Kaiser and Dr. Garfield transplanted the program to Kaiser's wartime shipyards in Richmond, CA, and the Portland-Vancouver area. They then expanded it to the Kaiser steel mills in southern California. With the end of World War II and the closing of the shipyards, the health plan was incorporated into a nonprofit public trust and opened to the general public. Today, Kaiser Permanente serves more than 6.6 million people--making it both the world's oldest and largest nonprofit integrated health care system. Mr. Speaker, I ask you and my colleagues to join me in celebrating the birth of Mr. Kaiser and Dr. Garfield's idea, which has since developed into one of the most influential forces in the delivery of modern health care and a model for others to follow.

Mr. STARK

Mr. STARK. Mr. Speaker, I rise today to congratulate the Serra Center, a non-profit organization located in Fremont, in California's 13th Congressional District. This month Serra is celebrating its' 20th anniversary of serving adults with mental retardation. The Serra Center was founded in 1975 by a group of parents in the community, because there were no programs available to provide individualized care for their family members with mental retardation. The goals of Serra Center are to empower individuals with mental retardation and give them the opportunity for independence and productivity; to help them achieve their maximum potential in the least restrictive environment consistent with their needs; and to integrate each person into the community with a sense of dignity and well-being. Services provided include training in household skills such as cooking, cleaning and money management; development of skills leading to employment; training in community skills such as how to use public transportation, libraries, and pay phones; recreation programs, and in- home support as needed. Serra was dedicated on September 14, 1975, and began by serving 19 people in its residential program. In 1976, the Serra Center opened it doors with five on campus residences and an administration building. The organization has continued to grow, and now, in its 20th year of operation, the Serra Center has residential facilities for 57 people and provides services to 93 people living in their own homes and apartments in the Fremont community. Mr. Speaker, I am proud to recognize the Serra Center on its 20th anniversary. I hope you and my colleagues will join me in congratulating the members of this organization who, 20 years ago, recognized a need in our community and have been working tirelessly to fill it ever since. I wish Serra the best and look forward to working with this organization for the next 20 years.

Mr. STARK

Mr. STARK. Mr. Speaker, as we consider changes to the Tax Code, I hope that we can consider bills to discourage pollution and the depletion of scarce natural resources. I've long proposed these kinds of tax changes, and I am today introducing the first in a series of such tax bills--a bill which will eliminate various subsidies designed to encourage the consumption of polluting materials and the destruction of scarce natural resources. I would like to enter in the Record at this point an excellent op ed on this subject which appeared in the September 10 Washington Post entitled, ``The Green Revenue Path.'' Over the coming months, I plan to introduce other bills to advance the ideas contained in this article. The Green Revenue Path--For Healthy Growth, Washington Should Tax Resources, Not Labor (By Ted Halstead and Jonathan Rowe) For all the talk of radical tax reform in Washington, there's a basic question that the politicians and experts have somehow missed. The leading proposals, whether Democratic or Republican, are justified by what they wouldn't tax--capital gains, interest income, etc.--not by what they would tax. Purporting to encourage savings and investment, these proposals would all tend to shift the burden of taxation in one way or another from income onto work--that is, onto the folks who, in Sen. Phil Gramm's apt phrase, ``pull the wagon.'' There's a better way, one that doesn't penalize the things--work and enterprise--that America needs most. Instead of taxing the creation of wealth, the government ought to [[Page E 1760]] tax the depletion of it. The federal government should be moving toward elimination of payroll and income taxes and toward taxation of the use of finite natural resources and the pollution that results. Instead of using taxes simply to raise revenues, the government could raise revenue in a way that helps reduce the need for both government and taxes. This idea of resource-based taxation is quite different from President Clinton's BTU tax proposal in 1993 that was mainly a new tax on top of the existing income tax structure. By contrast, we're talking about replacing the income and payroll taxes on the middle class with taxes on the use of finite resources such as oil and coal, on pollution and on virgin materials that end up in the trash. The federal income tax would be restored to what it was in the early 20th century--a kind of excise tax on only the very richest Americans (a historical fact that the Democratic party seems to have collectively forgotten). Such a tax shift would provide a big boost for jobs and for America's ability to compete in the world. First, eliminating income or payroll taxes for most of the middle class would cut the cost of labor in America without reducing wages. The real ``job killer'' of the current tax system is not the tax on capital gains, as Republicans claim. Much more debilitating for employment in America is the payroll tax, which slaps a big penalty on small businesses for the heinous act of hiring a worker. Resource-based taxes provide a practical way to reduce that penalty. Second, a shift to resource taxes would push our whole economy toward more efficiency. A few pioneering companies have already shown the economic gains that are waiting to be tapped, as Joseph J. Romm demonstrates in his book ``Lean and Clean Management.'' Boeing, for example, installed efficient new lighting that has cut electricity use for that purpose by 90 percent. West Bend Mutual Insurance, in West Bend, Wis., cut total energy use almost in half with a new office building designed to conserve resources. Since conservation technologies and practices employ many more people than does the use of virgin resources, more jobs would result. Many of those new jobs would be in recycling, which would boom because virgin materials would no longer have the subsidies they enjoy under current tax laws. This, in turn, could help bring manufacturing jobs back to the inner cities, which could become the new supply depot of recycled raw materials, the equivalent of the mouth of the mines, that companies seek to be near. Third, resource-based taxes would help solve our environmental problems by reducing the need for cumbersome, top-down regulation. Boeing's manager of conservation, Lawrence Friedman, has noted that if every company in America adopted the lighting efficiencies that Boeing did, ``it would reduce air pollution as much as if one-third of the cars on the road today never left the garage.'' In other words, a resource tax system would make tax avoidance both legal and socially desirable. As individuals and corporations sought to cut their tax bills, the environment would become cleaner and the economy more efficient--and regulators less necessary. This is not a pipe dream. We have completed the first draft of a resource tax proposal for the state of California, and found that the state could abolish virtually all existing state and local taxes, and raise the same amount of revenue from resource use and pollution instead. A shift of that scale is not feasible at the federal level. However, a reasonable tax on resource use and pollution--which would keep the price of gasoline within the levels paid by Europeans and Japanese--would make it possible to eliminate the federal income tax entirely for families making up to $75,000 a year, and for individuals earning up to $40,000. Part or all of that money could be used to abolish payroll taxes at the lower wage levels, and to buffer low-income Americans from the impact of the tax. So why not? Some will warn that the United States would lose competitive position, but the opposite is more likely. With incentives to become lean and efficient in the use of resources, American companies would actually gain a competitive edge. Convinced of this, major international corporations in Sweden, such, including IKEA and Electrolux, are supporting a move toward resource taxes there, and the European Community is moving in this direction as well. Moreover, Prof. Lawrence Goulder of Stanford has shown how a resource tax could be levied on the energy content of key imports, keeping the playing field level for American producers paying such taxes. Another objection will be raised by technological utopians, who say there's no such thing as ``finite'' natural resources, because the infinite ingenuity of people will always find substitutes for any resources that run out. If that's true, then resource-based taxation would buy more time for such new technologies to arise; it would also create price incentives that would hasten the development process. This would help bring about exactly what Newt Gingrich says he wants: a Third Wave economy, which Alvin Toffler describes as based on ``processes and products that are miserly in their energy requirements.'' Resource-base taxation is a proposal designed for where the economy is going, rather than where it has been.

Mr. STARK

Mr. STARK. Mr. Chairman, I believe most people on both sides of the aisle know why we are spending the time of the House on this issue. This is nothing more than a cynical maneuver by the Republicans to give themselves some cover with the elderly for the massive cuts they are planning to make in Medicare and Medicaid. We have heard the Republicans charge that the Clinton administration is raiding private pensions to fund the liberal social welfare programs that were rejected by the voters last November. And we have heard how the valiant Republicans are going to come charging in on their white horses to slay this misty Clinton dragon by passing H.R. 1594 and rescue the fair elderly from this dreadful attack on their pensions. But we all know what is really going on. The Republicans are, as we speak, making plans for massive cuts in Medicare and Medicaid that will cause extensive harm to millions of senior citizens, both in their pocketbooks and in the quality of their health care. Let me tell you a little bit about what the Republicans have in store for the elderly. The House Republicans' budget resolution would require us to cut $270 billion out of the Medicare program over the next 7 years. This is a huge cut--the program would be 25 percent smaller in 2002 under this plan than it would be under current law. What this means for the elderly is that Medicare premiums and deductibles will go up, [[Page H 8755]] while benefits will go down. The Republican cuts will reduce seniors' access to health care and require new co-payments for services such as lab tests, home health care, and skilled nursing facilities. On average, Social Security recipients will pay $3,500 more out of their own pockets for medical care over the next 7 years if the Republican Medicare proposals are passed. In the year 2002 alone, average costs for each senior will rise by $1,060. Seniors in my area of California would pay $1,466 more on average for health care by 2002--or a total increase of $4,783 over the next 7 years. Seniors on Medicare have an average income of about $18,000 apiece-- how can they possible pay more than $1,000 more per person for their medical care? About 83 percent of Medicare benefits go to seniors with income below $25,000. Medicare cuts of the size proposed represent a massive tax hike on middle and lower income seniors. Lower-income seniors, especially those fortunate enough to need extended nursing home care, will be hit again by the additional huge cuts proposed in the Medicaid program. Almost two-thirds of Medicaid spending goes to senior citizens, largely for seniors in nursing homes who have already used up their own resources to pay for medical care. Turning Medicaid into a block grant program, as some Republicans have proposed, and cutting it by as much as $182 billion over the next 7 years will make it impossible to continue current levels of support for low-income seniors--at a time when needs will be rising dramatically because of Medicare cuts. A costly extended illness can happen to anyone--and these cuts would remove the Medicaid safety net for seniors who need extended nursing care. We still don't have the full details of the Republicans' plans to cut Medicaid and Medicare. The proposals we've seen so far don't generate enough savings to meet their budget targets, but they are bad enough. For example, in the Supplementary Medical Insurance (Part B) part of Medicare--which is financially sound and does not require cuts to maintain its solvency--the Republicans may be planning to double the deductible that Medicare patients have to pay before Medicare reimburses them for their doctors' bills. And then after doubling the deductible, they plan to index it--just to make sure it goes up every year thereafter. At the same time, the Republicans plan to increase the premiums that Medicare enrollees must pay. And if that isn't enough, they may also want to make patients pay a higher share of costs of laboratory services, home health care services, and skilled nursing facilities. And so the bottom line is, Medicare patients will be paying more up front for their coverage, and when they get sick and actually use medical services they'll pay more for that too. And if they use up all their resources and still need nursing home care, the Medicaid program will no longer be there to provide a safety net. Now you understand why the Republicans need some protection, some way of conjuring seniors into believing that the Republicans are protecting their retirements, even as they eviscerate the Medicare and Medicaid programs. Today's charade is part of that effort. The Republican bill under consideration focuses on a minor Labor Department regulation which lets pension fund managers consider ancillary benefits when making investment decisions. These are known as Economically Targeted Investments, or ETI's. For decades, there has been strong bi-partisan support for requiring pension funds to seek the best possible financial returns for the sake of their beneficiaries. The Employee Retirement Income Security Act [ERISA] imposes that fiduciary duty on managers on the Nation's private pension plan assets of $4.5 trillion. Early on, however, pension managers raised the question whether, in choosing between two investments with equally promising financial prospects, they could favor the investment with collateral benefits to their group or community, such as whether an investment creates jobs in the local community or stimulates small business development or even whether to pass up an investment because the money would go abroad. In a series of letters to pension funds seeking clarification on this issue, the Department of Labor made two points. First, investments failing to make competitive returns could not be chosen. But, second, among investments with competitive returns, pension managers would not violate their fiduciary responsibility by giving consideration to collateral benefits. This interpretation of ERISA is nonpartisan. It originated more than 20 years ago and has been endorsed by the Carter, Reagan, Bush and Clinton administrations. However, it was not widely known, even among pension professionals, since it only existed in a series of individual letters. Following a recommendation by the Bush administration's outside advisors on ERISA, the Labor Department put out an interpretive bulletin last year which restated the guidelines issued not only by Democratic administrations but also by the Reagan and Bush administrations. In response, the Republicans began accusing the Clinton administration of plotting to hijack America's pension assets to fund its liberal social agenda. As time has passed, their claims have grown wilder. Last week, Congressman Saxton, the chief sponsor of H.R. 1594, issued a preposterous study. First, it claims that the interpretive bulletins issued June 23, 1994 was a stealthy response to the Republican takeover of Congress in January 1995. No less absurdly, it claims that ETI's would reduce pension assets by an average of $43,000 per beneficiary over a 30-year span. That phony calculation comes from, first, assuming the pension funds consistently sacrifice 2 percent a year in financial returns on ETI's, blatantly against the law; and second, that pension funds will grown 12 percent per year for 30 years reaching $2,075,000 per recipient. Because of ETI's, there would be only $2,032,000 apiece. In fact, just as in health care and Social Security, the Clinton administration is working to defend the elderly: The policy to permit economically targeted investments does not cost the elderly one red cent in pension benefits, since the rules require that the risks and returns of ETI's must be the same as for other investments. The current interpretation of the law is identical to the policy adopted under previous Presidents, including both President Reagan and President Bush. The ERISA rules require that all investments have competitive rates of return and risk but only permit the additional consideration of collateral benefits. The legislation proposed by Vice Chairman Saxton is not just a solution in search of a nonproblem, it is pernicious. It would create a thought police for pension fund managers. In effect, the Saxton bill says to fund managers: ``Don't let us catch you considering anything in your investment decision that may benefit your country or your fellow citizens. If we catch you thinking about anything but the fund's bottom line, you're in trouble.'' What else does the vice chairman's bill say to pension managers? It says you can protect yourself by putting your funds in Wall Street but don't even think about putting them in a small business in your own community. It says you can invest in a multinational firm that plans to close factories and ship jobs abroad, but don't even think about investing in an American company to help create jobs here. It says you can invest in a foreign company that will compete with the United States but don't even think about using your funds to help an American company compete. It is ironic that Representative Saxton would sponsor a bill to eviscerate the ETI regulations when his own State of New Jersey has two very effective ETI programs. In New Jersey, the State Investment Council directs the investment of about $34 billion of assets for the State public employees pension funds. The following is a statement of the council's policy: The Council has determined that investing for the benefit of fund beneficiaries need not exclude investments in New Jersey or those which advance other social goals. In 1984 the Council codified a list of Social Investment rules for the State Division of Investment that includes reviewing all reasonable investment proposals presented by New Jersey corporations and giving preference to New Jersey investments if other terms are equal. Is the vice chairman going to go back to New Jersey this weekend and demand that the State pension funds be prohibited from giving preference to New Jersey investments if other terms are equal? There is another program the council initiated in 1986: Under the program, the Division determines a market rate for mortgages once a month and creates an open window to buy identical New Jersey mortgages from banks at this rate. In fiscal year 1992, one million dollars of New Jersey mortgages were purchased. The open window can prevent temporary capital gaps from developing if New Jersey suffers a temporary shortage of secondary mortgage funds. Is the vice chairman going to go home this weekend and demand that the State pension funds stop buying New Jersey mortgages and only purchase mortgages from other States? Mr. Speaker, in summary, there is no truth, not even a kernel, to the Republican charges--the ERISA rules are very clear that ETI's are permissible only when they do not involve any sacrifice of return to plan beneficiaries. The interpretive bulletin on ETI's is no threat to private pension funds--Ronald Reagan didn't think so when he was President and nonpartisan experts do not think so today. But the Republicans, who are desperate for any cover to protect themselves from the growing wrath of the seniors, have latched on to this bulletin and have shamelessly invented whatever distortion necessary to create an [[Page H 8756]] imaginary threat to private pension plans--a wispy dragon which they will slay by passing H.R. 1594. Responsible Members of Congress should have no part of this charade. If the Republicans want to make billions of dollars in cuts in Medicare and Medicaid, they should do it in the open without diversions or smokescreens and they should accept the responsibility. I urge you to vote against H.R. 1594.

Mr. STARK

Mr. STARK. Mr. Speaker, today my colleague, Mr. Amo Houghton, and I will introduce the Exempt Organization Reform Act of 1995. This bill reforms three provisions of exempt organization law. The bill would first create a category of transactions that would be considered self- dealing because of insiders involved in a transfer of 501(c)(3) or 501(c)(4) organization assets; second, clarify that private inurement prohibitions apply to 501(c)(4) organizations; and third, impose intermediate sanctions on both private inurement and self-dealing transactions. Section 501(c)(3) of the Internal Revenue Code exempts from Federal income tax religious, charitable, educational and certain other organizations that meet statutory and regulatory requirements. A primary requirement for tax-exempt organizations is that the organization's net earnings may not inure to the benefit of any private shareholder or individual, and the organization may not be organized or operated for the benefit of private rather than public interests. Under current law, the only sanction available to the IRS to combat private inurement is revocation of the organization's exempt status. Revoking an organization's tax exemption is a severe penalty, which in many cases penalizes the wrong parties--the intended beneficiaries of its charitable work and the local community--while leaving untouched the insiders or other private parties who benefited from the diversion of the organization's assets and/or income. The IRS rarely imposes this sanction. Since 1950, Congress has been concerned with problems of self-dealing between private foundations and insiders, and as recently as 1993 and 1994, the House Ways and Means Subcommittee on Oversight held public hearings that focused on compliance by public charities with the private inurement and private benefit prohibitions. Evidence presented at the oversight hearings documented numerous abuses of these prohibitions by a number of public charities. At the Oversight hearings, the IRS established a need for a wider range of enforcement tools--sanctions that do not require revocation of exempt status for violations of the private inurement and private benefit prohibitions. Problems of insiders inappropriately benefiting from a tax exempt entity are all too common among nonprofit entities. The following examples illustrate transactions in which individuals have enriched themselves at the public's expense while nonprofit organizations have been looted. An exempt 501(c)(3) health care organization operated a clinic at which the chief executive officer received total compensation in excess of $1 million. In addition, the organization made substantial payments for his personal expenses. The organization had sold its charitable assets and was purchasing physicians' private medical practices, often at more than fair market value. An exempt University gave its president a significant compensation package, including salary, deferred compensation, expense accounts and loans--many of which were non interest bearing. He also received the use of an expensive residence whose maintenance costs, including maid service, were paid by the University. A public charity provided assistance to the poor. A principal officer of the organization, along with relatives, used its funds to pay for personal expenses such as leasing of vehicles, educational expenses, vacations, home improvements, and rental of resort property. An exempt organization headed by a television evangelist raised large sums of money through fraudulent or misleading fundraising. Only a small part of the funds raised was used for charitable purposes. The organization paid the personal expenses of the officers and controlling individuals. Television evangelist Pat Robertson, chairman of Christian Broadcasting Network [CBN], and his son Timothy, turned a $150,000 investment into stock worth $90 million by the 1992 sale to the public of cable TV stock they had originally bought from CBN. This story is complicated, with twists and turns that often exist in self-dealing and private inurement cases. A cable TV programming company, The Family Channel, was started in 1977 as a division of the nonprofit CBN and was financed with charitable donations of viewers. CBN wanted to sell the Family Channel in 1989, partly because the Family Channel was so lucrative that it jeopardized the tax exempt status of the CBN--IRS rules require charities to receive their revenues more from charitable activities than from business activities. The Family Channel reportedly generated $17.5 million in just 9 months of 1989. For the purchase in 1990, Pat and Tim Robertson formed a for-profit company, the International Family Entertainment, Inc., [IFE] with a minority shareholder and bought the Family Channel. The Robertsons put up $150,000--2.22 cents a share--and the minority shareholder put up $22 million. IFE/Family Channel went public at $15 a share in 1992, and the Robertsons' $150,000 investment became worth $90 million. They retained 69-percent control of IFE/Family Channel. The Family Channel continues to be a cash cow. Pat Robertson's 1992 salary and bonus from IFE/Family Channel amounted to $390,611. His son Tim received $465,731 in 1992 alone. All the while, Robertson remains chairman of the nonprofit CBN that created the lucrative family channel. The 1993 and 1994 Oversight hearings established the need for sanctions that fall short of revocation of exempt status for violations of private inurement and private benefit prohibitions. The health care bills reported in 1994 by the House Ways and Means and Senate Finance Committees both incorporated provisions on intermediate sanctions. The bipartisan effort in this area has been demonstrated time and time again--in hearings, in committee reports, and in proposed legislation. When unable to pass intermediate sanction legislation during health reform last year, a provision on intermediate sanctions was offered in the Ways and Means Committee's GATT bill, however it was not accepted by the Senate Finance Committee. The evidence of abuse in this area is compelling. We should move quickly to pass this legislation before insiders take further advantage of organization's tax exempt status. Explanation of Bill: Present Law Under the Internal Revenue Code (the ``Code''), a tax- exempt charitable organization described in section 501(c)(3) must be organized and operated exclusively for a charitable, religious, educational, scientific, or other exempt purpose specified in that section, and no part of the organization's net earnings may inure to the benefit of any private shareholder or individual. Organizations described in section 501(c)(3) are classified as either private foundations or public charities. Organizations described in section 501(c)(4) also must be operated on a non-profit basis, although there is no specific statutory rule prohibiting the net earnings of such an organization from inuring the benefit of shareholder or individual. Under the Code, penalty excise taxes may be imposed on private foundations, their managers, and certain disqualified persons for engaging in certain prohibited transactions (such as so-called ``self-dealing'' and ``taxable expenditure'' transactions, see sections 4941 and 4945). In addition, under present law, penalty excise taxes may be imposed when a public charity makes an improper political expenditure (section 4955). However, the Code generally does not provide for the imposition of penalty excise taxes in cases where a public charity (or section 501(c)(4) organization) engages in a transaction that results in private inurement. In such cases, the only sanction that may be imposed under the Code is revocation of the organization's tax-exempt status. i. excise tax on excess benefit transactions A. The bill would amend the Code to impose penalty excise taxes equal to 25 percent of the excess benefit as an intermediate sanction in cases where a public charity described in section 501(c)(3) (such as a hospital) or organization described in section 501(c)(4) such as an HMO) engages in a ``self-dealing'' transaction with certain disqualified persons. In the case where an organizational manager knows of such a transaction, an additional tax equal to 10 percent of the excess benefit may be imposed upon the organizational manager. B. For purposes of the bill, ``excess benefit transaction'' generally means any transaction in which an economic benefit is provided by an applicable tax-exempt organization to or for the use of any disqualified person if the economic benefit provided exceeds the value of the consideration. The term ``excess benefit'' includes loans and certain private inurement. C. Under the bill, ``excess benefit'' also includes the lending of money or other extension of credit between an applicable tax-exempt organization and disqualified person. D. ``Disqualified persons'' would de defined under the bill as any person who was an organization manager at any time during the five-year period prior to the self-dealing [[Page E 1766]] transaction at issue, as well as certain family members and 35-percent owned entities. The term ``organization manager'' means any officer, director, or trustee of a public charity or social welfare organization (or any individual having powers or responsibilities similar to those of officers, directors, or trustees). E. The bill would provide for a two-tiered penalty excise tax structure, similar to the excess tax penalty provisions applicable under present law to prohibited transactions by private foundations and political expenditures by public charities. Under the bill, an initial tax equal to 25 percent of the amount involved would be imposed on a disqualified person who participates in a self-dealing transaction. Organization managers who participate in self-dealing transactions, knowing that the transaction constitutes self- dealing, would be subject to a tax equal to 10 percent of the amount involved (subject to a maximum amount of tax of $10,000), unless such participation was not willful and was due to reasonable cause. F. Additionally, second-tier taxes would apply under the bill if the self-dealing transaction is not ``corrected,'' meaning undoing the transaction to the extent possible, but at least insuring that the organization is in a financial position not worse than that in which it would be if the disqualified person were dealing under the highest fiduciary standards. If a self-dealing transaction is not corrected within a specified time period (generally ending 90 days after the IRS mails a notice of deficiency), then the disqualified person would be subject to a tax equal to 200 percent of the amount involved. Any organization manager refusing to agree to correction would be subject to tax equal to 50 percent of the amount involved (subject to a maximum amount of tax of $10,000). Under the bill, if more than one person is liable for a first-tier or second-tier tax with respect to any one self-dealing transaction, then all such persons would be jointly and severally liable for the tax.

Mr. STARK

Mr. STARK. Mr. Speaker, today, I am introducing the first in a series of bills to discourage pollution and resource depletion through the elimination of corporate energy and resource subsidies. The first bill in this series is simple. It repeals 11 incentives in the corporate Tax Code to produce various polluting energy supplies and consume various nonrenewable minerals. [[Page E 1762]] The revenue raised by repealing these corporate provisions is approximately $14.5 billion over 5 years. Through powerful lobbying, polluters have carved out special treatment in the Tax Code. These tax breaks or loopholes do nothing but undermine the public good. Not only is the Government subsidizing environmental degradation, but average citizens must make up for the lost revenue by paying higher taxes or suffering under the burden of increased national debt. These tax loopholes function as a reverse Robin Hood, taking from the average worker and giving to the polluting businesses. Fundamentally, these tax subsidies lock-in old technologies, such as coal-fired electricity, which make it harder for new, cleaner, more efficient technologies like solar or wind energy to take hold and complete. Furthermore, subsidizing the extraction of virgin minerals from the earth makes recycling and source reduction less competitive. Currently, these polluting tax subsidies cost taxpayers close to $2.2 billion per year. This figure is expected to total a $14.5 billion Treasury loss over the next 5 years. The mining and oil corporations are two industries which are rewarded with special tax breaks for polluting activities. First, the mining industry enjoys tax subsidies for mining toxic substances such as lead, mercury, and asbestos. These subsidies can exceed the value of the owners' investment in the mine. Furthermore, tax subsidies conflict directly with Federal environmental policies. The Tax Code subsidizes the mining of lead, asbestos, and mercury, while the Government spends millions to eradicate these highly toxic substance from our environment. The second major industry cradled by tax subsidies is the oil and gas industry, which enjoys the most elaborate targeted tax treatment available to any industry. For example, investors can write off passive losses from oil and gas investments but not from investments in other industries. Oil and gas companies are allowed to write off many of their capital costs immediately, and many can take deductions for so- called percentage depletion--which has no connection with actual expenses or depletion. The purpose of these tax subsidizes is to encourage domestic oil and gas production and consumption. Having provided these subsidies, Congress has recognized that it is not in the national interest to encourage oil and gas consumption. But rather than repealing the oil and gas tax breaks, it has instead provided additional, conflicting subsidies for alternative fuels and conservation. To make matters even more confusing, one of the largest alternative fuel subsidies is for gasohol, which some argue may use almost as much fuel to produce as it ostensibly saves. In total, the conflicting tax breaks for oil, gas and energy are estimated to cost $19 billion over the next 5 years. The U.S. Treasury studies have repeatedly found that extractive and polluting industries such as coal mining, petroleum, natural gas, and hardrock mining already have lower effective rates than other industries. In a time when there are no guarantees of Government support for the poor, the young, or the disabled, one might ask whether there should be guarantees of Government support for businesses, particularly those that degrade our natural environment and threaten our health. It is time to end these tax breaks.

Mr. STARK

Mr. STARK. Mr. Speaker, today, I would like to join my constituents in the celebration of the completion of the modernization of the Century Village Apartments, a 100-unit apartment complex in the city of Fremont. This complex was recently acquired and renovated by the Mid-Peninsula Housing Coalition, a nonprofit housing developer, with financing assistance provided by the city of Fremont and its redevelopment agency. Ten apartments at the Century Village are reserved for participants in the Housing Scholarship Program, which combines affordable housing, job training, child care, and other supportive services, to enable participants to obtain full-time employment and achieve economic self- sufficiency. Through donated units and units required through financing agreements to be reserved for housing scholarships, the program is helping people who are helping themselves during a critical period in their lives. To date, a total of 70 housing scholarships have been provided to families who are in job training. Over 90 percent of the housing scholarship recipients have successfully completed job training. Housing Scholarship Program graduates are developing new leadership skills and becoming valuable assets to the program and the community. Graduates have testified before the city council about the need for additional housing units. Graduates also serve as mentors for new job training participants. Therefore, Mr. Speaker, I come before you today celebrating with my constituents the success of the Housing Scholarship Program and the completion of the Century Village Apartments. I hope all my colleagues will join in congratulating the city of Fremont and the Mid-Peninsula Housing Coalition for their contribution to their community.

Mr. STARK

Mr. STARK. Mr. Speaker, I am today introducing an updated version of H.R. 1213, with a prospective effective date. The bill relates to real property sales of S corporations. It is my understanding that if the legislation has a prospective effective date, Treasury will have no objection to the proposal.

Mr. STARK

Mr. STARK. Mr. Speaker, over the years, I've entered a number of letters from fellow citizens detailing the outrageous failures of our current health insurance system. I'd like to share with you a letter from the Carawan's of Aransas Pass, TX, which details the crushing increase in health insurance premiums for a family which has had health problems but which has incurred little health expense in the last few years. Clearly, their insurance company wants to force them into giving up their policy--but with no protection against pre-existing condition exclusions, the Carawan's have no where to turn. Their family policy started 8 years ago at $3,096 a year with a deductible of $2,000. It is now $3,645.90 a quarter with a $3,000 deductible. Mr. Speaker, I regret we did not pass H.R. 3600 last year. It would have required the kind of open enrollment, no-pre-existing condition, community-rated policies which would save the Carawan's and millions of other Americans from being priced-out of the insurance market. Following is their moving letter on why we so desperately need health insurance reform: Dear Congressman: Today we received notice that our health insurance was going to be increased by 30% on July 1, 1995. In January, 1994, our quarterly premiums for my husband and I for a $3,000.00 deductible were $1,770.00. The quarterly premium on July 1, 1995 for the same coverage will be $3,645.90 or $14,583.60 a year. Eight years ago when we purchased this plan for our family the premiums were $258.00 quarterly or $3,096.00 a year. (Note the deductible at that time was $2,000 and has been increased not by our choice to $3,000.00). I have spoken to my insurance carrier and they claim the large increase is due to the high loss ratio in the group we are in. Since January, 1994, my husband and I have paid in a total of $12,641.00 in premium and had a total of $584.10 in claims. The stress from this impossible increase will surely increase our chances of recurring illness. My husband and I both have had cancer and we know what a financial strain a serious illness can cause with health insurance coverage and we can't imagine how we could handle such a situation without any protection. We also realize that we cannot qualify for another plan even though it has been over six years since either of us have been hospitalized. Do we pay the increased premiums until we deplete all our financial resources or do we save the premiums and try to self-insured knowing we could not possibly save enough for a possible needed heart or liver transplant. There is not a simple answer. My husband who is age 55 and I, age 54, are both self- employed. I am an insurance agent and my husband is a commercial shrimper. My husband is a veteran of the Vietnam war with 8 years service to our country. We have always worked, paid our taxes, and tried to be responsible Americans. We have always tried to protect our family with insurance coverage and have never asked for a free handout from our government. It is not fair at this time in our life to be faced with such a dilemma from no fault of our own. As a representative of our country, I plead with you to take note of the health care problem and act on what is happening. We cannot keep on much longer the way things are now. If something is not done soon, only the rich and the poor (those on disability or very low income supplemented by our government) will be able to receive medical care. What will happen to the middle class worker that has no company benefits? Respectfully, Frances R. Carawan, Aransas Pass, TX.

Mr. STARK

Mr. STARK. Mr. Speaker, I would like to issue a press advisory concerning the coalition to save Medicare. Earlier this month, a spokesperson for the coalition was quoted as saying-- We want to reform Medicare and we want to save it. That's what it's all about. No one's going to be forced into managed care or anything else. It's so simple and so innocent. I'm just amazed at how it's being depicted. (Associated Press, August 9, 1995.) The person who made this comment on behalf of the coalition was Claire del Real. Ms. del Real served as the Deputy Assistant Secretary for Public Affairs in the Department of Health and Human Services [HHS] during the Reagan administration. Upon leaving HHS, Ms. del Real took a position with International Medical Centers [IMC]. IMC was a private HMO participating in a Medicare demonstration project that promised to provide free prescription drugs, eyeglasses, and doctor and hospital care without Medicare deductibles in an effort to increase competition and reduce costs to the Medicare Program. (The Washington Post, June 23, 1987.) In reality, IMC President Miguel Recarey was indicted for being one of the most fraudulent parties to ever participate in the Medicare Program, with the fraudulent activity permitted largely as a result of waivers approved by HHS officials. Recarey remains a fugitive from U.S. courts. The inspector general of the Department of Health and Human Services, the General Accounting Office, and a congressional committee found that-- Between 1981 and 1986, a period in which HHS was making key decisions regarding IMC, numerous HHS employees left Government service for employment with IMC, either directly or as consultants providing services to IMC. (``Alleged Misconduct by International Medical Centers, Inc. Officials,'' Report of the Office of Special Investigations, General Accounting Office, December 15, 1987.) Among the former HHS officials hired by IMC was Juan del Real, the HHS general counsel who left the Government in November 1984 to work for a large Washington law firm. The firm began representing IMC several months later and was paid $800,000 in 1986 by IMC. In June 1985, del Real quit the firm to work for IMC at a salary of $325,000, four times what he earned as a Government lawyer. IMC also hired his wife, Claire, a former HHS spokesperson at $130,000 per year. (Miami Herald, 1988.) McClain Haddow, the chief of staff to the Secretary of HHS, was found to have circumvented his agency's normal procedures, got a secret opinion justifying the waiver to IMC and granted it. Months after Haddow left HHS in 1986, Claire del Real offered him a job and hired him as an IMC lobbyist. (``Medicare Health Maintenance Organizations: the IMC Experience,'' Hearing of the Committee on Government Operations, December 15, 1987.) In sum, Ms. del Real was a senior representative in an organization that offered to strengthen, but actually looted, Medicare. Today, she represents an organization with the stated goal of saving Medicare.

Mr. STARK

Mr. STARK. Mr. Chairman, I am very disappointed that the cable television industry will be deregulated as a result of the Telecommunications Act of 1995. Many of the consumer safeguards that resulted from the 1992 Cable Act are being swept away as a result of this legislation. The 1992 Cable Act helped keep the cable operators honest and was effective in saving consumers approximately $3 billion. True competition is still a few years away and without the necessary protections, cable operators will very likely raise their rates and overcharge their costumers for service. From 1986-1992, when the cable industry was last deregulated, cable prices rose at three times the rate of inflation. Only when the Congress passed legislation in 1992 did the cable operators become more responsible. If cable regulations are removed, the consumers of this country will suffer.

Mr. STARK

Mr. STARK. Mr. Speaker, I rise today to recognize Mr. Thomas K. Blalock, the public works director of of the city of Fremont in California's 13th Congressional District. Tom is retiring after 34 years of dedicated service to our community. Tom began his professional career in Fremont in November 1960, when he became Fremont's assistant city engineer. As assistant city engineer, he was responsible for managing the engineering division and overseeing the areas of project design, construction management, real property, and traffic engineering. In March 1975, Tom became Fremont's director of public works where, for the last 20 years, he has managed from 172 to 254 employees in four areas: engineering, maintenance, integrated waste, and administration. Tom has been a resident of the South Bay for over 43 years. After graduating from San Jose State University with an engineering degree in December 1954, he began his career as a planning aide in the city of Mountain View, where he had worked as an engineering aide throughout college. In April 1955 he moved to the city of Sunnyvale to work as a design and traffic engineer. He held this position until November 1960 when he came to Fremont. Tom belongs to a number of professional organizations including the American Public Works Association [APWA] of which he is a life member. In 1991, he was the recipient of the APWA's Samuel A. Greely Award. He is also a member of the American Society of Civil Engineers [ASCE] where he has served as an executive board member for 10 years in the urban planning and development division. In 1985, he received the ASCE's Harland Bartholomew Award, a national award for urban and regional planning. He is also a member of the League of California Cities. In 1991, he was president of the league's public works officers department and has also served on a number of the league's policy committees. Tom has also served on the boards of many of our community organizations including the Chadbourne School Family and Faculty Association, from 1962 to 1965, and the Mission San Jose High School Parent Faculty Association, where he was chair from 1976 to 1978. He also participated as a Mission San Jose Little League umpire from 1970 to 1974 and has been an active member of St. Anne's Episcopal Church, serving both as bishop's committee member and a senior warden. He was a member of the Children's Home Society of California for 14 years and represented that organization at the both local and the state level. Although Tom's expertise will be sorely missed by those in the city of Fremont, he was elected last November to the Bay Area Rapid Transit [BART] Board for region 6. Therefore, citizens in this area will continue to benefit from his knowledge of and involvement with engineering and transportation issues. Mr. Speaker, I'd like to recognize Mr. Thomas K. Blalock for his commitment to our community. I hope you and all of my colleagues will join me and all of Tom's friends and neighbors in congratulating him on his retirement and wishing him well in all of his future endeavors.

Mr. STARK

Mr. STARK. Mr. Speaker, today, I would like to pay tribute to 13 firefighters for their years of service to the city of Fremont. These firefighters have collectively provided 370 years of protection to the citizens of Fremont. In addition to their dedicated years of public service, these individuals also served their country in branches of the armed services. I would like to share with you and my colleagues some of their accomplishments. Robert Andrade, over 29 years of distinguished service. Hired September 1, 1964, promoted to captain on April 16, 1972 and retired May 31, 1994. Captain Andrade made many significant contributions to the department, particularly in the training division and in fire hose and nozzle research and development. He served 3 years in the U.S. Navy and was active during the Cuban missile crisis. Robert L. Asher, Jr., over 26 years of distinguished service. Hired January 3, 1967, promoted to captain on April 16, 1972 and retired June 9, 1993. Captain Asher served in the fire suppression division for the majority of his career, with 1 year in the fire prevention division. He coached little league baseball and CYO basketball for several years. He was also a volunteer assistant football coach at Ohlone College in Fremont. Edward Bauchou, over 30 years of distinguished service. Hired March 15, 1963, promoted to engineer December 1, 1982 and retired July 1, 1993. Mr. Bauchou served in the fire suppression division his entire career. He also served 3 years in the U.S. Navy and was on active duty during the Korean conflict. Mr. Bauchou coached several years in CYO Basketball and in the city of Fremont youth baseball. Mr. Bauchou was a volunteer catechism and first aid instructor at Saint Leonard School in Fremont. Richard L. Cabral, over 29 years of distinguished service. Hired September 1, 1964, promoted to captain July 1, 1979 and retired December 3, 1993. The majority of Captain Cabral's career was spent in fire suppression with years of exemplary service in the fire prevention division. He ended his assignment as the assistant fire marshal. Captain Cabral coached 8 years in CYO Basketball, little league baseball and youth football. He was also a volunteer football coach at St. Mary's High School in Berkeley, CA. John R. Ford, over 25 years of distinguished service. Hired October 16, 1968 and retired December 15, 1993. Mr. Ford worked in the fire prevention division, was a member of the hazardous materials response team, and was one of the first tillermen on the department. He served 4 years in the U.S. Navy and also volunteered as a first aid and CPR instructor at the Church of the Latter Day Saints. He is currently active as a director at his local homeowners association. Campbell G. Gillies, over 29 years of distinguished service. Hired on September 1, 1964 and retired March 1, 1994. Mr. Gillies was one of the first tillermen trained to work on Fremont's tillered ladder trucks. Mr. Gillies' entire career was in fire suppression. He coached 2 years of little league baseball and was also active in the Boy Scouts for about 5 years. Mr. Gillies served for several years as the president of his local homeowners association in the Mission San Jose area of Fremont. Robert A. Guardanapo, over 29 years of distinguished service. Hired on June 1, 1964, promoted to captain on April 16, 1972 and retired December 15, 1993. Captain Guardanapo's years of service were mostly in the fire suppression division, with 8 months in fire prevention. He coached for several years in CYO Basketball and has been an active member of the Elks Club for many years. Captain Guardanapo helped to organize the Desert Storm Veterans appreciation event in the city of Fremont. Frank A. Horat, over 33 years of distinguished service. Hired on August 1, 1960, promoted to captain on April 16, 1972 and retired October 30, 1993. Captain Horat's years of service were all in the fire suppression division. He also served 8 years in the National Guard. He also coached 4 years with the Centerville Little League and 3 years with CYO basketball. William J. Kaska, over 26 years of distinguished service. Hired on October 16, 1968 and retired on January 26, 1995. Mr. Kaska's years of service were all in the fire suppression division. He also served 3 years in the U.S. Naval Reserve. He was active in the Boy Scouts of America as an assistant scoutmaster for 35 years and coached 7 years in Fremont youth baseball. Mr. Kaska also assisted with the Fremont Fire Department Historical Project. Donald H. Promes, 31 years of distinguished service. Hired March 15, 1963, promoted to captain on April 16, 1972 and retired June 30, 1994. In addition to Captain Promes' years as a suppression officer, he worked as a fire inspector investigator in the Fire Prevention Division for 7 years. He also served 6 months in the U.S. Army. Captain Promes coached Fremont youth baseball for 7 years and 8 years in CYO youth basketball. John L. Schacherer, nearly 30 years of distinguished service. Hired on September 1, 1964 and retired August 1, 1993. Mr. Schacherer spent his career in fire suppression and was one of the first tiller- qualified firefighters. He also served in the U.S. Navy for 4 years. Richard M. Schreiber, over 25 years of distinguished service. Hired on March 1, 1968, promoted to engineer on December 1, 1982 and retired on October 30, 1993. Mr. Schreiber spent his entire career in fire suppression and is especially remembered for his fabrication skills in apparatus outfitting. Mr. Schreiber also served 5 years in the Marine Reserves. His community service includes coaching little league baseball, CYO basketball and also youth track. Mr. Schreiber is currently volunteering as the Bucks Lake Homeowners Association director and is also on the board of directors for Gallippi Ranch. Mr. Schreiber was also an active PTA member for many years. Philip L. Soria, over 29 years of distinguished service. Hired on September 1, 1964, promoted to captain on July 1, 1974 and retired August 1, 1993. Captain Soria served as the training officer of the Fremont Fire Department. As well as working several years in the fire prevention division, he was an acting battalion chief in his final year. Prior to joining the department, he served 3 years in the U.S. Army where he attained the rank of corporal. Captain Soria has coached many years in little league baseball, youth soccer, adult soccer and was also active as an adult soccer referee. Captain Soria was very involved in Fremont's Sister City Program. He delivered a donated fire engine to Fremont's Mexican sister city. Captain Soria was a volunteer adult literacy teacher and active as a room parent for his children's elementary school. Mr. Speaker, I come before you today to recognize these men for all their years of public service and commitment to our community. On Friday, September 8, 1995, these individuals will be honored by local officials, their colleagues, friends and families at a dinner in Fremont, CA. I hope you and my colleagues will join me in congratulating these role models and wishing them well in their future endeavors.

Mr. STARK

Mr. STARK. Mr. Speaker, I was unavoidably detained from voting on Monday evening, July 31. I was attending a child-birth class with my wife, Deborah, and I was unable to return in time to vote on the Stokes amendment to H.R. 2099, rollcall 605. Had I been here, I would have voted ``yes,'' just as I did when the Stokes amendment passed the House on Friday, July 28, rollcall 599. I am saddened and disappointed that this provision was defeated, as I have continually fought for clean air and safe drinking water. I would like my colleagues to know that I wish I had been available to vote on this measure.

Mr. STARK

Mr. STARK. Mr. Speaker, on July 25, the president of the National Association of Public Hospitals, Larry Gage, testified before the Ways and Means Subcommittee on Health on the pending Medicare cuts. I am inserting portions of his outstanding statement--a statement that every Member should read before voting on the excessive, destructive Medicare and Medicaid cuts proposed by the budget resolution. In this section, Mr. Gage discusses the dangers of managed care if not properly implemented and supervised, and the benefits of managed care when done correctly. Portions of Mr. Gage's statement follow: With Respect to Managed Care, We Must Be Careful Not to Overpromise and Overexpand, Beyond the Capacity of Our Health System to Respond The term ``managed care'' is now so ubiquitous that it dominates the field of vision in both the private and public sectors of the our health industry. More than just a helpful tool, managed care has become a preoccupation--perhaps even an obsession--for private insurers, employers, and individuals, as well as for legislators and bureaucrats at every level of government. Yet it is an obsession that obscures the need for greater scrutiny of the managed care industry, in order to avoid potentially irreversible damage to the future viability, quality and ethical standards of health care providers, as well as to the good health of many millions of Americans. In other words, before we continue this headlong rush into uncharted territory, we need to pause and take stock, to make sure our moral compass is working properly. We need to ask (and answer) some tough questions in the heat of the current debate, which I believe represents nothing less than a struggle for the reputation, ethics, values, even the soul, of the managed care industry. The dilemma is essentially a simple one: what is ``managed health care'' and should it primarily benefit payers or patients? It is largely designed as a blunt instrument for containing health costs--as many policymakers in Washington and dozens of state capitols believe? Or--as many managed care advocates would like to believe--is it something else: a genuine health care delivery reform that shifts the historic emphasis from acute and episodic intervention to the prevention and maintenance of wellness? This is not an idle question. If managed care is primarily the former--a way to contain costs--then we may be wasting our time worrying about ethics. As indicated by the recent publicity over the failure of some HMOs to pay for emergency services, if the bottom line is all that counts the patient and the provider will both suffer (this is true whether the bottom line is Medicare savings or higher dividends for shareholders). Of course, we would all like to believe that effective managed care plans can BOTH restrain costs and improve wellness. But the plain fact is, in the public sector at least, MOST managed care activities have been carried out in the name of short term cost containment rather than genuine health system reform. There are perhaps several ironies here. The first, of course, is that there is increasing evidence that managed care is not much more effective over time in holding down health costs that the fee for service system it is rapidly supplanting. Only the most highly organized and self- contained plans--staff and group model HMOs--have any measurable track record over time in holding down costs. For most other plans, after a brief initial flurry of savings-- often driven more by the arbitrary demands of payers than any inherent efficiencies in most organizations--costs seem to rise at about the same rate as the industry as a whole. A second irony is that the major underlying reasons for cost increases in the American health industry have little or nothing to do with either managed care or fee for service medicine. Rather, they depend on such factors as the large and ever-growing numbers of uninsured, continuing advances in expensive technology on both the outpatient and inpatient fronts, and the fact that no one has effectively cured most Americans from demanding the most and the best no matter what health plan they enroll in. (It cannot escape the Committee's notice that the so-called ``point of service'' managed care plans--the most costly and least controllable--are the plans that usually score highest in consumer satisfaction among HMOs.) The third, and perhaps greatest, irony is that the steps which clearly could reduce health costs over time-- prevention, wellness and public health services--are the last services added and the first ones on the chopping block when the primary goals are short term cost containment and profit- taking. Certainly, there is no disagreement about the importance of preventive measures aimed at improving both individual and community-wide health status. Preventive health can minimize both the potential for excessive care in the fee for service environment and the potential for providing too few services in the managed care environment. Moreover, the assignment of patients to primary care gatekeepers who are able and willing to manage the full continuum of a patient's care, also improve a patient's health, and thus hold down long term health costs, even if more services are needed in the short run. But these features must be fully integrated into HMO's not just grafted onto the surface. Of course, many managed care organizations and employers do try to emphasize wellness and prevention, or at least pay lip service. The problem is, we cannot demonstrate that these services will reduce health costs overnight. In fact, in the short run their effective use is likely to increase services and costs, especially for low income elderly patients historically deprived of such services. Ultimately, of course, if ``managed care'' is seen only as a tool for cutting costs, the result will be a health system that is neither ``managed'' nor ``care.'' We all know that there are more than a few dirty little secrets about the explosive growth in Medicaid managed care over the last several years. I will agree that some managed care organizations have developed elegant, sophisticated MIS and case management systems that emphasize prevention and wellness. Some plans may also have adequate and well-rounded networks of providers that are reasonably reimbursed even as they are given rational incentives to change wasteful practice patterns. However, many other organizations have simply grown too fast to take the time to develop such systems or incentives. Rather, they devote their efforts to enrolling mostly people who are young or healthy (or both), invest as creatively as possible the enormous cash flow generated by capitated payments, ratchet down payments to providers wherever they can, keep support staff to a minimum, erect subtle and not-so-subtle barriers to access, and pray no one needs a liver transplant before they can cut a deal to sell out. Now it may sound from these statements that I am cynical-- perhaps even that I oppose managed care. But nothing could be farther from the truth. I belong to an HMO. NAPH has been working rapidly to help both public and private health systems develop or expand managed care capacity all over the country. Together with my associate, Bill von Oehsen, I have even published a new book--a 1000 page ``How To'' manual for Medicaid Managed Care and State Health Reform. Managed care is not problematic in itself--especially for the poor and disenfranchised. Done properly, managed care can result in genuine improvements in health status and expansion of access for some of our most vulnerable patient populations. It is just that, done poorly, implemented too rapidly, or for the wrong reasons, it could be a setback, not an improvement, both for patients and for entire communities. We need only look at the TennCare Medicaid debacle to see some of the problems we face when cost becomes the only issue. With TennCare, the state of Tennessee dumped all Medicaid and many uninsured patients overnight into ill- prepared managed care plans with inadequate provider networks, only to pay them premiums that were originally found to be 40% below acknowledged actuarial soundness. As recently as last month, TennCare rates were determined by Governor Sundquist's own TennCare Roundtable to remain 10-20% below costs. And in fairness to the Governor, who was not responsible for developing TennCare, he and his staff have now publicly committed themselves to implementing needed reforms. I do not believe it is inevitable that TennCare represents the future of managed care--but if we hope to expand such programs to include a substantial proportion of Medicare beneficiaries, we must act quickly, together, to set tough standards for equity, fairness, access, quality and fiscal integrity in managed care plans.

Mr. STARK

Mr. STARK. Mr. Speaker, I am today introducing legislation to clarify, simplify, and improve the Medicare and Medicaid physician self-referral legislation, while maintaining its important protections against abuse of patients and expensive over-utilization and over- billing of the Medicare and Medicaid Programs. Last month, when Caremark International Inc., a former health care giant pleaded guilty to Federal fraud and kickback charges, two physicians were accused along with the company. It is predicted that several hundred more doctors eventually could face criminal prosecution before the investigation concludes--that is because Caremark's guilty pleas stemmed from paying doctors to induce referrals of Medicare and Medicaid patients to the company's several home care businesses. Although the Caremark case is not a pure physician self-referral case, it confirms that physicians are vulnerable--vulnerable to greed; vulnerable to pay-offs; and vulnerable to temptation. Without a doubt, physician self-referral is bad for the public and bad for the patient. Study after study has shown that it inevitably encourages unnecessary duplication and overutilization of facilities and services, producing an overall significant increase in cost to the patient and to the Treasury in higher Medicare and Medicaid payments. As shown by the Caremark case, this type of unethical arrangement gives doctors powerful incentives to bend their professional judgment. Without laws to prohibit abusive arrangements, doctors will continue to drift toward the opinion that medicine is just a business, and patients are theirs to be bought and sold. Clarification of current law is necessary. Perhaps the main problem with the law is the administration's inexcusable delay in releasing the antireferral regulations. The lack of guidance has contributed to both confusion of the doctors and to the bank accounts of lawyers, who have often created unnecessary fears about the legislation. We must clarify, where necessary, without creating loopholes that would essentially negate the law. Last year, we worked extensively with a number of provider groups and organizations to draft amendments during health reform, which were included in H.R. 3600, but that unfortunately did not pass. Today, I offer legislation to amend and clarify the physician self-referral law. Today's bill includes a number of provisions designed to make the law clearer, more workable, and more acceptable to the provider community. The bill does the following: repeals the exception for physicians' services; includes durable medical equipment and parenteral and enteral nutrients, equipment and supplies in the exception for in-office ancillary services; excepts shared facility services that are furnished under certain conditions; creates a prepaid plan exception in the case of a designated health service, if the designated health service is included in the services for which a physician or physician group is paid only on a capitated basis by a health plan pursuant to a written arrangement and in which the physician or the physician group assumes financial risk for those services; includes an exception to the prosthetics, orthotics, and prosthetic devices and supplies designated health service by providing for prosthesis replacing the lens of an eye, eyeglasses, or contact lenses; and exceptions relating to compensation arrangements are deleted and language is inserted to define an acceptable compensation arrangement. Physician self-referral has no inherent social value, biases the judgment of physicians, and compromises their loyalty. As the Caremark case exhibits, physicians are susceptible to the same temptations as any other person. This bill clarifies and simplifies many of the questions raised by current law while maintaining important protections for patients and for the taxpaying public.

Mr. STARK

Mr. STARK. Mr. Speaker, on July 25, the president of the National Association of Public Hospitals, Larry Gage, testified before the Ways and Means Subcommittee on Health on the pending Medicare cuts. I'd like to reprint here two paragraphs from his outstanding statement--a statement that every Member should read before voting on the excessive, destructive Medicare and Medicaid cuts proposed by the budget resolution: Despite rhetoric to the contrary, these programs have achieved their results for the most part efficiently and economically. Medicare in particular has seen provider payments capped at a growth rate less than inflation for most of the last decade. And current projections for growth in the Medicaid program are largely due to demand for long term care and the growth in the number of recipients, with the poor elderly being a major factor on both fronts. For these reasons, it is simply impossible for most analysts to imagine reducing spending in these two programs by almost half a trillion dollars over the next seven years without destroying both programs and disenfranchising tens of millions of elderly and low income Americans. Surely, it is impossible to contemplate implementing positive reforms such as are envisioned in the Committee's new proposal in the face of such reductions.

Mr. STARK

Mr. STARK. Mr. Speaker, for 117 years, family-operated Pacific Lumber Co. was a model corporation. As owners of the Headwaters Forest in Humbolt County, CA, Pacific Lumber's conservative logging practices left their forests healthy long after other timber companies had liquidated. Corporate raider, Charles Hurwitz, recognized Pacific Lumber Co. as an undervalued asset and with his friends Michael Milken and Ivan Boesky orchestrated a takeover of Pacific Lumber primarily through high interest, high risk, junk bonds. In the wake of the takeover, Hurwitz's United Savings Association of Texas failed, costing the taxpayers $1.6 billion. It was the sixth largest savings and loan failure in U.S. history. Hurwitz has been logging the Headwaters Forest at an unprecedented rate so that he can pay off his debts. He has tripled the logging of redwood, especially old growth and since 1986 has cut in excess of 40,000 acres of redwood and Douglas fir. The company has only 5,500 acres of virgin redwood and 5,000 acres of virgin Douglas fir left. However, Hurwitz's debts from various ventures are so massive that no amount of logging will help him balance his accounts. By logging at such a furious pace, Hurwitz has nearly exhausted the resources of the forest which will devastate the local timber industry and mean the loss of hundreds of jobs from the region. Several court decisions have kept Hurwitz from logging even further. Still, Hurwitz has been logging previously restricted parts of the forest since March and has indicated that he will log the Headwaters Grove, home of the last stand of privately owned ancient redwoods in the world, in September. He has already violated State and Federal endangered species law and is clearly not afraid of punishment. Mr. Hurwitz needs to know that the taxpayers will not stand idly by and watch him break the law time after time, avoid his massive public debt and cut down an ancient grove of 2,000-year-old redwood trees. Unfortunately, it appears that Hurwitz will break the law once again, but this time he will also completely ruin one of nature's greatest treasures. The Federal Deposit Insurance Corporation [FDIC] is investigating Hurwitz for his role in the 1988 savings and loan failure. If prosecuted, the FDIC on behalf of the taxpayers could force Hurwitz to pay back $550 million, which ironically, conveniently, or justly approximates his price tag for the Headwaters Forest. A debt for nature swap is the best way for the taxpayers to recover their debt from Mr. Hurwitz and also save the Headwaters Forest from destruction. If the public is interested in saving the Headwaters Forest redwoods from the chainsaws, then this dept for nature proposal is our best hope. Voters should let their Members of Congress know--and all concerned taxpayers should urge the FDIC to pursue aggressively its investigation of the failure of United Savings Association of Texas.