Tax Relief Extension Reconciliation Act of 2005--Part II

TAX RELIEF EXTENSION RECONCILIATION ACT OF 2005 -- Part II

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Mr. BAUCUS. Mr. President, I think around 8 we will probably have two votes. It is also my understanding that the other side of the aisle will be offering various motions to instruct which presumably will be voted on, as will motions to instruct on this side of the aisle.

I must say, though, I have glanced at the proposed motions to instruct on the other side, and I find it very curious. Why do I say that? I say that because we in the Senate passed a bill. The House has passed a bill.

We are going to go to conference on the two bills now. Presumably, it is the Senate conferees who are charged to defend the Senate bill. Presumably, the House conferees are charged to defend the House bill. After all, that is what a conference is all about. The Senate passes a bill and goes to conference; the House passes a bill and goes to conference.

These motions that are going to be offered, however, do not defend the Senate bill. Quite to the contrary, they are opposed to the Senate bill. They defend the House-passed bill, the capital gains treatment. I find that very curious. I, frankly, find it very disconcerting, because if this is the case, it will set the precedent basically for a motion to instruct, not to defend the body's views. Most of the motions to instruct from the other side will be motions not to defend the Senate bill, but urge provisions in the House bill. That is nuts.

Most of the motions to instruct by Members on this side are asking the conferees to defend the Senate-passed provisions. I point that out because, as I said, it is curious and disconcerting, and I hope all Members recognize what is going on here; namely, what I just outlined. I hope this is an aberration and that it doesn't continue. Otherwise, this is another example of the chaos, the virtual free-for-all around here, and disrespect for procedure, for rules, for civility, and for both sides working together. I hope maybe that is an oversight by the other side of the aisle with all the motions that are going to be coming up.

Nevertheless, I have them before me. That is what they seem to say. I point that out for Members; it is an observation before we vote to take into consideration. Most of the instructions I see are with respect to capital gains treatment. There is no provision for extending current law which doesn't expire until January 1, 2009; whereas, there are provisions in the House-passed bill to extend it for 2 more years, even though current law doesn't expire until January 1, 2009.

The motions to be offered are to basically take up and encourage the conferees to pass the House provisions. That is very curious.

Mr. President, I suggest the absence of a quorum.

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Mr. BAUCUS. Mr. President, I strongly support extending the deduction for tuition costs through December 31, 2009, as provided for in the Senate bill.

To compete successfully in the world today, America must make education a priority--not only a priority but a very top priority. Why? I think it is pretty obvious. For one thing, our competitors certainly are.

Let's talk about, for example, training engineers. Engineers develop new jobs and new industries. Yet Japan and Europe train twice as many engineers as we do. China trains three times as many. In fact, I think the statistics are even more alarming than that. We are missing the boat. We are missing the boat.

Let's just stop for a minute. If China, Europe, and Japan train many more times than we, especially China, and add Indians to the mix--Indians are training lots of engineers--just think of what that means for the next 5 or 10 years based only on the size of those countries. If they are training many times more than we--and I think the population of India is close to 1 billion, and China is 1.3 billion. In about 10 years, it is going to be somewhat more than 1 billion. And our population is about 280 million, 290 million, something like that. I would say we are way behind the eight ball. We need to spend much more time than we are on education.

Congress has responded with a number of income tax benefits for higher education financing. Tax incentives such as the HOPE scholarship and lifetime learning credits,

the Coverdell education savings account and prepaid tuition and college savings plans help American families pay for college. The deduction for qualified higher education tuition and related expenses, section 222 of the Tax Code, was first added as part of the 2001 Economic Growth and Tax Relief Reconciliation Act.

Let me explain more. We cannot allow America's workforce to be left behind. To remain the most competitive and innovative country in the world, we need to make education affordable.

Let me state a small anecdote. I was in Bangalore, India, not too long ago, about 3 or 4 weeks ago, and I asked the head of the research center there, the Jack Welch Research Center, which, frankly, is one of the two or three state-of-the-art research centers General Electric has, I asked the manager of it: Why are you here? Why are you here in Bangalore? Guess what he said.

He said: Because this is where the greatest talent pool is.

I asked: Where is the next greatest talent pool for your top-flight scientists and engineers here?

He said: China.

I asked: Well, where is the United States in terms of ranking for the best talent pool?

Frankly, he said it was way down on the bottom. Not the very bottom. He said: You are down there.

So I asked him: What can we do in America to be more competitive than we are today, to make sure we have the best jobs for our kids, and, more importantly, for our kids and grandkids so that we in America can pass on to our kids and grandkids the same standard of living we have today, which our parents gave to us?

His answer: You guys have to spend more on education, and you have to make it less expensive so more students can get the quality education they want and need. Also, you have to lower your education costs. It is too costly in America to get a good education. He said: You also have to lower your health care costs. Your health care costs are way, way too high compared to every other country in the world.

Sure, we have high-quality health care, he said, but we spend twice as much per capita on health care in America as does the next most expensive country.

Are we twice as healthy as the next most expensive country? I doubt it.

But right off the top, the manager of that technology center in Bangalore, India, made it very clear to me that we
Americans have to spend a lot more time boosting our talent pool so we have more scientists and engineers than we currently have in the United States. We have a lot of them, and they are good, but it is also very clear that we are slipping or, to put it differently, other countries are catching up and are going to pass us soon if we don't get our act together.

It costs today almost $43,000 a year for tuition, fees, and room and board in a 4-year public college. Just think of it: $43,000 a year; that is a public college. At a 4-year private college, it costs more than $100,000. That is just ridiculous, that it costs that much for a college education in America today. It is outrageous, and it puts education far out of reach for so many students.

From 1981 to 1995, tuition at a 4-year public college/university increased by 234 percent. That is right. From 1981 to 1995, tuition increased by 234 percent. That is three times the growth in median household income and more than three times the increase in the cost of living over this same period. That is unsustainable, clearly unsustainable. That is wrong. I don't know why this country doesn't start to address that more directly, more frontally, because the earlier we do, the more jobs and the more high-paid jobs we are going to have for Americans.

For tax years 2002 and 2003, taxpayers with adjusted gross incomes of less than $65,000--or say $130,000 for married couples filing jointly--are allowed to deduct $3,000 for qualified higher education tuition and related expenses. Three thousand dollars. Remember how costly education is, the figures I just gave you a moment earlier.

For tax years 2004 and 2005, the maximum deduction is $4,000 for those same families and $2,000 for Americans with adjusted gross incomes of $65,000 to $80,000 for a single person or from $130,000 to $160,000 for married couples filing jointly. Unfortunately, this important deduction expired at the end of 2005.

Critics of extending the deduction for tuition costs ask why we have both this deduction and the HOPE and lifetime learning tax credits. It is true that the current system can be complicated, and it is complicated. Families that qualify for tax credits are sometimes better off with a deduction. Unfortunately, families don't always know which tax choice is best for them. So we are looking at whether the tax incentives for education should be combined or should they be simplified. But until we do, I wish to put the deduction on the same timetable as the tax credits which are in effect until 2010.

Let us look at the House. The House only extends this deduction for 1 year--clearly not enough. Senators on both sides of the aisle have agreed that this deduction is important to working families trying to get their children a good education. We must, therefore, preserve this deduction and, as proposed in the Senate bill, extend this important deduction for 4 years.

If America is going to be competitive in the global economy, it must make education a top priority. Extending the deduction for tuition costs through December 31, 2009, does exactly that by helping provide our children with affordable education. Therefore, I will work hard to ensure the deduction for tuition costs is extended through December 31, 2009, as provided for in the Senate bill, and I urge my colleagues to support this extension.

I may sound like a broken record, but every fiber in me, my bones and my muscles, my blood and whatever is in me, I just know that we have to work a lot harder, a lot more effectively to address American competitiveness, and most of that comes down to education.

It is making sure that our kids and we ourselves are educated as best as we possibly can. Education is a lifetime effort; it is not just K through 12. It is lifetime. It also begins at very early ages--Prestart, Head Start, K through 12, college. It also includes votech training for job skills. It is continuing education. It is bringing us more up to date. For those of us who graduated a long time ago, it is making sure we are continuing to be up to date with what is going on and are able to translate new ideas into jobs.

I have traveled a lot overseas and I have seen a lot of countries, especially in Asia. I can tell you, they are on the march. Speaking primarily of the Chinese and the Indians--clearly Japan is a very large country, with the second largest economy in the world, but it will not be long before China is the largest economy in the world. I am guessing by the year 2030 China will be the largest economy in the world. That is not far away. It is only 24 years from now. I may be off by 10 years; it may be 10 later or 10 earlier. But 24 years is now, in terms of the time it takes to get us up to speed, the time it takes to get education programs in place, the time it takes to make sure we are graduating more scientists and engineers and have a tax and health care policy that makes more sense, and an energy policy that makes more sense.

We are a wonderful, big country. We are extremely lucky. We are the luckiest people in the world to be Americans. We don't see people heading for the door to live in other countries. Rather, people want to live in America. They want to come to America because of our values, et cetera.

It is true in the last couple of years our image overseas has been greatly tarnished. The image of America today is not what it was several years ago. That is due, I think, primarily to the foreign policy of this country. But nevertheless, overall most people would rather live in America than some other country. We Americans certainly would. We want that to continue as long as it possibly can, not just for ourselves but, more importantly, for our children and for our grandchildren. That is the legacy we want to pass on to them.

To do that, you have to have some kind of plan. You can't let these go helter-skelter. Other countries have plans. They definitely have plans. It is clear, China has a plan. I don't know if they are going to be successful, but they have a plan. They know what they want to do. They know that they have to boost and are boosting their science and engineering education. They know they have to develop the interior provinces, not just the eastern coastal provinces. What are they doing about it? They are doing something about it. They have a plan. They are spending a lot of money and building big superhighways out in western China. There is a big, fancy airport in western China. I was in Chunking 4 or 5 weeks ago, at a huge, massive, fancy, wonderful airport in western China. That is government policy.

They have plans to deal with unemployment. They have plans, frankly, to put on what they think will be the world's best Summer Olympics in 2008. I bet they have a plan to win more gold medals than any other country, too. They have plans. You have to take your hat off to them because they are doing what they think they have to do to progress and bring themselves out from the lower living standards they have had for so many years.

It is true many Chinese live in poverty. It is true many Indians live in poverty. That is also true. But they have plans to address that. I remember not too many years ago I was in Shanghai. I was talking to the mayor of Shanghai about all these wonderful, fancy buildings in Shanghai. I said: You must be proud of all you are doing in Shanghai.

The mayor turned to me and said: We have problems.

I said: What do you mean?

We have high unemployment by China's standards. This is what we are doing to retrain people. Some of these jobs are old jobs. As the Chinese Government works to downsize these state-owned enterprises, Government-owned enterprises that are all subsidized, they know as they enter the World Trade Organization they have to get rid of a lot of these state trading enterprises. Man, oh, man, they know as that happens they are going to have huge unemployment problems. So they have details, all they are trying to do, in their plan to address that job loss in China.

Then he pointed to the river there in Shanghai and he said: Pollution; this river is polluted. We have a 10-year plan to clean up this river so it is no longer polluted.

I don't know whether it has been successful or not. That was 5 years ago. I assume the river is probably polluted. But you could tell, talking to him, he had plans to address the problems that we have.

India certainly is the same. When I was in India a couple or 3 weeks ago, they have plans how they are going to build up India. I went to the subway in Delhi. That is a fancy subway. That makes our subway in Washington, DC--it is comparable. But guess what. In the Indian subways you can use your cell phone because they make sure when they tunnel under they have the radio stations there, the towers, so you can use your cell phones. They are building 18 more subways in India, fancy ones.

Other countries are building them. It is not us. When I was there, I heard constantly from all over India: Where are the Americans? Where are you? Australians are here and Malaysians, other countries are here, Germans and French. The subway was 60 percent Japanese financed. Where are the Americans? They want us there, but we are not there.

What I am saying is things are happening in this world. We have to get with it. Much of that is education. Much of that is learning what is going on. Much of that is forming partnerships where both countries do well. We can't stick our heads in the sand. Things are happening and I think a large part of this is education.

Let me say this again, about that same point. When Tom Friedman's book came out, ``The World Is Flat,'' I took it on myself to travel around the United States by myself and ask CEOs, What do you think of this book? Have you read this book? They all read it, of course.

I said: What do you think? Do you agree? They all agreed. Some said: This is scary. Some said: Yes, this is a challenge.

Then I asked the next set of questions: What do we do about all this? Sure, it is true, largely true. Sure, it is a little scary. Sure, it is a challenge. What do we do about it?

That kind of set them back a little bit. They hadn't thought a lot about solutions; a little bit. But the solution they all tended to gravitate to was education. We Americans have to focus much more on quality education, quality teachers. We are doing a good job. I got a great education when I grew up in Helena, MT, in Missoula, MT. The teachers, I thought, were excellent. They were tough and they were good. Current teachers are good. But all I am saying is whoever we are, we know we have to keep moving and progressing. You know when you tread water you are likely to sink. You can't keep treading water. You have to go ahead.

I am often reminded of the former head of Intel, Andy Grove, who wrote a book, ``Only The Paranoid Survive.'' That is probably true in the semiconductor industry, but I think it is partly true in life. That is not to say we all have to be paranoid. Clearly not. But it is to say you have to be vigilant, and really vigilant.

Frankly, if I were President, what I would do is change this budget around massively. I would put a lot more in this budget for education. I would put a lot more into making sure we can solve our health care cost problems in this country; more coverage. I would make sure we tackled and made America energy independent. This thing about independent 25 years from now is way too tepid, way too weak. We have to get started now. I suggest developing DARPA for energy. DARPA, in the Defense Department, developed lots of great technologies, military technologies, applicable in the private, civilian sector. We can do the same on energy. That will attract bright minds. It will help us be more energy independent, make us less hostage to events overseas.

It is so clear to me. I may be wrong, but I tell you it is clear to me, anyway, what we need to do. I think in my gut most Americans sense that, this sort of sense we have to get moving here. I think a lot of Members of this body would be surprised, if we were to be much more bold, as to the gratitude Americans would show to Congress for finally taking the lead and doing something.

We have to get organized somewhat, not seen to be prescriptive, not seen to pick winners and losers, but I am saying harness the energy that is in America and help focus it a little more on where we should be going. After all, that is why many of us sought these jobs. We sought these jobs to represent our people in the best way we could. We sought these jobs because we thought, many of us--most of us think we have pretty good judgment and priorities and common sense. If that is the case, I urge us to get out of our little boxes, get out of our little cubbyholes, get out of our daily routines, get out of the stuff that pulls us apart from our real job here, just a little bit--maybe for 30 percent of our time--and work more on long-term strategic measures and do what is right and address the core of some major issues that face us, rather than getting caught up in the routines around here, our series of meetings.

Meetings are good. Seeing constituents is great. We serve our employers back home. But we are also here as a body, 100 of us, and I think it is time for us, working with the other body and the executive branch, to truly put partisan politics aside and get something done that makes some sense.

I yield the floor.

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Mr. BAUCUS. Mr. President, I first commend my friend and colleague from Utah. I agree with him. I think it should be permanent. I urge my colleagues to support the motion to instruct making it permanent. We will have a little more certainty and help in research and development in our country. It helps us be more competitive. I compliment him for offering that motion to instruct.

I also speak in favor of the Stabenow motion to instruct with respect to the R&D tax credit which will be coming up shortly, essentially because we have to move ever more aggressively to invest more in research and development in our country. And the current temporary nature of the credit just makes no sense.

The Senate-passed bill is a credit extension for 2 years. I remind my colleagues that the current credit is expired. It expired at the end of last year. We are now in February. The Senate bill extends it for calendar years 2006 and 2007, and the House bill just has 1 year, 2006.

I am for more predictability, more certainty, especially with expect to the R&D tax credit.

I also received a letter from the R&D Credit Coalition, a group representing 85 trade associations and more than 1,000 small, medium, and large companies. In the manufacturing sector alone, which performs nearly 60 percent of all private and industrialized R&D in the United States, there are 14 million manufacturing employees who get the benefit of this credit.

The coalition in their letter said:

The Coalition believes the Senate-passed provision will help make the credit a more powerful incentive to undertake long-term, high-risk R&D projects in the United States. Consistent with the provision you and 45 of your Senate colleagues have taken as sponsors of a permanent and strengthened R&D credit, extending this credit for an additional year will better enable the intended incentive effect of the tax credit to be realized.

I ask unanimous consent that the letter be printed in the RECORD.

There being no objection, the material was ordered to be printed in the RECORD, as follows:

R&D CREDIT COALITION,

Washington, DC, February 13, 2006.
Hon. CHARLES GRASSLEY,
Chairman, Committee on Finance, U.S. Senate, Washington, DC.
Hon. MAX BAUCUS,
Ranking Democrat, Committee on Finance, U.S. Senate, Washington, DC.

DEAR CHAIRMAN GRASSLEY AND RANKING MEMBER BAUCUS: On behalf of the members of the R&D Credit Coalition, we thank you for your leadership in amending the Tax Relief Act of 2005 to include a two-year extension of a strengthened research tax credit (the ``R&D'' tax credit). It is critical that the credit be extended and strengthened and the additional length of the proposed extension will provide needed certainty to businesses that are making investment and hiring decisions.

The Coalition believes the Senate-passed provision will help make the credit a more powerful incentive to undertake long-term, high-risk R&D projects in the United States. Consistent with the position you and 45 of your Senate colleagues have taken as sponsors of a permanent and strengthened R&D credit, extending this credit for an additional year will better enable the intended incentive effect of the tax credit to be realized. The best incentive is one on which businesses can rely and one that applies broadly to all research-intensive companies. The members of the R&D Credit Coalition applaud your efforts to strengthen this credit and to lengthen its extension period. We look forward to working with you on this issue.

Sincerely,

Bill Sample,
Microsoft Corporation, Chair, R&D Credit Coalition.

Donna Siss Gleason,
The Boeing Company, Vice Chair, R&D Credit Coalition.

Keith H. Smith,
United Technologies Corporation, Cochair, R&D Credit Coalition, Government Affairs Committee.

Karen Myers,
CA, Cochair, R&D Credit Coalition, Government Affairs Committee.

Monica M. McGuire,
National Association of Manufacturers, Executive Secretary, R&D Credit Coalition.

Mr. BAUCUS. Mr. President, spending for R&D will increase in 2006, but America has challenges to face, such as major increases in the funding of offshore operations. The total amount of foreign direct investment, including R&D, is shifting heavily towards India and China, and competition for qualified researchers will increase markedly over a short period of time.

Most important is to keep American jobs. Keep them here, keep them at home. R&D has some of the most highly paid and intellectually stimulating jobs. With offshore operations and foreign R&D investment shifting to India and China, jobs for U.S. workers will decrease in this area.

I strongly urge support of both the motion to instruct by Senator Hatch and also the motion to instruct that will be presented later, I assume, by the Senator from Michigan, Ms. Stabenow.

I suggest the absence of a quorum.

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