somewhat of a nonpreemption leveraging. it says can you do it without state law. but would you agree that this should be a general position with regard to preemption? >> i would not agree on the grounds i think in some instances the states internalize the costs of regulation better than others. for example, in the creation of business entities like in montana, i think that the -- massachusetts, i think the state does a good job. if it becomes a bad signal, i think your secretary of state and legislature will internalize that -- >> but that's not a matter of governance. >> i would cover the creation of business entities and internal affairs which would also apply to massachusetts -- >> i'm sorry, i'm less parochial than you might think, but i still don't understand the answer. would you expand that to cover that?

>> i think the focus on business entities, i would define very broadly. .. >> i'm just trying to write a conclusion based on sufficient economic analysis and their sufficient literature on the nature of corporate -- >> and there is no other preemption, you don't think there's any economic analysis anywhere else? >> i think that -- >> that's what your language says. >> i would broaden it keeping in

mind some type of speed as i understand but again you are merging, and i think too often do this, the procedure on the subject. i can understand people saying yes, this precision -- preemption is good and that when isn't. but i'm just surprised, i'm not surprised, but i think we will only look at preemption in those cases where i think preemption will be bad and not look at it, or elsewhere, rights peoples policy inclusion into procedure which is not a good idea. >> i will be glad to discuss this with you as well spent i thought that's what we're doing, transit. but my point is, you were writing a procedure which embodies your policy preferences, and i think that's a bad idea and along with. i think it is going to be a procedure issued the policy neutral and should apply to the whole topic. >> my only preference is efficiency. >> that's all.

>> thank you, ranking member. it's always exciting when you come here. >> you've got to get a life, david. [laughter] >> you know, i hear that a lot. and actually this is something i wanted to share real quickly. on vacation when you look out and using not a lot of bodies in the room, understand there's a lot of eyeballs watching as she walked to some of the different rooms, up on the television cameras in lots of different places. wanted to do a huge sort of back step and do something conceptually. i start with the professor. professor, if you were starting with a clean slate from a regulatory standpoint, not just sec but some of the other agencies that wanted to dip their toe into this role, considering that chairman is starting to put together a package that would have i think $100 billion for additional technology, and living in the

age of the internet, if we were starting from scratch, what would a regulatory environment look like? >> well, i would start with the principle that government actors as well as individual actors are at the best when they compete. that when we can be, for resources and when we compete for people to join our group, whatever that might be, we are at our best. so i would look to the principles of regular competition but i would look to reform sros, reform the sec, potential creation of s. creation of sros with all of that in mind. and i think i'm in agreement with former commissioner atkins on that issue, and i think to the extent we consider new sros we should consider making membership voluntary and getting more deference to voluntary mentorship organization rather than mandatory. exempted relief based on, i know you asked me for mclean state.

it's hard to think of that sort of nature. >> part of the nature of the question is actually as removing, and you know, the actual, as chairman schapiro, as start to move much more their platform to access of information and those things but i'm just trying to get my head around what which would be the optimal, if we had started from scratch, and could we possibly move in that direction? >> well you know, i hope so. that's a very broad -- >> and maybe it is just too theoretical. but chairman, any come in my living in fantasyland, which i get told often, as i mentioned. >> no, i think it's an appropriate question. i'm not sure whether you're asking just about the jurisdiction of, say, the sec and self regulatory bodies, or all of financial regulation. >> i would ask ago from almost all type. >> i think we have, i think we

have a terrible system of regulation. and i think we missed an opportunity to create a better structure. the current structure is based on what you were born as were called at birth. it doesn't depend on what it is you in fact do. so we have banks that were doing securities work, but they were regulated as banks. we at securities firms that were doing banking. we had mutual funds that were doing all of that. and depending on what they were born as that's how they got regulated. that is in my view not the kind of system that we ought to have. we should have a central regulatory system for financial services. and the only things that i would exempt out of that are, first monetary policy, and second, systemic risk. those two issues i would give to

the fed, but i would divorce the fed from all of its banking regulation and put that in a central repository financial regulation. then you can have functional regulation as well as prudential regulation. i don't think we'll ever get there, but i think it would be great to imagine that. and it would be great to try to achieve it. >> mr. katz? >> congressman, unlike my brethren on the panel plans to work for a living, i am retired. so i'm free to think about some of these issues. in the last five years i ask we do a fair amount of work for the world bank and the imf in these technical advisers. which means i'm working with people who are starting from a clean state -- clean slate. and two or three points that i think go towards this direction. the first one is, what harvey just mentioned about the regulatory philosophy, there was

prudential regulation and there is business conduct regulation. the sec is historic live in pretty good at business conduct. sound practice. as a prudential regulator during examinations. it's never had the resources and it's never done it very well. and i think working on a clean slate, maybe the time is now to look at what is referred to as international as a twin peaks mall, separating out these two models. boy number one. point number two, and i know this offensive but it has to be emphasized. we are the only country in the world i think that has a separate futures regulator and securities regulator. and i believe firmly that it is an enormous impediment or capital market development, and competition. it is a huge problem to the industry, not just the regulators. another principle on the same

lines is the heart, the core of sec regulation is corporate disclosure. founded on the basis of materiality. and our system now has just become so bogged down in trivia, and it is still a paper-based system, 25 years after the development. we need to fundamentally change our disclosure system, get away from some thing built upon pace is put in the mail every 90 days, and get away from pre-scripted trivial requirements for all companies and get back to the original concept of tell us what's but you about your company for your shareholders. >> i appreciate. you've hit on two of my favorite fixations. >> thank you. mr. chairman, and congressman. 10 years ago around the year 2000, the british decided that they're going to have a comprehensive regulator called the fsa who is going to cover

banking, securities, insurance, everything. 10 years down the road, how are they doing, breaking it up? it was a big organization. there may have been management problems. i'm not familiar enough with it. there were political issues. obvious he the financial crisis. can we create something that gigantic and make it actually work while we have that experiment a failure? who knows? >> i want to redefine the question becomes less about creating a super regulator. just what would accomplish the goal of maximum capital formation and philosophy while distributed throughout the country, and keep those investors save? what would that be? >> no, i think that's true, if we could ever create a comprehensive regulator and make it work, or even focusing it on securities or what we can in the turf world that the congressman frank referred to earlier.

whatever we can do, even if it is just securities. i think we can make changes, and i think that the risk is to try to do it all at once and just create a new agency from scratch. i don't think that's a viable, but that said, i think we can morph the existing organizations in positive ways that effectively would achieve that over time. and what i'm talking about our core focus is on core missions, capital formation versus, as mr. katz said a moment ago, when you look at the reporting requirements, some of them are excellent, some of them are just a waste. capital formation, the procedures could be simplified, streamlined. they need to be without question. capital formation, get it right, get it simple, get protecting investors to full disclosure but make it so that small businesses can raise capital or capital formation, market surveillance with all this crazy stuff going

on, these huge shoot up in volume, we have to be able to look at it in real time. congressman, last year when we had a flash crash they try to deconstruct a few hours in working on old computers and old software, took him three months to decode what actually happened in three hours. there are packages, software packages that wall street uses that were able to tell in real time what's going on. we need to get this to the sec. we need to enhance them and link them with other regulators with the sros, with the exchanges, so the market regulation, markets to we see what's happening in real time in the markets, if there's a manipulation going on. stop it now before, and likewise when we do our rulemaking, trading and markets a, we see what's actually happening in the markets and our rules respond to that and not to what we imagined theoretically might be happening. so efficient capital formation,

real-time market surveillance, computer-based technology-based, real-time surveillance. and then lastly, congressman chairman, the enforcement tools, enforcement beefing up enforcement with the tools they need, tools, surveillance tools that they need and the enforcement tools they need and streamlining of their investigative litigation processes. part of which have been done recently, and dodd-frank, tactical things like that, sound picky and arcane but are really, really important to make the program run well and run efficiently. so again, core missions are what make sense. i think go to the organization, but morphing over time with buy-in from all constituencies i think we could really get there. >> thanks, mr. crimmins. >> can i add just a few --

>> we will bounce it because i want to do a little more follow-up on the capital formation. >> i think one thing we can't forget is that dodd-frank has really changed a lot of the situation. i think it is calamity, frankly, from the marketplace. the cost, the uncertainty that is weighing down on the economy. with regulators struggling to implement it under unrealistic time limits that the statute is set, the directions to them, huge missed opportunity like chairman pitt was saying, to actually reorganize our broken financial services regulatory structure. and it is but one aspect of that. constitution of the financial stability oversight council we're ascribing to bureaucrats sitting around a table that they could somehow. into the future and predict bubbles and cricket than before

it happens. because ultimately it's always one person's bubble, another person's livelihood and that was the problem of the housing crisis and everything else that went on in the buildup there. we have sros no longer really are self regulation organizations. they block the as big a not regulatory organization. so that has changed significantly. and to the point of trying to be for the sec up so somehow it will be able to monitor things closely and in real time, i think maybe that's a good aspiration of the future but we have to realize that is that the best thing for the government to replicate, things that are already in the marketplace the sec has subpoenaed he hard. it has ability and should be working very closely with market participants to get this information, should the government have that separately and other ways, you know, on

national security issues and things like that but we don't do everything always in the government realm. there's a lot of working together with people in the private sector as well to make sure that things are kept up-to-date. and most importantly, that the expertise, which is always hard to get and very costly, that the government can tap into that when it needs it. >> mr. atkins, starting with you, bouncing back to something you actually touched on and i think your opening statement, and and i'd like to run this through the whole panel. if you were to call out one or two functions are actual activities, the regulator engages in, that slows down or is barrier to smaller organization gaining capital, kenny economic growth, producing jobs, which we are all fixated on here, what is that activity?

and as a policymaker how would you change it? >> well, i think the major one, frankly, is the threat of litigation. we all know it's important to have people out there, the private securities litigation aspect in the united states is important because government can't be everywhere. and you have to rely to a certain extent on people out there to police the markets. on the other hand, in the united states i think it's hard to find anybody who would say that, you know, we don't have a surplus of these sorts of deleterious actions that just through the threats, you know, inhibit capital formation in the marketplace. so that, and then plus the red tape that is added through unnecessary filings and having

to hire lawyers and other things. the costs in the marketplace, because of the threat of private litigation has increased, you know, for all sorts of market participants. >> mr. crimmins? >> congressman, as the president said in a joint session last week, we've got to cut the red tape, enable small businesses to raise capital and promote growth and create jobs. the problem is, congressman, is we are putting band-aids on a system that was created in the 1930s for capitalizing. we have 1933 act providing for the registration of securities and marketing the securities. that is a typewriter error, telegraph and telephone type of world that has been created. we have exemptions from

registration, obviously and we can talk about those in rulemaking that the acc could do. but i think you hit on it a little earlier when you said we are in an internet world. we are in a different world our we communicate differently and there are ways to check on things and check on the bloody of things that didn't exist before. i would suggest that we at least consider it. i don't presume to be an expert on this. those who are, at least consider whether we could create capital formation area, and entirely electronic platform, where people, small businesses could access it cheaply with some advisers but nowhere near the crazy cause that they have now to raise capital. and electronic platform with the information could be available to everybody and could be widely disseminated, but also where they could be electronic verification, where outside professionals, whether it's financial or lawyers or accountants or whatever,

contribute it electronically to the filing. so you would have, you would have the immediate verification of kind of real-time electronic reporting. just an entirely different way of thinking of things, i think rather than putting band-aids on her 1930 system which we have right now, and that's what we're doing, putting band-aids on a 1933 system, it's like we are driving a 1933 car. i would suggest, that those who are experts in this area tell us how we can create an electronic platform that will be safe and secure for investors but will also let the small businesses, the little startup companies raise raise capital cheaply. >> thank you. mr. katz? >> slightly contrarian perspective on this. again, over my years of the commission, the commission has tried -- >> can i take you to move your microphone and? >> create so-called small

markets. and it never really worked that well, and at some point i think i came to the sad conclusion that an ipo was not always the best way for a small company to raise the cash that it needs. and right now given the problem of banking industry, people are saying maybe the ipo is the answer. and i keep thinking, at various times there's been these concepts, promoting venture capitalist, promoting development companies. and i would suggest to you -- >> to that point would that be raising the number of shareholders? >> that becomes a piece of it. my problem with the fiber shareholder role frankly is i hate on off switch regulation. and i keep looking for gradations so it becomes, does become sort of the dramatic shift of one from the other. and if there was some way to develop some sort of model where you had business developing countries are some variation of

that plane like lead shareholder or lead investor rules, with some potential for other investors to participate, that wasn't a term step before you become a fully listed company. intellectual it seems to be something in the middle like that may be an interesting avatar. >> thank you. mr. pitt? >> yeah, i think we have a couple of problems. the first is, as has been mentioned, we are dealing with an antiquated set of foundational statutes. and most of the innovations over time, and it not just for the sec, it's in the banking area as well, have been by jury rigging existing statutes, to sort of get around some of the restraints. there is not enough attention paid to the fact that government is a service business.

and when people have new ideas and they want to get to market, and they've got ideas, they run into the kinds of bureaucracy and red tape that they do. they can't get their ideas to market. so when i was in private practice, i saw people's money dry up when the staff couldn't get to those issues because they had other issues and they didn't know how to juggle their efforts, and things. so one problem is clearly the fact that the statutes are antiquated. second, we have a system that is predicated now on the reverse logic. if you look at what the most sophisticated investors want when they choose to invest their capital, they want current and future information. they are smart enough to know that if you give them

projections and so on, they will have to discount some of that. but what they want is what's available now and what you are anticipating a year from now, and back it up. but we give the public is retrospective information. so all the public its is what's already happened. there's this huge disconnect, and i think the issues that arose with facebook and goldman sachs point out exactly why our system is so bad. you had a company that was extremely valuable, and it thought it could raise $50 billion, an unheard of amount for an ipo, without going through the sec process, all because that process takes forever, it induces litigation as commissioner atkins said, it requires red tape to get to the sec and get your documents out. and it gives investors the most meaningless of disclosure,

namely, what happened last year instead of what's happening today and tomorrow. >> that's actually helpful. and because i'm out of time on going, the chair will yield itself another six hours. [laughter] professor? >> i think on this point i'm largely in agreement with the rest of the panel. and i think -- >> forgive me, did you say fortunately or unfortunately? >> fortunately. yeah, i'm in agreement, and i'm particularly excited about the prospect of some of the bills that had been introduced on crowd funding and on reform of reg a. and i would pay attention to i think what's been an unfortunate eventuality and most exempting of, exemptions or reform of rules of the commission, and exemption is established and even at the beginning or as it's interpreted, it's eroded away even at the very beginning it is created but to make use of the

exemption you have to, you know, for instance, in a number of regulations have to issue reports that have not audited us to the same substance as a 10 q. or 10-k. in other words, i think we create extension sometimes that really are not extensions at all. and also in part this issue goes to erosion of the censure to erosion by the agency. and i think part of that company goes to the heart of the lawyer dominance of the agency. lawyers have a vital role to play. lawyers are always going to be made at the head of the table but i think -- >> professor, you have to break my heart, didn't you? >> right. but i think economists need to be part of the conversation. we can learn a lot on this. the sec has -- different types of law that are enforced by this agency but in many ways analogous. we look at the sec, 1000 plus, almost 100 of them are a

communist. at the sec, 3700 employees, 30 of them are economists, right? 10% versus about 1%. i think it's indicative of a problem. >> gentlemen, why don't we call it quits? i want to thank you for spending this time with us. you actually all our grazing an issue that i think will be really important, because it's one of those few occasions where i think both the right and the left we have a common agreement that is emerging, whether it be the reg a, whether some discussions about the cloud funding, and with the use of the internet, does that create better public exposure, faster timing, a more current look, and is that sort of an honorable future for the regulatory body, but also much more cost-effective. and our great hopes as we move into some of these more current discussions of capital formation is that also provides an opportunity go to the next

generation of regulatory. so if any of you ever come across articles or something you think we should read, please, send it to us. you know, at the time we get our heads around it. so with that, enjoyed it. >> my understanding is the hearing record will be open for 30 days. if any of you have anything to submit, and with that, we are adjourned. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations]

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that? >> it's basically, well, it's somewhat open for debate but it's been pretty much proven just recently that it allows the right to bear arms to individuals, citizens in the united states. >> the right to the right to bear arms? >> it's the right to keep and bear arms. >> do you feel safer wearing a hand can? >> yes, i did because being a woman i am automatically the weaker target than any other man. so i feel that a handgun here, i would be able to defend myself a lot easier. >> if you are talking about a robbery against a person, obviously i think an offender, so what is going to rob you issue the with the gun would not bother trying to rob you. >> that's one of the winners from last years student can competition. and you can see all of the winning videos online at student can.org. not this year's student him is

under way. the topic, the constitution and you. get more information at student can.org. >> yesterday the senate passed the renewal of trade restrictions on myanmar which also includes funding for disaster relief. the senate also passed an extension of faa programs and transportation infrastructure spending. senate majority leader harry reid spoke to capitol hill reporters about those votes for about 10 minutes. >> [inaudible conversations] spent about 2 million people breathing a sigh of relief because they will have jobs monday. the work that we did on fema was

bipartisan in nature and sent a resounding message to the house of representatives. this is an important day for our country. we talk about jobs all the time. this is really jobs in action. now, we have a lot of other things to do. we're going to do everything we can on jobs, but this certainly is a step in the right direction. senator schumer? >> thank you, senator reid. let me say a few things. if today shows that the pendulum is swinging back, because we passed the highway bill and the faa bill without cuts. previous months i think our colleagues would have demanded cuts before we pass them. in fact, they did. and we passed the opening, we passed a fema bill that actually met the needs of fema in a bipartisan way with 10

republican votes. first, we are calling on speaker boehner to take up our bill and take it up early next week. this is a bipartisan bill. it's a strong bill and it feels he must needs. we cannot find fema on a month-to-month basis. anyone who is involved in a massive kinds of cleanups that are being done in my state and so many other states knows that you can't do this on a month-to-month basis. so fond of them just up to november, the middle of november, doesn't make much sense. second, we are going to fight very, very, very hard on jobs in the future. as leader reid said, this bill saved jobs. we didn't have jobs, we kept people working on our highways and working on our airports. and the next phase, when we get back after passing, we have to pass this and the fema bill, will focus on creating jobs.

we're working closely with the white house. we've had a very good lunch today where there was a great deal of unity, and we are going to focus like a laser the next several months, as we did this week, hopefully in a bipartisan way, on jobs. >> across the country people are asking the questions, rightfully, whether we can focus on issues that are important to them, that we can work together in a bipartisan way, and that we can begin to restore the confidence of families and business owners everywhere, that we can help them help this country work for them. and the bills that we passed today begin to do that. focusing on the people who have been hit so hard by disasters, and giving them some confidence that this country and this government will be there for them. making sure that we send people to work on monday and they've got the confidence to do that, and doing it in a bipartisan way.

and i know i think these bills are good, and good for our economy and good for jobs, good for people, that they help of take an important direction in this congress to show that by working together we can show people this country can work. >> thank you, leader, for including me in this very important press conference. in our work, and i have kind, lost my voice. i been talking so much to senator coburn today. in this work we have good days and we have some bad days. this is a good day. it is a good day to be able to go home and say, we worked together in a bipartisan way to save almost 2 million jobs. these jobs were threatened. we could have seen a protracted debate. i met with a lot of people before with senator schumer to explain what the problem was, and why we were very concerned, that if there was demand a

filibuster continually, we couldn't get to vote until wednesday on faa and highway. we showed today that we can, in fact, work together. so i am very pleased. and i am pleased that the house sent over the faa and the highway bill, that it can't be at the current levels of funding. they turned away from their one-third cut in the highway bill that was part of the ryan budget to pass. they seem to be backing away. this is a very good signal for the two-year bill that i'm working on with senator inhofe. my closing comments are these, senator inhofe has been a very strong partner with me when it comes to infrastructure. you've all heard to say when it comes to the environment, we don't see the world the same way. but when it comes to infrastructure, we worked together. we together have talked to senator coburn, we were able to work through senator reid to resolve our problems are and we

turned back a huge vote which would have put into place in the one-third cut. so it was a good day, for to mine workers, and the businesses who hide into an and thank you for including me. >> questions? >> senator reid, what was the deciding come a couple hours ago we heard that there hadn't been any kind of -- [inaudible] suddenly we had a deal. >> i was walking to lunch today to go to our caucus, and senator coburn was on the floor and we started conversation. and that was the introduction to senator inhofe and senator boxer working with him that he feels more accountable about what we will be doing in the future on these highway bills. i think that as happens with all things in life, and legislation is no different, people need to understand the problems we have and then try to eat those problems.

no one had to compromise any of their positions, but it was just a better understanding. both sides had and that's how we are able to get it done. [inaudible] >> my plan right now, that could change shortly, but i doubt it, i'm going to move to the trade deficit system itself. we have lots of people are hurting out there because jobs are being taken away. this plan was set up to take your people just like that. we have a vehicle in the house-senate come and i know that there's some people want to offer some amendments to that. but my goal is to get it done as quickly as we can, send it back to the house. and hopefully that will be the pathway to working on the trade bills. i've said before, i don't need to repeat it here, but i will, i'm not a big fan of these trade bills, but there's a majority of the caucus on the senate that

wants this done. so i will try to move to those in an orderly fashion. senator schumer has indicated we are going to have debate, legislation on china currency and we will do that at the direct time. [inaudible] >> appropriate in your view? >> we are where we are. i worked very hard to get the proper person to lead this committee. i put the two very fine people representing democrats. we have 12 people who are doing their utmost so that we don't have sequestration. i'm disappointed that speaker

boehner would get involved with this super committee in a public fashion. i don't think he should do that. i'm not going to do that. so i am confident that the super committee can come up with something that will stop sequestration. as to what that should be, i have some opinions but i'm certainly not going to voice them publicly. and i will only answer questions that are asked me in a private fashion with news of the super committee. i'm not going to be volunteering. [inaudible] >> i would hope no one would even consider that. we spent months working out, we have our numbers agree to. i can't imagine how this is a winning hand for the republicans in the house, and certainly the republican senators know that. because we worked out our differences. the debt ceiling is not an issue

anymore. so i would hope that no one is considering shutting down the government. remember, we agreed on the number come and that was the reason we gave a little bit, and i think that republicans felt they gave a little bit so that we wouldn't have this issue all the time. no one thinks with the economy being in a situation it is in today that shutting down the government would be very good. and i can't imagine how the republicans feel really getting this issue will help them. i don't think it will. i think it would hurt them drastically. one more question. [inaudible] >> we had a great find caucus today. i guess stephanie was there, she did answer any question but she was there. of the presidents people. they were there. they answered questions for an hour and a half. i was very impressed with their

intent. i think they answered lots of questions for this caucus. as most of you know, i introduced a bill here on the floor yesterday and we will move to that as soon as we can. and as i said, i don't think i can be any more deliberate than what i just said. as soon as we can. but we are going to have opportunities to vote on the president's bill and pieces of it before we leave here. thanks everybody. [inaudible conversations] >> also in the senate yesterday, senator john barrasso came to the floor to talk about former senator malcolm wall to who died at age of 78. senator wallop represented wyoming as a republican from 1977-1995. nois is 15 minutes.ho

>> i come to the floor today to honor one of our former colleagues and a dear friend. u.s. senator malcolm wallop die, yesterday, september 14, 2011,ok at his wyoming home overlookingc the majestic bighorn mountains. enduring figure in the history of wyoming and in the history of the united states. malcolm was a stalwart defender of freedom and democracy around the world, and a determined advocate for limited government and opportunity for every person. like that iconic range in northern wyoming that he loved, malcolm stood very tall. as a citizen, as a state and federal legislator, and as a loyal guardian for wyoming people and our way of life. i want to send my deepest condolences to malcolm's family

back in wyoming and around the country. to i isabel, his wife, to his beloved children, malcolm, matthew, amy, and paul. to his dear sisters, jenin and carolyn. i also want to offer my condolences to all of those folks who worked for senator wallop during his years of extraordinary public service. i have met most and known many over the years. my wife bobbi, my wife bobbi served on his very first staff in washington. and plast last night she shared with me again what we've all come to know. malcolm was a kind, a caring, and an extraordinary gentleman. malcolm's staff served him ably and honorably. i know there are always some in this body today who served alongside malcolm wallop. you no doubt remember him well.

he was -- it was just four years ago that senator wallop returned to this chamber and attended my own swearing-in on june 25, 2007. on that day, as is tradition, senator wallop walked with me up to the president's desk to take the oath. he stood with me during the ceremony and offered private words of encouragement and advice. i was honored that day to have him there next to me, and it saddens me greatly to join senator enzi to announce his death. malcolm wallop was someone i followed throughout his career. i admired him greatly. he was a man that many of us looked up to as he grew into one of the most influential legislators of his time. hello, my friend, that was his classic western rancher's drawl and it was what you heard if malcolm wallop was on the other end of the phone line or came through the door. malcolm was a real-live version

of anyone's version of a western gentleman. today i remember him as a brilliant servant leader. he possessed a special western wisdom which often found those around him racing just to catch up. he found great continent in all of the many facets of his life. even during recent years when numerous medical challenges conquered his physical body, his spirit and his intellect were never diminished. public service was his heritage and his calling. his grandfather, oliver henry noel wallop founded the canyon ranch in the big horn mountains of wyoming in 1888. that's before wyoming even became a state. he had the distinction of serving first in the wyoming state legislature an thin later in life in the house of lords in great britain. noel was the youngest son of

lord isaac newton wallop, the fifth earl of ports moth. when earl's older brothers died, he reluctantly returned to england to fulfill the family duty. however his own son, oliver, malcolm's father, he had grown up and remained in wyoming. malcolm was born in 1933 and big hoanch was always his home. his children and grandchildren are fourth and fifth generations of his family to make their lives in the beautiful big horn mountain area of north central wyoming. they ramp, they own businesses, they teach, they serve their community, all those things that we do to make this nation strong. malcolm was a pilot. he served as a first lieutenant in the u.s. army. he was a cattle rancher, elected to the wyoming state legislature serving both in the house as well as in the senate from 1969 through 1976.

in 1974, wallop ran unsuccessfully for governor of wyoming but it was during that summer campaign that malcolm began to distinguish himself as a principled and energetic future force in republican politics. he didn't shy away from the tough issues. instead, he seemed to gather freng strength from the challenges. only two years later he unseated incumbent senator gale mcgee and became wyoming's 19th senator serving from 1977 to 1995. when malcolm was elected to this body in 1976, it was really something. you heard about the commercials from senator enzi. well, a group of young people had gathered around to support his very unlikely bid to serve wyoming in the united states senate. the national press called it the children's crusade. many of those young people came to washington with him, and my

wife bobbi brown was among those who began her own public service career as part of his first-term staff. it is an indication of the affection and the loyalty felt by those who were part of his team that more than 60 people gathered together with malcolm in wyoming in 2006 for a 30-year reunion. he served three terms this the senate and his work here was very broad in scope. his presence was lasting, and it touched on the mercurial issues of the late 70's and 80's from energy policy to the environment, from national security to tax reform. one of our own colleagues, senator carl levin said of malcolm, quote, "while we disagreed again probably as often as we agreed, that didn't stand in the way of my admiration for the quality, the characteristic that he had of

letting you know precisely where he stood, and why." he went on to say "and his patriotism is second to none in this body." malcolm wallop was the first elected official to propose a space-based missile system, which eventually became pennsylvania part of our strategic defense initiative. he was highly regarded for his knowledge and understanding of defense issues and surely helped bring the berlin wall down. later in his senate service he was a member of the helsinki commission and traveled in eastern europe and the former soviet union as an arms control negotiator. speaking of their strategic partnership, president reagan said, "leadership, hard work, experience, loyalty to wyoming -- that's what malcolm wallop is all about." malcolm was fiercely protective of property rights and the

rights to privacy and a champion of the rights to the individual. he is remembered for the wallop amendment to the surface mining act which forced the government to compensate property owners. he worked to protect others in the clean water act. avenues key force behind the passage of the far inform reaching 1992 energy policy afnlgt senator wallop on more than one occasion commented that he "was not burdened with a law degree." and yet he was selected in his very first term to serve on the judiciary committee. the first nonlawyer ever so chosen. perhaps his greatest contribution was his landmark contribution to address the hard- breaking issue of parental kidnapping. he was one of a long and distinguished line of wyoming

senators who served with distinction on the senate finance committee. his 1981 bill to cut inheritance and gift taxes is remembered as one of the most substantive changes to tax policy that decade. he appreciated opportunities which allowed for private-public sector partnerships. early in his senate career there was talk of establishing a national service requirement for young people. but malcolm felt that if we were going to require young people to serve the nation, the nation should recognize them for the service, so many were already providing through their daily lives this. this resulted in his leadership to establish the congressional award. he joined with colleagues in both houses of congress in a bipartisan effort and the unique program available to all interested young people in the country was created. it is a program of congress which operates with private-sector funds. it is an earned honor and is the highest honor which we bestow on

our nation's young people. the many young people in my state who participate in the close-up program do so because malcolm thought it was an important opportunity for his young constituents it. at the time, close-up only offered their program in the cities. well, malcolm worked to convince the close-up foundation that a statewide program would work and i believe that close-up today counts their wyoming program as one of its most successful. malcolm wallop reached across capitol hill. he reached across party lines in the creation of the aquatic resources trust fund, commonly neons the wallop-breaux trust fund. which has resulted in billions of dollars generated by users for supported fisheries and wetlands around the country. but it wasn't all serious. he was an enthusiastic supporters of his staff's efforts to deal with their home sickness in july. and in july of 1977, they held the first frontier east, an east coast celebration of cheyenne's

frontier days, which is known simply as "cow pie." cow pie stands for the committee of wyoming nem in the east. it is still today one of the washington area's most celebrated summer events. autograph my wife reminds -- my wife reminds me how joyful malcolm was each year on his birthday. his birthday was february 27. as bobbie remiewndzs me, that's when his staff organized the wallie awards, making great fun of them seafntiondz their boss. the best was their impersonation of him by their chief of staff, who went on to serve as the chief justice of the wyoming supreme court. malcolm remained forever steadfast against the growth and power of centralized government. and he warned, as we remain the sheep, the government happily remains our shepherd.

he talked often as a senator of our shrinking freedom and the battle to lay claim to our fragile liberty. that was malcolm wallop. when he announced his retirement in 1993 after 18 years in the united states senate, senator wallop told the casper star tribune simply, "i don't think the only place to fight for freedom is in the halls of congress." his life after the senate was filled with his continuing work on issues focusing on constitutionally limited government, a strong national defense, and the rights of the individual. to address these issues he founded the frontiers of freedom. he spoke with power and eloquence about the issues which he found to be the core of our great country. in a 2003 interview with peter evans, he said, "you'll find in the american people an enormous sense of pride and self-assurance that only comes

from people living free." it's unbelievably -- it's unbelievably invigorating and very reassuring to know the great experiment," he said, scwtion in the handles of the people who don't even know it and isn't in the hands of the people who think they hold it." malcolm wallop was so many things, but what malcolm wallop was not was sentimental. the new phase of his life was the full phase of his life. he did not dwell on past things. his energy was always spent looking forward. i want to conclude today by repeating senator wallop's own word. speaking in 2005 before the ronald reagan gala sponsored by the frontiers of freedom, senator wallop spoke about his own beliefs. and i quote: "government was not meant to possess us, rule us, encompass us, judge for us, substitute for us.

it was meant to serve us. we were founded as a noble self-governing tribe of free people, respecting each other as americans under god, not under washington. americans know this even if their government does not. the biggest difference between the principle of government in america and anywhere else is that here the rulers must stick to clearly defined tasks while ordinary people may do whatever they wish." he goes ton say, "we must make up our minds to put this principle into practice again, lest we lose the spirit that made us the envy of the world." most important, he said, "the american model is based on a certain kind of people dephoned not by race but by virginia tuned by the willing misto take responsibility for our own lives.

people fit to be americans to be blessings only from god because being americans is not a matter of birth; we must practice it every day. lest we become something else." he says, "the size of our continent, its fabulous wealth, its indescribable biewrkts the ships, tanks, and airplanes in our arsenal are no treasure compared to the moral character of the american people. i pray to god, "quetion said, "that he will graciously help us preserve and protect that splendid moral base." and that ends his quote. to isabel and his beloved children -- malcolm, matthew, amy and paul -- to his sisters jeaniment. ne, we thank you for letting us share so much his life.

there iwe can cherish our memord stories of malcolm knowing that he would cast a wry glance and wonder why we weren't spend our thoughts and our energy on a challenge that needed our attention. it is what he would expect of all of us. it is the example that he left for us. it is his legacy. and so today, godspeed, malcolm. mr. president, the u.s. senate, wyoming, the united states of wyoming, the united states of >> friday morning a very short date expected with no legislative work or votes on the schedule. before a jury yesterday senators pass several pieces of legislation including a measure

providing for almost $7 billion in assistance to communities that were hit by recent natural disasters. the chamber approved extensions of faa programs for four months and surface transportation projects for six months. now live coverage of the u.s. senate here on c-span2.

the presiding officer: the senate will come to order. this morning's prayer will be offered by the chaplain of the senate, dr. barry black. the chaplain: let us pray. eternal lord god, you are our light and salvation. we will not fear.

you protect us from dangers, seen and unseen. we will not be afraid. you know the pressures and tensions that beset our nation and the need for your wisdom on capitol hill. make all of us worthy of the high calling you have given us to be faithful stewards of the responsibilities before us to serve you and our country. inspire our lawmakers to seek to serve rather than being served, following your example of humility and sacrifice.

we pray in your sacred name. amen. the presiding officer: please join me in reciting the pledge of allegiance to the flag. 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., september 16, 2011. to the senate: under the provisions of rule 1, paragraph 3,

of the standing rules of the senate, i hereby appoint the honorable joe manchin, a senator from the state of west virginia, to perform the duties of the chair. signed: daniel k. inouye, president pro tempore. mr. reid: mr. president. the presiding officer: the majority leader. mr. reid: following leader remarks, the senate will be in a period of morning business, senators permitted to speak for up to ten minutes each. there will be no votes today, and the next vote will be on monday, september 19, at 5:30. we begin we'll begin consideration of the trade adjustment assistance bill on monday. we're working on procedures to get to that today. we have a lot to do. next friday, we have to have a continuing resolution passed in this body. we had a good week this week. we were able to get the highway bill extended for six months, federal aviation administration for four months, and of course we were able to have that significant vote on the fema

legislation so vitally important to the entire country. it's interesting to note that the president has had emergency declarations of disasters in 48 states. the presiding officer's state is one of those that did not have one, as the state of michigan. h.r. 2587 is due for a second reading and it is at the desk. the presiding officer: the clerk will read the title of the bill for the second time. the clerk: h.r. 2587, an act to prohibit the national labor relations board from ordering any employer to close, relocate or transfer employment under any circumstance. mr. reid: i would object to any further proceedings in regard to this matter at this time. the presiding officer: objection is heard and the bill will be placed on the calendar.

mr. reid: mr. president, today we pay tribute to the american men and women who have traveled abroad to defend this great nation but never returned home to our shores. we also honor those who have suffered as prisoners of war. we're grateful to them every day, but today, which is national pow-mia recognition day, we dedicate our remembrance to their sacrifice. mr. president, i had the good fortune to be appointed in 1992 by majority leader mitchell to be a member of the select committee on pow-mia. that committee was chaired by john kerry. it was a wonderful experience for a number of reasons, not the least of which is to watch senator kerry, because i really,

frankly, didn't know him very well then. i had been in the senate for a few years. when we work here, sometimes you don't really understand how good people are until you work with them on a real close-knit basis as i did with him because of that appointment. he did a magnificent job of chairing that committee. of course, he had some standing to look at what went on in vietnam since he was wounded three times and won a number of silver stars for his heroism in vietnam. but legislatively, that was a great experience for that year, to look to see what had happened in southeast asia. not only vietnam, laos and cambodia, people who had been taken prisoner of war, and certainly if not were missing in action. it was really a good experience for me, and i will always remember that. so this day, national pow-mia

recognition day, recalls those memories of many years ago, of the hearings that we held and the evidence we gathered to make a decision as to what really took place there. more than 83,000 americans are missing. world war ii, korea, the cold war, vietnam and of course the gulf war. there are also soldiers, shores, marines reported -- soldiers, sailors, marines reported missing from our missions in iraq going on right now. we will not rest and we should not rest until we have accounted for every missing american service person who has fought to protect the freedoms we enjoy as americans. although they are missing, they are not forgotten. it's difficult to comprhend the suffering -- comprehend the

suffering of families who have lost loved ones. i'm hopeful and somewhat confident that it's comfort to them today to know that we give thanks and praise for their dedication to the ideals upon which this nation was founded. that's why today we commemorate the sacrifices made by those families as well as the soldiers that they love. i also give thanks for the brave men and women who wear uniforms of the united states armed services today, including more than 2,000 nevadans currently deployed around the world. not in the service but who are nevadans deployed around the world. anything worth having, of course, is worth defending, and our freedom is one of the most precious things we have. so today we thank those volunteers who have placed themselves in harm's way to protect this great country. many of them have paid the

ultimate price for our liberty, so today and every day they have the thanks of a grateful nation, especially today, the faithful in service to their country. mr. president, i would note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call:

mr. levin: i ask unanimous consent the proceedings under the quorum call be dispensed with. the presiding officer: without objection. under the previous order the leadership time is reserved and under the previous order the senate will be in a period of morning business with the senators permitted to speak therein for up to 10 minutes each. mr. levin: mr. president, yesterday i spoke on the floor about the need to restore revenue as part of our deficit

reduction efforts. i explained that i've sent a letter to members of the joint committee now crafting a deficit reduction plan with seven ideas on how to address our revenue shortfall and ways that reduce the deficit, protect economic growth, and ensure that the sacrifices which are necessary to achieve our budget goals are shared broadly among the american people. together, these proposals would reduce deficits on the order of a trillion dollars over ten years. and today i want to go into greater detail on two of those ideas to address loopholes and tax breaks that are as damaging to our budget as they are unfair to working families. one proposal would stop corporations and individuals from using off-shore tax gimmicks to dodge the taxes that they owe. the other proposal would close a

loophole that gives corporations a huge tax break when they award stock options to their executives effectively using the hard-earned tax dollars of american families to subsidize the paychecks of c.e.o.'s and other top executives. let's begin with the goal here, deficit reduction. budget experts tell us we cannot close our budget gap with spending cuts alone. revenue must play a role. these two proposals can help. the permanent subcommittee on investigations which i chair has estimated that the use of off-shore tax rifns havens by wealthy u.s. taxpayers costs our treasury around a hundred billion dollars a year. i believe legislation to address that issue can recover a significant appropriation of -- portion of that loss. the joint committee on taxation

estimated a previous version of the legislation would recover nearly $30 billion over ten years but new provisions that we have included should raise that figure significantly and closing the stock option loophole would save $25 billion over ten years, according to the joint committee on taxation. this revenue would help the joint select committee in its difficult task of achieving at least $1.2 trillion in deficit reduction, and it would help restore fairness to the tax code without penalizing activities that contribute to economic growth or raising taxes on middle-class america -- middle-income america. our work on the committee on investigations has for more than a decade exposed the ugly truths of tax haven abuse. a singling about in the cayman islands called the ugland house

serves as the mail drop for nearly 19,000 companies. incorporated there for tax-dodging purposes. of the 100 largest publicly traded corporations in america, 83 have subsidiaries in tax havens. hedge funds whose employees live right here in the united states pretend to be based in tax havens to dodge u.s. taxes, an army of lawyers, bankers and accountants help u.s. taxpayers use off-shore abuses to avoid taxes. all of this shifts the tax burped of these tax dodgers onto the backs of honest taxpayers. yesterday, the internal revenue service announced that they have recently completed an off-shore

program where they give a degree of amnesty to people who are willing to come in and pay their taxes. 30,000 such people have come in since 2009. and mr. president, that is the tip of the iceberg. as our investigation at the permanent subcommittee on investigations disclosed. now, how do we combat this? several colleagues and i have introduced legislation called the stop tax haven abuse act, senate bill 1346. our bill will authorize the treasury secretary to take special measures against foreign jurisdictions or foreign financial institutions that impede u.s. tax enforcement by prohibiting u.s. financial institutions from doing business with those foreign financial institutions in uncooperative

jurisdictions. it will help the i.r.s. identify ownership and control of off-shore entities. it would stop corporations whose management and control are located primarily in the united states from claiming foreign status to dodge taxes. it would prevent businesses from dodging taxes by claiming that assets physically held in the united states should be treated as off-shore assets for tax purposes. and it would treat derivative payments, derivatives payments sent from the united states to off-shore entities as taxable income. enacting this legislation and ending these off-shore abuses would penalize tax dodging, not legitimate economic activity, and it will help to bring down the deficit. similarly, closing the stock

option loophole would not penalize productive economic activity. it would still -- it would innot stead end an unaffordable federal subsidy for corporate executive pay. today under tax rules for reporting stock options corporations report stock option expenses on their books when the stock options are granted but they use another method to claim a different and a usually much higher expense on their tax returns when the stock options are exercised. the result is that corporations can usually claim far larger tax deductions for stock options paid on their tax returns than the actual expense that they show on their books for those same options. they get a much bigger tax deduction for exactly the same tax option expense as they show

on their books. stock options are the only type of compensation for which the tax code allows a corporation to deduct as an expense for tax purposes more than what they show on their books for that same expense. i.r.s. data shows that from 2005 to 2009 this loophole allowed companies to claim between $11 billion and $52 billion each year in excess tax deductions. now, legislation that i've introduced with senator sherrod brown and senator mccaskill would end these deductions by require stock options to equal the engines pens shown on the corporate books for those same options. it would not affect the taxes

paid by individuals who receive the stock options. as of now they pay for the actual sales price minus their cost. it would not affect so-called incentive stock options, often used by startup companies, and it would take -- it would make stock option pay subject to the same million-dollar cap on corporate tax deductions that applies to other forms of executive pay. now, these proposals, mr. president, will alone put a major dent in the deficit. they would ensure that multinational corporations and wealthy individuals pay the taxes that they owe. just like working americans. if we're to seriously reduce the deficit, these kind of tax reforms and the resulting added tax revenues must be part of the discussion. and i urge my colleagues especially those on the joint

select committee, to embrace these ideas. again, i sent a letter yesterday to the members of the joint committee, all the members, laying out these seven ideas. which together will raise over a trillion dollars in ten years. and i'm going to return to the floor again in the days ahead to discuss additional reforms with the resulting revenues that were set out in my letter to the joint select committee. these changes, these reforms, this loophole closing will help to close the gap between spending and revenues that all of us, i know, want to close. mr. president, i yield the floor and note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call: he

senator from oregon. mr. wyden: mr. president, i'm going to take just a few minutes this morning to take on the naysayer caucus that has developed on the issue of tax reform. the presiding officer: the senate is in a quorum call. mr. wyden: i ask unanimous consent to vacate the quorum call. the presiding officer: without objection. mr. wyden: mr. president, i will just take a little time this morning to, as i indicated, make some remarks with respect to this issue of tax reform and

particularly try to lay out why the naysayers, those who say oh, tax reform isn't going to make any difference any time soon or there hasn't been a lot of groundwork laid, those are the two major arguments they are making. mr. president, i'm going to try to lay out why those arguments are wrong. to start with, they reflect a misunderstanding about markets and about free enterprise and about what drives the american economy. one of the major reasons that consumers are not spending and businesses aren't hiring workers is uncertainty about taxes. enacting fundamental tax reform now because of the rules of free

enterprise and markets would start changing consumers' behavior very quickly, and business would be in a position, in west virginia and oregon and everywhere else to start making judgments with respect to investment. they can't make judgments right now, when you have these piece meal tax changes. it might last a year or a year and a half. that's not the way the american economy works. businesses in west virginia and oregon, they're thinking about investments that are going to last five, ten years, even longer, and they need some certainty. and so i'm going to spend some time talking about why permanent tax reform enacted early next year, where we make a start at it with our super committee. we have the good fortune of having chairman baucus on it. i serve on the finance committee. he's on it. chairman dave camp of the house ways and means committee also on

it. and what i feel very strongly, as does the cosponsor of the legislation that i have authored, senator coats, they can make a good start on tax reform in the super committee, and i'm going to out line how that could take place and then finish it up early next year. so let's start by talking about how you might see people's behavior start changing and getting consumers back into the marketplace and businesses start making decisions. my own view is if working families knew at the end of the year or early next year that they would get real tax relief as they get under the legislation that i have been part of, senator coats and senator begich and former senator gregg, if they knew middle-class folks that reduced rates were going to be in place not just for a year but for the long term, they would start

making the kinds of decisions that they are putting off now because they are uncertain today and they are going to be uncertain next year and the year after, if we continue to make these changes in tax law piece meal. my view is if we saw permanent tax reform enacted early next year, we would see consumers start going back into the economy, making the kinds of purchases they have been postponing, in major appliances, new cars, the other investments that you make when you know that the economy is going to start picking up because millions of others are going to go back into the marketplace, just like yourself, and businesses when they see that additional demand for their products go out and start hiring more workers.

so let's talk for just a minute about how fundamental tax reform puts more money into the pocket of the middle class. under the legislation i have been part of, with two republicans and senator begich, a typical couple making $90,000 would pay close to $5,000 less in taxes, according to estimates by the congressional budget office. mr. president, the reason that's the case is our bipartisan tax reform triples the standard deduction for that middle-class couple. triples the standard deduction. mr. president, let me emphasize that it is permanent. i want to say that again, permanent. it's not something that's going to be jerked away in a year. it's something that would be locked into the tax code on a permanent basis.

and economists and others have repeatedly said that when you make those kinds of changes, and typical families know that on a permanent basis, they will have more money in their pockets. they will go out and make the major purchases that they have put off, in west virginia and oregon over the last few years. you talk to them. you talk to them at coffee shops and know the president of the senate spends a lot of time getting out and talking with folks. when i go into coffee shops and i ask people in particular about why they are putting off major purchases. i talk about appliances and cars. they will say i just don't know what's going to happen. i heard that there was this break that i was getting for a year, and i don't know what's going to happen after that. we need to make permanent changes in the tax law. give permanent tax relief to

middle-class people, and then based on everything we know about economics, people start changing their behavior. they aren't going to do it, mr. president, not in a big way, without permanent changes, predictable changes, changes that they can count on that won't be jerked away from them in another year or so. the same principle goes for business. once they know there is going to be a new tax system in place with reforms -- and by the way, virtually all the reform plans, mr. president, virtually all of them take the corporate rate today, it's now the second highest in the world, down to somewhere in the mid 20's. senator coats and i with senator begich were at 24, the bowles-simpson proposal is a little higher, but everybody is pretty much in the same prays. do you that on a permanent base -- same place. you do that on a permanent

basis, businesses will be able to start planning and they will start planning immediately for the beneficial effects of consumers going back into the marketplace because of permanent changes in the individual tax code, and because they know what the rates are going to be. once a reform tax system was signed into law, mr. president, we'd have more certainty and we would begin to see the spending, hiring, and investment decisions that are not being made today in the american marketplace by the consumer and by business. now, it would also be possible to further jump-start the process and generate economic growth even more quickly. for example, as part of term tax reform you could allow the consumer an advanced refund of the reduced taxes that they will be getting under tax reform.

the congress did that a few years back. it helped a bit in terms of consumer demand, but again, it was short term. since it was not combined with reform, permanent reform of the tax code to provide future certainty, it didn't stimulate demand either in the short term or the long term as much as it might have. the bottom line, mr. president president, is that enacting fundamental tax reform now would provide immediate benefits to the economy by ending the un-- the sirnt that i happen to believe is strangling our prospects for a real, significant, long-term economic growth. mr. president, we all understand that the american tax system is an antigrowth mess.

it is riddled with loopholes and tax dodges. i said on -- sit on the senate finance committee, a big part of the tax system today, the language is pretty much incomprehensive, you know, gibberish. so we do need to make these changes. and now i want to get into this issue that well, it's not going to be possible to do tax reform now because the groundwork hasn't been laid. i'm sure the distinguished senator from west virginia has heard this argument, gosh, we could do it in 2013, we ought to spend more time, you know, studying it and all that. i'll tell you, not only is the uncertainty of putting it off again going to continue to harm the economy -- in fact, mr. president, i predicted after the lame-duck session of the

congress in 2010, i said unless we got people moving in a bipartisan way on tax reform, we would have the same debate in the lame-duck session of the 2012 congress, exactly the same debate about whether or not you are going to on a temporary basis extend the bush, you know, tax cuts. so if we aren't successful in public pushing, pushing permanent tax reform onto the agenda, that's what will happen. we'll have the same debate in the lame-duck session of the 2012 congress after the lame-duck session of the 2010 congress which will be about once again trying to patch up this dysfunctional, antigrowth tax system we have in our country. so i'd like to now spend a few minutes addressing the claim that it's not possible to do tax reform now because the groundwork hasn't been done.

that is awfully puzzling to me, mr. president, given all of the tax reform proposals that are out there now and how similar they are. for example, erskine bowles and alan simpson when they came to the senate budget committee, said point blank that they modeled their recommendations after our bill. senator greg and i -- senator gregg and i had spent week after week working on the legislation. that was of course flattering. we were happy about that. but the fact is going all the way back to some of the studies done by the commission appointed by george w. bush, and then highlighted by the work done for president obama, the volcanoer commission --, volcker commission. there has been an often lot of common ground. for example, mr. president, the tax rates under all of these

major proposals involve on the individual side of the tax code taking the country from six major brackets to three major brackets. the bowles-simpson proposal really comes in around 12% for the lowest rate, 22% for the rate in the middle, 29% for the rate at the top. now, the proposal that i've been part of with former senator gregg and senator coats and our colleague and friend mark begich, we are a bit higher than that. that's because we didn't under our proposal make changes with respect to the mortgage write-off and the charitable write-off and the changes with respect to middle-class folks who depend on their health care

and retirement. so the point is, we've got something that we can have a real debate on right now. mr. president, let me highlight one other point. we touched on it yesterday when our group of more than 30 got together. our proposal has been scored by the joint committee on taxation, the committee that specifically looks at tax law. so if the distinguished senator from west virginia, the president of the senate, wants to come in and make a modification in tax law for example, adjust the rates, say, in these three brackets, one way or another, because we have the numbers now from the joint committee on taxation and it is the only proposal, our bill, the only proposal they've scored -- we can give to the senator from west virginia and any other member of the senate, the other 98 senators not here,

we can give them the actual numbers that have been furnished by the official scorekeeper, the joint committee on taxation, so we can be in a position to have a real debate. there has been an enormous amount of groundwork done, mr. president, on this issue. i've already mentioned the similarity and reforms on the individual, you know, rates, the corporate rate reforms proposal are similar, revealing the alternative minimum tax, it's in our bill, it's in all of the bills. we understand what a crushing burden this alternative minimum tax is. it's got middle-class folks all over america, if you got somebody who, say, is on the police force in a town in west virginia and perhaps their spouse is a teacher, they could be filling out their taxes twice

with this bureaucratic nightmare called the alternative minimum tax. it wasn't intended for those kind of people, it was intended for people who manage to get out of paying taxes altogether. so we are in a position, mr. president, to move forward, and what i and others have said is that if you started in the super committee by laying a base line, a foundation, you've already got an opportunity for simplicity, moving from those six brackets to three, you've already got an opportunity on the corporate rate where essentially all of the reforms are in the vicinity of going from 35%, you know, to the mid 20's. all of the reforms talking about abolishing the alternative minimum tax, all of the reforms talking about getting taxpayers, individuals and businesses, off the roller coaster. the super committee could make a

very significant start on major tax reform by the end of the year and then early next year we could have a guaranteed legislative process, mr. president. let me use those words specifically. a guaranteed legislative process where the finance committee under the leadership of chairman baucus and the ways and means committee under the leadership of chairman camp could enact permanent tax reform by early next year. now, i've already talked about how markets work, mr. president. i think if this holiday season the american consumer can have a sense that we're going to make a break with tax policy as we know it today, we're going to stop all these piecemeal temporary

changes, we're going to make permanent changes, they're going to be built around reform principles which are widely accepted, mr. president, ever since the 80's when democrats and ronald reagan got together. the fundamentals of tax reform have been very clear. they're all about eliminating preferences, all of these special interest tax breaks and loopholes and dodges and preferences, eliminating them and using those dollars to hold down the marginal rate, the rate you pay on the last dollar you earn, while keeping progressivity, while keeping a sense of fairness. those principles are very clear. all the reform proposals are based on them. it sure seems to me if middle-class people can have the certainty of knowing that tax

policy is going to change so that they can start making decisions about their economic future, have a real sense that it isn't going to just change in a year, that it isn't just some temporary thing, i think we will start seeing beneficial changes in the american marketplace very quickly. and that, of course, is what tax reform is really all about. it's about getting consumers back into the marketplace and about businesses growing again because they know they're going to have more consumers and they know that they are going to be in a better position to compete in tough global markets. that, mr. president, means jobs. and i want to wrap up by talking about tax reform and jobs.

in the two years, mr. president, after the 1986 reforms -- and remember, we have not had fundamental tax reform for a quarter century. for a quarter century this country has been making almost one tax change a day, almost one tax change a day, mr. president. thousands and thousands of tax changes cumulatively. talk about what that means for uncertainty for a business and consumer. we can make a break with that and do what was done in 1986 which translated into a big boost for our economy. and i want to give the numbers specifically, mr. president, so that folks will see what this tax reform issue is all about. according to the bureau of labor

statistics, mr. president, in the two years after the 1986 tax reform bill, our country created 6.3 million new jobs. 6.3 million new jobs, mr. president. sounds pretty good. i think that would go over pretty well in a coffee shop in west virginia. it certainly does at home in oregon. now, i'm not going to come to the floor of the senate, mr. president, and say every one of those jobs, every one of them, is due to tax reform. there are a host of issues that go into judgments with respect to why consumers buy those appliances and those basic necessities and why businesses invest. but i'll tell you one thing, mr. president: you couldn't have generated 6-3 million -- 6.3 million new jobs in the two years after the 1986 tax reform bill if you had seen a tax reform proposal enacted that didn't make sense for the

american economy. it wouldn't have happened. clearly, consumers and businesses said that this is a proposal moved by a republican president, ronald reagan, and a host of democrats, very progressive democrats, folks like dick gephardt who ran for president, strong backing of american labor, they came together and they created 6.3 million new jobs, in two years, mr. president, with the kinds of reforms that senator coats and former senator gregg and senator begich and i advocate now that are in line with the fundamental thinking of the bowles-simpson proposal, the reforms proposed by former president george bush and president obama's own commission directed by paul volcker. we have a chance, mr. president, now to make fundamental changes, fundamental changes that will change the direction of our economy, and i think the

psychology of the american marketplace. in this debate, we can talk, for example, about the issues that are front and center with american workers. i'm certain that in those coffee shops in west virginia, one of the things that is said again and again is senator, make sure you keep the jobs here, keep them at home. we're tired of all those jobs going offshore. well, senator coats and i have a proposal that takes away the tax breaks for shipping jobs overseas and uses those dollars to create jobs here at home. red, white, and blue jobs, mr. president, jobs that pay good wages here in the united states because we changed tax policies and made it more attractive to do business in the united states. we could talk about the various ways to do it. there is discussion about a territorial system, discussion about a worldwide taxation

system for the large businesses. the bottom line, mr. president, again reflected in all of the reform proposals is that competitive rates, which means lowering rates for small business and businesses of all size to do business in the united states will help us create more jobs, and they will be red, white, and blue jobs. they will be jobs here in the united states. so, mr. president, i assume this weekend whether it's in coffee shops or talk shows or wherever, people are going to be talking about this discussion about taxes, and they will say oh, i don't know if those folks in washington are going to get anything done, and if they do anything, it will probably just be a temporary thing, and they will all talk about why if you had real tax reform it might not

do anything soon and, well, it will take a lot more study and that sort of thing. i hope i have been able o'mr. president, this morning to talk about why i believe permanent tax reform, permanent tax reform will start changing the behavior of consumers in the marketplace, get them back into the marketplace buying those products that fuel a consumer-driven economy, and they will start doing it quickly if they see permanent tax reform enacted, and i hope i have been able to out line why a great deal of groundwork has been done already to allow us to move forward, not do the entire tax reform effort in the six or eight weeks that the super committee has, but to get a foundation, a base line in

place, a base line that is built around these areas of consensus, changes that are advocated essentially by all the reform proposals, and then allow the senate finance committee under the leadership of chairman baucus and the house ways and means committee under the leadership of dave camp to use the first few months of next year with their committees, they are the committees of jurisdiction, the finance committee here in the senate, the ways and means committee in the other body. they take the first 90 or 120 days, mr. president, to enact permanent tax reforms. i think that will be a huge boost for the american economy. i think it will change the behavior of american consumers and american business because that's what markets do. they react when positive and permanent changes are put in

place. this can be thoroughly bipartisan, mr. president. it was in 1986 when a whole host of white progressive democrats got together with ronald reagan, and i have had the pleasure over the last few years to work with two outstanding members on the other side of the aisle, former senator gregg and senator coats and senator begich of alaska, former small business person. this isn't like health care, mr. president. we have done it before. we have done it before. the reform proposals are very much built around the same sort of principles which were the fundamentals of tax reform in 1986, and while i know there is going to be considerable debate this weekend, about whether tax reform will be done, whether or not it's going to change anybody's behavior or change

anybody's behavior soon, i just wanted to weigh in and outline why looking at the principles of the market i believe it is going to change consumer behavior, change consumer and business behavior for the better, why there has been a lot of ground work laid that we can build on. there is an opportunity, mr. president, opportunity for democrats and republicans in this chamber to come together and take steps, steps that will end this antigrowth mess of a tax system and give our consumers and businesses the certainty and predictability they need to grow to come back into the american economy. mr. president, we'll talk some more about this on the floor of this great body in the days ahead. i just want the american people to know that this is an opportunity where if there is a

will to do permanent tax reform, there is a way to get it done. mr. president, with that, i yield the floor and i would note the absence of a quorum. the presiding officer: the clerk will call the roll. quorum call: r.

mr. reid: i ask unanimous consent the call of the quorum be terminated. the presiding officer: without objection. mr. reid: i now move to proceed to calendar number 166, h.r. 2832. the presiding officer: the motion is pending.

the clerk: motion to proceed to calendar number 166, h.r. 2832, an act to extend the generalized system of preferences and for other purposes. mr. reid: mr. president, i have a cloture motion at the desk. the presiding officer: the clerk will report the cloture motion. the clerk: we the undersigned senators in accordance with the provisions of rule 22 of the standing rules of the senate hereby move to bring to a close the debate on the motion to proceed to calendar number 166, h.r. 2832, an act to extend the generalized system of preferences, and for other purposes. signed by 17 senators, as follows -- mr. reid: i ask consent that the reading of the names be waived, mr. president. the presiding officer: without objection. mr. reid: mr. president, i ask that the quorum required under rule 22 be waived and that at 5:30 p.m. monday, september 19, the senate proceed to vote on the motion to invoke cloture on

this matter. the presiding officer: without objection. mr. reid: mr. president, first of all, i want everyone within the sound of my voice to understand that i do not like the colombia free trade agreement, the korea free trade agreement or the panama free trade agreement. i will vote against them. but i have been asked on numerous occasions to move these trade matters to the floor. and that's what i have agreed to do and i'm going to do that. but it is very difficult for me to understand when my republican colleagues who they, their chamber and commerce and others support these trade agreements, they want them done, and now they want to move to them. i can't. it's pretty hard for me to comprehend we have to file cloture on a motion to proceed to the agreement that we have, an agreement that we have if we're going to do the trade adjustment assistance and then

with a few other stops in the middle, we're going to do the free trade agreements. so i again say this is the pattern we have experienced for the last eight months. it doesn't matter what it is. something they agree with, we're moving to the free trade agreements. and they are stopping us from doing that. i hope the american people get the picture, and i'm confident they're getting it more clearly every day that goes by. the picture that there isn't a thing that we can bring up here that they don't stall to the very, very limit of the procedures here. so again, we're going to move to these free trade agreements, the first part of the deal of course is trade adjustment assistance and we have to invoke cloture to do this. i think that's a travesty and it's too bad. i ask unanimous consent that when the senate completes its business day it adjourn until 2:00 p.m. on monday, september 19, following the

prayer and pledge, the journal of proceedings be approved to date, the morning business be deemed expired, the time for threeders reserved for use later in the day. following the leader remarks the senate will be in morning business until 4:30 with senators permitted to speak up to 10 minutes. they the senate will resume consideration of h.r. 166,. the presiding officer: without objection. mr. reid: next roll call vote will be monday at 5:30. if there is no further business come before the senate i ask that we adjourn under the previous order. the presiding officer: the senate stands adjourned until monday, september 19 at monday, september 19 at

would mean that the soviet plan are looking at the united states could not be assured of the outcome of an assault on the first strike on us.

but he changed political history. he's one of the 14 men featured on c-span's new weekly series, the contenders. live from the blaine house in augusta maine tonight at 8 p.m. eastern. learn more about the series and upcoming programs at c-span.orgl thecontenders. postmaster general yesterdac proposed ending one day delivery of first-class mail at the agency considers closing have the facilities to maintain. comt this is about two hours and tenm minutes. our >> so mu nch of the nation's progress is interwoven with the history of the postal service. if you look at some old maps of america, you see that a lot of the roads that we use today started out as colonial post

roads. as our nation pushed west before the railroads were built, the post office created the pony express to keep america connected with its frontiers. and the post office subsidies for air mail in the early days of aviation helped jump-start the fledgling airline industry. through parts of four centuries now the postal system has actually helped make as a nation, connecting the eric and people to one another, moving commerce and culture coast-to-coast and to all points in between. postal service has also bound the individual towns and neighborhoods together with the local post office often serving as the center of civic life. over the years, the post office

has grown very large. today the united states postal service is the second-largest employer in the united states, second only to walmart. and with 32,000 post offices, it has more domestic retail outlets than walmart, starbucks, and mcdonald's to mind. sadly, these impressive statistics belie a troubled business on the verge of bankruptcy. business lost to the internet and more recently, of course, to america's economic troubles have led to a 22% drop in male handled by the postal service and a gross revenue decline of more than $10 billion over the past five years. this year the postal service is expected to have a deficit of approximately $8 billion, maybe

more for the second year in a row. the postal service will also soon bob up against its $50 billion credit line with the u.s. treasury, which could force it to default on a five and a half billion dollar payment into the health care fund for its retirees, which would normally be paid at the end of this month. the bottom line is that if nothing is done the postal service will run out of money and be forced to severely slash service and employees. that is the last thing our struggling economy and country needs right now. despite its shrinking business, the postal service still remains a powerful force in america's economy and american life. it's still delivers 563 million pieces of mail every day, even with the rise of e-commerce, most businesses don't send out

bills, and most families don't pay those bills, except through the u.s. postal service. while magazine deliveries are also down also because of competition with the internet and the recession, 90 percent of all periodicals, about 300 million paid subscriptions per year worth billions of dollars to the publishing and advertising industries and bringing about the employment of millions of people are still delivered by the postal service. only the post office will go that last mile to ensure delivery throughout the country to everyone's address, and even using the grand canyon and snowshoes in alaska. last year, just to show the diversity, and the american

people know this, last year the postal service process to over six and a half million passport applications. right now there is no other federal agency with the national presence that is ready or able to take on that task. now, why are we here today? before the homeland security and governmental affairs committee became the homeland security and governmental affairs committee it was the government affairs or government operations committee, and in that capacity it has long had jurisdiction over the united states postal service. that is why we are convening this hearing today. we are going to hear several proposals this afternoon about what can be done to create greater efficiency, close the postal service deficit and give it the flexibility and tools that it needs to survive and thrive in america's future.

postmasters general donato recently offered a plan that he believes would save $20 billion return the postal service to solvency by 2015, and that plan is the immediate impetus of this hearing, to both give him the opportunity to explain it, describe it, argue for it, and to give others the opportunity to comment on it and, indeed, to oppose it, which some will do. the proposal includes eliminating saturday delivery, closing approximately 3,700 post offices, shrinking the work force by as much as 220,000, pulling out of the federal employee health care plan to create a separate postal service employee health plan, doing away with the defined retirement plan for new employees and transitioning to a fund

contribution plan and asking that almost $7 billion in overpayments to the federal employee retirement system be returned to the postal service. these are self evidently been told, tough, and controversial proposals. as for myself, i don't feel i know enough about them yet to reach a conclusion. that is why i look forward to the testimony of the witnesses today, but i do know enough about the real crisis that the postal service is in to appreciate the postmaster's courage in making these proposals. i am also grateful that my fellow senators have been leaders on behalf of this committee in dealing with the postal service problems and,o indeed, were the architects of the postal reform bill that passed back a few years ago.

each of my colleagues, senator collins and carper, have now introduced legislation to deal with the current postal crisis. i am encouraged to learn that president obama wilson offer an administration plan to respond to the postal service's fiscal crisis. so, i have an open mind on the various proposals that have been made, but to me the bottom line is that we must act quickly to prevent a postal service collapse and enact a bold plan to secure its future. the united states postal service is not an 18th-century relic. it is a great 21st century national asset, but times are changing rapidly, and so, too, must the postal service if it is to survive. senator collins. >> thank you, mr. chairman.

first, mr. chairman, let me thank you for holding what is truly an urgent hearing to examine possible remedies for the postal service's dire and rapidly deteriorated financial condition. the drumbeat of news about the exhilarating lapses at the postal service underscores the need for fundamental changes. the postal service is seeking a far-reaching legislation to allow the service to establish its own health benefits program, administered its own retirement system, and lay off its employees. this is a remarkable turnabout from its previous proposals. i appreciate that the postal service has now come forth with

several big picture ideas, although many of the details remain unclear. as we search for remedies, we must keep in mind a critical fact, the postal service plays an essential role in our national economy. if the postal service were a private corporation, its revenue would rank just behind boeing and just ahead of home depot on the the fortune 500 list, but even that comparison worth the one used by the chairman understates the economic importance of the postal service. the postal service directly supports a 1.1 trillion dollar

mailing industry that employs approximately 8.7 million americans in fields diverse as direct mail, catalog, paper manufacturing, and financial services. many of these businesses can't return to readily available alternatives. they depend on a healthy, efficient postal service. but as vital as a stable postal service is to our economy, at its current financial status is abysmal. the most recent projections are that the postal service will lose some $9 billion this year. that is $700 million more than the deficit that the postal service was projecting just at the beginning of this year.

this hemorrhaging comes on top of eight and a half billion dollars in red ink last year, and 3.8 billion lost in 2009. unfortunately there is little cause to believe that an improvement in the overall economy will stop this slide. the fact is that americans are unlikely to abandon e-mail and text messaging and return to first class mail. the postal service's own projections now resume declining revenue all the way out to the year 2020. the losses in mail volume are even more dramatic. last year the postal service handled 78 billion pieces of first-class mail. that number is now projected to

fall to 39 billion pieces in 2020. this represents the 50% decline in first class mail volume over ten years. i want to give the new postmaster general great credit for coming forth with more creative proposals to stem this crisis. at times, however, the postal service response in the past has been inadequate and even counterproductive. some would cut directly into the revenue that the postal service so desperately needs while leaving customers with diminished and insufficient service. consider, for example, the debate over post office closing. now, let me make very clear, there are undoubtedly some post

offices in maine and elsewhere that can be consolidated or moved into a nearby retail stores. this simply is not an option for many rural or remote areas. in some communities closing the post office would lead customers without feasible alternatives and access to postal services. that would violate the universal service mandate that is that justification for the postal service's monopoly on the delivery of first-class mail. let me give you a couple of examples from my home state, maine. two islands, post offices, good examples. the tennant this is 20 miles off

the coast of maine. it receives mail five, rather than six, days a week and only in good weather. closing this post office or moving it into a large retail facility is simply not realistic for the residence of cliff island, closing their post office would mean more than a 2-hour round trip by ferry in order to send parcels or conduct all but the most simple of postal transactions. the fact is that maintaining all of our nation's rural post offices cost the postal service less than 1% of its total budget that is not where the problems lie. that does not mean that there should not be consolidation and, indeed, i believe that closing some post offices and moving

them into the local treasury store or pharmacy would work very well. similarly the postal service plan to move to a 5-day delivery is not without significant downside. it would harm many businesses and less the postal service can mitigate the impact. it would force industries ranging from home delivery medication companies to weekly newspapers to seriously consider other options. once these private firms leave the postal service behind, they won't be coming back. and the postal service will suffer yet another blow to its finances. the major solution to the financial crisis should be found in tackling more significant expenses that do not drive

customers away and lead to further reductions in volume. to actuarial studies have found that tens of billions of dollars have been made in overpayments by the postal service to the federal retirement plan. regrettably today the administration has blocked the bulk of this prep payment. i proposed last year a new, more gradual amortization for the postal service's annual payments to reduce the unfunded liability for retiree health benefits. to that, too, is no longer adequate. more than 80% of the postal service's expenses are work force related. the failure to rein in these

costs threatens not only the viability of the postal service, but also the livelihood's of the postal service workers themselves. the worst possible outcome for these workers would be for the postal service to be unable to meet its payroll. that is a very real possibility for next year if we cannot act together to achieve reform. in my a judgment the most recent contract agreement with the postal service's largest union by and large represents a missed opportunity to negotiate a contract that reflects the financial realities facing the postal service. the postal service has to preserve the value and the

service it provides to its customers while significantly cutting costs and streamlining its operations. and that is no easy task. senator carper and i have reached introduced our own bills to try to avert this crisis. i am the first to admit that worsening conditions clearly require far more significant reform. so, mr. chairman, thank you for calling this hearing. we do face an urgent task, and that is to save this icon of american society and this absolute pillar of america's economy. thank you. >> thanks very much, senator collins. senator carper, because you have been doing such an extraordinary

work on behalf of this committee i want to invite you to make a opening statement if you like at this time. >> did you very much. to our witnesses, thank you for joining yes. thank you for holding this hearing and allowing me to deliver an opening statement. appreciate it to you and senator collins for the attention that you and your staff has paid to this vitally important economic issue. for some time my subcommittee and i have been sounding the alarm about the dire financial situation facing the postal service. unfortunately while the number of bills have been fourth congress has been unable to up reach consensus on the kind of dramatic and likely painful reform that will be needed to avoid the looming showdown. in addition the proposals put forth by the administration today have been insufficient. just a few weeks after narrowly avoiding the first ever to fall by the federal the government if we may be a few weeks away from??? the first ever default of the?

postal service. that defaults, if permitted to? happen, would be lasting and? dangerous and would pave the way for postal insolvency by this time next year if not sooner. officer of manager and budget declined to testify to discuss the administration's plans for preventing the postal service from failing. it is my hope that the discussion we have will jump-start the process of developing a bipartisan, bicameral consensus around the reforms necessary to restructure the postal service's finances and transform operations to reflect the uncertain future that it faces. postmaster general donahoe will testify today that the postal service's finances continue to deteriorate. he is projecting a year and loss of some $10 billion. nearly 2 billion more than projected when our subcommittee last held a postal oversight hearing, i think, in may.

it will not be able to make the five and a half million dollar payment due on september 30th. come october it will have exhausted its line of credit with the treasury and we will have only enough cash on hand to get by. then under what is likely the best case scenario, cash will be completely exhausted by next summer and the postal service, absent any lifeline, will likely be forced to close its doors. if the postal service were to fail the impact on our economy would be dramatic. as postmaster general donahoe and others have pointed out time and time again the postal service operates at the center of an industry that employs? millions of people.? these people don't just work at? the postal service, magazines,? banks cannot printing companies, and businesses large and small across america. every state and congressional district. and they generate more than

$1 trillion in sales and revenue each year. given the challenging economy facing our country we cannot afford to put jobs, these jobs in that kind of productivity in jeopardy. in fact, it is our job to do what needs to be done to save this industry, even if it involves decisions that might be difficult politically. like it are not come in a number of ways i don't like it very much myself. the postal service needs to right size itself to reflect the decreasing demand for products and services offered. it's needs to shed employees, downsize its network up processing facilities to reflect there is less mail to process and technology has made getting it to it's destination easier to do. the postal service needs to be able to relocate or colocate some of the postal services that are provided in communities across america. putting forth a plan to eliminate 120,000 positions on top of the 100,000 that were

lost through attrition. they have begun studying some 300,000 post offices around the country. looking at 3,000 post offices for closure or card location with other businesses. expected to propose similarly dramatic changes to its processing network in the next week or so. we are rapidly reaching the point, however, at which the postal service no longer has the authority to do what it needs to do to get by which is why i have introduced legislation that aims to clean up the postal service's finances and help implement the ambitious plan it announced last spring. postal operation sustainability act aims to permanently address the various pension and retiree health related issues that have plagued the postal service for years. the postal service inspector general, postal regulatory commission, and to independent

actuaries, one of whom is represented here today, have come to the conclusion that they have overfunded obligation by some 50-$75 billion. in addition, numerous observers and the office of personnel management have pointed out the postal service has paid $7 billion more than it goes into the newer federal employees retirement system. my bill will give the postal service access to the funds that it has overpaid. they would be able to use them to make required retiree health refunding payments picking a parts of $5 billion off its books each year for the next several years. once they're satisfied, the fines this bill would free up could be used to pay workers' compensation obligation and a debt to the treasury. these reforms are in similar can be a vital part of any effort to improve the financial condition in both the short and long term. stopping these reforms and avoiding further and potentially

more difficult changes will simply not be enough. to anyone taking an honest look at the numbers, it should be clear that more will need to be done. that is why my bill takes important steps toward giving the postal service the flexibility that those of us in congress all say we want to give them. the new realities and operate more like a business. no business facing the kind of difficulty the postal service faces today would survive very long if it were told how many retail outlets they should have and where they should be located or if they were prevented from making operational changes are taking full advantage of the resources and expertise at its disposal. if that is what congress does to the postal service. my bill and to address these problems and take congress out of the day-to-day management, assuming the postal service can continue to build on recent cost-cutting efforts these changes could help set the service on more solid footing in the years to come. i don't just focus on

cost-cutting. also aiming to give the postal service new authority to leverage its nationwide retail logistics' transportation and delivery networks to attract new business. it gives the postal service more flexibility to work with existing customers to keep them in the mail and partner with state and local governments to find new potentially profitable resources. i mentioned at the beginning of my statement that there have been a number of bills introduced to address the postal service financial condition -- condition. my hope and prayer is that they will do it this time to good effect. another approach. parts of both i don't agree with, but also parts of support. overlapping the provisions in my own bill. we need to focus on the areas of agreement. from there, with input from the administration, a key stakeholders, prevent a default and insolvency and said the

postal service on the road toward stability and profitability. in conclusion, mr. chairman and senator collins, let me say this, the postal service is an enterprise, a business enterprise. it is an enterprise that has more people than it needs if it is to reduce its head count we need to let them. we have more post offices and we need. the key is not closing post offices but to provide better service to customers and communities across america by co locating services to drugstores and supermarkets and department stores and the like. finally, twice the number of processing centers and they need. they need to reduce the number of processing centers, and as they do those things we need to get out of the way. there is not a huge bailout that is needed, but to let the postal service act more like a business and come up with even more great

ideas like flat rate boxes and last mile delivery. if you do that and we do our job, i think the postal service will be here for a lot longer. thank you so much. >> thank you, senator carper. postmaster general donahoe, we will go to you first. i thank you for being here. it probably does not need to be said, but the fact is that you÷ have had some tough proposals. i think everybody listening÷t should know that you are not÷ some sort of executive that was brought in from outside to go through the post office. you spent your whole career in the postal service, beginning as a clerk 35 years ago in pittsburg. having had that experience, from my perspective, you remained remarkably youthful. whether i can say that at the end of the next year or so remains to be seen.

thank you for being here. >> mr. chairman and members of the committee, good afternoon and thank you for scheduling this hearing. i appreciate the opportunity to testify about the financial state of the postal service and about the proposals to improve its business model. america depends on a financially strong postal service. the postal service provides a vital national delivery platform that is part of the bedrock infrastructure of the american economy. it supports a $1 trillion mailing industry that employs over 8 million people. every american residents and business depends on regular, secure, and available delivery of mail and packages. this will always be so, even in an increasingly digital age. nevertheless, the postal service is at the brink of default. without the enactment of comprehensive legislation by september 30th the postal service will default on a

mandated five and a half billion dollar payment to the treasury to pre fund retiree health benefits. our situation is urgent. the congressional action is needed immediately. mr. chairman, the postal service requires radical changes to its business model if it is to remain viable into the future. the postal service is in a crisis because it operates with a restricted business model. a self financing entity that depends on the sale of postage for revenue. requiring the ability to operate more as a business does. this applies to the way it provides products and services, allocating resources, configuring retail, delivery, and mail processing networks and the way it manages its workforce. unfortunately the postal service today has a limited flexibility to respond to the changing marketplace. since 2008 the combination of weak economic conditions and

divergence to electronic forms of communication have resulted in unprecedented declines in the use of first-class mail and the weakness in the use of standard mail. in response we reduced our annual cost by more than $12 billion our work force by 110,000 fewer employees in just the last four years. as impressive as these have been, we must accelerate the pace of cost reduction over the next few years. based on current revenue estimates the postal service must reduced its annual costs by 12 -- $20 billion by the year 2015 to become profitable and to return to financial stability. mr. chairman, we do not have the flexibility in our business model to achieve these cost reductions. to do so requires the enactment of a comprehensive long-term legislation to provide us with needed flexibility. short-term stopgap measures will

not help. our long-term revenue picture dictates developing a long-term comprehensive approach to help the postal service and mailing industry that we served. the postal service has made a number of policy proposals that merit consideration including giving the postal service the authority to determine its delivery frequency and transition to a national five day a week delivery schedule. the postal service needs to restructure its health care system and make it independent of federal programs and eliminate the mandatory annual five and a half billion dollar retiree health benefit payment with this action. we need to accelerate work force reduction by as many as 220,000 employees and are asking congress to consider the reductions -- be governed under the reduction provisions applicable to the federal

employees. be are also seeking the authority to provide a defined contribution plan for new hires, rather than today's defined benefit plan. we are seeking the return of $69 billion in federal overpayments. we are also seeking to streamline postal governance models. we have advanced these and other proposals to provide the congress with a range of legislative options and are also aggressively doing things that we can do within our own business model. by 2015 we intend to capture more than $11 billion in additional cost reductions by optimizing our delivery network, retail network, reducing mail processing footprint by more than 300 facilities, and by taking advantage of negotiated workforce flexibility. these are aggressive and necessary steps.

america deserves a financially strong and independent postal service that can meet the evolving needs for generations to come. we require the flexibility to operate more as a private sector business would. this would enable the postal service to return to profitability and sound financial footing. this would also enable the postal service to properly fulfill its mission since the 70's, which is to operate on a profit test launch basis independent of taxpayer support. let me conclude by announcing the commitment and dedication of our employees during difficult times, even as we consolidate facilities and made substantial work force reductions. they have delivered at record high service performance levels. mr. chairman, thank you for giving us the opportunity to testify today and i look forward to answering any questions you might have. >> thank you for your testimony. we will go to the hon. john

berry, director of the u.s. office of personnel management directly to testify as to the subject matter as it relates to opm. he is able to speak on behalf of the administration as well. >> thank you, mr. chairman, for the opportunity to testify regarding the financial challenges facing the united states postal service. i have met with the postmaster general several times recently, and the administration is committed to exploring ways that can be helpful to the postal service. both the president and i know of the critical importance to our nation's economy that the postal service provides, and we are grateful to the men and women of the postal service for the important work they do for our country. the president's fiscal year 2012 budget proposed ways to provide postal service financial relief, but since those proposals were offered the financial situation of the postal service has deteriorated further. in response to this situation

the administration plans to release a proposal in the few coming weeks that will ensure a sustainable future for the postal service. this proposal will be included as part of the broader one in a half trillion dollar deficit reduction package that the president has promised to submit to the congress. in the interim the administration supports delaying for 90 days the postal service's five and a half billion dollar refunding retirement health payment that is due on september september 30th. this would allow the congress, postal service, and administration the time to carefully worked through the details of a proposal. we believe that the postal service and its employees and retirees are well served by the existing health benefits program and the retirement system. the postal service proposes reducing costs by discontinuing participation in federal health and retirement benefits this is

a complex proposal that will require further study and analysis . as such the administration does not have of formal position on this proposal at this time. opm expects that a withdrawal of the postal population would not have a significant impact on the federal employee health benefit program as a whole. in addition, the overall cost of the program would be minimal and would not impact the integrity. however, it would have a significant impact on health plans with a large postal population or such as rural letter carriers with the american postal workers union plans. if these plans chose not to participate in the fehbp in the longer it could have a

significant impact on the number of choices that are available to our enrollees and overall competition in the program. the postal service's proposal to withdraw its employees from c.s. irs would pose very significant challenges because postal and not postal service are integrated in the same retirement system. as such many employees have a credible and door fers service both in postal and not postal employment, and the federal government will have a legal obligation to pay those benefits. any proposal to remove the post a population from federal employment health and retirement systems would be complex and more analysis is required. as i mentioned earlier, the president's budget proposes improving the postal service's financial condition by approximately 5 billion in bh