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The Presiding Officer: The Senator from New Hampshire.

Mr. Gregg: Madam President, it is my understanding that under the prior order, Senator Kyl is now recognized for an hour, with Senator Kyl having 40 minutes under his control and the Democratic side having 20 minutes under their control.

The Presiding Officer: That is correct.

Mr. Kyl: Madam President, I thank the Senator from New Hampshire, the ranking member of the committee, for all his hard work and support for those of us who have prepared amendments and would like to offer them.

This is actually the Kyl-Graham amendment. The Senator from South Carolina will be offering this amendment and, incidentally, as soon as we have the exact text typed, we will present that for actual formal submission, but I can begin talking about it right now. Let me begin doing that.

The purpose of this amendment is to demonstrate, I believe, that there is sufficient ability in this budget to take care of a couple of problems that are very important and which we believe should be included within this budget before it gets passed: provisions that provide for the education of American children, provide for capital gains and dividend tax relief to continue to exist both for our families and businesses and the competitiveness of our economy, as well as other provisions which were not included in the underlying budget, such as death tax reform, which I think most of us acknowledge needs to occur and which we need to provide for in the budget.

This amendment Senator Graham and I will be offering in a moment is designed to include these very important provisions which I think most of us support in the budget. Not to do so would clearly represent a very big hole, I suggest, in the budget.

There is a suggestion in the amendment that was offered by the Senator from Montana and others that what Republicans have been saying about this budget resolution--namely, that it raises taxes on every American taxpayer--is, in fact, the case because as approved by the Budget Committee on a party-line vote, I might add, this budget raises taxes by $916 billion over the 5 years of the budget, which would be, of course, the biggest tax increase in the history of the country.

The chairman of the Senate Finance Committee, the Senator from Montana, well understood this, and I suggest probably is the reason for his offering of the amendment to reduce the revenue that is projected by the budget resolution and then, in his case, purports to dedicate that revenue to middle-class tax relief. He wouldn't be offering this amendment were it not for the recognition that there is a huge tax increase in the budget that came from the Budget Committee.

So I submit, to begin this conversation, that Senator Baucus's amendment is a good start, but it leaves in place the tax hikes on millions and millions of Americans, and that is not something most Republicans want to see.

If the Baucus amendment is adopted, then Democrats will be proposing to raise taxes on hard-working Americans by $736 billion over 5 years, rather than the $916 billion, still the biggest tax increase ever. We don't think this is right.

Incidentally, on a technical note, according to the Republican Budget Committee staff, the Baucus amendment increases the deficit in 2010 and 2011. This is important. When the interest is factored in, the Baucus amendment would take the budget out of balance in 2012 by some $6 billion. In the past, the Budget Committee members have had an informal agreement that interest would not be computed for amendments because it would be too cumbersome.

While this amendment would take the budget further into deficit-- preventing tax increases is more important than worrying about a small, manageable size deficit--it may be interesting to note that the Baucus amendment would have this effect.

In addition to raising taxes, we are talking about increasing the amount of deficit.

The Senator from Montana notes that his amendment would extend the 10-percent bracket, the child tax bracket, the marriage penalty relief, the adoption tax credit, the earned-income tax credit for combat pay, and provide modest estate tax relief. I agree with the Senator on all these policies except with the modesty of the death tax relief.

Senator Baucus and some of his cosponsors, especially the two Senators Nelson, have always supported repeal of the death tax, as have I. So it is disappointing to many family businesses and farm owners that we now have sponsors who had supported the repeal of the death tax endorsing an amendment that would set the death tax rate at what I believe is a confiscatory 45 percent and set the exemption at only $3.5 million, which most of us believe is too low. This leaves more than 22,000 families subject to the estate tax each and every year, according to the Joint Tax Committee.

Another one of the cosponsors of the amendment of the Senator from Montana, the Senator from Arkansas, says on his Senate Web site that he supports a $5 million exemption and a 35-percent rate. I am disappointed he would then be endorsing a proposal that would have a 45-percent rate. A 45-percent rate allows the Government--think about this for a moment--to take almost half a family farm or business over the $3.5 million exempted amount at the time of death.

There is a reason this particular policy has been supported by life insurance companies. I think everybody can understand that. It keeps the onerous death tax in place and would require these family businesses and farms to continue to pay exorbitant premiums to insurance companies.

One of the reasons we would like to eliminate the death tax is so we don't have to pay the burden of trying to avoid the tax, which a lot of these small businesses have to do.

As I said, the Kyl-Graham amendment we think substantially improves the Baucus amendment by modifying the year-to-year revenue numbers so that certain tax provisions that have been essential in helping families pay education expenses essential to our economic recovery, essential to savings for retirement, senior citizens, and families facing the death tax are provided for in this budget. Let me quickly go through them and then ask my colleague, Senator Graham, to make further comments.

On the matter of education, the Baucus amendment fails to extend the many education tax provisions that are scheduled to expire. Our amendment, on the other hand, makes higher education more affordable for middle-class Americans by extending the tuition deduction, extending the modifications to the Coverdell education savings accounts, extending certain provisions for the student loan interest deduction, and for extending the exclusion for employer-provided educational assistance.

These are important provisions to American families. They need to be recognized in this budget.

Our amendment permanently extends the $250 deduction for expenses of elementary and secondary school teachers who, on many occasions, are required to pay for the very school supplies they feel are necessary and are important for educating the kids for whom they are responsible.

These are the education provisions.

On capital gains and dividends, who can argue that the capital gains and dividend tax rate reductions have been two of the most important reasons for the strong economic recovery that our country has made. Yet the Baucus amendment fails to prevent an increase in these two important tax rates.

An extension of the current rates would allow our economic recovery to continue. Allowing these rates to expire and to go back up to where they were would be devastating for our economy and for the competitiveness of our capital markets and, by the way, for the retirement savings of many Americans.

So the Kyl-Graham amendment permanently extends the reduced tax rate for qualified dividends and capital gains for nearly 18 million families and individuals every year. That, too, is an important component that should be in this budget.

Quickly on two items before I turn to the discussion of the death tax, this goes to competitiveness. What our amendment would do is prevent tax increases that would clearly hurt our competitive position in the world economy. We talk about outsourcing of jobs and competitiveness and the rest of it. If you want to know what will save American jobs and will allow us to continue to grow, it is the tax rates that Senator Graham and I preserve in this budget.

America cannot be the home for worldwide capital markets if it is hostile to American investors. So the amendment makes the existing tax rates for long-term capital gains and for qualified dividends permanent tax policy. We understand that the lower tax rates that were implemented in 2003 and extended again in 2006 have been a tremendous success for our economy and have benefited a broad range of American citizens.

Growth, since the 2003 tax relief, has averaged more than 3.5 percent a year, while it averaged 1.3 percent from the first quarter of 2001 through the second quarter of 2003, before these tax rates were put into effect.

The Dow Jones industrial average has risen by 40 percent since the lower investment tax rates were enacted.

The average 401(k) balance has risen by about 65 percent since 2003, very good news for American families and investors.

Why would we want to destroy this tremendous growth in the economic wealth of Americans? All of this investment activity makes it easier for entrepreneurs and businesses to raise funds to expand and grow their businesses, create more jobs, and improve the standard of living for all Americans.

By the way, to answer the question of who benefits by all this, some of our colleagues are prone to suggest it is only the wealthy who benefit. Not so. It is interesting to note that most Americans who are benefiting from these lower tax rates are middle-income taxpayers. Fully 43 percent of tax filers in 2004 reporting capital gains had adjusted gross income of under $50,000. These are not the wealthy; these are not the rich. Just 9.5 percent of filers reporting capital gains had an adjusted gross income of $200,000 or above.

So the majority of Americans benefiting from these lower tax rates, the rates we preserve in the budget if our amendment is adopted, are average, middle-class Americans.

For lower income Americans, the current 5-percent rate for investments, which drops to zero in 2008, is another important but sometimes forgotten benefit, especially, important, I might add, to our senior citizens.

According to statistics calculated by the Joint Committee on Taxation, more than 75 percent of all elderly taxpayers' returns reporting capital gains income have adjusted gross incomes of less than $100,000; more than 40 percent have incomes of $50,000 or less. Again, wealthy, the rich? No, we are trying to preserve lower tax rates for middle-income Americans and for senior citizens who rely significantly on their investment income in their retirement.

Madam President, 79 percent of all elderly taxpayers' returns reporting dividend income have incomes of $100,000 or less, and 44 percent have incomes of $50,000 or less, adjusted gross income. So clearly, continuing these lower tax rates is important for our senior citizens and for middle-income Americans.

Incidentally, these lower tax rates, far from blowing a hole in the budget, have actually helped increase revenues far beyond the projections of CBO.

I note that since 2003, Treasury has collected $133 billion more in capital gains revenue than was originally projected by CBO and exceeded the official CBO projections by 68 percent.

In the meantime, all the additional tax revenue flowing into the Treasury from our growing economy has caused our budget deficit to shrink below 2 percent of GDP, which is below the historical average.

If we stay on this current path, we can see continued increase in revenues, continued reduction in the deficit, and continued growth of our economy, not to mention support for our families and retirees.

Last point. What happens if the budget is adopted without providing for the continuation of these lower tax increases? Last fall, Goldman Sachs conducted a very interesting analysis. They wanted to see how the economy would react if taxes were increased in 2011, as the Democrats advocate.

Their analysis showed that the tax increase, and I am now quoting, "would almost surely mark the onset of a recession." Their analysis assumed that the Federal Reserve would step in and cut interest rates to boost the economy, and I am quoting here, "In an effort to resuscitate demand, the Fed immediately cuts the federal funds rate, bringing it 250 basis points below the status quo level over the next year and one-half. Despite this, output growth remains well below trend over that period, putting downward pressure on inflation as slack in the economy increases."

That is a projection of what would occur if this were to happen. We want to prevent this. We want to keep the economy strong and not allow anything that would cause it to go into recession.

Just a final point having to do with the death tax reform. We can't pass a budget that doesn't include an assumption that we are going to reform the death tax. We ought to be repealing the death tax. But what we have done in this amendment is to provide an amount of money that would accommodate the kind of death tax reform that has been supported by both Republicans and Democrats.

Last year, the senior Senator from Louisiana introduced a death tax reform bill, S. 3626, which would provide for a $5 million exemption per estate, indexed for inflation. It would provide for a family business "carve out," a 35-percent rate to taxable estates, and it would begin in the year 2010. The Senator from Arkansas, Mr. Pryor, has endorsed death tax reform that meets these specifics in a statement, according to his Web site.

Now, our amendment provides room in the year-by-year revenue numbers in the budget to accommodate death tax reforms such as those which were proposed by Senator Landrieu and endorsed by Senator Pryor. There have been other Members on the Democratic side of the aisle who have supported proposals I have introduced on death tax reform.

What we are very much hoping is that all of the people, both Republicans and Democrats, who have supported these proposals in the past will remain true to their commitments to their constituents to make sure small farms and small business owners aren't going to have to prepare for or pay the death tax and that we would make room for that in this budget. If we fail to do that, then clearly we are not going to be able to provide the kind of relief our constituents demand and deserve.

Our amendment provides room in the year-by-year revenue numbers to accommodate death tax reform such as that which has been proposed by our Democrat colleagues and, I would add, that I have proposed as well.

Now, of course, budget resolutions don't dictate policy to the Finance Committee, so it would certainly be our intention to work with a lot of different Senators. I worked with Senator Lincoln in the past, and certainly we would want to work with Senators Landrieu and Pryor and all of the others who have indicated they would be willing to support a kind of death tax reform. As long as we have provided the numbers in the budget as Senator Graham and I propose here, then we can work to make those provisions law.

I would hope we could craft an estate tax proposal that would provide an exemption of at least $5 million, indexed for inflation, that provides workable relief for the smallest estates, and that provides for a top death tax rate which is no higher than 35 percent--no higher than 35 percent. Workable relief could mean a lower rate for the smallest estates; it could also mean a family business carve-out as long as it actually works for small businesses and farms and doesn't drive up their administrative costs and leave them with planning uncertainty.

All of these are goals both Democrats and Republicans have endorsed. We hope our colleagues on both sides of the aisle will therefore agree with us that it is important for us to accommodate in this budget room to extend the important tax provisions for education, capital gains and dividends, and for the estate tax.

Amendment No. 507

Madam President, I understand the amendment about which I have just been speaking is actually at the desk. I would like to call it up at this time, and I ask unanimous consent that Senator Graham be added as an original cosponsor.

The Presiding Officer: Without objection, it is so ordered.

The clerk will report the amendment.

The legislative clerk read as follows:

The Senator from Arizona [Mr. Kyl], for himself and Mr. Graham, proposes an amendment numbered 507.

Mr. Kyl: Madam President, I ask unanimous consent that further reading of the amendment be dispensed with.

The Presiding Officer: Without objection, it is so ordered.

The amendment is as follows:

(Purpose: To protect families, family farms and small businesses by raising the death tax exemption to $5 million and reducing the maximum death tax rate to no more than 35 percent, to extend college tuition deduction, to extend the student loan interest deduction, to extend the teacher classroom deduction, to protect senior citizens from higher taxes on their retirement income, to maintain U.S. financial market competitiveness, and to promote economic growth by extending the lower tax rates on dividends and capital gains)

• On page 3, line 11 increase the amount by $390,000,000.
• On page 3 line 12, decrease the amount by $184,000,000.
• On page 3, line 13, decrease the amount by $3,796,000,000.
• On page 3, line 14, decrease the amount by $31,544,000,000.
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• On page 3, line 22, decrease the amount by $3,796,000,000.
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• On page 4, line 1, decrease the amount by $36,398,000,000.
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• On page 4, line 8, increase the amount by $78,000,000.
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• On page 4, line 15, decrease the amount by $9,000,000.
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• On page 4, line 17, increase the amount by $78,000,000.
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• On page 4, line 24, decrease the amount by $399,000,000.
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• On page 5, line 1, increase the amount by $3,874,000,000.
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• On page 5, line 7, decrease the amount by $399,000,000.
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• On page 5, line 9, increase the amount by $3,645,000,000.
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• On page 5, line 15, decrease the amount by $399,000,000.
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• On page 25, line 24, increase the amount by $912,000,000.
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The Presiding Officer: Who yields time?

Mr. Kyl: I yield to the Senator from South Carolina, Madam President.

The Presiding Officer: The Senator from South Carolina is recognized.

Mr. Graham: If that is acceptable with my colleagues, I will speak now, Madam President.

Ms. Stabenow: If I may inquire, Madam President, is the Senator speaking on this amendment?

Mr. Graham: Yes, I am.

Ms. Stabenow: I would ask to be recognized after that.

The Presiding Officer: Without objection, it is so ordered.

Mr. Graham: Madam President, I really don't have much to add because Senator Kyl has done an outstanding job in explaining our amendment and the benefits to the country if we pass this amendment.

To the people in South Carolina who might, by chance, be listening, the reason I am so passionate about trying to extend the tax cuts and making sure this budget does not deal a death blow to tax cuts that have been in place in some form or manner since 2003 is the evidence is overwhelming that they have helped our economy.

Just to kind of build on what Senator Kyl has said, my belief is the global economy of the 21st century is going to require America to rethink across the board how we engage our global competitors. Americans have to ask themselves these questions: Is our tax structure going to be globally competitive? Are we going to have a tax structure that will allow capital to be welcome in this country so that people who take risk can be rewarded here or will we drive people somewhere else?

The regulatory side of government, the litigation side of our American experience here needs to be looked at anew out of a sense of a need to fit into a global economy and to be fair to all our citizens. In my opinion, the worst thing we can do is to create a tax structure that drives jobs overseas.

In this economy, where anyone can do business anywhere in the world, people do look at tax rates in making decisions about whether to invest here or somewhere else. From the Government's point of view, the evidence is overwhelming that the tax reductions in dividends and capital gains, particularly capital gains, have generated revenue to the Federal Government. As we have lowered the rate down to 15 percent, in some cases to zero and other cases 5 and 10 percent, with a maximum capital gains rate of 15 percent, people have generated a lot of capital gains transactions that have been good for the economy and good for the Federal Treasury, and they are due to expire.

This budget, the way it is drafted, is going to deal a death blow to tax reductions that have been beneficial to the economy--and without a good reason, in my opinion. There is no good reason. The question is, Does this budget deal a death blow to tax cuts? The answer has to be yes, simply because Senator Baucus is trying to extend tax cuts by an amendment. And I wish to congratulate him. I am not here to play "gotcha" politics. What he is trying to do in his amendment is a wonderful thing. He is trying to make sure the 10-percent tax bracket is extended for a couple more years in this budget. He is trying to make sure the $1,000 child tax credit is extended as far as this budget applies and we don't revert back to a $500 per child tax credit. In South Carolina, a $1,000 per child tax credit for the families who have been eligible has made a world of difference to people.

My State, like every other State, has great success stories economically and where you have people living paycheck to paycheck. The marriage penalty relief has been good for families in my State. The dependent care credit has been good for people trying to work and raise kids. Adoption credits have been good, helping to create new families. There is nothing more exciting as a lawyer than to be involved in an adoption where you get a child who has no home and you marry them up with a family that wants a child. It is just a wonderful experience. There is combat pay and the EITC exemption.

None of us disagrees with those. Why not go forward into the other areas where we have cut taxes that have benefited the Treasury and benefited job creation? The only reason I can think of is there is a view that there are some Americans who are entitled to tax relief and some who are not. The ones to whom we don't want to give tax relief in this budget have been labeled "the rich" and are somehow unworthy of being included in this budget.

Class warfare is a time-tested political endeavor whose time has passed. We are in this together. There are about 270,000 people in my State who depend on capital gains income and dividend income. Senator Kyl has gone through, in very detailed fashion, who benefits from capital gains and dividend tax reductions, and there are a lot of seniors.

At the end of the day, though, we have a choice to make as a Congress. We can do what Senator Baucus wants, which I wholeheartedly support, and we can stop believing that people on the other side of the river, when it comes to taxes, just make too much money or they do not need the help. I would argue that if you are in business today, creating a product for sale in the global economy, you need help when it comes to your taxes because some of your competitors have tax rates a lot lower than the United States.

When it comes to lowering dividend tax rates, how does that help America? People will invest in companies that pay dividends, they will buy stock, which helps American corporations capitalize, if the tax rates are lower. It is not just a theory; it is a fact. When you are trying to grow your business, you can get investors from the private sector or you can go to the bank and borrow money. It seems to me we would want to create an environment so that corporate America, whatever the size, could get money from the private sector to grow their businesses without being so debt laden, and the people who are receiving dividends, that would be income to help them in their retired years, which would be a win-win situation.

We can't afford to divide America any longer based on how much one makes or this concept that some of us are more worthy of protection from the Tax Code than others. The Tax Code is not going to allow us as a nation, in its current form, to survive in a global economy. But if we extend the tax cuts in this budget, it would be a good signal to the private sector in America that they are going to be able to count on-- for at least a couple more years--some tax cuts that have worked to produce jobs.

The real challenge of this Congress lies ahead; that is, trying to find a way to simplify the Tax Code. That is a debate for another day. Our friends on the other side have been in charge of the Congress now for a couple of months, and this is a test, in my opinion, of how the Democratic Congress views the needs of America across the board in a global economy. Again, the evidence is overwhelming. There is overwhelming evidence that the dividend tax reductions and the capital gains tax reductions have been beneficial to the Treasury.

The amendment of Senator Baucus to extend tax cuts for working families, to extend marriage penalty relief, and the $1,000 child tax credit, to make sure it doesn't go to $500, should be applauded. I see the need, as a Senator from South Carolina, for what he is doing. It is frustrating that I cannot convince my friends on the other side that the need exists in abundance in South Carolina and everywhere else in the country to keep our tax rates low when it comes to the entrepreneurial spirit that has made us great, that the capital gains rates need not go up. They need to stay where they are, as long as we can keep them that low, until we find a new Tax Code. The dividend tax rates need not go up or double in a few years. They need to stay low because America needs jobs. The way you create jobs is you leave as much money as reasonably possible in the private sector and you have a tax structure that rewards people who decide to take risk and invest.

What America needs more than anything else is some certainty as to the death tax dilemma we created. There is a great debate going on in this country about the role of the death tax in the 21st century. It is indefensible, apparently, to say that the current rates and the current exemptions are fair. I think we have won the argument that the death tax, without change, is going to put a lot of people at risk who have made something of their lives, the family farm or the small business. As Senator Kyl said, there is a lot of buy-in with our Democratic colleagues that we need to increase the exemptions fairly dramatically because people can be land-rich and cash-poor. I know in South Carolina there are a lot of people who have inherited tracts of land, and the death tax appraisal requires the family to break up the property and sell it. About 70 percent of small businesses, they tell me, never make it to the third generation--one of the reasons the business has to be bought back from the Government.

I think we have all bought into that as a body, that the exemptions need to change. I hope we have bought into the idea that the rates need to be lower because they are oppressively high. But here is the dilemma we have created for the country. It is my understanding, given the tax packages we have passed over the last several years, the death tax exemptions go up over time and eventually go to zero in 2010. In January 2011, unless we do something as a body, they go back to the old system.

I have been a lawyer for a long time. There are going to be a lot of mysterious deaths on New Year's Eve 2010 because if you live the next day there is going to be a big hit to the family when it comes to tax rates. It is not right for us to put the American business community and the family in that position. We need to help straighten this mess out. I am very openminded to compromises, but it is not fair for someone, if they live 1 day longer than they should, half of what they have worked for all their life goes to someone they don't know. We can do better than that. That is the place we find ourselves in America. The Congress has created the dilemma that if you die on New Year's Eve 2010--I think that is the correct date--your family has absolutely no estate tax liability. If you die the next day, almost half of what you have worked for in your entire life is gone through taxation. We can do better than that.

One way to start doing better is to pass a budget that would include what Senator Kyl has described on the list of Senator Baucus.

I do believe the country is dying for us to come up with a rational system of how we tax the American people, including low-income, middle- income, and upper-income Americans. I am trying the best I can to express to a lot of people in South Carolina, who live paycheck to paycheck, that we are all in this together. If I overtax the business owner, your job is threatened because his business may move offshore. People back home in South Carolina very much get that.

If you are in a manufacturing State, as I am, like Michigan, one of the reasons our jobs are leaving this country is because you can go to places such as China and other places and not have the burdens you have here. I do not want to chase China to the bottom, don't get me wrong. I want to put a floor on what China does. I think we will make a mistake chasing China to the bottom. But I think we would make an even bigger mistake if we do not address, in this budget, tax relief that has worked for Americans across the board.

We have a chance in this amendment to do something about death taxes that is extremely rational and would get America out of the dilemma of dying on the wrong day. We have something in this amendment that would allow the capital gains rate reductions to stay in place a couple of years longer and keep the dividend taxes low because they more than paid for themselves, and we have some education tax relief.

If we add this amendment with what Senator Baucus has done, I think we could say this budget does a very good job of trying to extend for the life of this budget tax relief across the board that has worked for all Americans.

Finally, if we buy into the idea that there is a certain group of Americans who are not worthy of tax relief, we are going to, over time, make it very difficult for the American economy to survive globally, and we are going to create a dynamic in the 21st century that I think will come back to haunt us over time.

With that, I urge my colleagues to vote for the Kyl-Graham amendment because when you marry it up with the Baucus amendment, we have done a pretty good job of extending tax relief across the board in a way that will help the American economy from top to bottom.

With that, I yield the floor.

The Presiding Officer: Who yields time?

Mr. Conrad: Madam President, might I inquire of the Senator from Arizona what the cost of his amendment is?

Mr. Kyl: Madam President, may I say to the Senator, the chairman of the committee, our amendment is some four pages long, and it has the amounts increased and decreased stated. I am sorry I have not totaled up the exact amount and then subtracted out the cuts. I will be happy to try to do that for the Senator.

Mr. Conrad: Does the Senator have some rough idea of what the amendment costs?

Mr. Kyl: All of the provisions that we have in this amendment are accommodated by the budget that has been provided to us by the committee. Let me get the exact number.

Mr. Conrad: Could the Senator tell us how he pays for the amendment?

Mr. Kyl: Madam President, the so-called payment for this is the same as other things are paid for in this budget, by the assumption that revenues will be available. As a result, there is no specific cost, if that is what the Senator is asking.

Mr. Conrad: That is the problem. I am told this amendment costs in the range of $75 billion and has no offset. Here is our problem. Senator Baucus has previously offered an amendment that extends the middle-class tax relief and also addresses the problem that the Senator from South Carolina addressed with the estate tax. We have this anomaly in the estate tax where we go to a 3.5-million-dollar-per-person exemption and then we drop down the next year to $1 million, going backwards.

Senator Baucus, in the amendment he has offered, does a series of things. The amendment addresses all the middle-class tax cuts--the 10- percent rate, the marriage penalty, the childcare credit. It extends those. It does it within the budget room that we have for 2012, so we still are able to achieve balance in 2012. It also deals with the problem of the estate tax going backwards, going from $3.5 million per person as an exemption back to $1 million. The Baucus amendment deals with that. It actually is a little better than that because the Baucus amendment also contains $4 billion that is not accounted for that would be available to the Finance Committee to improve the estate tax provisions. He also deals with the SCHIP, the need for us to fund SCHIP. He does that within the budget room that is available in 2012 so we do not have a deficit.

As I understand the amendment of the Senator from Arizona, that would take the budget into substantial deficit in 2012. And there is no pay- for; there is no offset. The money that did exist in the budget resolution, the money that was available, has been taken by the Baucus amendment.

Mr. Kyl: Madam President, I now have a number. The Senator from North Dakota was very close in the estimate which he gave. I believe the number is $72.3 billion for 5 years, which is very close to the number that the Senator had. Of course, since the budget raises taxes by $916 billion, that more than accommodates what we provide.

Mr. Conrad: The problem is, all the money is spoken for. So to add the Kyl amendment would drive us back into deficit, substantial deficit. I say to my colleagues, I think that would be a mistake. Unless the Senator provides an offset--there are things that are in his amendment for which I might have some sympathy. I personally believe we ought to have a goal of keeping rates low and having a broad base to our tax system so we can pay our bills and at the same time be a strongly competitive economy. In fact, my own conclusion from all of the debates on both sides is we need fundamental tax reform, and it is that, in part, for which this budget resolution tries to create an incentive.

We have some time because we do not face any of these tax measures expiring for the next 3 years. But during that time, I think we have to engage in a discussion of fundamental tax reform.

The bottom line is, I hope very much that colleagues will support the Baucus amendment. I hope very much they will resist the Kyl amendment at this point because it is not paid for, it is not offset, and it will take us back to the deficit in a substantial way.

How much time do I have remaining?

The Presiding Officer: The Senator has 14 minutes.

Mr. Conrad: How much time remains on the other side?

The Presiding Officer: They have 6 minutes.

Mr. Conrad: Does the Senator from Michigan request some time?

Ms. Stabenow: Yes.

Mr. Conrad: How much time?

Ms. Stabenow: I ask for 5 minutes.

Mr. Conrad: I yield 5 minutes to the Senator from Michigan.

Ms. Stabenow: Madam President, to add to what the distinguished Senator from North Dakota indicated, we have tax cuts built into this budget. We are in a global economy. We need to be competitive. There are a number of ways in which we need to be competitive.

My friend from South Carolina and I are working together on the question of trade enforcement. That is a critical part of it--investing in education, a skilled workforce, innovation. That is a very big part of it. That is a big part of this budget, making education a top priority.

Changing the way we fund health care, getting it off the back of businesses, addressing health care costs is a big part of being competitive and is addressed in this budget.

We say every child in a family where the folks are working ought to have access to health insurance, and this budget finds a way to do that. We address other issues. Health information technology, that Senator Snowe and I and others are working on together, is addressed in this budget. So we address a number of items, including tax cuts.

We address one of my biggest concerns, and I know my Democratic colleagues share this concern, of what is happening with the alternative minimum tax and how it is going to be shifted more and more to middle-income taxpayers and is becoming the alternative middle-class tax. We address that.

Through this Baucus amendment we say when we get into surplus, when we get out of the hole that has been dug in the last 6 years and actually begin to have a surplus, we are going to capture that $132 billion, both to make sure that children's health care is funded and to expand on investments in tax cuts, including what has been talked about in terms of extending the exemptions on the estate tax for a certainty.

We want folks to know that once you get to 2010, you can keep living a healthy life, continue, and, in fact, the same rates, at a minimum, will continue. So the Baucus amendment is about making sure we can do that. We all come together around the education cuts and making sure that we have the child tax credit and the 10-percent tax rate and other areas that are very important to working families, middle-class families. But we do this within the context of another very important value that Americans hold, and that is we pay the bills. We do it within a framework of fiscal responsibility.

In the last 6 years we have seen this tax policy, we have seen a war that has not been paid for, we have seen other spending that has been rolled over onto the national debt creating the largest deficit in the history of the country. We are now trying--and with this budget we will succeed--to dig our way out of that. But this amendment adds over $72 billion back into the hole. It keeps on digging. That is what this budget resolution is committed to stop: fiscal responsibility, and to invest in the priorities of American families and American businesses and invest in middle-class tax cuts.

I have heard on the other side of the aisle over and over that we should not pick who receives tax cuts. That is exactly what the current policy has done. If you earned over $1 million last year, you received at least $118,477 worth of a tax cut. That is more than the average person in Michigan makes in a year, and that was the tax cut.

I suggest, looking at this chart, for someone earning less than $100,000, it was $692. We can go on down. If someone was, in fact, earning less than that, those numbers go all the way down to less than $100.

I would suggest that the priority was set the previous Congress, the administration deciding whom they wanted to get tax cuts--and they have been getting them--adding to the deficit, taking away from our ability to critically invest in those things that will allow us to be competitive; investments in science and education and changing the way we fund health care and doing the other kinds of things we need to do, including balancing the budget, to be able to address the costs of interest, et cetera.

So what we are saying is this picture of who receives tax cuts is not ours. This is not ours. We reject that. This budget focuses on the folks who have not been getting the tax cuts, it focuses on the folks who not only have not been getting the tax cuts, but they have been getting the wage cuts at the same time.

The average, the real median household income has declined by almost $1,300 in the last 5 years. Folks are working harder, the gas prices are going up, the cost of college is going up, health care costs are going up, maybe they lose their pension and hope and pray that they have a job, their income is going down, and to add insult to injury, they have not received the tax cuts that have been offered.

What we are about is changing that picture. This budget resolution is about a new direction, a new set of priorities, focusing on middle- class families who are working hard every day, businesses who are investing in America and want to keep the jobs here. That is what this is about. I hope we will reject the Kyl amendment.

Mr. Conrad: Can the chair inform us how much time remains on each side?

The Presiding Officer: There is 6 minutes for the Senator from New Hampshire, 7 minutes for the chairman of the Budget Committee.

The Senator from New Hampshire.

Mr. Gregg: Madam President, I think it is important to note what this amendment does. First off, the chairman has said it is not paid for. Well, actually, the Baucus amendment hasn't passed, so you can argue it is paid for. If the Baucus amendment does not pass, this amendment would have the same funds available to it.

But that is a specious argument. It is straw dogs because the issue is the extension of the tax rates, which we have heard from the other side of the aisle are not going to be affected, that they are in favor of extending the tax rates.

Well, if that is the case, then they cannot make the case that the tax rate can't be extended, which is the case they are making. I mean it is a little inconsistent, to say the least. So I think that is inside-the-park baseball but not even good baseball, by the way--bad baseball.

But what is important to remember about these proposals which we have in this group is that first it addresses educational funding, tax breaks which benefit especially teachers who help out in their classrooms--very important.

It puts the death tax in a better position than what was proposed by the Senator from Montana, and it basically takes the language which I believe was developed by the Senator from Louisiana, Ms. Landrieu, and uses that as the basis for the death tax. It does not go to full repeal, as occurs under the present law, in 2011, but sets the ceiling much higher and makes it much more reasonable and I believe gives a stepped-up basis and capital gains treatment, essentially, to death taxes, so that people do not get wiped out when somebody who owns a farm dies; if the primary owner dies, the family does not get wiped out and have to sell the farm, or a small business does not get wiped out. This mostly involves that issue, quite honestly, because high estates are not affected by this. We are not talking about the founder of some technology company who is worth hundreds of millions or potentially billions of dollars avoiding estate taxes--just the opposite. That person will still be subject to the estate tax.

We are talking about setting the threshold high enough so that the family farm, the small business is not put out of business by the untimely death of an individual. You know, why should somebody be taxed for getting hit by a car? It makes no sense at all, but we try to straighten that out.

The most important element of this proposal, in my opinion--although I am sure others focus on education more than the death tax issue--is the fact that it continues the very positive proposals which were put in place relative to the formation of capital in this country and, as a result, the creation of economic activity and the creation of jobs. The dividend rate and the capital gains rate, as opposed to those which are in place today, have had a massive impact on creating economic activity in our society and as a result have created a huge number of jobs and as a result has caused the revenues of the Federal Government to jump dramatically.

The capital gains rate, for example, we have seen come in, and this chart shows it, at exceptionally high levels compared to what the estimates were going to be, dramatically high levels. We should have expected this because this is human nature. What happens is someone has an asset they have had significant appreciation in. Boom. What happens if they have got to pay a high tax on that asset if they sell it? They are not going to sell it, they are going to hold onto the asset. But if the tax rate is a fair tax rate, which is what we have in place today, then the person sells that asset. That has two very good effects. First, it frees up the cash from that event, and the person ends up paying taxes, which we would not have otherwise had because the person would have held onto the asset. Second, they will take that money and they reinvest it in a much more productive way. That is human nature.

Also, as a result those dollars are being more productively used, creating more entrepreneurial activity, so it works well.

The capital gains rate has produced dramatic increases in revenues. So we should keep it in place because it is doing what it is supposed to do. It got the economy going, creating jobs. But something which people do not focus on is that the cap disproportionately benefits senior citizens. If you raise the capital gains rate, you are basically raising the taxes on seniors in America because it is seniors who take advantage of the capital gains rate, because that, again, is human nature and logical.

Seniors basically are not earning money in the sense they are out working daily. Most seniors or many seniors, the majority probably, a vast majority are retired, but they have assets. As they take those assets and they convert them, they pay capital gains. Those assets are usually at a pretty low basis since they were acquired when they were young or during their working years. So when you raise the capital gains rate, you are focusing a tax rate right on top of the seniors of this country. You have launched a torpedo at them. You are going to basically say to those seniors: You are going to have less money to use in order to make sure that your retired years work the way you expected them. Not only does that work for captal gains rate, it also works for dividends. The dividend rate is also disproportionately used by senior citizens. Well, that is again human nature; it tells you that seniors do not have earned income, what they have is dividend income because they have invested or their 401(k) has been cashed out or their IRA has been cashed out or their defined benefit plan is suddenly getting them some revenue. They get dividend income.

When you raise the dividend income tax rate, you are taxing, again, seniors. So it is totally reasonable, from a standpoint of continuing strong economic activity and from a standpoint of maintaining a reasonable tax burden on Americans, and especially seniors, that we continue these tax rates as they are. That is why this is a good proposal.

The Presiding Officer: The Senator from North Dakota.

Mr. Conrad: I understand I have 7 minutes remaining?

The Presiding Officer: That is correct.

Mr. Conrad: Madam President, let me say briefly on this, you can extend all the tax breaks that have been described in this amendment if you pay for them.

The problem with the Kyl amendment is he does not pay for it. Over $70 billion is not paid for, goes on the deficit, which will drive this budget, which now balances in 2012, right out of balance. We will be going right back into the deficit ditch. Please, colleagues, let us resist this amendment. People could support it if it was paid for, but it is not.

I yield 3 minutes to Senator Schumer.

White House Proposal on U.S. Attorneys

Mr. Schumer: Thank you for yielding. I am going to talk a lit bit about the U.S. attorneys in response to the comments that have been made today from the White House.

The bottom line is very simple, to paraphrase "The Godfather": The White House has made us an offer that we cannot accept. We cannot accept it very simply because it is no way to get to the truth.

Mr. Snow said today that the White House wants to get to the truth. Well, if they want to get to the truth, what is wrong with testimony under oath? Do we not have oaths to ensure that truth is given?

Karl Rove was mentioned by Mr. Snow himself at one point, who stated incorrectly Karl Rove's involvement and then corrected himself. No one is saying there was any prevarication there. But with so many misstatements that have been out there, so many corrections, doesn't it make sense to interview witnesses with a transcript, under oath?

Because if we do not, we will never get to the bottom of this. We Democrats want to resolve this issue quickly. We want to get the facts. We want to find out what went wrong--it is clearer and clearer that many things did--and correct them and move on.

But when the President gives an offer that does not allow the truth to be gotten--no oaths, no transcript, no public testimony--it does not serve the purpose of finding out what happened, resolving it quickly, in a fair and nonpartisan way, and then moving on.

I hope the White House would reconsider its offer, would be willing to negotiate--they have stated they have not--and then we can finally get to the bottom of the matter.

I yield the floor.

The Presiding Officer: The Senator from North Dakota.

Mr. Conrad: I wish to thank the Senator from New York. I wish to go back, if I can, to the two amendments we will be considering soon, the Baucus amendment and the Kyl amendment. Let me, if I can, reframe this issue for my colleagues.

The Baucus amendment looked to the $132 billion surplus we had in 2012, I use that term "surplus" advisedly, but that is what our budget resolution shows, $132 billion in 2012. Senator Baucus fashioned on amendment to extend the middle-class tax cuts, addressed the problem of the estate tax going from an exemption of $3.5 million per person down to $1 million a person; in other words, going backward, and prevents that from occurring, as well as having some additional moneys, some $34 billion to be able to improve that package and perhaps provide for other measures, education tax credits or others, that the Finance Committee might decide.

It also provides funding for SCHIP, the proposal that will allow every child in America to receive health insurance. That amendment deserves our support.

Senator Kyl then comes with an amendment to extend all of the other tax cuts, but unfortunately he does not pay for it. He does not have any offset. That would drive our budget back into deficit. Please, colleagues, let's not do that. Let's not take the country--after all this work of getting out of the deficit ditch, which this budget resolution does--right back into deficit. To me, it makes no sense. That is going in the wrong direction. We could extend all the tax cuts mentioned by Senator Kyl if we pay for them, if we provide offsets for them.

I yield the floor.

The Presiding Officer: The Senator from New Hampshire.

Mr. Gregg: Madam President, I understand at this time we go to Senator Cornyn; is that correct?

The Presiding Officer: That is correct.

Mr. Gregg: I would ask Senator Cornyn to yield me 1 minute.

Mr. Cornyn: I yield 1 minute.

Mr. Gregg: What the Senator from North Dakota did was make a very good case for the Kyl amendment or a very bad case against the Baucus amendment.

The Baucus amendment was $195 billion, not $132 billion amendment-- $60 billion-plus is deficit spending. The allegation that the Kyl amendment, under this present structure, is $70 billion of deficit spending matches apples to apples. The two amendments are essentially the same in the area of deficit spending, so you cannot argue that one is not deficit and one is deficit. It is the opposite. They both have the same practical effect on the deficit.

What the Kyl amendment does, however, is at least extend the tax cuts or tax rates that actually create significant economic activity, which we have shown through the capital gains rate have generated significant revenues to the Treasury. Whereas, although I agree with the Baucus tax rates, most of those taxes rates, in fact all of those tax rates, are socially driven. They are good social policy, but they do not generate economic activity.

Amendment No. 511

The Presiding Officer: The Senator from Texas.

Mr. Cornyn: Madam President, I have an amendment and I ask for its immediate consideration.

The Presiding Officer: The clerk will report.

The assistant legislative clerk read as follows:

The Senator from Texas [Mr. Cornyn] proposes an amendment numbered 511.

Mr. Cornyn: I ask unanimous consent that reading of the amendment be dispensed with.

The Presiding Officer: Without objection, it is so ordered.

The amendment is as follows:

(Purpose: To provide a deficit-neutral reserve fund for the reauthorization of the State Children's Health Insurance Program (SCHIP) that will cover kids first)

At the appropriate place insert the following:

SEC. __. DEFICIT-NEUTRAL RESERVE FUND FOR THE REAUTHORIZATION OF THE STATE CHILDREN'S HEALTH INSURANCE PROGRAM (SCHIP) THAT WILL COVER KIDS FIRST.

In the Senate, if the Committee on Finance reports a bill or joint resolution, if an amendment is offered thereto, or if a conference report is submitted thereon, that--

(1) reauthorizes and improves the State Children's Health Insurance Program (SCHIP);

(2) emphasizes providing health insurance to low-income children below 200 percent of the Federal poverty level;

(3) limits the use of SCHIP funds for coverage of non- pregnant adults unless States are covering their low-income children;

(4) allows parents to cover their children on their own health insurance plan with SCHIP funds;

(5) increases State flexibility so that States can use innovative strategies to cover kids; and

(6) improves and strengthens oversight of Medicaid and SCHIP to prevent waste, fraud and abuse, then, provided that the Committee is within its allocation as provided under section 302(a) of the Congressional Budget Act of 1974, the Chairman of the Committee on the Budget may revise allocations of new budget authority and outlays, the revenue aggregates, and other appropriate aggregates to reflect such legislation, to the extent that such legislation would not increase the deficit for fiscal year 2007 and for the period of fiscal years 2007 through 2012.

Mr. Cornyn: Madam President, this amendment establishes a deficit- neutral reserve fund for the Finance Committee if it reports a bill that reauthorizes the State Children's Health Insurance Program, better known as SCHIP, but the important distinction is that this bill must cover children.

One might ask: Why in the world would a program known as the State Children's Health Insurance Program, why would it be necessary to offer an amendment directing the Finance Committee to cover children? That is because the current proposal does not limit Federal funding to pay for health insurance for children. In fact, it creates a patchwork system which allows States to spend money that should go to cover children to cover adults and other individuals. While I certainly understand that, it leaves many children uncovered.

The chairman's mark, the base bill that is on the floor, states the SCHIP program of the budget is to expand coverage of the estimated 6 million children eligible but not enrolled in either SCHIP or Medicaid. This is a more limited goal than covering every uninsured child, as has been stated on the floor as the goal. It assumes $15 billion in new SCHIP funding and includes an additional $35 billion in an allegedly budget-neutral reserve fund for SCHIP authorization, for a total of $50 billion for SCHIP reauthorization. This triples the size of the current program. There are no offsets outlined in the Democratic budget, and they can either be from spending cuts or tax increases.

The Democratic reserve fund is for passage of legislation that meets three conditions. Let me point out the problem. The original purpose of the SCHIP program was to provide health insurance coverage for children below 200 percent of the Federal poverty level. However, today some States have expanded their programs using Federal taxpayer dollars to include children up to 350 percent of poverty, not 200 percent and lower, but up to 350 percent, which is currently about $70,000 for a family of four. States have used this money without covering all their children to cover adults, parents, and even childless adults. Nine States cover children at 300 percent and above of poverty level. Here again, it is not an effort any of us could necessarily criticize in the abstract, but to take money that is designed for children at 200 percent of the poverty level and below and to cover children from families with much greater income and to cover adults and other individuals who are not part of the SCHIP purpose is off track.

Twelve States will spend almost $807 million of their SCHIP money on more than 671,000 adults this year. The State Children's Health Insurance Program will cover 671,000 adults this year. Three States have more adults as enrollees than children. This is a matter of false advertising by the Federal Government. We have passed legislation, which I support, designed to cover low-income children, and the Federal Government has authorized a situation where now 671,000 adults are being covered, and people not from low-income families but middle- income families are being covered.

Here again, I don't begrudge them the coverage, but to take a program designed for low-income children and use it for a purpose other than advertised is simply not honest, and it is not what Congress intended.

Several States spend half of their SCHIP allotment on adults, so it is no surprise that more than one-third of the 14 States experiencing shortfalls have expanded coverage to adults. The other problem with the underlying SCHIP provision is, with more than 6 million SCHIP and Medicaid-eligible children still uninsured, shouldn't States cover the intended population before they expand their program? Why in the world wouldn't Congress support an effort to cover low-income children before we approve the use of that money to cover unintended and nontargeted populations? The SCHIP match rate is more generous than Medicaid's match rate. The children eligible for Medicaid and SCHIP should be covered by their respective programs.

The other feature in the underlying bill this amendment would correct is this underlying provision supports States in their efforts to move forward in covering more children, but it has no income level cutoff.

In other words, the stated objective of Chairman Dingell and Senator Clinton to cover children up to 400 percent of poverty level, which would translate to an income of $80,000 for a family of three, simply represents an unprecedented wealth transfer from the pockets of the American taxpayers to these families who should be expected to pay a portion of their own health coverage.

The SCHIP amendment which I offer would instead focus the reauthorization of the SCHIP program on its original intent--low-income kids--by creating a budget-neutral reserve fund for the passage of this legislation. It would reauthorize and improve the State Children's Health Insurance Program. It would emphasize providing health insurance to low-income children below 200 percent of the Federal poverty level. It would limit the use of SCHIP funds for coverage of nonpregnant adults unless States are covering their low-income children first. It would allow parents to cover their children on their own health insurance plan with SCHIP funds. That is an important feature. Some parents have no alternative but to basically drop their own health insurance for their children in order to get them to be eligible under their State SCHIP funds. This would allow parents to cover their children on their own health insurance if, in fact, they have health insurance, by allowing the additional cost to cover their children to be paid from SCHIP funds. It is important flexibility that I would think all Members would support.

It increases State flexibility so States can use innovative strategies to cover kids, and it improves and strengthens oversight of the Medicaid and SCHIP programs to prevent waste, fraud, and abuse.

I offered this same amendment in the Budget Committee last week, and it was opposed unanimously by my colleagues on the other side of the aisle. I think we need to make a clear statement that SCHIP is a program for low-income children. Otherwise we ought to call it something else. Let's be honest with the American people. Let's not take something called the State Children's Health Insurance Program and make it a program for adults. That is simply dishonest. I don't think it is appropriate. I am concerned that using SCHIP dollars to provide coverage for childless adults diverts limited resources from covering children first, which is the original purpose of this program, a laudable purpose which I support.

The fact is, more than 10 percent of those enrolled in SCHIP are now adults, approximately 639,000, according to the Government Accountability Office. These 639,000 adults are from nine States. The GAO agrees covering adults is not the point of SCHIP, certainly not what Congress said it intended to do. These State coverage expansions mean funds are being diverted from the needs of low-income children who go uncovered because those States choose to use it for other purposes. Adults accounted for an average of 55 percent of enrollees in the shortfall States compared to 24 percent in the nonshortfall States.

Congress needs to make a firm statement that SCHIP is for children. If States focused on covering kids, it would have been much easier for them to stay within their allotments. This amendment makes clear that in the SCHIP program, our priority must be for low-income children.

In addition, as I noted a moment ago, my amendment would allow States to continue to use innovative strategies to cover kids and will improve and strengthen the oversight of the SCHIP program to weed out waste, fraud, and abuse.

I hope my colleagues will vote in favor of this amendment. I know the ranking member of the Senate Finance Committee, Senator Grassley, wants to use a portion of the time we have remaining on the amendment. I certainly reserve the remainder of the allotted time for him.

I thank the Chair and the managers of the bill.

Mr. Gregg: Will the Senator yield?

Mr. Cornyn: I am happy to yield to the ranking member of the Budget Committee.

Amendment No. 466, As Modified

Mr. Gregg: Madam President, I send a modification of the Sessions amendment to the desk.

The Presiding Officer: Is there objection to the modification?

Mr. Gregg: I ask unanimous consent that the amendment be so modified.

The Presiding Officer: Without objection, the amendment is so modified.

The amendment, as modified, is as follows:

At the end of title II, insert the following:

SEC. __. EXCLUSION OF TAX RELIEF FROM POINTS OF ORDER.

Sections 201, 202, 203, and 209 of this resolution and sections 302 and 311(a)(2)(B) of the Congressional Budget Act of 1974 shall not apply to a bill, joint resolution, amendment, motion, or conference report that would provide for the extension of the tax relief provided in the Economic Growth and Tax Relief Reconciliation Act of 2001, the Jobs and Growth Tax Relief Reconciliation Act of 2003, and sections 101 and 102 of the Tax Increase Prevention and Reconciliation Act of 2005.

Amendment No. 511

Mr. Gregg: Madam President, I support the amendment of the Senator from Texas. He is basically getting at the essence of the SCHIP issue. SCHIP has become nomenclature. It has become a motherhood term. It is being used as a smokescreen to dramatically expand the amount of money we spend as a Federal Government on health care and basically take a big bite out of what I would call the nationalization effort in health care because it has been expanded well beyond its purpose. Its purpose should to be take care of children in need and make sure they have proper health insurance. We all agree on that. What the Senator from Texas is proposing is to do exactly that, make sure this program is directed at children. However, we have seen State after State and some of our biggest States use this program for adults and for families up to $68,000 of income. That is not about low-income kids being taken care of. That is about trying to nationalize the health care system. If we are going to spend all this new money on SCHIP--and I think we need to spend some additional money on SCHIP--let's make sure it goes where it is supposed to go, to needy kids. That is why the amendment of the Senator from Texas is such a good amendment.

The Presiding Officer: The Senator from North Dakota.

Mr. Conrad: Madam President, the Senator from Texas is retaining his time. Perhaps we could modify our previous unanimous consent request so we stay on this question until the votes. The Senator has approximately 15 minutes remaining and we would have 15 minutes on our side to discuss it.

Mr. Gregg: I have no objection.

The Presiding Officer: Without objection, it is so ordered.

Mr. Conrad: Madam President, I ask unanimous consent that the votes in relation to the following amendments occur beginning at 5 p.m., with the votes occurring in the order listed and that there be 2 minutes of debate equally divided before each vote; and that after the first vote, each succeeding vote be limited to 10 minutes; that no amendments be in order to any of the amendments covered under this agreement: The first amendment being the Baucus amendment No. 492; the second amendment being the Kyl amendment No. 507; the third amendment being the Cornyn amendment No. 477; the fourth amendment being the Sessions amendment No. 466, as modified; the fifth amendment being the Ensign amendment No. 476; the sixth amendment being the Bunning amendment No. 483; and the final amendment being the Bingaman amendment No. 486.

The Presiding Officer: Without objection, it is so ordered.

Mr. Conrad: I thank the Chair.

Amendment No. 511

Back to the issue of the most recent Cornyn amendment which is on the question of SCHIP. Frankly, I have some sympathy for the argument advanced by the Senator from Texas. There may be some policy reason to have very low-income adults covered with some SCHIP money, but this is supposed to be a program directed at children. Whatever the merits of the Cornyn amendment, there is a very serious problem with the Cornyn amendment that leads me to oppose it, and I ask colleagues to oppose it. That is, this isn't the place for the Cornyn amendment.

The simple fact is, the budget resolution does not determine the policy on SCHIP. It has nothing to do with the policy on SCHIP-- nothing, zero. This is a policy question that will be before the Finance Committee.

Let us review what a budget resolution does and does not do. A budget resolution gives an instruction to the Finance Committee of how much money they need to raise to meet the budget. It tells them how much money they have to spend in the various categories under their jurisdiction. It does not tell them one word of what the policy is related to those fundings. That is not the role of the budget resolution. So as well meaning as this amendment is, it has nothing whatever to do with the policy determination that is to be made by the authorizing committee.

The Budget Committee is not the committee of jurisdiction. We are not the committee that makes these policy judgments. We are not the committee that makes these determinations. So this amendment is eyewash. As well intended as it is, it simply will have no force and effect on the deliberations of the Finance Committee with respect to this policy. That is the fact. Sometimes I wish the Budget Committee did have that kind of authority and that kind of power, but we simply do not.

So let's be honest with our colleagues. Let's be honest with the people who are watching. This amendment will do absolutely nothing about the question of who gets covered under SCHIP--nothing, zero. That is a determination that will be made by the Finance Committee.

At this point, Madam President, I recognize the Senator from Michigan and ask her, how much time would she like on this amendment?

Ms. Stabenow: Madam President, 5 minutes.

Mr. Conrad: Madam President, I am happy to yield 5 minutes to the Senator from Michigan.

The Presiding Officer: The Senator from Michigan is recognized.

Ms. Stabenow: I thank the chairman.

Madam President, as a member of both the Budget Committee and Finance Committee, I concur with our leader's comments in terms of the jurisdiction of the Budget Committee. I look forward, frankly, to this debate and working through all the specifics on children's health care in the Finance Committee because there are very important issues we need to address.

The spirit of the Cornyn amendment is what we have addressed in this budget resolution, which is making sure we have the resources to be able to cover every child. Right now, about 6 million children are covered. There are another 6 to 7 million children who actually qualify for the SCHIP program, for children's health care, but the funds are not there. So this budget proposal will allow that to happen.

Now, in some States--such as my own State of Michigan, where Michigan decided on its own to meet its moral obligation to cover children and began to reach out creatively using other funds to cover children--when they have received the children's health care funds, they have found that being creative, using what they were already using, they could stretch it a little farther to maybe cover moms and dads or very poor adults.

In the law we passed regarding children's health care, there was a waiver provision put in that the administration could use--used by this administration and the former administration--to waive the rules to allow a little more flexibility, if the States were able to work hard and be creative and be able to stretch their dollars.

That is what has happened in Michigan. I am very proud of the hard work that has gone on in Michigan and by our current Governor who is very committed to extending health care coverage not only for every child but for every person in our State. I hope that is our goal, together, for our country. We should not be talking about how we limit health care but how we make sure it is available for every individual. I believe health care should be a right and not a privilege in the greatest country in the world.

But in our case, we cover an individual making $4,500 a year--$4,500 a year--certain individuals. So when we get to the Finance Committee debate, I hope we are going to keep in there the ability and flexibility for States to receive, if approved, waivers that allow them to stretch their precious health care dollars a little bit farther.

This amendment would, in its policy--even though it has no effect ultimately, it states we should not allow that flexibility for States, we should not allow the ability for States to be creative. It also sets a limit of 200 percent above poverty, which may sound--well, it may sound as though it is OK, but you are talking about basically two individuals in a family each earning the minimum wage. That is about hitting that number of 200 percent of poverty. So if you get a minimum wage increase or maybe you get a little bit more money, and you still do not have health care coverage in your employment.

Again, we would be saying, through this kind of amendment, they should not be able to cover their children with health care, not be able to have access, even though they are working hard. The whole point of SCHIP is to say to those who are working: If you are working hard and in a low-income job, you should be able to know you can receive health insurance for your children. If you are working hard, you don't have to go to bed at night saying: Please God, don't let the kids get sick--which is what happens every single night in America. So I hope we reject this amendment. It is not appropriate for the Budget Committee.

I also look forward to the debate on the policy once we get to the Finance Committee. We want to cover every child. The money in this budget will allow us to cover those children who are currently eligible but not covered. We will cover every child. That is our commitment. That is part of the moral document we have put forward in this budget resolution. But we also, I believe, need to figure out a way to make sure in the process we are not taking away health care coverage from anyone in the country.

Thank you.

The Presiding Officer: The Senator from New Hampshire.

Mr. Gregg: Madam President, in a brief response, because I see the ranking member of the Finance Committee is here, the chairman of the committee has made the case we should not vote for the Cornyn amendment because it has policy in it. Well, actually the budget resolution has policy in it. In its reserve fund, the budget resolution has three specific policy directives relative to SCHIP which is just as specific, just as policy driven as the proposals of Senator Cornyn. So either you are pure or you are not pure. In this case, both sides are directing policy. So I do not think that argument has a whole lot of credibility. But the issue here is this: The Cornyn amendment tries to focus SCHIP on kids. That is what it should be focused on. The problem we have today is that SCHIP is being used as a stalking-horse to basically ensure all sorts of people who do not qualify in the concept of kids at 200 percent of poverty. You have three States where they actually spend more SCHIP money on adults than they do on children. You have 12 States that are spending almost $1 billion annually of SCHIP money on adults. You have nine States where they are covering up to 300 percent of poverty. You have other States where you are going up to $68,000 of personal income and still qualifying people for SCHIP.

That is not the way SCHIP is supposed to be structured. SCHIP is supposed to be structured for kids. The Cornyn amendment gets us back to the original purpose of SCHIP, thus giving probably more coverage to more kids than the present program or even the expanded program which has been put forward by the other side of the aisle.

Madam President, what is the time situation relative to the Members?

The Presiding Officer: The Senator from New Hampshire has 13½ minutes. The Senator from North Dakota has 7½minutes.

Mr. Gregg: Madam President, I yield such time as he may desire to the ranking member of the Finance Committee.

The Presiding Officer: The Senator from Iowa.

Mr. Grassley: Madam President, I appreciate very much that the Senator from Texas has offered his amendment. I support it. I supported it during the Budget Committee's markup of the legislation that is before us right now, and I am happy to support it on the floor.

This amendment adds a new reserve fund which identifies some very important priorities that complement the reserve fund in the legislation that has come out of the Budget Committee.

The reserve fund in the budget stipulates the legislation reported out of the Finance Committee must "maintain coverage for those currently enrolled in [the State Children's Health Insurance Program]."

As my colleagues in the Senate know, this current population includes children, pregnant women, parents, and childless adults. The cost of extending coverage to these populations has been roughly estimated by the Congressional Budget Office to require a net increase of budget authority of approximately $8 billion.

The Cornyn amendment would put kids first--after all, wouldn't you think that is what the State Children's Health Insurance Program ought to do, put children first--prioritizing lower income children and limiting the use of State Children's Health Insurance Program funds for nonpregnant adults unless States are covering those children.

We will have to make some very difficult choices when it comes to the limited funds available for the SCHIP. The cost of covering children who are uninsured but eligible for SCHIP continues to rise.

According to the Center on Budget and Policy Priorities and their analysis--and this was in a recent memo from the Congressional Budget Office--it will take $47.5 billion to cover the estimated 6 million children who are uninsured but eligible for either SCHIP or the Medicaid Program. To quote the center, even this figure is "too low"--those are their words: "too low"--because it does not include the cost of the policies necessary to increase enrollment in Medicaid and SCHIP.

Given the priorities placed on pay-as-you-go and the limited offsets available to pay for increased SCHIP spending, it appears some priorities have to be set. We are faced with that every day--setting priorities, that everybody cannot have everything they want.

Republicans have taken the position--and I emphasize that position-- we want to prioritize putting kids first. So I support Senator Cornyn's emphasis upon this key principle.

I also agree with the language in the budget that would support States in their efforts to move forward in covering more children. However, this language can be improved by emphasizing that reauthorization should make State flexibility a priority. With State flexibility, we can get more bang with the State's money, we can get more bang for the Federal dollars going into the program. We found that in Medicaid last year when a bipartisan group of Governors came to me, when I was chairman of the Finance Committee, and sat down and said: If you can give us more flexibility in Medicaid, we can save State tax dollars, we can save Federal tax dollars, and we can serve more kids who have need--because States know what their local situation is, they know better than we do in Washington to get the most bang for the taxpayers' dollars. So we can do the same thing for the SCHIP program by giving the States greater flexibility.

Much of the success we have seen relative to the SCHIP program is because the Congress gave States the authority to manage the SCHIP caseloads, to control costs, and to experiment with innovative strategies to increase access to health care.

This country is so geographically vast, our population is so heterogeneous that if you try to make all policy by pouring policy in the same mold in Washington, DC, it is not going to fit New York City the same way it might fit Des Moines, IA. But we ought to give those States in the case of New York, Albany, and in the case of Iowa, Des Moines, give those leaders, Governors and State legislatures, some leeway so we get more bang for our buck.

Reauthorization then should build on the State flexibility that was already there and should be a key feature of the priorities set in the budget.

Finally, given my zeal for oversight, meaning congressional oversight of what our bureaucracy does and how the taxpayers' money is spent, I must also commend the Senator from Texas for including, as a priority for the SCHIP reauthorization, improving and strengthening the oversight of Medicaid and SCHIP to prevent waste, fraud, and abuse. We have made improvements to preventing waste, fraud, and abuse, but we can certainly do more. We can always do more.

I commend the Senator for his amendment. It builds on the language already in the bill, and I urge my colleagues to vote in favor of it.

I reserve the balance of the time on our side.