in the past, i testified in credit cards, everybody has issues in terms of their dealing with the credit card companies. in that context, that the possibility of there being more pressure, political pressure, put on the federal reserve system is, in fact, greater. and so again i think this is another reason why not having something that is in your core mission which in fact is something that tends to get more political could actually be harmful to the independence of the feds, something that i'm going to turn to later. the third question is, are there dangers from the federal reserve taking on this role of systemic risk regulator? and i think the answer is yes. there are three dangers that do particularly concern me. i will argue, however, that even though these dangers exist, that the federal reserve still should be the risk regulator, systemic risk regulator, and that there are steps congress can take to ensure that the federal reserve can do its job adequately, both in terms of monetary policy and

in terms of promoting financial stability. so the first danger is that the federal reserve might lose its focus on price stability. ..

this is a major concern i have right now, where concerns about the federal reserve independence and people who have been talking about the federal reserve needs to be reigned in. it can damage the federal reserve's able to keep the price i but i think in that context, we could actually have even problems currently with concerns about the fed's credibility, which is actually something that can raise interest rates, something that has indeed happened. the third issue is that something that is not really discussed as much as i'd like to see discussed, which is that the federal reserve's resources have been stretched to the limb by this crisis and this is particularly true of the board of governors, that i experienced this has a member of the board of governors, where i saw the staff working extremely long

hours, exhausted and i left in september of 2008 before of the crisis really got bad. so there are issues in terms. fed having enough resources, and the support of the congress with the fed to arequire the resources that it needs and i think again, that's something quite important. so the bottom line here for me is that -- one of the important lessons from this crisis is that we absolutely desperately need a systemic risk regulator and then i look at who can do that the best and my view it the federal reserve is in fact best positioned to do that. on the other hand, there are some dangers here, but this is why i think the congress needs to support the federal reserve in its independence in terms of the resources that it needs to do this job and as a result, i think that we would be better served having the feds better pursue this role. >> i thank you, dr. mishkin for your testimony and dr. mario,

your recognized for five minutes. >> thank you very much and thank you for giving me that opportunity to testify before you this afternoon. the independence of central banks, with respect to monetary policy is absolutely essential. policy that focused on financial stability on the other hand require a more cooperative approach, including in the u.s., central bank, functional regulators of banks and non-bank subsidiaries, and a clear role for the treasury, but there needs to be a bright line between the more cooperative approach to financial stability policy and the independence of the fed with respect to monetary policy. now, supervising systemically important financial institutions is of course a central part of financial stability policy. i don't believe there's a conflict between the current or newly proposed role for the fed as systemic risk regulator and independent role as monetary authority on monetary policy.

but then again, i don't have to see the treasury proposal as conferring on the fed's vast new authority as a systemic risk regulator. the fed is already bank holding company of consolidated supervisor for all financial institution that is have a bank. of the systemically important financial institutions today, most are already bank holding companies. other institutions that might be designated systemically important could be a couple of insurance companies, a few other large financial firms that are not supervised today, and in principle, but not likely in practice initially, very large and highly levered hedge funds. it should also be recognized that already functional supervisors of the bank and the investment banking and insurance subsidiaries of bank holding companies and they do much of the heavy lifting in overseeing the risks in their respective parts of the bank holding company. now, there's always been a debate about whether the fed's

role in bank and bank holding companies' supervision complements or conflicts with its role in monetary policy. one of the cases for complementary role is that the feds' responsibility as hands-on supervisor of some banks and all bank holding companies provides firsthand information about the state of the banking sector, which can be valuable input into the assessment of the economic outlook, especially in periods of extreme stress like today. now, the counterargument is that the feds' concern for the health of the banking system, derived from its role as bank and bank holding company supervisor, can encourage the fed at times to sacrifice its macro objectives in order to help the banking system when it's ailing. when i was on the board, i never witnessed any conflict in practice between these two roles. i don't why the debate should change has a result of the marginal increase in supervisory reach upped the treasury proposal.

now, a basic premise from my view is that a central bank should always have a hands-on role in bank supervision. first central banks always have at least an informal responsibilities for monitoring systemic risk and the banking system is a major source of such risk. second, its central bank is always a source of liquidity to and lending to banks and must therefore have firsthand knowledge of their credit worthiness hands this is especially true at times of stress. finally, the central bank will always be called upon to cooperate with treasury at times of interventions in particular institutions where the fed will sometimes provide the liquidity and treasury should take all the credit risk. given the feds' role already as consolidated supervisor of most systemically important financial institution, the choice may be whether to remove the fed from its role in banking supervision altogether, or expand its role modest live to cover all systemically important financial

institutions. this seems like an obvious choice for me. i also don't see the need to isolate these two functions from each other within the federal reserve. at least more than they are today. now, if the fed were getting substantial new powers as a systemic regulator and had it devoted considerable new resources to this responsibilities, then it seems reasonable that it should give up some of its current responsibilities. if something is to be given up, the most obvious choice is consumer protection and community affairs. these are not seen around the world as core responsibilities of central banks. in addition, the case for giving up consumer protection and community affairs is strengthened by the treasury proposal to unify these responsibilities in a single agency. now the bottom line is that the fed is the best choice for consolidated supervision of

systemically important financial institutions, in addition to its role as independent authority on monetary policy and these joint roles are much more complementary than they are con flicking. -- conflicting. indeed, there is a very natural fit between these two roles. thank you. >> thank you, dr. meyer. dr. galbrith. >> thank you very much, mr. chairman, and as a member of the -- it's a pleasure and a privilege to be here. i want to begin with a comment on this question of independence, which has been touched on repeatedly. vice chairman cohen said, and i think with very carefully chosen words, that the congress granted a substantial degree of independence to the federal reserve. that independence is of course independence from the executive branch. it is not and cannot be independence from the congress itself. the federal reserve may be

delegated certain functions by the congress, but the congress can always choose to hold it accountable and this committee of course has the responsibility of oversight precisely for that reason. so i think we should be very clear that when speaking of the independence of the federal reserve, it's a legal independence of a kind that other regulatory institutions have had over the course of our history. it's not an independence which is specific to monetary policy per se. the question before us is whether the federal reserve is the best agency to take on the responsibility for regulating systemic risk. and i have some reservations about them, -- about that, and i would classify them in three broad categories. the first one might call constitutional, and i would pick up a point that was already may this afternoon by congressman sherman, concerns the fact that the federal reserve is constituted in part of regional

federal reserve district banks who have boards of directors, who are formed from the membranes themselves, -- member banks themselves and it's of course true, that the district banks are represented on the federal open market committee with a voting power, whose constitutionality was challenged when i was working on the staff. the issue was never resolved on the legal merits. it's also the case as i understand it, that the examiners under a systemic risk supervision regime would actually reside in the district banks, rather than at the federal reserve board and it seems to me this does raise a question at least of perception, that is to say, whether it is appropriate to have systemic risk regulators who are part of institutions that report in part and accountable in part to boards of directors consisting in part to the member banks of

those institutions, for two rems reasons, one, there may be a systemic conflict between the interests of the member banks and the interests of system stability and secondly, there may be conflicts between the interests of member banks and the interests of other tier one financial holding companies who are not member banks, so it seems to me that is at least a question that is worth considering as you think about the architecture of this particular system. the second concern that i would have is institution hall. it is whether, in an agency, whose primary functions are macro economic, one would ever have a commitment to the systemic risk regulation, to the supervisory responsibilities, that is commensurate with the importance of that particular function. it seems to me worth pointing out that there is in the treasury proposal basically a two-stage process. one of which is analytical and the other one is more of -- has

more of an enforcements character. the other analyst cat question is to determine what is a systemically dangerous institution, to be classified as a tier one financial holding company. that it seems to me would be an appropriate function to vest in the federal reserve board, to where an office that is incremental in the sense that vice chairman kohn stipulated could decide amongst the relatively number of large institution who's is and who is not in that category. the open forcement, the -- the enforcement, the supervision, the regulation of the behavior of the institutions it seems to me would naturally be more appropriately placed in an agency for whom that is a primary authority, an agency such as the fdic. the third concern i have is a question of really the leadership of the federal reserve. historically, this is -- the chairmanmanship of the governors of the federal reserve is a high profile appointment, who needs to have the confidence of the

financial markets and there is a real question as to whether there is any record in the history of the federal reserve of effective response to systemic risk in advance of crisis. this was not the case of benjamin strong in the 1920's, it was not the case of alan greenspan in the runup to the latest crisis. we had a doctrine which in effect denied that systemic risk, could in fact bring down the system, that doctrine was articulated at the peak of the federal reserve and it seems to me we had a test of that proposition and it came up wanting, so it does seem to me that there are reasons to be worried about vesting the authority for systemic risk in the federal reserve. thank you very much. >> all right. thank you for your testimony and dr. berner he, you're recognized for five minutes. >> thank you mr. chairman, ranking member paul and other members of the committee. thank you for inviting me to this complete at the to address the role of the federal reserve in systemic risk regulation.

i think the broader question here is how should we address the significant weaknesss in our financial system, in our financial regulatory structure that the currents financial crisis has exposed? among market participants and i talked to many of them, i think there are two policy changes that are needed, that are well recognized. first, strength in our regulatory infrastructure. and second, a don't an appropriate regulation oversight to adopt the systemic systemwide risks across markets and institutions. in addition, i believe that macro economic policy should lean against asset and credit booms, which create financial instability. in my view, the federal reserve is best equipped to take the lead on systemic risk regulation and oversight. like others, i think this function is an essential and natural extension of the fed's traditional monetary policy role and of its responsibilities as lender of last resort. the three reasons or three factors that support that claim.

first, the fed is the ultimate guardian of our financial markets, and so it should be the agency that ensures the safety and soundness of the most important financial institutions operating in those markets. second, the process of intermediatation through traditional lenders and the capital markets has become increasingly complex. supervision of the institutions involved will enhance the fed's ability to make the right monetary policy decisions and finally, the fed's expertise in financial markets and institutions makes it the natural choice for this role. the fed's leadership in the supervisory capital assessment program demonstrated that expertise. in short, good monetary policy an financial stability in my view are complementary. asset booms and busts have destabilized the economy and financial system at great cost. a financial stability mandate for the fed requires a focus on asset and credit booms, as well as systemic regulation and oversight, and a policy tools required for each overlap

substantially. that may explain why the other countries that separate such responsibilities from the traditional role of the central bank have fared no better than we did in this crisis. the u.k. is a good example. while the bank of england and the financial services authority clearly have collaborated in the recent crisis, their separation of powers did not help manage the current crisis more successfully than u.s. regulators. however, naming the fed to this role won't solve all of our problems that i just enumerated. to see why in rest of my time i outlined some related remedies. i'll conclude by answering the four questions that you raised. in my view, our regulatory system has three major shortcomings. we supervise institutions rather than financial activities which allowed some firms to take on risky activities with inadequate oversight. a focus on systemic risk is one remedy for that problem. designating the feds to take the lead will limit risky activities and important market information slipping through the cracks. and it will promote supervisory

accountability. our regulatory safety net is excessively prone to hazards, encouraging risk taking. concentration as you've all alluded to in this hearing in hour financial services industry has created institutions that are too big to fail. remedies needed should include more extensive oversight and supervision of large, complex, financial institutions. an explicit regulatory charge on such institutions to help offset the moral hazard created by an implicit guarantee and a strong resolution framework that is understood by all before a crisis hits. and ad hoc approach creates uncertainty and reduces the credibility of policy. the third problem is our regulatory infrastructure encourages excessive leverage, which magnifies financial market volatility. three remedies needed here are first, we need a stronger system of capital regulation, that should improve financial stability and help monetary policy lean against the wind of asset booms.

we must resolve the tension between accountants who wants to limit reserves and regulators who want to build them in favor of the regulators. second, securities must be more transparent and homogeneous and less reliant on credit ratings and third, to reduce settlement and payment risks we need greater risk of central party over sight. i want to conclude buoyancy your four questions. are there conflicts with the fed's traditional role here? yes, there can be. in a crisis, decisions about particular firms likely would involve the fed and inherently political considerations. and the use of taxpayer funds that could compromise its independence. we should insulate the fed's independence with two fire walls. first, the resolution of troubled financial institutions should fall to the fdic. and second, and globally, we must change institutions now too big to fail now being too strong to fail. remedies will include many of the options i just discussed.

both fire walls should strengthen the fed's role as lender of last resort by reducing moral hazard, especially by reducing the chance that we will keep non-viable institutions alive. a concern you've expressed. what are the policy pros an cons? in my view, the pros outweigh the cons. interconnectedness means we must look across hoarsen talely at institutions rather than vertical silos. in my view, the fed has the most expertise. the fed is also best positioned to describe remedies and build financial shock absorbers. the fed isn't perfect. as the guardian of our financial system, the fed in the past has come up short in a number of ways. i'd only say that wile we consider making the fed the lead systemic regulator, the fed and we must examine how it can improve its functioning to take on these new duties. happen about the arguments against? while ensuring financial stability may be too big a job for just one regulator, even if

the fed takes the lead, coordination with other regulators will be essential for success. coordination with regulators and central banks abroad may be even more critical than being in sync with regulators at home. markets and institutions are global, but our regulation is largely local. so i like the president's recommendation for its financial services oversight council and international cooperation and coordination especially. last, what about reassigning some federal responsibilities to other agencies? regular haters should do what they do best. and for example, as others have said, consume are protection and promotion of financial literacy could go to another agency. but i think that the fed may still play a useful role in supporting these areas. mr. chairman, let's me add that these views are mine and not necessarily those of my employer, morgan stanley, or its staff. but i thank you for your attention. happy to answer urges. >> thank you for your testimony.

dr. taylor, you are recognized. >> thank you, mr. chairman. ranking member paul, the other ranking members, members of this committee for inviting me to testify on this important subject. in my view, the administration's plan would grant the fed significant new powers. more powers than it has ever had before. these powers would include determining whether a financial firm is a threat to financial stability. these designated firms by the fed would then be put in a special group, called tier 1fhc. the fed would then have the power to supervise and regulate this newly defined group and the firms in this group would be subject to this new resolution regime, chosen by the fed, subject to the new regime. taken as a whole, these powers mean that the fed would be a

systemic risk regulator. though that term is not defined in the -- in the documents, incompetent take it as a definition, these new powers. in my view, these new powers will negatively affect the fed's role as an independent monetary authority. i have four main concerns. first, it seems to me that the additional powers and responsibilities would dilute the key mission of the federal reserve, which is to maintain overall economic and price stability by controlling the growth of the money supply, an thereby influencing the overall level of interest rates in the economy. my experience in government, including the u.s. treasury, and elsewhere is that institutions work best when they focus on a limited set of understandable goals, and are held accountable to the public for achieving these goals. as the number of goals and the lack of clarity increases, the

effectiveness and performance generally decline. my second concern is that responsibility for these new tier one financial holding companies would reduce credibility of the federal reserve by involving it directly in potentially controversial decisions. in fact, it seems to me the experience of the last few months illustrates this problem. the fed's credibility is an extraordinarily valuable asset, and it would be terrible to lose that asset. my third concern is that the plan would create a conflict of interest. indeed, this has been discussed widely already at this hearing with the vice chairman and others. in my view, firms in the tier one financial holding company category would be perceived as too big to fail, and perhaps even too big to resolve, to go through that complicated process that's being proposed. in my view, there will therefore be a temptation to adjust the

instruments of monetary policy, its money supply or the interest rates, to help protect these institutions. it's a natural evolution. lower interest rates, when they're not appropriate, will be harmful to the economy, and a larger fed's balance sheet when not appropriate would be harmful to the economy. my fourth concern is that by giving so much new power to the federal reserve, that the plan would actually threaten the fed's independence regarding monetary policy. why would this be the case? in my view, its sooner -- sooner or later, the increased power will result in checks and limits on it. perhaps through micromanaged political interference or perhaps through legislative changes. it would be impossible, as some have suggested, in practice, to prevent such interference from spreading from the new regulatory powers and supervisory powers to the traditional monetary function of the fed. after all, they are in the same institution, and they're run by

the same c.e.o. i think this loss of federal reserve independence is a serious issue, especially at this time of rapidly growing federal debt and greatly expanded federal reserve balance sheet. actually, i could not do any better than to quote a former secretary of the treasury, also former secretary of state, secretary of labor and directo r of the budget, secretary george shultz who after studying carefully the events of the last few months, came up with the following statement and i quote secretary schultz. observing this process, the question comes forcefully ought. has the accord gone down the drain. the secretary of course is referring to the 1951 accord where the fed regained its independence from the treasury, which had lost during world war ii and was committed to pegging treasury interest

rates. and then he goes on to say, an remember how difficult it was for the fed to disentangle itself from the treasury in the post world war ii period. so these are very serious concerns. my four concerns, and i'd be happy to answer any questions you have about them. thank you, mr. chairman. >> thank you, mr. taylor. dr. meltzer. >> thanks to my old friend, congressman ron paul and to the members, thank you for the opportunity to present my appraisal of the administration's proposal for regulatory changes. i will confine most of my comments to the role of the federal reserve as a systemic regulator. and will offer an alternative proposal, much closer to the republican proposal. i share the belief that change is needed and long delayed. but appropriate change must protect the public, not the bankers.

during much of the past 15 years, i have written three volumes entitled "history of the federal reserve." working with two assistants, we have read virtually all of the minutes of the board of governors, the federal open market committee and the directors of the federal reserve bank. we have also read many of the staff papers and the internal memos supporting decisions. i speak from that perspective. two findings are very relevant for the role of the federal reserve. first, i do not know of any single clear example in which the federal reserve acted in advance to head off a crisis or a series of banking and financial failures. we have all know of sell where it failed to act in advance. congress members should ask themselves this question. can you expect the federal reserve or anyone else as systemic regulators to close fanney and freddie after congress decided it declined to act? what kind of a conflict is that

going to pose and how is it going to be resolved? second, in its 96 year histories the federal reserve has never announced a lender of last resort policy. it has discussed internally the content of such a policy several times, but have rarely announced what it would do and the announcements that it made as in 1987 were limited to the circumstances of that time. announcing and following a policy would award financial institutions to the fed's expected actions and might reduce pressures on congress to aid failing entities. following the rule in a crisis, the blend of last resort rule would change bankers' incentives and reduce moral hazard. a crisis policy rule is long overdue. the administration proposal recognizes the need but doesn't propose the rule. experiences in the past from the history suggest three main lessons. first, we cannot avoid banking

failures, but we can keep them from spreading and creating crises. second, neither the federal reserve nor any other agency has succeeded in predicting crises by anticipating systemic failure. it is hard to do, in part, because systemic risk is not well defined. reasonable people will differ and since much is often at stake, some will fight hard to deny that there is a systemic risk. one of the main reasons that congress in 1991 passed the federal deposit insurance corporation improvement act was to prevent the federal reserve to prevent closing of failing banks. the federal reserve and the fdic have not used fdicia against large banks in this crisis. that should change. the third lesson is a successful spy will alter bankers' incentives and avoid moral hazard. bankers must know that risk taking brings both rewards and

costs, including failure. loss of managerial position and equity, followed by sale of continuing operations. several reforms are needed to reduce or eliminate the cost of financial failure to the taxpayers. members of congress should ask themselves, and each other, is the banker or the regulator more likely to know about the right side beings on the bank's balance sheet? of course, it is the banker and especially so if the banker is taking large risks that he wants to hide. to me, that means the reform should start by increasing the banker's responsibility for losses. the administration proposal does the opposite, by making the federal reserve responsible for systemic risk. systemic risk is a term of art. i doubt that it can be defined in a way that satisfies the many parties involved in regulation. members of congress will properly urge that any large failure in their district is systemic. administrations and regulators will have other objectives. without a cheer definition, the

proposal will bring frequent controversy and without a clear definition, the proposal is incomplete. resolving the conflicting interest is unlikely to protect the general public. more likely, regulators will claim that they protect the public by protecting the banks. i think that's wrong. i believe there are better alternatives than the administration's proposal. first step, end too big to fail, require all financial institution toss increase capital, more than in proportional to the increase in the size of their hey sets. too big to fail is peevers. it allows banks to profit in good times, and shifts the losses to the taxpayers when crises or failures occur. second step, require the federal reserve to announce a rule for lender of last resort. congress should adopt the rule that they are willing to sustain. the rules should give banks an incentive to hold collateral to

be used in a crisis period. 19th century from the bank england is a good place to start. third step, recognize that regulation an ineffective way to change behavior. my first rule of regulation states that lawyers regulate but markets circumvent burdensome regulation. it told banks to hole more reserve if it held more risky assets, so they put the assets off their balance sheet. later, after the fact, they had to take them back, but that was after the fact. fourth step, recognize that regulators do not allow for the incentives induced by their regulations. in the dynamic financial markets, it is difficult, perhaps impossible, to anticipate how clever market participants will circumvent the rules without violating. fifth step, either extend fidicia to include holding companies or subject financial holding companies to bankruptcy

law. make the holding company subject to early intervention, either under fidicia or under bankruptcy law. that not only reduces or eliminates taxpayer losses but also encourages prudential behavior. other important changes should be made. congress should close fannie mae and freddy macand put any subsidy for low income housing on the budget. the same should be done to other credit market subsidies. the budge is the proper place for subsidies. three principles should be borne in mind. first, banks borrow shorthand lend long. unanticipated large changes can and will cause failures. our problem is to minimum highs the cost of failures to society. second, remember the capitalism without failure is like religion without sin. it removes incentives for prudent behavior. third, those that rely on regulation to reduce risk should recall that this is the age of

madoff. the fed too backs a record of success in managing large risks to a financial system. the economy, and the public. incentives for fraud, evasion, and circumvent of regulation often have been more powerful than incentives to enforce regulation that protects the public. thank you. >> thank the gentleman for his extensive statement. i'm going to recognize the members for questions and i'll just reserve my questions until last, if we have time. because we have to be out of here by 5:00 p.m., there's another meeting. i recognize the gentleman from texas. mr. paul, for five minutes. >> thank you, mr. chairman hand i well some the panel and especially nice to see dr. melzger here. i would like to start with a question to dr. metlzer because i would like to follow up on his testimony about the latin american crisis where he mentioned that the federal reserve went to the imt and

instructed the imf to pay interest to those banks that were exposed and of course, that was without congressional permission, and i think it makes a point -- one of the points that i've been trying to make and that is transparency of the federal reserve. now, i -- it sounded to me like the majority here somewhere for independence, -- is for independence, which is a code work for secrecy, in opposition to transparency and it's always used for the public interest. of course, i think the public interest is served by exposure and knowing what's going on and whose interests are being served and that's why i would like to see a lot more transparency. but the question i have for dr. meltzer, is since he's aware of this, he's published this, is this a good reason for us to know a lot more about the agreements that the federal reserve makes, because they can make agreements with international banking

institutions, and we have no right -- we may have a right under the constitution that we should, but we don't -- we've given up that right, we've given up that privilege. would this be a good example of why we need to know more of actually what the federal reserve is doing? >> yes. let me begin by saying independence to me and i believe to many of the members of the panel does not mean lack of transparency. it means protection -- the reason we have independent central banks is to that they don't expand on the pressure from congress, from the administration, from the banking community, and from others. which want them to be independent, to make their judgments, without -- because they are obligated by law to maintain high employment and low inflation. now, that law doesn't work very well, at least in my opinion, but that's why we want independence. so transparency, how can you be

against transparency, but i believe the congress would be more effective in its oversight of the federal reserve if it concentrated much more on outcomes and much less on process. let them make their decisions the way they want to make them. monitor the process. they are not living up to the mandate, to maintain full employment or high employment and low inflation and that's what we should be concerned about. >> i thank you and i'm going to hurry along because our five minutes runs out rather quickly, but i wanted to ask dr. galbraith a question, he's work here and he knows the system, so i've been rather shocked hat what you've presented here. you actually talked about the constitution. didn't you find out that we're not supposed to do that around here? we don't have that much concern about it, so i was delighted, from my viewpoints, that you brought this up and reminded us

about henry reiss's concern about the constitutionality, fmoc, of course i agree with that, but i wanted to see if there's a little bit more that you might agree with, because there are some who believe that we shouldn't be doing anything unless it's explicitly authorized and the central bank is not authorized, it's been ordained by the courts and the congress, but it was never explicitly authorized, but the point, the more practical point that i might be able to get you to comment on is the concept of the budget. i mean, the fed is a government untoe itself. you know, they hire hand make their wages and it doesn't go through the ordinary process. the constitution says it should all go through the constitutional process, and also, maybe you could comment on these foreign agreements. these are like treaties. the federal reserve passes out money. does this strike you as maybe

that too might be challenging if you happen to come at this from a constitutional viewpoints? >> well, i think under the constitution, the congress has every right for whatever information it seeks from the federal reserve. and if the congress were to decide to change the way the federal reserve is funded, it would also have the right to do that. it seems to me it would be an appropriate decision for congress to make. >> so they would then have a right -- but you -- so my proposal that we find out more, you would say that would be right and proper to find out what type of an agreements they've made with other governments, other central banks, i understand national banking organizations? >> my own view on this is that has a member of congress, you're entitled to that information, that would be the position i would -- understood to be the case when i was working here 30 years ago. >> thank you. >> the gentleman from delaware, mr. casse he l is recognized for

five minutes. >> thank you mr. chairman. this is a very good panel, i think you had some good ideas, whether one agrees or not to the concept of where we want to go. i would hope that staff and that hall of us will take note of what you stated here today. i think it makes a difference. i might start with you, dr. meyer. the -- you basically indicated that in going to systemic risk regulation, it wouldn't be a great change as far as the fed is concerned. i don't mean to put words in your mouth, but it's my impression of what you stated. and if that's the case, and others have indicated that the fed did not anticipate particularly well the problems which have arisen in the banking industry in the last year or two, but if that's the case, is it arguable that the fed had some of this power and did not succeed in carrying out the responsibility of dealing with systemic risk, to the limits they had before and therefore we

should have had question whether they should expand or not? >> ok. so first, let me reiterate what i said before, and i agree with vice chairman kohn here, that what the treasury proposal does is very incremental, not a vast expansion of powers, basically asking the fed to do what it's been doing as bank holding company supervisor and extending that reach to a modest degree over financial institutions that don't have a bank. now, i think it's clear that the federal reserve didn't distinguish itself in its carrying out its responsibilities as supervisor and regulator of banks and bank holding companies. this is an extraordinary period, it's the worst financial crisis since the great depression. and i don't believe any other

financial supervisor or regula regulator carried out its responsibilities to protect the safety and soundness of the banks and institutions under their control in this circumstance either. so i think what we need to do is not only ask the fed to carry out its responsibilities, but to encourage it to do what i think it would otherwise do, to change capital standards that make them more onerous for systemically important institutions, carry out more macro prudential supervision than is done before, although let me say that treasury proposal separates that out and gives that responsibility mainly to treasury -- well, mainly to the risk counsel that's staffed by treasury and chaired by the secretary. >> thank you. i'm not sure i understand all that quite yet, but i'll try to absorb it and i appreciate your

answer. dr. berner, you indicated that coordination with other regulators will be essential. can you be more explicit about that, what other regulators, i assume the fdic and others, and exactly what that coordination would be, would this be something that the federal reserve would do of its own or should there be some sort of a council in which they would meet on a regular basis, how would that coordination occur in your mind at least? >> well, i mentioned that there are probably two aspects to that coordination. one is within our own boundaries in the united states and for u.s. financial institutions, but i also think that we need to coordinate globally, since our markets and institutions are global as well. as far as the u.s. is concerned, you know, we have a multiplicity of regulators and even in the sweeping proposal from the treasury or in other regulatory proposals, i haven't heard any move to you know, to consolidate them all into one, and as i

indicated, it's not clear to me that doing so would produce a better outcome. so the coordination would have to take place among the various regulators that we have. however we reshape them, so that information doesn't slip through the cracks. so that we don't miss the activities of institutions who are regulated by one group or one regulator, but who are engaged if activities that are properly the responsibility of, if you will, collectively, all the regulators. that extends, i think, across borders, because markets are global. and so we need to coordinator the federal reserve and other regulators will need to coordinate across borders, with their counterparts overseas, taking into account what institutions are doing, either to as dr. meltzer indicated, avoid regulation by doing things in 1 place rather than another, so they're aware of what's going on and so that they can

appropriately safeguard the markets and institutions. >> i think what you've just discussed is vitally important and i hope everybody gives a lot of thought to exactly how that should be done, because ultimately i think that's something that's going to have to happen, no matter which way we go. >> the gentleman's time has expired. >> i yield back. i may write to you about that question. >> the gentleman from new jersey, mr. lance, is recognized for five minutes. >> thank you, mr. chairman. let me agree with my colleagues, that i believe this is an extremely distinguished panel and it's my privilege to participate this afternoon. dr. galbraith, to follow up on some of the questioning of ranking member paul, you indicate one way out of the difficulty might be the elimination of the boards of directors of the regional federal reserve banks or alternatively, to remove the voting power of the regional bank presidents on me, somc,

realistically, is that likely to occur? >> as a witness, it's my responsibility to be the most realistic person. >> mr. skwrao: we do rely on your expertise, however. >> i do think, however, that one has to look at this question of the perception of a privileged position for those who are -- to whom the presidents of the regional district -- >> absolutely. >> -- are responsible, an one, you know, an alternative of course, is not to put the examining power in the regional federal reserve banks. to leave it in the hands of a tough cop who is entirely awe ton must. >> -- autonomous. >> yes, on our side, we have great difficulty with reposing these powers with the fed presever board at all. to dr. taylor hand dr. meltzer, regarding the establishment of tier one financial holding companies, i think many of us

have a concern that if that were to occur, there would be some sort of assumption that they would have the backing of the federal government. we already may be in that place in some areas, an certainly we were in that place regarding fannie mae and freddie mac. your comments, both of you as distinguished persons regarding this area of your expertise, would you elaborate on that a little bit for me? >> yes. i think the reason why i would characterize this proposal as giving significant, not incremental powers to the federal reserve, largely lies in this ability to distinguish certain institutions as threat to the financial system, as defined by the treasury. and so once an institution -- we don't know quite frankly how many there will be. it's not clear. that would be a good question to

ask the treasury or the fed. but it could be quite large. >> in your opinion -- could you give us an estimate as to how many you think it might be? >> i have no idea. i think one of the problems, quite frankly, operationally, there is no definition of systemic risk here. and so it could -- it might not be by the way, this federal reserve. these people who make a decision. it could be their successors. >> yes, sir. >> and so i think the danger just as you say is once these institutions are in this group an they do become too big to fail, in fact, probably too big to resolve, because it will look like a black mark, and so, they could become fannie mae's and freddie mac's of the future. >> i like your emphasis on realism. >> i'm new here, so i'm sure i'll get over it. >> try hard not to. the realism to me says what would the systemic risk

regulator do with a tier one holding company? in my opinion, it would be fannie mae and freddie mac -- >> that is my concern. >> there would be -- these are going to be banks or institutions that are going to have branches all over the country. every member will feel an obligation to say, we can't let that happen in our district, and in hour districts. -- our districts and so too big to fail will really become an even greater problem now. how can you limit the risks that bankers -- some bankers are going to take. make them bear the risk. >> thank you, thank you very much. i yield back the balance of my time. >> the gentleman yields back. the gentleman from alabama is recognized for five minutes. >> thank you, mr. chairman. mr. meyer, you described the proposed changes as incremental to the federal reserve. >> right.

>> reading the treasury proposal, you know, what they say about it, they say this report proposes a number of major changes to the formal powers and duties of the federal reserve, including the addition of several new financial stability responsibilities. these proposals would put into effect the biggest changes to the federal reserve's authority in years. or decades. so i think you have to read the rest of the report and see whether you agree with that. i read the rest of the report, and i don't see that there is this. now the administration possibly wants to look at this as a more sweeping set of proposals, than perhaps it is, but you know, as vice chairman kohn said, this is just not the case. >> ok. so actually, you don't agree with their description of their own plan. >> absolutely.

>> ok. >> let they have ask the panelists, -- me he ask the panelists, can you function as a systemic risk regulator of significantly -- significant institutions without a robust examination and supervision authority? or can you -- can you do that? >> impossible. >> impossible. ok. >> can't do it. >> i agree. >> i completely agree here, that clearly, part of this issue of being a systemic risk regulator, you have to go in and know what's going on in the institutions that you are regulator, and so i think -- regulating, so it's essential that this be part of the role and i think clearly that there's already an element of this, a very strong element in what the federal reserve does now to the bank holding companies. >> so do you think the federal reserve had a robust supervision

and examination of those institutions that failed including aig? >> well, certainly the federal reserve did not have this responsibility for aig. >> well, they were a holding company, were they not? >> not a bank holding company. >> how about citi? >> citigroup, people monitoring citigroup and aid, new york -- all from the new york fed, every day. do they find anything at citigroup? nothing that they were willing to do anything about. >> and i guess wachovia was a bank holding company. does the fed -- do they have, do you think, the robust examination or supervision, or is that something that the occ or the fdic is -- does on a

day-to-day basis? >> i -- the occ and the fdic have never been responsible for consolidated supervision. they have no history of doing that. the fdic does not have a supervisory staff that has any expertise in the complex banking situation of the institutions we're talking about. the occ is already involved, and was the bank supervisor of many of the institutions that have gotten into trouble and in most of the large institutions, occ is the bank supervisor and the fed is the holding company supervisor, an they both have to work together. >> and they don't do that in the last -- >> well, i think neither distinguished themselves. >> ok. all right. do we need to determine the causes of the present financial crisis before we start legislating a fix and have we done that? >> it would be very helpful in

my view to conduct a full and independent investigation into the cause of the financial crisis, similar to the precora committee investigations. >> how did dr. -- >> to do regulatory reform is something i have been concerned about. i do actually think however, that the need for resolution authority is absolutely critical. and so -- >> and i don't disagree. >> i think that one of my concerns has been that if we go down the route of worrying about the big picture and then don't do anything, we're in a situation that not only can large institutions get in trouble an we can't do anything about it, but we're in a weak position to get them to fix things because we have no ammunition. >> the republican proposal is for an enhanced resolution, a

bankruptcy-like proceeding, so i mean, like for nonbank financial companies. have you all looked at the republican proposal? >> not in detail. >> the gentleman's time has expired and i'm going to encourage him to send each of these witnesses, the republican proposal. unfortunately, there is another meeting scheduled, as i have previously announced in this room at 5:00 p.m., if we had been more expeditious on the floor, perhaps we could have had more time to do what we do in committee. and i'm not trying to be mean about it. i just - -- >> i don't think you're being mean. >> i can't give more time than the room allows me to give. the gentleman's time has expir expired. you distinguished between the two responsibilities on the bottom of page 2 and top of page

3 of your testimony. one was to identify the tier one financial holding companies considered to be so large hand interconnected, and then the s.e.c. was the institution of regime of examination and regulation. if the first part of that, i take, the first one of those i take it, you concluded was not constitutionally suspect, to be done by the fed? >> it could be done in the federal reserve board and it would be an incremental responsibility of the kind that chairman kohn described, yes. >> i take it that you're recommending that the second part of that be undertaken by the fdic? >> by an agency for whom it is the highest priority and the major mission, yes i couldn't. >> even for institutions that are not federally insured. >> yes. >> i note that members may have

additional questions for this panel, which they may wish to submit in writing without objection. the hearing record will remain open for 30 days for members to submit written questions to these witnesses and to place their responses in the record. i have thank the witnesses for their unending patience throughout the afternoon, and regret that we have to rush out of the room, otherwise we would be happy to go another round. but i'm sure the members will follow up with vigorous written questions and i encourage you to answer them as expeditiously as you can, so that we can continue the process, moving along. i thank you for coming, and the hearing is adjourned.

[inaudible conversations] >> on monday, the senate judiciary committee begins the confirmation hearings for supreme court nominee, sonya sotomayor. we'll brioche complete coverage on its c-span networks, c-span radio and on line at c-span.org. monday's session begins with opening statements from committee members and judge sotomayor. watch it at 10:00 a.m. eastern on c-span. >> we take you live now to the u.s. capitol. monday, its senate takes up defense department programs for 2010. issues including military pay raises, if-22 fighter planes and rules of evidence for detainee trials.

now live senate coverage here on c-span2. senate will come to order. the chaplain will now lead the senate in prayer. the chaplain: let us pray. help us, o lord, to run when we can, to walk when we ought, and to wait when we must. today, give wisdom to our lawmakers. may they leave undone that for which they aren't ready, as they

open their minds to discern your will. lord, help them to not pray for tasks fitted for their strength, but for strength which fits them for their tasks. conform their lives more and more to your likeness. continue to lift the light of -- your light upon them and fill them with your peace. we pray in your holy name. amen. the presiding officer: please join me in reciting the pledge of allegiance. i pledge allegiance to the flag of the united states of america and to the republic

for which it stands, one nation under god, indivisible, with liberty and justice for all. the presiding officer: the clerk will read a communication to the senate. the clerk: washington, d.c, july 10, 2009, to the senate: under the provisions of rule 1, paragraph 3, of the standing rules of the senate, i hereby appoint the honorable jeff merkley, a senator from the stae of oregon, to perform the duties of the chair. signed: robert c. byrd, presidet pro tempore. mr. reid: mr. president? the presiding officer: the majority leader. mr. reid: following leader remarks there will be a period of morning business, senators will be allowed to speak up to 10 minutes each, no roll call votes during today's session of the senate. mr. president, many americans are fortunate to have health insurance help them pay for their prescription, treatments, or even doctor visits. like any kind of insurance, we hope we never have to use it, but it's comforting to know it's

there. what happens if the system designed to give us that sense of security and stability isn't itself secure or stable? where does one turn when that certainty is taken away? that's a fear too many middle-class families in america have. they see the jobs around them disappear. for some one of those jobs may be their own job. they see their paychecks get smaller, or they struggle each week because that paycheck doesn't simply go far enough. they may have insurance today, but they don't know if they'll be able to say the same tomorrow. too many families in the greatest country in the largest economy in the world, by far, live just one illness, one accident, or one pink slip away from losing that sense of security, their health insurance. far too many families have to make a decision when their children get sick. did they buy them new school supplies, do they buy them clothes? do they buy some extra things for the groceries for that family or are they going to be

able to take them to the doctor? as i said, do they get them new clothes as they grow out of their old ones or do they get them the treatment to stay healthy or even to get healthy. far too many hard-working americans have to make a choice when their doctor gives them a prescription for chronic illness or what insurance companies like to call a preexisting condition. do they get this medicine or do they add that little piece of paper to a top of a mounting pile of bills they can't afford to pay? and what about small businesses? those entrepreneurs in big cities and small towns who innovate, invent and fuel our economy. they he too have a choice to make -- they too have a choice to make. do they hire new employees, lay off hard-working americans or do they simply cans thairl health insurance for their employees because it's too expensive. business men and women don't have a lack of insurance because they are cheap, they don't care

about their employees. they don't have health insurance because they can't afford it. it's too expensive. taking your child to the doctor, filling a prescription or giving your workers health insurance should not have to be choices. they should not end in question marks. that's exactly why we're working to bring security and stability back to health care. health care reform is making sure that every american can afford access an care. reform means making sure that if you lose your job, your health care won't go with the job you lost. if you change jobs, your health care stays with you. reforming health care means that if your mother had breast cancer or you had minor surgery last year our child gets allergies every spring, your insurance company can't say, i'm sorry, you're too much of a risk for us to cover anymore. health care reform means lowering the cost of care and keeping them home it means improving the quality of care

you get and keeping quality high. it means that premiums you pay every month won't go up just because your insurance company feels like it should. senator patty murray of washington told a story, i was at an aevent with her yesterday, she -- at an event with her yesterday, she got up yesterday to find a washington press an insurance company that insures 135,000 washingtonians. they will have a 17.5% increase immediately in their health insurance policies. that's an average. some are higher, some are lower. so it means the premiums that you pay, that's what reform means. you pay every month. it won't go up just because your insurance company feels like it. it means keeping costs stable so that the price of staying healthy doesn't fluctuate like a gallon of gas. it not only means making sure that you can go to your family's doctor or keep your health care

plan if you like it, but also that you can afford to do so. no one can predict when the next accident might come. when one might get laid off. we don't know when we'll get sick or when one of our loved ones will get sick. but we can put people in control of their own health care. a doctor's first job when someone comes into the emergency room is to stablize the patient. when it comes to addressing the emergency care in our health system, our job is to do the same, stablize it. we have to cure the uncertainty in health care. we must fix our broken health care system so that when you open your medicine cabinet, you can be certain the prescription you need will get better -- to get better will be there. when you open your wallet, you should be certain that you can afford to go to the doctor. and when you open that small business in your hometown, you can be certain that you can hire employees to grow your company, put your ideas into motion, realize your american dream and have your employees covered with

health insurance. mr. president, the status quo is ruining our country's financial stability. right now one-sixth of every dollar spent in america goes to health care. if we don't change this, by the year 2020, that's a little over 10 years away, it will be 35 cents of every dollar spent will be in health care. it will bankrupt our country. we must change this. i ask my republican colleagues -- let's not make this a partisan issue. let's work together. that's why i so appreciate a number of valiant republicans on the finance committee working together to try -- to try to come up with a health care plan that can be supported by democrats and republicans in the senate. mr. president, we can do it alone. democrats can do it alone we don't want to do it alone

because it would be under a -- a -- something we call reconciliation. and it changes the rules and instead of being able to do this much health care, we're only going to be able to do that much health care. we want to work with our republican colleagues. this is not a partisan issue. people losing their health care are not democrats or republicans or independents, they're americans. they're from the state of oregon, they're from the state of nevada. the presiding officer represents the state of oregon, extremely high unemployment in oregon. higher than in nevada and we're over 11%. in one month we went from 10.4% to 11.3% unemployment. so the people losing their jobs, losing the health care in oregon and nevada and all the rest of the states are not partisans. they want something done to restore their jobs, to get them new jobs and to give them health insurance if they don't have it and make sure that it's not take wayne from them.

so -- away from them. so i reach out to my republican colleagues to join with us in this necessity of doing something about health care. this isn't something we're looking for work to do. we're doing it because it is absolutely essential. right now, i repeat, one-sixth of every dollar spent guess to -- goes to health care in america. if we don't change this in a few years it will be 35 cents of every dollar. we can't sustain that. it's my understanding you're going to open morning business, mr. president. the presiding officer: under the previous order the leadership time is reserved. under the previous order, there will now be a period morning business with senators permitted to speak for up to 10 minutes each. the clerk will call the roll.

quorum call:

the presiding officer: the senator from arizona.

mr. mccain: i ask unanimous consent that further proceedings under the quorum call be suspended. the presiding officer: without objection. mr. mccain: mr. -- mr. president, i would like to note in the context of my remarks the announcement yesterday that the deficit for the first nine months of the -- of this year is now $1.1 trillion, headed for the end of this year to $1.8 trillion, perhaps the highest as a percentage of g.d.p. in the history of this country outside of wartime. and so we are now in the process of adding amendment after amendment in the "help" committee, without any idea of the cost. and as one of my colleagues who proposed a massive expansion of women's health care yesterday said in the "help" committee said it's not the cost that it's

important. it's the cause. well, a remarkable approach to the fact that we are mortgaging our children and our grand children's futures in a fashion which is the commission of generational theft. the committee chairman dodd received a new score on his bill last week by hiding the real cost of the bill. a few weeks ago the preliminary cost was over $1 trillion. now it's at $900 billion. same bill, just different numbers. wound, we're told that reform -- on the one hand we're told reform is urgent. then they'll tax employers with a job-killing employer health mandate, collect $52 billion from small employers, the engine that will take us out of our recession. nobody disagrees with the role of small business in our economy. and then this latest proposal

hides the cost of the additional hundreds of billions of dollars of medicaid expansion. mr. president, the state of california is offering i.o.u.'s to pay their bills. they have some, i read $26 billion deficit. and we're going to increase the medicaid burden on the states by -- to the tune, in the case of california, of several more billion dollars. how are they going to pay for it? i think that it's an impossible task. well, as i mentioned, i'm told that it's not about the cost. it is about the cost. just as the stimulus package is about the cost. just as continued bailouts of industries such as the automotive industry, banks, financial institution, and anybody who's -- quote -- "too big to tpa*eul when the small business people all over america

are closing their doors because they are too small to save. for the first nine months the deficit was $1.1 trillion, more than $800 billion greater than the deficit recorded last year. the american people have a right to know what this health care bill will cost, what it will cost now and what it will cost our grandchildren. "the washington post" today tells us how not to reform health care. in opposing the government insurance president obama says is so critical. according to today's "washington post" -- quote -- "it would tragic if this issue were to drag down health reform or make it impossible to secure republican votes. restructuring the health care system is risky enough. the democrats would be wise not to try to accomplish it entirely on their own. i certainly hope my friends on the other side of the aisle pay attention to that comment.

well, it's turned into a partisan effort, and it's prely too bad. -- it's really too bad. in today's "wall street journal" democrats hoodwink the health lobby. america's health care c.e.o.'s are being taken for a ride by congress and their own lobbyists. basically it's a very interesting article by kimberly strassel. the industry's calculation is by cutting deals it can set the terms of its contributions to -- quote -- "reform and i-wangle up sides. the insurance comes first promising to squeeze costs out of the systems. democrats are letting her believe that in return she'll get a mandate to require all tphoerpbs carry insurance which members will supply and be spared a public option which would decimate her str-g. it goes on to talk about mr. tauzin who came along

pledging drugmakers would plug in $80 million to plug a gap. he's been led to think washington will give him a hand on generics. the word is that the administration is now saying drug re-importation is not important in exchange for this deal with mr. tauzin. how unsavory is that? drug re-importation will save the american people $50 billion a year. it's a fact. and so phrma, the large prescription drug lobby, and very powerful one here in our nation's capital, in return for saying they will save $80 billion, the administration in return will give up their support for what would save the american people $50 billion, when the $80 billion that they're talking about is purely illusory, to say the least.

so, "the wall street journal" article goes on to say, "democrats have complimented their smiling encouragements with behind-the-scene threats. after retaking the house in 2006, the party made clear that companies that did not hire democratic lobbyists would not get a hearing in washington. the ruling party is now seeing the fruits of its bullying. these days a meeting of health care lobbyists is better described as a reunion of senate finance chairman max baucus tpofrpler aides. a the new democratic lobbyists does not exist to protect the industry from congress. it exists to present democratic ult pha*eut may tupls to business. -- ultimate tupls to business. when senate republicans last month hosted a meeting to discuss reform ideas mr. baucus called in a bloc of these democratic lobbyists to deliver a message. he said republicans are having a

meeting and you need to let all of your clients to know if they have someone there, that will be viewed as a hostile act, reported one attendee to the baucus caucus. interesting. so, all these actions -- the white house meetings, the strung-out negotiations, the muzzling have been taken with one aim. to. buy silence. president barack obama is committed to a public option. liberal democrats intend to make the private sector fund their plans. they figure by the time they drop a bill that contains odious elements it will be too late for any industry player, big or small, to cut a harry and louise ad. industry players got a glimpse of how they will be treated this week. house energy and commerce chairman henry waxman dismissed the $80 billion drug deal claiming it did not have house support and, moreover, that the white house -- quote -- "told us they're not bound to that agreement." so the question is just how long it's going to take for america's health care c.e.o.'s to realize

that they're being taken for a ride both by congress and their own lobbyists. american are wary enough about o*epl-care to maybe appreciate straight talk -- about obama care to maybe appreciate straight talk from corporate america. it's my understanding that the debate and discussion goes on in the house and here in the senate. they still haven't found a way to pay for the health care reforms that they want to make. it's still at around $1 trillion. we hear everything from a ten-cent tax on soft drinks to the employer benefit proposal which was so strongly dried and attacked during the last campaign -- derided and attacked during the last campaign campaign. but so far we're talking about laying another $1 trillion or $2 trillion in debt on the american

people in addition to the deficit that we have already amassed this year. mr. president, again, i urge my colleagues and the administration to sit down in true negotiations in a bipartisan fashion together, and maybe we can solve this issue because we all know that the quality of health care in america is the highest in the world. but the cost of health care in america and the inflation associated with it are something that we must address so that health care is affordable and available to all americans. mr. president, i yield the floor and i suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

mr. brown: mr. president? the presiding officer: the senator from pho* ohio. mr. brown: thank you, mr. president. i ask unanimous consent to dispense with the quorum call. the presiding officer: without objection. mr. brown: this week, mr. president, congress is deciding whether to broaden access to affordable generic drugs for millions of americans. as we all argue our points, it's important to remember what this issue is all about. broadening access to generic drugs is not about republicans. it's not about democrats. it's not even about the drug companies, the biologic makers or other pharmaceutical companies t.'s about men and women in my state of ohio and around the country. broadening access to generic drugs is about the 192,370 new

cases of breast cancer that will be diagnosed in american women this year. in the $48,000 average annually is what it will cost to treat their disease with a biologic drug, $48,000 annually. this is about the 1.3 million adults affect bid rheumatoid arthritis each year and the $20,000 average annually it costs to treat their disease, just the drug part of the disease, to treat their disease with a biologic drug. broadening access to generics is about the 48,610 men and women diagnosed with colon cancer each year and the $100,000 each year to treat the disease with a biologic drug. let me mention a few other noteworthy numbers. $1.2 billion represents the

average cost to develop a new biotech product. this includes research and development and the costs lost to products that never make it to market. so it's not just $1.2 billion for the product itself that makes it to market. it's about the false starts and includes all of that taofplt $9.2 billion represents the 2008 sales of genentech's biologic colon treat avastan. $8 billion. $8 billion represents the 2008 sales of amgen's biologic arthritis treatment. $7 million represents how much money phrma, the pharmaceutical industry, how much money phrma spent in the first three months of 2009 to lobby congress. $7 million to lobby congress in the first three months of this

year. i would -- that's before we really started, as the presiding officer sits with me on the health, education, labor, pension committee committee knows, before we started working on the most intense part of the bill. i would encourage my colleagues on both sides of the aisle to keep all of these numbers in mind as we go through the debate this week and go through the debate next week, the numbers of patients who depend on these drugs, the cost to the patients one by one by one for each of these drugs, the amount of money that the drug companies -- the biologic companies have made on these drugs and the amount of money they're spending lobbying congress to have their way on these issues. countless americans can't afford brand name drugs known as biologics. these drugs provide promise and hope. we're indebted to these companies. they clearly save lives. they promise hope to those

suffering from devastating illnesses, cancer, parkinson's, alzheimer's, m.s. for example, annual treatment for breast cancer with the biologic drug herceptin i is $38,000. these drugs are simply too expensive for so many people to afford. the average household income for ohio in 2007 was $46,579. -- $46,597. it doesn't matter if it is a breakthrough or lifesaving, he or she can't afford it. to put this in context, mr. president, there is currently no f.d.a. approval process for biologic generic equivalent that enables generic drugs to compete against the brand name

counterparts. we have seen the money you can save when you go to a interest for a typical drug with a generic substitute. it is the same drug with the same active ingredients. a physician will encourage a patient to buy the generic equivalent. that's true for the chemical drugs that we've had for many, many years. it's not true for the biologics. there is no pathway allowed for generics to compete against the biologics. absent that process, there is no free market exerting downward pressure on biologic prices. so prices remain high as $20,000 or $7,000 or $8,000 a month for some of these biologics. that's the problem in a nutshell. this is all talking public policy up here. but behind, it underneath it lie -- are the lives of hundreds of thousands of americans. the situations in which americans can't afford treatments that prevent

disabilitiy and in some cases prevent death. early this year ohio representatives from the arthritis foundation visited my office to talk about soaring health care costs and the limitations of our current system. these individuals spoke of extreme and prolonged physical pain. maintain could be alleviated if only the treatments existed, which they do, and if only they were affordable, which too often they are not. biologics provide great promise and hope to those suffering from devastating diseases and chronic illnesses. but absent competition, absent what we call follow-on biologics, absent a generic substitute to compete, but absent competition, countless americans will be unable to benefit from these medicines. it would be irresponsible on our part not to pursue a safe and efficient path to biologics. it would be irresponsible on our part to pursue a pathway that

allows for over a decade for monopoly protections for brand name products. we didn't do that with the generic drugs, the so-called hatchman bill. most people around our country in toledo, akron, cincinnati, dayton, and mansfield have benefited from hatchman, which -- ax hatchman which cut the prices 50% to 70%. we have not allow follow-on biologics, to allow competition in the system. but next week, as the presiding officer knows, in the health, education, and labor, we have the opportunity to make affordable generic drugs more accessible for our seniors, more accessible for our nation's middle class. more accessible for the hundreds of thousands -- no, the millions of americans who are suffering

from these diseases, but the -- the -- so many of them are unable to get the -- the -- unable to afford these expensive biologics. health care reform must broaden access to generic alternatives. it must broaden access to generic alternatives to biologics, the most expensive kinds of prescription drugs. failing to do so, mr. president, is not just bad policy -- bad public policy, failing to do so means we are letting down millions of our sickest citizens. i yield the floor and suggest the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

the presiding officer: the

majority leader. mr. reid: i ask consent that the call of the quorum be terminated. the presiding officer: without objection. mr. reid: mr. president, i now ask unanimous consent that the senate proceed to executive session to calendar number 169, the nomination of robert m. groves to be the director of the krensus for our country. the presiding officer: is there objection? without objection, so ordered. the clerk: nomination, department of commerce, robert m. groves of michigan to be director of the census. mr. reid: i send a cloture motion to the desk. the presiding officer: the clerk will report the motion. the clerk: cloture motion: we, the undersigned senators, in accordance with the provisions of rule 22 of the standing rules of the senate, do hereby move to bring to a close debate on the nomination of robert m. groves of michigan to be director of the census, signed by 17 senators as follows: reid, rockefeller, dodd, specter, durbin, begich, udall of

colorado, bingaman, casey, ewe call of new mexico, nelson of florida, dorgan, mccaskill, and gillibrand. mr. reid: i ask unanimous consent that the mandatory quorum be waived. the presiding officer: without objection. mr. reid: i now ask consent that on monday, july 13th, at 4:30 p.m. the senate proceed to executive session and at that time there be an hour of debate prior to the vote on the motion to invoke cloture on the nomination. that the time divided as follows, 5 minutes each for -- 15 minutes each for collins, shelby and vitter, 15 minutes equally divided between senators lieberman and carper. at 5:30 the senate vote on the motion to invoke cloture. then the senate vote on confirmation of the nomination. upon confirmation of the nomination be -- the confirmation be laid on the table and the president notified of senate's action and the

senate resume legislative session. the presiding officer: without objection. mr. reid: are we in morning business? the presiding officer: we are not in morning business. mr. reid: i ask unanimous consent that we now proceed to a period of morning business. the presiding officer: without objection. mr. reid: with senators allowed to speak therein up to 10 minutes each. the presiding officer: without objection. a senator: mr. president? the presiding officer: the senator from nebraska. mr. johanns: mr. president, late last week media reports heralded the decrease in the price tag of the "help" committee's health care proposal. but i would suggest that before we uncork the champagne, before we celebrate a complicate accomplishment, let's study more

closely the untold story and i believe we will find accounting gymnastics that have been employed. while the headlines may have touted a "help" committee bill that scored at $611 billion over 10 years, the real price tag when fully implemented actually totals about $2 trillion. now, that's a big, darn difference, mr. president, and almost $1.5 trillion discrepency simply can't be swept under the rug. even in the federal government and too much of a budget buster to be ignored. so where is the difference? first, the congressional budget office assumes that it will take the federal bureaucrats over four years to get the government-run health care and other subsidies up and running. so while the $611 billion score

claims to be a 10-year number, essentially it only covers six years of the cost. if you look at the c.b.o. score for the first 10 years after the program is fully implemented, the actual spending is closer to $1.5 trillion. in addition while the press releases were claiming credit for increased insurance coverage, they were actually leaving out what had actual -- what it actually cost to make that happen. that euphoric claim that -- that 97% of americans would be covered under the "help" proposal is not even in the "help" committee proposal. only in washington, mr. president, can you assume something to be -- take credit for the accomplishment and then not pay the bill. the 97% statistic is based on an

assumption. the assumption is that medicaid will be expanded up to 150% of the federal poverty level. this expansion is estimated to bring 20 million new people into a government-run health care plan. however, c.b.o. estimates that it will cost around $500 billion over 10 years. nowhere is that cost yet considered. and this is only the federal share of the program. it does not take into account the state taxes that will need to be raised in order for each state to pay its share of this bill. mr. president, at one point i was governor in my own state of nebraska this expansion will cost the state taxpayer taxpayers $73 million a year when they have to assume the

cost of the program. now, that's a lot of money to come up with in these tough economic times. the american people, i believe, deserve more than budgetary tricks. let's be honest about what we are trying to do here and let's be very candid with people about the real costs, the fully implemented cost of the program. let's also be very upfront about the realities of what a government-run program can or cannot accomplish and actually -- in actually bringing down health care costs. now, some claim that a government-run plan will serve as competition for private insurance and thus will bring down the cost of those insurance premiums. however, the c.b.o. score makes it clear that if a government-run plan competes on a truly level playing field,

it's not going lower health care costs. the only way a government-run program can offer reduced insurance premiums if if they pay providers and hospitals at rates equivalent to current government programs. but this wouldn't cover costs. instead it would create cost shifting on to private insurance, which is already happening today. c.b.o. cautioned that reducing payment rates would only increase the access problems we have with current government programs. currently we know that 40% of doctors just don't take medicaid patients. it's not that they don't want to. it's because the rates are so low, they don't cover their costs. this directly contradicts president obama's message that if you like your doctors, you'll be able to keep them.

the reality is on this government program, medicaid, which is due to ensure more, that's not the case. the c.b.o. score actually confirms that many employees would lose their employer-based health care should this bill become law. let me put up a chart, if i might. in fact, the "help" committee's bill seems to directly encourage employers to dump their employees into a government-run plan. in the committee draft, businesses that employ 25 or more employees would be required to pay an annual penalty, which is shown here, of $750. for a full-time employee if they choose not to provide private health insurance for the employees. when you do the math, though,

this isn't a penalty at all compared to the cost of private insurance. looking again at the chart, in 2008, the average employer's cost for an individual in a group plan was $3,983. $3,983. so putting their employees on the public plan option is actually a savings. it's a savings, as the chart shows, of $3,233 a year for each employee for that employer. paying the so-called penalty to get out from underneath the private insurance costs looks like a pretty smart business decision. in fact, mr. president, i don't think it's a coincidence that a very, very large retailer recently came out in support of

the employer mandate. when i heard this news, my initial reaction was what's the catch? i think we found the catch. with over 1.4 million employees, this company reports that 51.8% of their employees have coverage through an employee health care plan. if all these employees end up on the public plan, it would save this company $2.4 billion a year. the employees, members of our middle-class, lose their insurance plan. the promise is not kept. no surprise that the company does very well -- $2.4 billion go to the bottom line -- and also no surprise this company is supporting an employer mandate.

ultimately people will not have a choice to keep their employer-based coverage and will not receive the same level of care when their employer dumps them on to the government plan to make their bottom line look better. ladies and gentlemen of the middle class, this will directly impact your ability to choose the doctor that you want. it will inject government bureaucrats into your medical decisions because you have no choice here. it is an employer's choice to move you to the government plan. to promise otherwise is misleading. false promises will not help us achieve true solutions. congress has been tasked with solving this problem. and we must work together to resolve the problem reining in soaring costs. adding another $2 trillion

entitlement program on to a budget that is already in serious trouble doesn't make sense. the american people have sent us to washington to identify the problem and fix it, not exacerbate it. let's not put together bad policy and end up with another financial debacle. this time there is far more than money on the line. americans treasure their ability to choose their doctor, to receive treatment, to have control of their life here. they don't want a federal bureaucrat in the middle of it. so let's be candid with the american people and put together a good bill that actually addresses the real problems. let's get it right this time. mr. president, i yield the floor and i suggest the absence -- i yield the floor. the presiding officer: the clerk will call the roll.

a senator: mr. president? the presiding officer: the senator from delaware. mr. kaufman: i ask consent that the quorum call be dispensed with. the presiding officer: without objection. mr. kaufman: mr. president, i also ask consent to speak as if in morning business for 20 minutes. the presiding officer: without objection. mr. kaufman: thank you, mr. president. i rise todayed to talk about health care and why congress needs to pass reform now. there are three simple truths to health care reform. first, if we don't pass health care reform this year, the stars won't align for another opportunity to pass a major reform bill for years and years to come. don't kid yourself. the last time congress passed -- failed to pass major health care reform, 15 years passed until today. if the congress fails to enact a health care reform bill this year with a new president in his first year in office who has a strong relationship with the congress, it simply will not be done until years from now when the system has collapsed and in

truly catastrophic shape. that leaves the second simple truth. we must pass reform now because the consequences of failure are not that we'll be stuck with the health care system we have today. the consequences of failure are very ugly health care reality our system is quickly becoming. our health care system has become a gigantic resource-eating machine. which over time sucks in more money and delivers fewer and fewer options and decreased quality care, rising premiums, uncertain coverage, decreased quality. that's the reality, mr. president. the comparison of failing to enact reform is not the system we have today but to a very ugly destiny we'll face relatively soon. for example, if we do nothing, by 2016 health care premiums are projected to grow to an average of $24,000 per family. let me repeat. by 2016, 24,000 on average for

health care costs per family every year. that is simply unacceptable. the third seufrp truth for health care reform -- simple truth for health care reform is if you like what you have today, we need health care reform so you can keep it. we need reform to maintain stable coverage, to maintain stable costs that won't eat away at your paycheck, and to maintain stable quality so you get the treatment you need when you need it and from the doctor you choose. only reform keeps and improves on the best of our current system. failure to act leads to a catastrophic health care future. i am not exaggerating. this is where we are. the pressure on the system are building. if we fail to act now, those pressures will cause rising costs, decreased choice, loss of access to your current quality health care and basically worse health care outcomes across the board than we face today. let me add some additional

statistics and projections. health care spending is swallowing up our gross domestic product. in 2009, health care will account for 18% of our g.d.p. 18 cents of every dollar we spend is dedicated to health care. if we do nothing, this will rise to 28% of g.d.p. in 2030, 34% in 2040. this trajectory is unsustainable. today the average premium for family coverage is just over $12,000, an increase of 119% in nine years. as i said, if we sit by and do nothing, by 2016, a family premium will be estimated to cost at least $24,000, another increase of # 3%. -- of 83%. in my home state of delaware it will be higher. with a family insurance policy purchased by an employer estimated to cost over $28,000. can you imagine paying for that? that doesn't include out-of-pocket costs like

deductibles and copayments. when health insurance premiums grow at a rate of five times as fast as wages something has to change. there has been an increasing prevalence of medical bankruptcies. a study published by the american medical journal showed bankruptcies involving medical bills account for more than 60% of u.s. personal bankruptcies, an increase of 50% in just six years. in fact, more than 75% of families heading into bankruptcy because of health care costs actually have health insurance. most are middle class, well educated and own their homes. they just can't keep up with the alarming rise in out-of-pocket costs associated with medical care. passing health care reform is important but is not easy. but for reasons i mentioned, this year is different. this year the call for reform is coming from people and organizations that in the past opposed reform. this year businesses, unions, insurers, provider groups and

patient advocacy groups are looking for reform. and why is that? because the growing health care dollars involved threaten to bankrupt us all. we need reform to stabilize the system. i think it's important to keep in mind this is not just about an alarming set of numbers, statistics and cost projections. behind these numbers are real people who need quality and affordable health care, including people who struggle every day to get health care to keep the health insurance they already have. let me take just a few minutes to talk about some people from my home state of delaware and why we need health reform for them as well as for millions of americans like them in all parts of the country. we need health reform because of people like angela austin. she is a mother who works as a bartender. most of her earnings come from tips. she doesn't get health insurance through her employer. when she became pregnant, she tried to find private health insurance, but she was repeatedly denied coverage because her pregnancy was

considered a preexisting condition. she applied for medicaid to find prenatal care for her and her baby but was denied coverage because she earned $200 more than the monthly income allowed. she called organizations and clinics and was unable to find a payment plan that she could afford. midway through her pregnancy, she decided to cut back her work hours so she could qualify for medicaid. thankfully, angela was final able to get services at a wilmington hospital where they provide prenatal care and delivery on a sliding scale for those who can't afford insurance. she worked all nine months of the pregnancy and delivered the baby on may 27. the medicaid coverage was especially crucial because she had complications with hyper thyroidism and was able to get the necessary prescriptions to control her condition. the sad part of this story is that when angela was so anxious to get everything possibly done to ensure a healthy baby the

system threw up roadblocks. pregnancy should not be considered a preexisting condition. no one should be denied coverage because of a prekeufgt condition and no one should be forced to choose between poverty and to qualify for medicaid. we also need health reform for a small business. ian moved to delaware out of college in 1990. he was laid off from his job this past january and decided to start a small business. in the process, he picked up cobra coverage to ensure his family maintained their health insurance inch -- health care insurance. when he first signed up his monthly premium was $1,800. he then saw payments reduced by 66% which made monthsly premiums more manageable. however this premium system will run out this fall and he will once again have to pay $1,800. in anticipation, he applied for coverage with blue cross and

blue shield but was turned down. they never gave a reason but he suspects it was because of a preexisting condition for one of his daughters. ian worries the high cost of providing health care for his family in addition to finding a willing policy provider will affect his ability to stick with his start-up business. unfortunately, ian's health insurance predicament as a self-employed businessman is not uncommon. there are too many sole proprietors and small businesses that cannot afford health policies for th*efpls, their families and -- themselves, their families and any employers they might have. it is not only a problem of finding health insurance. we need health reform for people like bonita in democratic so they won't slip between the -- bonita in delaware so they won't slip between the cracks. she suffered a brain aneurysm. she applied for social security disability and was awarded

benefits. but she has to wait two years before medicare coverage kicks in. meanwhile she suffered two additional aneurysms since her initial episode and is advised she should receive an arteriogram to monitor her condition. she can't afford to pay the several thousands it costs so she is taking her chances until she becomes eligible in ofpblgt this is a considerable risk -- in october. this is a considerable risk but is the only option she can afford. she has had to canceling a scheduled arteriogram in september because she won't have coverage by then. it shouldn't be this way. we need health reform for those who have insurmountable debt many times for injuries and accidents they couldn't avoid. i want to highlight the situation after delaware woman who -- of a delaware wan who have a victim of domestic violence. she suffered major eye damage

and had three surgeries. she has no health no insurance and by 2008 owed $23,000. rereceived lost wages from the violent crimes competition board. she applied for medicaid but was turned down. she applied for social security disabilitiy and was turned down as her eye condition was not considered permanent and could be repaired with additional surgery. after waiting for months, she was able to get the eye surgery she needed because the doctor who performed the procedure reduced the fee from $12,000 to $2,000 and allowed her to go on a payment plan. however, she still owes $20,000 to $30,000 for her prior surgeries much. she's presently not working and does not have health insurance. she could have had cobra, but it was $809 a month and she could not afford it. she can presently see well enough to drive, but she is due

for anotherry and the financial arrangements will be extremely difficult if not impossible. these stories help to show why we can no longer wait for health care reform. these stories require us to put our differences aside and come together to make certain that americans have access to affordable quality health care when they need it. in my short time here in the senate i've had the pleasure of presiding on the floor on the president's desk. i've listened to my colleagues give good impassioned speeches on health care reform. i can truly say i learned a lot from these speeches, many of which helped to shape my own views on health reform debate. i have heard speeches that also give me cause for concern. some colleagues have prejudged the legislation before it appears. i've heard the dangers of the british and canadian style of the health care system. i listened to stories about

patients from other countries who come here to get care that they can't receive in a timely manner in their own country. i've heard over an over go government-run takeover of health care. i do truly do not doubt the sincereness of my colleagues who see potential pitfalls in health care reform. when i hear the speeches, i wonder what legislation they're warning us about. so far i've not seen any bill discussed in committee that calls for government-run, single-payer system like canada or great britain. i've not seen any legislative text that restrictions on what treatments doctors can provide or what they can discuss with their patients. i've not heard or read any language on this assertion of health care. i hope that the fears about change the health care system do not hurt our chances for enacting reform this year. i hope that the debate over the bill centers around what is actually in the ladies and gentlemen ration. not extrapolations about provisions in the bill or

frightening projections of a health care system in other countries not actually proposed here in the congress. i hope that as debate moves forward all of us near the senate will step back, take a breath and remember why we need reform health care. we're moving toward a health care system that americans will no longer be able to afford. this system is hurdling out of control. yes, we do need to keep what works an fix what's broken. we need to make certain that americans can get affordable health care insurance without worrying about preexisting conditions. we need to help americans to avoid bankruptcy because of out of control medical bills. we need to ensure stability in the system so that americans maintain insurance options an their choice of doctors. most importantly, we, as a country, need to take control of our health care destiny. we can a future in which americans can have stable coverage with stable costs and stable quality. or if we do nothing, we will

have future -- a future of rapidly increasing premiums, uncertain coverage and decreased quality. i urge my colleagues to gather their collective will, realize what is best for our country and do the right thing during this historic opportunity to pass health care reform. thank you, mr. president. i yield the floor and suspect the absence of a quorum. the presiding officer: will the senator withhold his request? mr. kaufman: i will withhold my request. i will happily withhold my request for the senator from arizona. the presiding officer: the senator from arizona. mr. kyl: thank you, mr. president. i appreciate the comments of my colleague. i wanted to deliver these remarks on the same subject of health care a little bit earlier in the week because i had been back home over the july recess as we had all spoken to constituents in arizona about the subject, but i didn't have the opportunity until today. but i did want to note that health care is very much on their mind and they have been

asking a lot of questions. they've been following the debate. and the majority that i've spoken for are very much in favor of reform. i think all of us in this body realize that there are things that we have to do to lower the cost of health care and ensure that everyone has an opportunity to be covered. but i can also tell you that they are very concerned about the -- the reforms that have been proposed by the president and they wonder whether they will, in fact, work to their best interest. cost is an issue that's come up repeatedly when i've spoken to my constituents. they want to know, for one thing, why we have to spend so much money in order to allegedly save money and how much it's going to cost. and i tell them it's projected to cost at least $1 trillion. this is not a fansful figure. this is what the two bills pending before the senate are being scored at, meaning that the congressional budget office has said that's about how much they're going to cost. the ultimate price tag could be

even higher because in a case of one of the bills, not everything that is going to be in it has already been scored by the c.b.o. and as to the finance committee bill it is still very much a work in project -- in progress. so the usual reaction that people have to a trillion dollar plus health care bill is that they can't believe we would want to spend that much money or we can't afford to spend that much money. my constituents know there are only two ways the federal government could pay for such a massive program -- one, either borrow more money or, two, impose new taxes or some combination of the two and they don't like either alternative naturally. most arizonians think that washington has borrowed more money than the taxpayers can handle after the president' president's $1.2 trillion stimulus bill, and the omnibus appropriations bill and th the $4.3 trillion 10-year budget. now we talk about adding an

additional trillion dollars on top of that and a lot of folks in arizona think it's just too much. in fact, by the end of the fiscal year, our publicly held debt will be 57% of the gross national product and the deficits for are predicted for the next decade. we got the statistic for the deficit this year, it is already at $1.1 trillion and by the end of the year could easily be another $500 million above that. this will drive the debt to at least 82% of the tbros domestic product by 2019. the gross domestic product is how much money we make as a country. it would be the same as saying for a family that has an income of $100,000, its credit card debt is $89,000. try to pay off a $89,000 credit

card debt on a $100,000 income. so obviously when we talk about spending another trillion dollars that we don't have, my constituents are very wary of this. they're wary about the debt and, to say the least, they don't think it's fair for washington to pass another trillion dollar bill with the cost of being transferred to our children or grandchildren. especially after what happened with the stimulus, which is, frankly, included a great deal of waste and has obviously failed to tame unemployment. a lot of folks have expressed skepticism that spending another trillion dollars is the right way to reduce health care costs, and i have to agree with them. someone has to pay the trillion dollars. now, they're also concerned about the new taxes that have been proposed to pay for this. because, in fact, part of this trillion dollars is proposed to be paid for through new taxes. and there have been all kinds of

ideas imposed on beer, soda, juice, snack food. those are really small items, but they hit people right where it counts when they go to the grocery store. there is a new value item tax idea. there are small business men and women who are especially concerned about of some of the taxes that some are suggesting they should pay. as much as a 10% increase in the amount of taxes that they would have to pay. this is important because in our economic downturn today we know it is small business that's we're going to count on to create the jobs to bring us out of the recession. this would be not just a job killer, but economic growth an recovery kill wer that kind of tax imposed on these folks. so my constituents want to know, and frankly i want to know if the president is going to fulfill his campaign pledge not to raise taxes one single dime on the middle class and if he will veto any legislation that

includes the kind of taxes that i'm speaking that would fall directly on families. many of my constituents believe there has to be a different way to achieve the health care reform we all want, in other words, without this new round of spending and taxes. they've heard the president argue in his pitches for washington to change our health care system that if we spend all of this money on health care now, we'll somehow save money later. but they have some commonsense questions about this claim. how will the government actually do this? will their health care be rationed? if they're privately insured, will they be able to keep the health care that they already have? 85% of americans are already insured and happy with what that they have. yet, proposals in the pending legislation would cause them -- many of them to lose that insurance and go on to government programs. and that, of course, then raises questions like rationing. as i've discussed many times before. a washington-run health care

system would likely try to suppress costs by deny org delaying care -- denying or delaying care. administration officials are talk about using comparative effectiveness research for this purpose. this is not some fanciful notion or high threat kal notion. this has happened in canada or the united kingdom. as abc's 20/20 program reported the canadian town of norwood, ontario, holds a lottery to give one winner a trip to the family doctor. a show film calling a name from a box and calling the elated winner. is that what we want in the united states? the average emergency room wait in canada is 23 hours if you're even considered sick enough to be admitted. in britain in 2007 the government set a goal to see a

physician later than 18 weeks. that is roughly 4 1/2 months to see a doctor. do americans want that? that's how government-run health care works. it makes something free, demand soars. tto reduce costs, bureaucrats deny treatment or tests or procedures they deem too expensive. and the way it works is simple. you set a budget every year of how much you're going to spend on health care and it doesn't matter how sick your folks get, it has to fit within that budget. think about that for your family. you set a budget, you're going to spend more than $5,000 on health care this year. a very good friend of mine in arizona just had an automobile accident. it was very serious. he had to have his spleen removed. he's still in recovery and it is obviously going to cost a lot of money. more than $5,000. well, if you set a budget and say that's all we're going to spend, what's he to do?

does he he not get the treatment he needs as a result of that accident? you cannot reform health care or reduce costs by rationing care to patients. one of the things that republicans will insist on is that the way that we do the reform doesn't hurt what we already have, which is a system that allows you to get to the emergency room, allows you to see a interest, you get to choose your own doctor. if you have insurance, you get to keep it. we don't want to take care of the few who are unable to get insurance today in a way that requires us to change what everybody else has if it's already working for them. now, it is true that you won't find the words ration or denial of care or withholding coverage in these bills. obviously they don't state it that way. but the results are precisely what's required by the policies in the bills.

the results are easily masked by all kinds of terminology, but the rules, the forms, the legal obligations, the provider reimbursement schemes all result in the ability of the government to tell you whether or not something is going to be covered. whether you and your doctor think it's necessary for your care or not. now, some i've heard respond by saying, well, at least in the canadian system, they may ration care, but at least everyone has access to a doctor. not true. a canadian think tank released a study this year that found that 1.7 million canadians, a country of 37 million people, were unable to see a family physician in the year 2007. that number does not include those that have a doctor but are on a waiting list. as i said earlier, many of my constituents also worry about losing their current coverage if a new washington-run health care

system is implemented. they've heard the president say repeatedly if you have health insurance, you get to keep it. but they have also heard the other side of the story, and i've read at least one of the bills -- in fact, there are two specific provisions that render this statement untrue, that if you have health insurance, you get to keep it. not true. congressional budget office has estimated just part of one of the proposed plans that shows that millions of people would lose their existing coverage and be told to enroll in government health care. the lewin study specifically mentioned 119 million people that would be shifted from their current employer-provided coverage on to a government plan. many of my constituents also want to know if the president would veto legislation that has the potential to cause americans to lose the private insurance they currently enjoy. mr. president, there's a final

concern, and this really concerns me. it goes to america's seniors. we've made some very strong commitments to our seniors through the medicare program. our seniors obviously are more susceptible to needing health care. they have a greater number of health concerns than younger americans, and we have said to them we will, through medicare, ensure that your health concerns will be taken care of. they're obviously very concerned about rationing if medicare were somehow to be cut in order to raise money to solve the problem for others in our society. and that is precisely what at least one of these bills proposes to do. cut medicare and take that money, apply it to the new costs

that we are going to be incurring as a result of this so-called health care reform. seniors are worried that these cuts in medicare will adversely affect their ability to get care. and they also fret that adding the 47 million uninsured americans, which would be just for starters, to health insurance rolls, including government insurance rolls, would impact the care that they now receive by crowding the system. in other words, leading to wait times, rationing for them, or even potentially denial of care. we must not implement a new health care system that would suddenly erode the quality of care for medicare beneficiaries. my constituents want high-quality, patient-centered health care. most already have good health insurance for themselves. they're concerned about its cost. they are also concerned that

there are some who need to be insured who are not. but what they want to hear are fresh new ideas about how to receive this result without throwing the baby out with the bath water without adversely affecting the system that takes care of them, whether it is seniors on medicare or the vast majority of americans who are already insured and like the insurance that they have. they don't want us to rush a costly new plan through the congress. i think the president was correct when he said if we don't do this quickly, we might not do it at all. what did he mean by that? in effect, what he was saying is if the american people have a long enough time to study and debate exactly what's being proposed, they may not like what they see. and, mr. president, i think that's exactly what's happening here. you have a bill that's going to be marked up next week in the house of representatives, and i

don't think the american people are going to like what they see in that bill. you have a bill that has been marked up in the "help" committee here in the senate, and much of my criticisms here go to that particular bill. there's one section in that bill, for example, that spends $400 billion over seven years to subsidize health care for families making between $66,000 a year and $80,000 a year. is that what we want to cut medicare to pay for? as more americans understand the details of these bills, the more questions i think they're going to ask. and we owe it to our constituents to allow them the time to understand it and to ask us those questions. and i want to be able to go back to arizona and say, all right, here are the three bills, or the two bills, or however many there are. here's what they do. do you like it or not? if not, how would you change it?

we need the time and the ability to get the reaction from our constituents if we are going to be true to our position as representatives of the people. so when the president says if we don't do this quickly, we might not do it at all, he's probably right. but it's better to get it right, to take our time to do it right and not make mistakes than to rush something through that's going to add $1 trillion in new spending that,'s going to potentially impact the coverage we already have, potentially impact medicare for our seniors, and perhaps not achieve the results that we want. this is one of the most important things that this congress will -- that the american congress will have done in years. it's complicated. it's hard. and we've got to get it right. the admonition of a physician,

one of the first things you learn in medical school is when you confront a patient to see what's wrong with that patient and to begin the treatment, first do no harm. it's possible to do harm to a patient. and the physician, first of all, is admonished. the body is a wonderful thing. it recovers pretty well. don't do anything to harm. and the same thing is true with our economy and with the policies with respect to health care. there are a lot of good things being done in health care. physicians are working very hard to take good care of us. most people have good insurance. seniors rely on medicare. let's not do harm to what we have in order to take a small segment of our population and make sure that they can get insurance. that's the primary position that we're taking here when we say let's don't rush this, let's do

it right. and at the end of the day we can all be proud of the fact that we had reformed our health care system to reduce -- not increase -- some of the expenses and to ensure that those who don't have insurance can in fact be covered. mr. president, i said i wanted to give these remarks earlier in the weeks, having talked to a lot of my constituents in arizona. i also wanted toward the end of this week to comment on the president's trip to russia. he's going to be returning home soon. his trip to russia produced some very important announcements which i wanted to discuss today. so i'm going to switch subjects now and discuss the president's trip to moscow and his summit with the president of russia. the most significant object of that summit, as we know, was the discussion of further strategic arms reductions. now i personally believe it's important that the verification

and confidence-building measures of the 1991 start agreement not expire without some measure to continue them, possibly including a legally binding replacement treaty. i know that's one of the purposes of the president's visit. but i'm also cognizant of the fact that a follow-on to the 1991 start agreement does nothing to address the most current threats to the united states and the west, namely, those posed by nuclear proliferation and nuclear terrorism. the two subjects are barely related. for example, threat from iran and the history of russian support for the iranian nuclear weapons and ballistic missile programs is well known. it's probably even going on today. this should have been at the top of the president's agenda with russia if in fact he's going to address the threats that are most currently before us rather than a decades-old arms control

agreement with russia. additionally, there is the ongoing nuclear weapon ambition of north korea. some press reports suggest that it may be sharing its technology with countries like syria and burma. given the well-known willingness of these rogue states -- and i speak of north korea and iran -- to support terrorism, their unchecked nuclear ambitions will surely hasten the day when terrorists are able to acquire a nuclear weapon. i believe that nuclear proliferation and nuclear terrorism are the greatest threats to our nation today, and we should be focused much more on those threats, as i said, than going back and negotiating arms control agreements with russia, which obviously is not a current threat to the united states. but yet, the main focus of the president's trip, when he was in moscow, appears to be on the subject of a strategic arms reduction treaty with russia. well, that being the case, the senate has a great responsibility if the administration seeks our advice

and consent, by smith the -- by submitting the treaty to us for rat ni tp*eu indication. to understand what the proposal is and to provide our advice to the president before it's negotiated and if appropriate, our consent to ratify it. obviously the constitution requires this process of advice and consent when it comes to treaty-making. here's some of the questions i think we need to answer. first of all, what does the united states get from such a new treaty, when it appears that the russians are on their way to reaching the levels of weaponry announced without a treaty? they're going to do it anyway. second, why has the united states bent to russian demands to take tactical nuclear weapons off the table, when the russians have a 10-1 advantage in tactical nuclear weapons over the united states and have openly talked in their military doctrine about using tactical nuclear weapons in conflict?

how will the administration provide for the modernization of the u.s. nuclear forces including the warheads and the complex of infrastructure that sustains them and the nuclear weapons delivery systems, the bombers and the missiles and the submarines that must accompany any start ratification process? that's perhaps the most critical question of all. a number of these questions and recommended courses of action have recently been articulated by some of this country's leading experts on arms control and nonproliferation policy including pwapls tkor james woolsy, ambassador john bolton and many others. mr. president, i'll ask that a document, u.s.-russian start renewal negotiations: guidelines to protect u.s. interests" be made a part of the record at the conclusion of my remarks. the presiding officer: without objection. mr. kyl: thank you. i also urge my colleagues to study materials recently

released by the new deterrent working group involved with the center for security policy, a respected think tank here in washington that has studies these issues for years. and also a very objective and important guide for how we should approach our thinking on these negotiations from the hudson institute. their outstanding compilations of expert opinions for senators to familiarize themselves with, they're too lengthy to insert in the record but i'm happy to supply a copy of both of these papers to my colleagues. another consideration concerns missile defense. just before the summit it appears the white house was taking a strong demand. the russians said we're not even going to talk about the start numbers unless we can also talk about u.s. missile defense.

the russians don't like it. they'd like to have us put some limitations on it. well, the administration recognized not only that there should be no constraint on the development of missile defenses, but that moreover, any treaty -- any treaty -- that limits u.s. missile defenses would be dead on arrival in the senate if we tied the two subjects together. this past week i joined senators wicker, johanns, mccain, hatch, lieberman, ben nelson and begich in sending a letter to the present in which we confirmed that linking missile defense plans to offensive force negotiations runs contrary to american strategic interests and would undermine our security. mr. president, i'd like to ask unanimous consent that that letter be inserted in the record. the presiding officer: without objection. mr. kyl: not withstanding what i've said, buried in the joint understanding that has now been made public, reached by president obama and medvedev is

inclusion in the following language suggesting an accession to the russian demand to include missile defense in the follow-on treaty -- quote -- "a provision on the interrelationship of strategic offensive and strategic defensive arms." i request that the text of the joint understanding be made a part of the record also at the conclusion of my remarks. the presiding officer: without objection. mr. kyl: this last statement is a dangerous connection to make and one that the administration must not negotiate. all. missile defenses exist to -- by rogue regimes and the threat of accidental or unauthorized launches. they're not about rush yament we should not attempt russia to limit our defenses and is that what i fear these words from the joint understanding may alou to -- allowed to occur.

i would also like to call attention to a curious statement by the president which was quoted in this past sunday's "new york times". i quote -- "it's naive for us to think that we can grow our nuclear stockpiles, the russians continue to grow their nuclear stockpiles and allies grow their stockpiles and that we will be able to pressure iran and north korea not to pursue nuclear weapons as well. "end of quote. the fact is the united states has not been growing or even modernizing its nuclear stockpile. why did the president make such a false statement in yes, the russians are growing theirs. at least modernizing it. britain and france are modernizing their stockpiles, though not growing them as far as i've seen in the press. india, pakistan, north korea are all growing their stockpiles.

and, of course, we're all familiar with iran's actions. all of this has occurred in the absence of the united states growing its stockpile. what the president said is not true. in fact, it's all occurred while the united states has undertaken substantial nuclear force reductions. we haven't modernized owr nuclear weapons and haven't conducted an underground nuclear test for 17 years. one would think this would put to rest the naive assumption that the u.s. move toward disarmament would be reciprocated by other nations. i would also like to submit for the record "the wall street journal" op-ed written by the former assistant secretary of state for international security and nonproliferation in the last administration and i ask unanimous consent to insert that after my remarks. the presiding officer: without objection. mr. kyl: mr. president, he correctly observe that's the

critics are not impressed by 2012 the u.s. will reduce its strategic deployed -- they will not be satisfied if the u.s. reduces by 99% so long as there is one nuclear weapon in the u.s. inventory, they will point to this as the root cause of nuclear proliferation. as i indicated there are real concerns facing the senate at this time as we consider the start follow-on treaty. it's imperative that the president understand the true situation as he negotiates with his russian counterparts. this is all the more important as we begin to understand the highly significant reductions that the administration currently wants to negotiate in a follow-on agreement to this. according to the joint understanding that i quoted before, the president plans to reach an agreement that represents a significant departure from current forced levels. i note that the 1,700 to 2,200

deployed nuclear strategic level, on the high end of that range, was considered the minimum forced level required for deterrence last year when the departments of energy and defense introduced a white paper, national security and nuclear weapons in the 21st century. given yesterday's announcement, i'm very curious to understand how estimates of necessary force levels could have changed so dramatically in the 10 months since the paper was issued. i'm concerned about the implications for our triad and conventional arms modernization if we lock in a launcher limit in anything close to 500. the triad is the combination of our bomber, our strategic bomber force, our intercontinental ballistic missile based on land and in silos and icbm's in submarines. that's the three part of our

strategic triad. and if we were to reduce the numbers as dramatically low as this paper would indicate, it is very clear that the triad would be jeopardized. that is to say that not all elements of it would have the weaponry to be part of our strategic deterrent. moreover, these numbers would suggest that parts of this triad which can be used for conventional purposes, bombs can drop high explosive bombs. they don't just drop nuclear weapons. a missile -- we have a lot of cruise missiles that send high explosive warheads to their destination. it doesn't have to be a nuclear warhead. if you reduce the number of delivery systems down below a certain level, you not only impact our strategic nuclear deterrent, but also our conventional deterrent and conventional capability. now, this may be very add van

taijus for russia. as i said, russia is headed to a low level anyway because of their economy. i believe it is a grave risk for the united states and our allies. these are the issues that will warrant the highest scrutiny by the senate. we can't be rushed in our work, these are very important questions. i note that the senate had over 425 days between the signature on the start-1 agreement and the eventual ratification of that treatment. there were 1,100 days between the signing and ratification of start-2. and the last successful arms control treaty with the russians, the strategic offensive reduction treaty or sort permitted the senate 287 days to review. i say, again, there is no need for a rush here. as "the wall street journal" reported yesterday july 8, and i quote, the white house

coordinator of weapons of mass destruction said on sunday that the administration may have to enact certain areas of the treaty on executive order to meet the december deadline. clearly there are options available to ensure that the senate has all the time it needs to thoughtfully consider a treaty and to make sure that a nuclear weapons modernization program is in place and funded before the senate proceeds to ratification of the start follow-on. mr. president, i have additional comments, but i see my friend and colleague from tennessee is here and so as to not impinge upon time he may need to deliver his remarks, let me ask unanimous consent that -- well, at the -- that the remainder of my remarks be inserted in the record as given and that each of the insertions into the record for which unanimous consent has been given be carried at the end of my remarks.

the presiding officer: without objection. mr. kyl: thank you, mr. president. mr. alexander: mr. president? the presiding officer: the senator from tennessee. mr. alexander: i thank the senator from arizona for his courtesy. i enjoyed hearing his remarks. no senator on either side of the aisle has been a more consistent spokesman on military preparedness than senator kyl has been over the years and his concern about our nuclear stockpile is well known and is very important and i hope that all americans will pay close attention to what he had to say. mr. president, i ask consent to speak for up to 20 minutes as if in morning business. the presiding officer: without objection. mr. alexander: thank you, mr. president. our job here in the united states senate is to -- is to debate. we're -- we're said to be the greatest deliberative body in the world and the great conflicts in our country come

here so that we can resolve them. and after six months of president obama's administration, americans admire him, like him, like his family, appreciate his seriousness of purpose. but americans are beginning to see some significant differences of opinion between the kind of country that the democrats are imaging for our nation and the kind of country that republicans and many independents are imaging. there is concern in tennessee, where i live, as well as, i believe, around the country, about the lack of check and balances now on too many -- too much debt and too many washington takeovers. in terms of debt, we see that the president's proposals for debt for the next 10 years are nearly three times as much as all of the money that the united states spent in world war ii. and as far as washington takeovers, it seems to be a

weekly running reality show. first, the banks, then the insurance companies, then the student loans. then the car companies. even, according to recent legislation, your farm bond, according to some federal legislation, and now maybe even health care. but people have a right to say to us on this side of the aisle, well, what would you republicans do? i mean, you can't just point with alarm. although that's part of our job. what would republicans do? so, mr. president, i want to mention three areas where republicans have a different opinion than the current administration and where we hope we might be able to persuade the american people and many democrats on the other side of the aisle and even the president to join us in a different path for our country. the first has to do with the government's ownership of g.m. -- general motors. we want goif the stock back to the people, the taxpayers.

the second has to do with health care. we want to begin at the other end of the discussion. we want to start with the 250 million americans who already have health care and make sure they can afford it and after we're making sure they can afford that, that they can afford the government. because they can't afford the trillion dollar additions to health care that we keep hearing about. then, third, on clean energy. we want clean energy as well as the president does. but we also want energy that americans can afford. we know that cheap energy is key to our economic success. we want jobs to be made. we want cars to be made in michigan, ohio, 10 and not mexico or japan -- tennessee and not mexico or japan. we have a bill for clean energy that would keep the jobs here that would compare to the markey-waxman climate change bill that is in the house and

headed our way. i would like to talk about those three. first, general motors. i would like to congratulate the new g.m. for emerging from bankruptcy today. general motors has meant a great deal to our country and it has meant a great deal to our state, tennessee. when general motors decided nearly 25 years ago to put the saturn plant in tennessee, we had very few auto jobs. nissan made its decision to come to our state. that was a pioneering decision because most auto plants were in the midwest, not in the youth east. today there are a dozen such plants including in spring hill. and in tennessee instead of a few auto jobs, one-third of the jobs are auto jobs. we're great full to g.m. for its decision. and we want it to succeed. we want the spring hill plant to make some g.m. products soon and believe that it will be because of all of the natural advantages it has. what are the best ways that we

in washington can help general motors succeed? that was a question that was asked of me last week in tennessee. well, the answer, mr. president, is to get the general motors stock that is owned by the government out of washington, d.c., and into the hands of the taxpayers. i have legislation that i'm -- i have introduced and i'm looking for the opportunity to amend an appropriate bill on the bill that is cosponsored by the republican leader and senator kyl and a variety of others, that would take the 60% of general motors that the u.s. government owns and give it to the 120 million americans who pay taxes on april 15. what's the reason for doing that? they paid for it, they should own it. what's the second reason for doing that? if the stock stays here, we find that washington bureaucrats and those of us who congress just can't keep our hands off the car

company. we have the president calling up the mayor of detroit saying: yes, i think the headquarters ought to be in detroit instead of warren, michigan. we have the congressman from massachusetts calling up the president of general motors saying, don't close the warehouse in my district and you have the delegation from tennessee and indiana and michigan saying, put a car here. and you have 60 committees -- put a car plant here. you have 60 committees in congress authorized to summon the executives here. we own the company. let's tell them what to do. paint it this color. get your battery from this congressional district. make it this way. and what are the poor executives going to do? drive in their congressionally approved hybrid cars to drive to washington to testify before 60 sub committees while general motors is making cars? g.m. will not succeed if we keep

this meddling alive. there are a variety of ways to get the stock out of government and back in the hands of the people. the president has said he'd like to do it. he also said he wants to keep his hands off of it. but that's not been the practice so far. senator bennett and i -- senator bennett of utah have introduced this legislation that would give the stock to the taxpayers who paid for it. that's the best way to do it, in my opinion. that would happen within a year. it would be a fairly common occurrence in the american corporate world is what procter & gamble did with clorox, it's what pepsico did with the restaurant businesses a few years ago. the company decided it had a subsidiary that didn't fit the role of the major company, and so it spun it off, a stock distribution, corporate spinoff. i think we can all agree, at least 90% of the american people

agree, according to the surveys, that the government and washington has no business whatsoever trying to run a car company. what do we know about it? what do we know about it? so the best way to get rid of it is to give it to the people who paid for it. there are other ways to do it, and several senators -- senator corker, for example, has suggested an ownership trust to try to make sure that while it's here that the government keeps its hands off the day-to-day operations. senator johanns and senator thune also have bills of this kind, as does senator nelson of nebraska. but my point, mr. president, now that general motors has emerged from bankruptcy, let's celebrate that by taking the 60% of the stock that the american taxpayers pay $50 billion for, and giving it to those same taxpayers and getting our hands off the company and cheer them on. there's another reason this

would be a good idea. most of us know that the green bay packers are a popular team, especially in their home area. why is that? because the fans own the team. that would be the same thing we would have with the general motors stock distribution. just as green bay packer fans have a special interest in who the quarterback might be because they own the team, if 120 million americans had a little bit of g.m. stock, they might be a little bit more interested in the next shefrl lay. that might create a -- chevrolet, that might create a new investor base for the new g.m. first, get the government stock, ownership of the car companies out of washington and back into the hands of the marketplace where it belongs. here's the second idea we have. it has to do with health care. mr. president, we would start at the other end of the debate. we would start with the 250

million americans who already have health care and say to you, we want to make sure you can afford your health care, that you can choose your health care, and that when we're done fixing it in this health care reform, that we would like to do this year along with our democratic friends, we want to make sure you can afford your government as well. that's our message. now, our friends on the other side, the democrats, have more votes than we do, and so they've set the agenda and they're writing the bill and on the health and education committee on which i serve, they're being very polite and nice to us but they're taking almost none of our ideas and recommendations, and they're starting at the other end. and their other end isn't going very well. it's not going very well in terms of cost, because -- and debt, because the congressional budget office has begun to tell us how much some of these proposals will cost, and we're talking $2 trillion in addition to all the trillions that we've

been spending this year. well, this nation cannot afford that. and even though we're adding $1 trillion or $2 trillion to the debt in order to have this sort of health care reform that is being proceed to the measure, it doesn't begin to cover the uninsured people in america. we would like to cover the uninsured people too but we think we ought to do that after we keep the cost down for the 250 million who already have health insurance, including the small businesses of this country. that's our main goal, to lower costs. we don't want to end up with a health care plan that adds debt to the government either. so that's why we've introduced a number of plans. senator coburn and senator burr introduced one. senator gregg of new hampshire introduced one. senator hatch introduced a health care plan that gives the states more responsibilities in figuring out exactly how to provide health care especially to low-income americans. the essential differences between our approach and the democratic approaches that are

being presented is that, one, ours don't add to the debt. and, two, the government doesn't run ours. the essential nature of the democratic proposals is to expand one failed government program for low-income people -- that's called the medicaid program -- and to create another, which we believe will tend to drive out your choices and your competition and not do very much to reduce your costs while adding heavily to the national debt that we already have. so that's a major difference we have. we have our proposals on the table. the discussion's not going very well because it's one-sided. i suggested three weeks ago when we began to discuss the kennedy bill, we ought to start over and suggested they might want to take some of our ideas, there's a wyden-bennett piece of legislation i didn't even mention. 14 of us, eight democrats and six republicans, are cosponsors

of that legislation. it has a zero addition to the national debt, according to the congressional budget office. and the principle of it is basically to take the dollars that we have available and give them to amecans and let them buy their health care insurance. so instead of expanding government programs, including for low-income americans, you get the dollars. you get the health care. and that takes care of virtually everybody. all of the plans from this side of the aisle, like those on the other side, say everybody needs to be insured. you are not disqualified for a preexisting condition. and the cost has to be affordable. all of us agree on that. the difference is whether it's going to be government programs or whether you're going to have dollars that you can choose. that's the big difference. and we hope that the american people will pay attention to the differences we're offering. we believe they will because as you look at the democratic plans, the costs are becoming

alarming. the first costs that we saw was to the national debt, which was to expand between $1 trillion and $2 trillion at least in the bill we're considering in the "help" committee. then in the new versions of it, the sponsors begin to shift the cost. where do they shift it? the first place they shift it is to employers. it's a bad idea, mr. president. we have a 10% unemployment rate in the country today. people work for employers, and all of the evidence shows that if we add costs to employers, one of a couple of things happens. one is that the wages of employees are reduced because the employer has to pay higher taxes. the second thing is you add costs to employers, and some of those employers go overseas. i was in tennessee last week talking to a lot of auto

suppliers and air conditioning manufacturers. they watch their costs every day. they are in discussions with their companies about if costs of electricity or health care or anything else really go up too much, we begin to go overseas and look for lower costs. and we've already seen what's happened to the automobile industry in the midwest because of high health care costs. so why is it such a good idea to begin to shift the costs and have every employer pay at least a $750 per employee tax for every employee as a way of reducing the cost of health care? and then the other place that these plans begin to shift the cost is to the states. that's a convenient place to shift it. i used to see that as governor, the presiding officer was speaker of the house in his state, we're familiar with members of congress who hold a big press conference and announce a good idea and take credit for it. and then they send the bill to the governor or the speaker of

the house or the legislature or the mayor and say, here you pay for it. it's called an unfunded federal mandate. the unfunded federal mandate in this case is to the medicaid program. the medicaid program, in my view, is a terrible choice for a way to expand coverage for low-income families. already 60 million americacans t their health care through their state medicaid program which is usually funded about 60% by the federal government. but the problem is it's so poorly run and so underfunded the way it's managed that 40% of doctors won't seep medicaid patients. and so -- won't see medicaid patients. whep you expand the medicaid program and dump more low-income americans in it you're giving people a bus ticket to a company that doesn't have very many buses and they don't get good health care services. that's not the way we should be doing this. then there's another person

who's going to be affected by that expansion of medicaid, the government program, and that's the taxpayer. the cost of the expansions that are being discussed when you expand the program to 150% of the federal poverty level and when you, in addition to that to try to attract more doctors and hospitals to serve medicaid patients, you require states to pay more to doctors and more to hospitals than they are today. the numbers are staggering. the congressional budget office has said well, it's a $500 billion figure over ten years or maybe $700 billion if you go to the fourth year and go for ten years after that. or maybe it's more than that depending on the various formulas you come up with. and will we assume all that at the federal level? well, maybe we will to start with. but after a few years it will go back to the states. we say that easily here because we've got a printing press, and we've suddenly gotten used to talking about trillions of

dollars. but states can't do that. states don't have printing presses. they have to balance their budgets. and i did a little calculation, and if we expanded the medicaid program by 150% of the federal poverty level and require states to put everyone in there, and if we increased the payments to doctors and to hospitals to 110% of medicare levels, which is still significantly below what private plans pay, it would add about $1.2 billion every year to the budget just for the state's share of medicaid. mr. president, that's about a 10% new state income tax in our state to pay. so that's the shifting of a cost. that's not just a little cost-shift, that's an impossible cost-shift. that's not even the era of reality. i think as employers begin to discover what they're going to be taxed and what states discover what they're going to be taxed and medicaid recipients

realize that if they get into this program that 40% of the doctors won't see them, this isn't going to be a very popular alternative. then last week we heard about medicare cuts. some of the democrats in the senate have made an agreement with the hospital to cut medicare, and that's not so bad, they say. but what is even worse, even worse is they're going to take the savings from medicare cuts and spend it on different programs. mr. president, we all know that the biggest problem we have with the federal budget is the rising cost of medicare, and we have to bring that under some control. control the growth of medicare. but if we're going to take any money out of the medicare program, it ought to be spent on the medicare program, for the seniors who are in it. we ought not to take money from the medicare program and use it to pay for some new program that we're talking about passing. so all of these plans that are

being talked about are shifting the cost. first they're adding to the federal deficit by maybe $1 trillion. then they're shifting the rest of the cost tpo employers who are struggling, to states who are broke, to taxpayers and the states, 10% are unemployed. they're taking money out of the medicare and spending it instead of spending it on medicare. mr. president, i don't think this is going to work. so i say my advice three weeks ago is still good. start over with one of the republican plans or with a bipartisan wyden-bennett plan. 14 senators are already there, 8 democrats and 6 republicans. and let's begin the 250 million americans who are already covered, make sure their costs are appropriate, that they can afford their health care, and that when we get through with this health care fix, that americans can afford their government. now, mr. president, one other

area of an idea that i hope and we hope our friends on the democratic side will agree with and that the president eventually will agree with and that the american people will agree with. and that has to do with how we go about having clean energy. on monday i will be making a speech at the national press club at 11:00 a.m. about a blueprint for 100 new nuclear power plants. this is a part of the republican clean-energy strategy which has four provisions to it. the first is 100 new nuclear power plants in the next 20 years. the second is electrify our cars and trucks. i believe we can electrify half of them in 20 years. the third is explore offshore for natural gas and oil.