Ron Wyden

Mr. WYDEN

Mr. WYDEN. Mr. Speaker, I rise today to discuss how $274 million in wasteful expenditures can be cut from in Washington State. This matter obviously has great implications for taxpayers across the country, but it certainly has special implications for the 1 million Oregonians who live downstream from Hanford. Last year the Energy Department made a binding commitment to citizens of the Northwest and to the American people to make progress in cleaning up the Hanford nuclear facility. Now, only 1 year later, the Department of Energy is threatening to break Hanford's contract with America by failing to fund critical cleanup work, while allowing its contractors to waste taxpayers' money on low priority projects and out- and-out boondoggles. Working with the Hanford watchdog group, Heart of America, I have carefully reviewed Hanford's $1.5 billion cleanup budget for fiscal year 1995, and have identified over a quarter billion dollars of wasteful spending in this budget. My staff has independently reviewed the budget data with Department of Energy officials and confirmed that the current budget figures in this report are accurate. Some of the areas where significant budget savings could be realized include significant contractor overhead costs. The current overhead budget is more than $450 million, which is 30 percent of Hanford's total clean-up budget for fiscal year 1995. Reducing these overhead costs from 30 percent to 20 percent of the budget would yield a savings of $150 million alone. Second, Hanford contractors should be prevented from claiming a bonus for purported cost savings from not constructing six new double-shelled waste tanks. The need for these tanks and the contractor's cost estimate of $435 million to contract them has always been a questionable expenditure. The Department of Energy has now determined that it is not necessary to construct all of these tanks. Under the current contract, eliminating the questionable expenditure for constructing these tanks could be considered a so-called cost savings for which the contractor could claim a bonus equal to 15 percent of these so-called savings. Eliminating any contractor bonus for purported cost savings for not constructing the tanks would yield a savings of $63 million. Third, the Hanford Advisory Board has recommended that the use of cleanup funds to subsidize defense and energy programs at Hanford be ended, and that this would save $39 million. Mr. Speaker, this waste of taxpayer money ought to be stopped, and the funds immediately redirected to urgent clean-up projects, such as preventing high-level waste tanks from leaking radioactive waste, and protecting the Columbia River. In these tight budget times, there is not a single dollar to waste on bloated contractor overhead, excessive legal fees, or flashy media production services. Certainly there is money to be saved on museums, on economic development, and a variety of other services which is not related to cleanup at Hanford at all. Every cleanup dollar ought to go to fund real cleanup. The money that is being wasted now, if it was put to more productive use, might allow Hanford to actually meet its cleanup obligations. With all of the wasteful spending that we have been able to identify in the Hanford cleanup budget, Hanford is almost certain to come up short in meeting its cleanup milestones. That means greater risk to Hanford workers and it means greater risks to the public. What is more, it also means greater expense to the taxpayers down the road, because as the groundwater contamination spreads, the cost of the cleanup will increase significantly. For the past 2 years, I have worked to obtain information from the Department of Energy and its contractor, the Westinghouse Hanford Company, about how the cleanup money is really being spent. The Department of Energy repeatedly delayed in providing this information, and when it finally did come, a significant amount of the information was simply omitted or blacked out. The reason for failing to disclose this budget information really was not clear during all that time that we struggled to get it, but it certainly is now. The reason the information was not forthcoming is that it is embarrassing, it is embarrassing to hear that the Department of Energy spent over $450 million on overhead last year at Hanford. That is more than twice the amount that was spent on actually cleaning up the soil and the groundwater. This spending on contractor overhead is robbing Hanford of the funds needed to protect the public from the threat of a high-level waste tank explosion and to protect the Columbia River and the 1 million Oregonians who live downstream from the Hanford facility. In fact, the Department of Energy and Westinghouse are cutting funds needed to properly characterize the contents of Hanford's nuclear waste tanks. This violates the recommendations of the Defense Nuclear Facility Safety Board and the intent of the law that I authored requiring the Department of Energy to identify the dangerous tanks that pose serious safety hazards. Scaling back contractor overhead from current bloated levels to about 20 percent of the budget would yield $250 million in savings that could be used to fund this critical work. Another area where there is rampant wasteful spending involves contractor legal fees. Again, most of this money has nothing to do with cleaning up Hanford. Taxpayer money is really being used to clean up contractor legal messes at a cost of over $40 million last year. So what happens is the taxpayer gets taken to the cleaners and the contractors' lawyers go to lunch and dinners on the taxpayers' dime. These are just a few examples of how the cleanup dollars are being wasted. I have sent a letter to the Committee on Appropriations urging that the committee redirect the $274 million of waste in Hanford's budget toward urgent cleanups that are not funded, and also I have indicated to the committee involved in overseeing the budget at the Department of Energy, I serve as the ranking Democratic Member on the Investigations Subcommittee, that I believe that our committee should further investigate these examples of waste in Department of Energy cleanup budgets. If the Energy Department wants to get its cleanup program on track, then the first thing that the agency has to do is clean up its own House to get rid of the waste. I would like to conclude by talking a bit about what the response of the contractor, the Westinghouse Corp., has been to our proposal. Without even looking at the proposal, Westinghouse sent out a message to its employees about the various findings in our report. Westinghouse seems to be saying in its statement that I am calling today for the elimination of all of Hanford's overhead budget. That is not what I am saying at all. What I am saying is that there is waste, that there is more than a quarter billion dollars' worth of waste in that Hanford cleanup budget, and, frankly, the way they have dealt with this report, spending dollars on trying to spread more misinformation, suggests to me that they are not getting the message. For example, to put into perspective some of the statements made in Westinghouse's message in response to the report that we did, that they did not write, I would like to make just a few points. Westinghouse says that the term overhead covers some expenses that are in reality indirect cleanup costs. I agree with that statement. Therefore, if the cleanup budget is going down, the overhead budget ought to be going down proportionately. The Hanford budget is being reduced by 20 percent over the next 2 years, so that means that the contractor should be reducing overhead at least 20 percent. Plus, Westinghouse has claimed that bringing Bechtel in as an additional cleanup contractor would lower overhead by 13 percent and that there would be additional overhead savings from the merging of Kaiser into the Westinghouse contract. Therefore, we should be seeing at least a 33 percent overhead reduction, which is almost exactly what I have been calling for. Westinghouse also admits that the fiscal year 1994 overhead budget totaled $451 million, but the examples of legitimate overhead they cite only account total. That means that two-thirds of the overhead is unaccounted for. We say one-third is wasted. Maybe we should be looking at the remaining third of the overhead budget more closely to determine if maybe some of that constitutes additional waste. Westinghouse cites a number of specific overhead expenses that they say are legitimately needed for their operations. For example, they talk about their utilities, they cite steam plant expenses and replacement of antiquated facilities. The steam plant replacement project included a 20 percent contingency, double, double the normal construction contingency. This project is not any different from building a steam plant in Ohio or Florida or New York. Should the contractor get an exorbitant contingency for building a steam plant? The contractors were already paid for the design work on the steam plant so the taxpayers are paying to indemnify the contractors against the risk that their own design is faulty. With respect to safety and insurance, we have not questioned any of their expenditures in their area, but certainly we have asked some questions about the services budget. Westinghouse cited costs of bus service as a legitimate expense. Recently the manager of the Department of Energy's Hanford operations, John Wagner, told congressional staff that the bus service could not be justified because it costs $4,000 per user per year to provide this service. On the administrative side, Westinghouse cites its communications expenses as legitimate. In the past, this budget has been used to pay for expenses like having contractors attend our press conferences and doctoring photos to make drums of waste disappear from the photo, while in reality the drums have not been cleaned up. Certainly public relations expenditures that we have outlined today show again how cleanup dollars are being misspent on work that is unrelated to cleanup of the Hanford facility. Westinghouse also cites regulatory analysis and compliance. This category includes expenditures for cleaning up those legal messes which I mentioned earlier, such as $8 million to defend litigations from those who live downwind from the facility. It also includes $2.5 million for Westinghouse lawyers and outside counsel whose overbilling and expense account padding was exposed last year by the Oversight and Investigations Subcommittee. Finally, it includes two contracts totaling $20 million for second and third layers of redundant review. Now Westinghouse says they have greatly reduced the costs that are not directly related to cleanup. What I have to say today is if that is the case, they certainly should not be against the recommendations I am making to save $274 million in addition. Westinghouse goes on to say that they are committed to increasing cost savings through their productivity challenge. EPA and the Washington Ecology Department say that Westinghouse's productivity challenge relies too heavily on the elimination and deferral of required work. Cutting the required work is precisely where they should not be cutting, but they ought to be making savings in the $274 million in wasteful expenditures we have found and report on today. Westinghouse says that they are working with the regulators to streamline the regulatory process and the compliance requirements at the facility. The Hanford Advisory Board found that regulatory processes where streamlining is needed the most are not the ones imposed by law or the regulatory agencies, but the ones that are imposed by the Department of Energy's own orders. Without the statutes and the legislators, it is questionable how much cleanup work would actually be taking place. Let me conclude by saying that the Federal Government hastened into an agreement with Hanford that really constitutes the Federal Government's contract with the people of the Pacific Northwest. More than 1 million Oregonians live downstream from Hanford. It is not acceptable that the Federal Government breach its contract with the people of the Northwest in order to fund public relations projects, lawyers' fees, free lunches, and unnecessary overhead. I am very hopeful that the Department of Energy will move to deal with these wasteful expenditures that we have identified. Many of my colleagues from the Pacific Northwest and other parts of the country ran for this body on campaigns to streamline the government, to root out waste, to make the government more efficient. I offer to them, the Members from the Pacific Northwest, both sides of the aisle, and Members of this body from other parts of the country, a specific analysis going through line by line the Hanford cleanup budget. It shows how $274 million in wasteful expenditures can be saved, and I hope the Members who have spoken so often about cutting waste will look seriously at this report and move on a bipartisan basis to make these savings, to redirect them so that the cleanup work that is necessary at Hanford is completed and to make sure that the taxpayers of the Northwest and of our entire country are not ripped off in the process.

Mr. WYDEN

Mr. WYDEN. Mr. Speaker, today I introduce the Food Stamp Trafficking and Prevention Act of 1995, a measure which will step up the penalties levied on criminals intent on tearing large holes in this Nation's most valuable social safety net. Each year, waste, fraud and abuse in the Food Stamp Program costs taxpayers as much as $2 billion. Laundering for cash, or exchanging food stamps for contraband items such as guns or drugs, accounts for hundreds of millions of dollars of that total. Occasionally, this activity occurs through retailers who have been initially certified as bona fide grocery stores, but which are, in effect, no more than fronts for the processing of illegal stamp transactions. This activity not only denies fundamental nutrition to some of our Nation's most vulnerable citizens. It also destroys public confidence crucial to the continuation of a very valuable program. I have long been a critic of our Government's lackluster efforts to investigate food stamp fraud, and bring to justice persons who are ripping off the system. Our investigative strength at the Food and Consumer Services Division, for example, is about half of what it was a dozen years ago--despite steady growth in food stamp use and fraud. These personnel cuts make no sense. We need more cops on the beat. Improvements in anti-fraud technology such as the electronic benefits transfer program will not produce maximum results until we have more people to make cases and bring the crooks to trial. I have recently pressed my case on this subject with White House domestic advisors. I am hopeful that the administration's welfare reform efforts will improve our capacity to police fraud in this important program. I believe my position has strong, bi-partisan support in this House. Beyond increasing our investigative effort, we must also look to establishing real penalties that will cause real pain for the chiselers who are, quite literally, taking food from the mouths of this Nation's poverty-stricken elderly, working poor and defenseless, destitute children. The Food Stamp Trafficking Prevention and Penalty Act has three important elements. First, we will strengthen current forfeiture provisions to allow the Government to take all assets resulting from, or involved in the commission of food stamp trafficking. I have devised this language in close cooperation with We are both convinced that this toughened penalty is absolutely necessary to discourage trafficking, and close down what amounts to a nearly no-fault avenue to criminal success now present in the system. Second, we allow the Secretary of Agriculture to require that owners of food stores certified to exchange food stamps submit a valid business license. The intent of this section is to verify that persons in the food stamp networks are actual retailers, and not criminal fronts set-up primarily to illegally launder the stamps. Third, the bill requires periodic reporting by certified stores to ensure that they are indeed in a bona fide business, and are not merely fronts for laundering. This can be accomplished in a user-friendly way by requesting copies of Federal tax forms which delineate volume and scope of business activity. Again, the inspector general has argued that this verification procedure is crucial to the program's sound and honest functioning, and I believe my bill creates a system that will be relatively easy and inexpensive for retailers certified for food stamp business. Mr. Speaker, as Congress moves forward with the welfare reform debate, the holes in system integrity must be closed. Effective welfare reform must be built on a strong foundation in order to guarantee taxpayer support and ensure that resources go not to the crooks but to the people who are most in need.

Mr. WYDEN

Mr. WYDEN. Mr. Speaker, the debate in this House concerning Tax Code reforms traditionally has been focused on two primary issues: Is the current tax law fair, and does the code encourage economic growth and new jobs? Today, I want to suggest that we address one other question: does the code encourage sustained management of an increasingly threatened national treasure--our 350 million acres of privately owned, commercial forest land. Global warming, the deforestation of tropical timberlands, and our own efforts to preserve our dwindling supply of native, old growth timberlands have all lead us to reevaluate our planet's crucial need for trees. As many of my colleagues are aware, I have for years advocated the position that our Tax Code contains severe disincentives for private forestry. With many of my colleagues from the Congressional Forestry 2000 Task Force, I have worked for reasonable changes in the law to overturn unfair obstacles to small woodlot owners who wish to keep their lands in long-term, sustained-yield, timber production. Today, I and 16 of my colleagues reintroduce legislation which takes dead aim at one of the most egregious of the code's disincentives to private forestry, IRS passive loss rules. Our bill, the Forest Stewardship Act of 1995, puts our tax policy on the side of jobs, wildlife conservation and proper timber management--where the code always should have been. This bill will restore to tens of thousands of small woodlot owners the right to deduct reasonable business expenses in managing their nonindustrial private timberlands. Incredibly, the Internal Revenue Service in the mid-1980s stripped these woodlot owners of this favorable tax treatment even though it would cost States like Oregon, which has more than 42,000 tree farmers, an untold number of timber industry jobs and undercut proper forest management. I believe the IRS' position is entirely inconsistent with the intent and will of Congress in enacting the 1986 tax reforms. At the heart of the problem is the agency's stringent rule on material participation, the test that separates passive investors from active managers. Under the IRS' interpretation, which is based on an inflexible hours-per-year activity standard, many tree growers have been unfairly barred from deducting costs of doing business. That means they can't even use professional foresters to help manage their lands without endangering their active status under the law. The resulting mismanagement can mean less timber, inadequate conservation measures, and, ultimately, loss of the lands from the timber base. This bill redefines the code to allow these farmers to deduct normal business expenses. I'm proud to be joined in this effort by a bipartisan coalition of cospnsors--Representatives Herger, Callahan, Deal, Cramer, Cooley, Emerson, DeFazio, Stupak, Klug, Wilson, Oberstar, Spratt, Hayes, Furse, Chapman, and Richard Baker--who have worked very hard with me in crafting this legislation. I would also point out that besides having the broad support of major timber associations representing both tree growers and the wood products manufacturing industry, this legislation has been advocated by environmental organizations including the Sierra Club, One Thousand Friends of Oregon, the Audubon Society, and others. Mr. Speaker, it is not often that both the timber products industry and the environmental community agree on congressional legislation effecting forests management. The reason both of these often warring factions back this bill is quite simple: they understand that this narrow Tax Code change will: First, encourage better forest management by allowing tree growers to deduct the cost of professional forestry consultants; and two, discourage tree farmers from converting their increasingly valuable lands to non-forest uses. As a consequence, wildlife habitat, watersheds, recreational values, and timber resources will be preserved. In Oregon, we have something in excess of 3.3 million acres in small woodlot management. Our State forecasts on future timber needs already have identified these acres as an increasingly important source of trees for our mills. Already, these woodlands account for more than 10 percent of our tree harvest--public and private--in Oregon. My colleagues, these forestlands account for real dollars, and real jobs. Discouraging their best-use management will have real, long-term, adverse impacts on employment and, consequently, IRS tax collections. No less a conservationist organization than our own One Thousand Friends of Oregon has sued the IRS, asking that the agency reconsider its regulations in this area. I urge my colleagues to join us in cosponsoring the vital legislation.

Mr. WYDEN

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

Mr. WYDEN. Mr. Chairman, the view of the gentleman from Florida and myself is that the juvenile justice system does not work. We see these young people committing offense after offense after offense, and there are absolutely no consequences. What we are seeking to do with a very small portion of Federal funds is try over the next few years to get States to adopt a new philosophy with respect to juvenile justice so that, when a young person commits their initial offense, the punishment will be specific, but it will not be the most severe----

Mr. WYDEN. All we are saying is over the next 3 years let us give an incentive to States. It is not a matter of changing the Federal criminal code. No criminal law at the Federal level will be changed, but because there are such serious problems with lack of accountability at the State level, let us encourage States in a modest way to try this out in----

Mr. WYDEN. Mr. Chairman, would the gentleman yield further?

Mr. WYDEN. Will the gentleman yield further?

Mr. WYDEN. Offense. They will face additional punishment

Mr. WYDEN. Mr. Chairman, I move to strike the requisite number of words. Mr. Chairman and colleagues, what the gentleman from Florida [Mr. Canady] and I have been working on together to do is essentially promote a new philosophy with respect to juvenile justice in our country. What we are seeing in community after community is that violent juveniles commit one offense after another and face absolutely no consequences whatsoever. for example, at home in Oregon it was recently reported that a violent juvenile committed 50 crimes, 32 of which were felonies, before the juvenile system took any action to protect the community. The problem has essentially been that the juvenile justice system has been built on the medical model, the notion that even though you are dealing with a repeat violent offender, somehow the offender could be rehabilitated. I think a number of our leading criminologists--and I would refer specifically to the work of James Q. Wilson of Los Angeles--have indicated that the challenge with respect to juvenile justice is to replace this medical model, which is now in place, with a system of accountability. And so what we seek to do in this amendment is to, through this Federal legislation, promote the philosophy wherein violent young offenders who commit crimes will face real consequences each time they commit an offense and those consequences will increase each time they commit an additional offense. Now, I would like to, in closing, particularly commend the Attorney General of my State, Ted Kulongoski. He has been an advocate within the Association of Attorneys General for an approach that would involve graduated sanctions for each offense. I would also like to thank the gentleman from Illinois [Mr. Hyde] and the gentleman from Michigan [Mr. Conyers] for their help. This amendment complements the earlier one, but our colleagues should make no mistake about it, what we would like to do through this amendment is promote a new philosophy of accountability, a philosophy that insures there are consequences every time a young person commits a criminal act. I particularly want to thank my friend, the gentleman from Florida [Mr. Canady] who has been so patient in working through this effort.

Mr. WYDEN

Mr. WYDEN. Mr. Speaker and colleagues, I am a Member of the House who has felt that the calculation of the Consumer Price Index for our country should be a concern that was outside politics, one that was going to be nonpartisan. Making sure that the Consumer Price Index is calculated accurately is of enormous importance to, for example, low- income senior citizens who depend on their Social Security to pay for their necessities, but it is also important to millions of middle- income taxpayers, because our brackets are now indexed for inflation, and the tax brackets and the personal exemption, the standard deduction. A number of these concerns for middle-income people are affected by the Consumer Price Index. But recently is seems to me politics has been introduced to these discussions, because the Speaker has said that unless the Consumer Price Index is changed within the next 30 days, the agency that calculates it, the Bureau of Labor Statistics, would be zeroed out. I think this is very unfortunate. We understand why someone might want to do this, because if you lower the Consumer Price Index, you can have a no-fingerprints way to cut the deficit by about $150 billion, if you cut the Consumer Price Index by just 1 percentage point. But what you will do in the process is hurt those low-income seniors and, ironically, there are some new studies by the Bureau of Labor Statistics that show because of the high medical expenses of seniors their Consumer Price Index may be understated rather than overstated. So you will hurt those seniors. But you will also hurt the middle-income taxpayers who will find they will be paying more in taxes as a result of these changes. Now, I am one of the Democrats who voted on the first day of the session to make it tough to raise income taxes, because I thought it was important to protect small businesses and seniors and others. So last Friday, with the minority leader, the gentleman from Missouri [Mr. Gephardt], and a number of our colleagues, I introduced a piece of legislation stipulating that to cut the Consumer Price Index in this Congress and raise the taxes on middle-income people and hurt low- income senior citizens you would have to comply with rule XXI that was passed the first day saying that a tax increase has got to be approved by a three-fifths majority. I am very hopeful that this bill will not be necessary. I want that Consumer Price Index calculated on nonpartisan bases by professional economists, but if there is going to be an effort to politicize the Consumer Price Index, it will come out on the floor of the House of Representatives and cutting it and hurting the senior citizens and the middle-income taxpayers, for those who want to do it, they will have to comply with the rule making it tougher to raise income taxes.

Mr. WYDEN

Mr. WYDEN. Mr. Speaker, it seems to me that it is very revealing that when my Republican friends feel strongly about the budget, they enshrine their views in the Constitution. But when it comes to protecting senior citizens, for the last half hour we have heard every manner of argument as to why Social Security really does not need constitutional protection. I am of the view that on a bipartisan basis Social Security deserves legally binding, constitutionally protected safety. Unfortunately, this resolution does not do that. Senior citizens deserve better, and on a bipartisan basis we should make sure that it gets done.

Mr. WYDEN. I yield to the gentlewoman from Colorado [Mrs. Schroeder].

Mr. WYDEN

Mr. WYDEN. Mr. Speaker, today I am introducing a package of four bills to help small businesses fulfill their potential as the engine of U.S. economic growth and job creation. This package is designed to overcome structural barriers that limit small businesses' ability to raise capital, attract and motivate skilled employees, and export to fast-growing foreign markets. These are three important challenges that face small businesses today, but too often these companies are victimized by Government indifference. Consequently, literally thousands of promising small companies die each year, not because they lack a good product or skilled management, but simply because they are too small to have the same opportunities for money, workers, and markets that larger companies take for granted. Mr. Speaker, if the U.S. economy is to continue to grow and create jobs, small business will have to be out front. Statistics clearly show that, despite the barriers they face, small companies are the key to the economy's future. In the 1980's, large companies lost a net 2 million jobs while small companies created a net 20 million. Moreover, in my home State of Oregon, perhaps the most predominantly small business State in the country, 98 percent of the businesses employ fewer than 100 workers, and the State government projects that fully 70 percent of the State's job creation in the 1990's will come from those small firms. Mr. Speaker, the legislative package I am introducing today will give small businesses a fair chance to grow and prosper. It will not give small companies any special breaks; rather, it will clear away some of the structural impediments that prevent them from competing on an equal footing. These are the four bills in the package: 1. the entrepreneurship promotion act At some point in its development, nearly every small business faces a crisis in finding the capital necessary to finance continued growth. Nearly every company gets caught in the awkward position of being too large to be financed internally, but not yet large enough to tap the public capital markets or adequate bank financing. Capital is the lifeblood of every small company, spreading nutrients throughout its operations, and without sufficient capital, an otherwise healthy small company with a great product line will be doomed to wither away. Companies caught in this position frequently turn for help to so- called angels--venture capitalists willing to invest their own money in companies they think have a real chance to succeed. Today, there is just not enough venture capital money available for these companies. Investing in new firms is risky, and most investors would rather take the more predictable returns of blue-chip stocks or Government securities than take a flyer on a small company. Moreover, in those parks of the country not near a financial center, there is frequently not a sufficient mass of potential investors who know the local companies well enough to risk an investment. Again, in my home State of Oregon, with its fast-growing software, computer, environmental, biotech, wood products, and other industries, numerous companies that could be global competitors and create thousands of jobs are at risk, simply for want of venture capital funds. It is imperative, Mr. Speaker, to pump more funds into the venture capital pipeline and to direct more of those funds to the companies that really need them. The Entrepreneurship Promotion Act is designed to do that by creating a tax incentive to get more investors involved-- and keep them involved--in starting and growing job-creating small businesses. This bill would create a tax rollover, similar to the one available to homeowners, to enable an investor who sold his stake in a qualified small business to reinvest the money in another qualified small business and defer paying taxes on the capital gain. With this bill, investors would have an incentive to keep their money in the productive sector of the economy, rather than simply cashing out their investment. Moreover, the bill would target the incentive at investments in firms with less than $20 million in annual sales--those companies with the fewest financing alternatives and therefore most in need of venture funds. I am especially grateful to have Mr. Matsui and Mr. Spratt join me in sponsoring this initiative today. 2. the family savings and investors protection act A second vital step to increasing the availability of capital to small business is to increase the return on investments and thereby draw more funds into the investment sector. Currently, investors who hold long-term assets get taxed on both the real gain in value of their investment and on the gain due solely to inflation. When the Government taxes paper profits, not real profits, the added tax burden can be so great that investors can actually end up paying a higher effective tax on capital gains than even the top income tax rate. The message this backward tax policy sends to investors is, ``don't save, don't invest, just consume.'' That is the opposite of what is needed to nurture a healthy, inflation-free environment in which small businesses can grow and prosper. The Family Savings and Investors Protection Act would index capital gains prospectively so that investors would pay taxes only on the real gain in their investment and not on the phantom gains due to inflation. A recent report by the Institute for Policy Innovation calculated that lowering the cost of capital by prospectively indexing capital gains would, by the year 2000, increase capital formation in the United States by $995 billion and create 260,000 jobs. Reflecting the higher economic growth, and resulting tax payments, net Federal revenue would increase by over $40 billion. Combined with the tax rollover bill, indexing capital gains would provide significant relief to those small businesses that have good products and good management but are starving to death for lack of capital. Mr. speaker, capital gains tax policy has been caught in fearsome partisan debate for many years but I believe it is time to move beyond old divisions and recognize that indexing capital gains is good for small business, good for investors, and good for the Federal Government. 3. the employee partnership reward act If Americans are going to enjoy long-term economic growth and more well-paying jobs without triggering inflation, it will be vital to raise productivity. Without rising productivity levels, long-term living standards will stagnate and American jobs will be increasingly vulnerable to global competition. One proven way to increase productivity at a firm is to put in place a performance-based reward plan, in which workers receive direct benefits based on their success in achieving certain measurable goals for the firm. Those goals can vary depending on the priorities of the firm at a given time. For example, a young company may want to boost sales or market share, a company making major new investments may want to raise productivity, and a more mature company may simply want to increase profits. All of those goals are valid--the crucial issue is that those goals must be communicated clearly to workers and the rewards must be tied directly to the firm's performance relative to those goals. These types of plans come under many different names--profit sharing, gain sharing, performance pay, and so on--but they all share the key characteristic that employees have a stake in the success of their firms and investors. The results where such reward plans have been put into place are dramatic. One comprehensive study found that the average productivity improvement in firms that implemented such plans was 7.4 percent-- significantly higher than recent economywide productivity growth rates of 1 to 3 percent. Moreover, in Japan, where about 25 percent of a worker's pay is tied to the performance of the company, fully 93 percent of the workers feel they benefit from an increase in the company's productivity, compared to just 9 percent in the United States. Performance-based reward plans also help make labor costs more flexible. This flexibility encourages firms to create more jobs, because the marginal cost of hiring an additional worker is less. Moreover, layoffs are less likely because when a firm goes through a bad spell and cash is short, its fixed labor costs are lower, as well. One great example of this benefit is a company called Lincoln Electric, a Cleveland-based manufacturer of welding machines and motors. This company suffered a 40-percent decline in revenues during the 1981-83 recession, yet it laid no one off, and has not done so since the early 1940's. And, in Japan, the unemployment rate has stayed around 3 percent through the recent recession--about half the level in the United States during the recovery. The Employee Partnership Reward Act would provide firms and workers with tax incentives to implement performance-based reward plans. Firms would be able to deduct 110 percent of their payments to workers under such a plan, while workers would receive a tax credit of $100-$500, depending on how much of their salary came from payments under the plan. It is entirely appropriate for the Federal Government to encourage such plans through tax incentives because increased productivity and new job creation are good for the whole economy. Today, the Federal Government offers billions of dollars of tax incentives for deferred pension plans, which help people save for retirement but have been shown to have little effect on productivity or job creation. The United States also offers incentives for investments in machinery--in effect, encouraging firms to replace workers with machines. Last year, such capital investments received $22 billion in tax breaks, while investments in workers got just $2 billion. Surely, there is room within the budget to reorder priorities so there can be an incentive for firms to implement plans that benefit the whole economy by boosting productivity and creating new jobs. 4. the small business export enhancement act Mr. Speaker, even if a firm succeeds in attracting sufficient capital and boosting productivity, it will in many cases still need to compete in fast-growing foreign markets in order to prosper. Exports are becoming an increasingly important part of the U.S. economy. Nationally, exports are growing three times as fast as overall economic growth. Over the past 40 years, the rate of job creation in trade-related fields grew three times faster than overall job creation. One in six U.S. manufacturing jobs is now related to exports, and those jobs pay 22 percent more than the average U.S. wage. The lesson is clear: As the global economy continues to develop, successful exporting will make the difference between a good economy and a great economy. While the U.S. economy overall has reached world-class exporting status, small businesses in the United States still lag behind. Smaller companies face special challenges in getting into foreign markets, but export assistance generally has not been provided in a way they find useful. The trade statistics clearly show that small business has not fully shared in the global bounty. According to the Commerce Department, only 10 percent of U.S. firms are regular exporters. A few large firms account for the bulk of U.S. exports, despite the fact that 90 percent of U.S. manufacturers are small- and mid-size firms. Clearly, small businesses remain a large untapped resource of potential export growth for the U.S. economy. However, small businesses with competitive products frequently face high transactions costs and inadequate information about foreign markets, which limit their ability to export. They need some additional help, but Government is not successfully providing it. The Federal Government is the major provider of export assistance, spending over $3 billion a year. A quick look at its export assistance program reveals why small businesses are having such a hard time. There are over 150 Federal export promotion programs fragmented among 19 different Federal agencies. These programs are characterized by duplication of effort, overlap, inefficient dissemination of services and information, turf battles, and confusion among both providers and users of assistance. The Trade Promotion Coordinating Committee concluded that ``for many small- and medium-sized firms, getting through the bureaucracy may be as great a hurdle as foreign market barriers.'' While Federal programs trip over each other and frequently miss their intended targets, many State-based export assistance providers-- including State departments of trade, local industry associations, international freight forwarding companies, local and regional banks, chambers of commerce, and world trade centers--have established good local networks that can effectively deliver timely, accurate, and useful assistance to would-be small business exporters. For example, in Oregon the State department of trade, working closely with the private sector, has set up an admirable model. It is focused on identifying specific, targeted trade leads, doing outreach to companies to inform them of opportunities, and working closely with the companies to help them through the export process. It is a classic example of local leaders who know the local economy working cooperatively to get the most out of the State's export potential. Unfortunately, in Oregon as in other States, those providers of export assistance are woefully short of resources. The Small Business Export Enhancement Act would redirect millions of dollars from the Federal Government to State-based export providers. For the most part, this money will be used to fund partnership programs, designed to combine the resources of the Federal Government with the local networks of State-based export providers. The bill also directs the trade promotion agencies to offset this new spending by identifying in a report to Congress savings of at least $100 million to be achieved through consolidating or eliminating some of those 150 Federal programs that provide overlapping or duplicative services. Mr. Speaker, the report of the National Performance Review stressed that the Federal Government needs to reallocate its export assistance resources to sectors that have clearly shown growth potential while it works to make its services more accessible to clients. Clearly, small business is the obvious place to turn to boost U.S. export growth, and the best way to help small business to export is through State-based providers that know the local companies and their particular needs. If the United States can successfully turn the small business sector into a source of export strength, it can provide a structural economic boost that can put the country on a permanently higher plane of income growth and job creation.

Mr. WYDEN

Mr. WYDEN. Mr. Speaker, in searching for a strong, practical strategy for reducing crime, both Democrats and Republicans have given short shrift to the growing problem of violent crime perpetrated by juveniles. The growth rate of violent crime committed by juveniles now exceeds that of adults. For example, in my home State of Oregon on May 24, 1994, The Oregonian reported that ``adult crime statistics have flattened out, but the number of violent juvenile crimes increased by 80 percent between 1988 and 1992.'' Nationally, according to a 1994 Department of Justice report, youth arrests for murder increased 85 percent, while adult arrests only increased 21 percent between 1987 and 1991. More generally, the violent crime index for juveniles increased 50 percent over the same period, while the adult violent crime index only increased 25 percent. Despite the dramatic increase in violent crimes by juveniles, both the 1994 crime bill and the crime provisions in the Republican Contract With America are business as usual with respect to juvenile crime. The 1994 crime bill allocates $7.9 billion for correctional facilities and a relatively paltry $150 million for alternative juvenile correctional facilities. The Republican Taking Back Our Streets Act contains nine law enforcement titles but doesn't once address the issue of violent juvenile crime. To their credit, the Clinton administration is trying to fill the gaps in the 1994 crime bill provisions. Despite controversy, they have interpreted the Violent Offender Incarceration and Truth in Sentencing Act to be applicable to juveniles. However, the clear thrust of the violent offender provisions in the 1994 crime bill is to reform the adult system and guarantee that our communities are safe from violent adult offenders. In fact, the bigger law enforcement challenge for our country is to reduce juvenile crime. My legislation, the Consequences in Sentencing for Young Offenders Act, pursues a fresh strategy against juvenile crime and sends a straight-forward message: young people who commit a crime will face real consequences for each criminal act and those consequences will increase each time they commit an additional offense. At present, juvenile criminals face few if any consequences. For the first offense--and often many thereafter--there is likely to be probation at best. A bit of history is in order. At the turn of the century, States began to separate the juvenile system from the adult system because of a belief that children who committed crimes could be rehabilitated. The States introduced the concept of parens patriae or a system that might act in the interests of the child. By 1925, all but two States had juvenile courts separate from adult courts. As long as this system was dealing with kids who used bad language and shoplifted, the system got by. In the 1960's and 1970's, with escalating rates of juvenile crime, new standards for juvenile justice were developed with an emphasis on placing juveniles in the least restrictive situation and on counselling instead of punishment. This system was based on a medical model approach grounded in the theory that young people could be cured of their criminal habits. However, little convincing evidence has emerged to show that programs based on the idea of rehabilitation have been effective in reducing recidivism and in protecting our communities. In reality, the understandable anger Americans direct at the juvenile justice system stems from the fact that the medical model has often ended up putting our communities at serious risk from young offenders. Several cases from Portland, OR illustrate what is wrong with the medical model: In 1993, 9 months after being convicted of raping a 4- year-old and facing absolutely no penalty for this crime, a 15-year-old youth and another juvenile who also had a record of violent crime and had faced few penalties, assaulted an Oregonian who was left permanently brain-damaged by the attack. In another case, described in The Oregonian, a child committed 50 crimes, 32 of which were felonies, before the juvenile justice system took action to protect the community. Nationally, only 50 percent of juvenile cases even go to juvenile court. Most cases are handled by some form of social services division. The majority of juveniles who do go to court are given probation. Incredibly, there is little follow up: many jurisdictions do not collect data on what happens to youths referred to the local juvenile services division. In Portland, until recently it was common practice for a juvenile to commit three crimes before being referred to juvenile court. When an offender was diverted from court they were required to sign a contract specifying what they would do to help themselves change their ways. This contract included such basic elements as attending drug or alcohol counselling programs, community service or restitution, or participating in a Big Brother/Big Sister Program. An audit of this system found that only 40 percent of the juveniles ever completed their contracts. Ten percent partially completed them, and the other 50 percent just slipped through the cracks. The major reasons for nonparticipation given were that the families were not responsive, or they just refused to participate. This system in Oregon was actually profiled in 1990 as being a model for the Nation by the Federal Office of Juvenile Justice and Delinquency Prevention! According to New York Magazine, the situation in the Empire State is far worse. Thirty thousand juveniles picked up for misdemeanors in 1993 were issued youth division cards and then released--essentially the paperwork was filed and the child walked out. The Consequences in Sentencing Act that I introduce today seeks to address the glaring States to adopt a new philosophy of juvenile justice--one built on a system of meaningful sanctions that increase with each juvenile offense. This concept has been endorsed by the likes of James Q. Wilson from the University of California at Los Angeles who states that ``the juvenile courts ought to manage the young people brought before them by a system of consistent, graduated sanctions that attach costs to every offense, beginning with the first.'' Dr. Wilson has been good enough to counsel me with respect to the legislation I offer today, and I would like to thank him for his suggestions and years of outstanding scholarship. Additionally, I have worked closely with Oregon's attorney general, Ted Kulongoski who chairs the National Attorney General's Association task force on juvenile justice, and prosecutors, judges, law enforcement, and juvenile services directors both in Oregon and across the country. I would especially like to commend and thank Attorney General Kulongoski, Portland district attorney Michael Schrunk, Bend juvenile services director Dennis Maloney, Judge Stephen Herrell, and Portland Police Chief Charles Moose for their commitment to juvenile reform and their assistance in drafting this legislation. Under the first part of my bill, I would amend the 1994 crime bill to give States with a system of graduated sanctions preference in receiving discretionary grants under the violent offender incarceration provisions. Additionally, these States would be able to access unused truth-in-sentencing funds for juvenile correctional facilities. The second part of the bill allows States with graduated sanctions the option to use any future funds allocated for adult correctional facilities for juvenile facilities. This approach gives States willing to put new accountability in their juvenile justice systems the opportunity to secure additional Federal resources. States are given considerable flexibility as to how they devise their own systems, but must show that they have adopted a system of meaningful graduated sanctions with the following characteristics: First, every offense carries a sanction of at least reimbursing the victim for the crime and for the bureaucratic cost of dealing with the crime. Second, juveniles will move up a scale of increasingly severe sanctions if they break probation or commit a repeat offense. Third, violent juveniles should be efficiently remanded to adult court. Fourth, all juveniles who enter the juvenile justice system should answer to the court. Fifth, to the extent practicable, parents should be held responsible for their child's conduct. Sixth, the juvenile system should be periodically audited for its effectiveness in protecting the community safety, reducing recidivism and ensuring compliance with sanctions. For the most part, there is a consensus among judges, prosecutors, police and people working in youth services, that any new philosophy of juvenile justice should place emphasis on community safety, individual accountability, work, restitution to victims and community, parental involvement and responsibility, certainty and consistency of response and sanctions, zero-tolerance for noncompliance and the highest priority given to community safety. My sense is that some States are beginning to integrate these objectives in their juvenile justice systems--the Federal Government needs to provide States with the incentives and resources to continue in this direction. Incentives and resources for these purposes is what my bill is about, and I hope others will join me and the police, prosecutors, judges and juvenile services directors in a national effort to rethink our juvenile justice systems' philosophy and priorities.