SENATE-Monday, October 19, 1981 - US Government ...

October 19, 1981 CONGRESSIONAL RECORD-SENATE

SENATE-Monday, October 19, 1981 24329

<Legislative day of Wednesday, October 14, 1981)

The Senate met at 12 noon, on the expiration of the recess, and was called to order by the Honorable WILLIAM S. COHEN, a Senator from the State of Maine.

PRAYER

The Chaplain, the Reverend Richard C. Halverson, LL.D., D.D., offered the following prayer:

Let us pray. Holy, Holy, Holy. Lord God Almighty.

Heaven and Earth are full of Thee, Heaven and Earth are praising Thee, O Lord, most high.

Almighty God, in whom is all righteousness, Thy word declares:

Righteousness exalts a nation but sin is a reproach to any peopZe.-Proverbs 14: 34.

History confirms that empires disintegrate in unrighteousness. We need a rebirth of righteousness, but we cannot expect it of the people if it is not true of public servants whom they elect to leadership. Let righteousness begin with us.

Enable us to turn from every thought and word and deed that violates righteousness. Help us to desire holiness and eschew evil. Help us to manifest righteousness in our private lives, our family lives, and our public lives.

Let integrity be the hallmark of our characters, individually and corporately. In the name of the Son of righteousness, we pray. Amen.

APPOINTMENT OF ACTING PRESIDENT PRO TEMPORE

The PRESIDING OFFICER. The clerk will please read a communication to the Senate from the President pro tempore (Mr. THURMOND).

The assistant legislative clerk read the fallowing letter: ·

U.S. SENATE, PRESID'ENT PRO TEMPORE,

Washington, D.C., October 19, 1981. To the Senate:

Under the provisions of rule I, section 3, of the Standing Rules of the Senate, I hereby app:>int the Honorable WILLIAM s. COHEN, a Senator from the State of Maine, to perform the duties of the Chair.

STROM THURMOND, President pro tempore.

Mr. COHEN thereupon assumed the chair as Acting President pro tempore.

RECOGNITION OF THE MAJORITY LEADER

The ACTING PRESIDENT pro tempore. Under the previous order, the majority leader is recognized.

Mr. BAKER. I thank the Chair.

THE JOURNAL Mr. BAKER. Mr. President, I ask

unanimous consent that the Journal of

the proceedings of the Senate be approved to date.

The ACTING PRESIDENT pro tempore. Without objection, it is so ordered.

RESCHEDULING OF ORDERS FOR RECOGNITION OF SENATORS

Mr. BAKER. Mr. President, I am advised that there is a desire to rearrange the sequence and order for the presentation of speeches on special orders in the following way: first, Senator McCLURE, then Senator JACKSON, Senator STEVENS, Senator MURKOWSKI, and Senator BAKER. I ask unanimous consent that the order for special orders be amended in that manner.


ORDER OF PROCEDURE Mr. BAKER. Mr. President, is there

an order for the transaction of routine morning business today?

The ACTING PRESIDENT pro tempore. There is an order for 30 minutes of morning business.

Mr. BAKER. To follow after the expiration of the time allocated for special order speeches?

The ACTING PRESIDENT pro tempore. That is correct.

Mr. BAKER. Mr. President, is there a further order for today for the resumption of the consideration of H.R. 4612, the dairy price support bill, following the period for the transaction of routine morning business?

The ACTING PRESIDENT pro tempore. The Senate will resume the motion to proceed when the Senator from Wisconsin is recognized.

Mr. BAKER. I thank the Chair. That is correct.

The debate, then, will be on the motion to proceed. The Senator from Wisconsin <Mr. PROXMIRE), under the order previously entered, will be recognized; and his recognition will be a resumption of his previous statement and will not be counted as a second speech under the rules. Is that correct?

The ACTING PRESIDENT pro tempore. That is correct.

Mr. BAKER. I thank the Chair. Mr. President, I have no further need

for my time under the standing order, and I am prepared to yield it to any Senator or to the control of the minority leader.

LEGISLATIVE PROGRAM Mr. ROBERT C. BYRD. Mr. President,

I thank the di5t1nguished ma·ior;ty leader. I wonder if he would outline for all of us the program for the week and indicate, as best he can, what we might expect in the way of votes throughout tho week.

Mr. BAKER. I thank the minority leader. I will be pleased to do that.

Mr. President, as we know, by virtue of the unanimous-consent order entered on Friday, after the transaction of routine morning business today, the Senate will resume debate on the motion to proceed to the consideration of the dairy price support bill. I expect that will consume most of this day.

I might say, by the way, that I hopeand I have some preliminary indications that the hope is not entirely in vainthat some method might be found to resolve that conflict and perhaps proceed to the consideration of the measure at hand and even dispose of it today. If there is such a possibility, I offer my efforts and assistance to the participants and principals, to try to bring that about, because this is a measure that should be dealt with if :i.t all possible.

There are ot.her matters on the calendar that may be dealt with by unanimous consent, and I will confer during the day with the minority leader on those matters.

There may !le other matters that can be disposed of with minimum debate.

I do not expect the Senate to be in late today, certainly not past the regular hour of 6 p.m. for adjournment or recess, absent other requirements and extraordinary circumstances.

Tomorrow, it fo the intention of the leadership to ask the Senate to proceed to consideration of the foreign assistance bill once more. I hope that bill can be completed on ·ruesday. If it cannot, then we will tontinue the consideration of the foreign assishnce bill on Wednesday.

There is a possibility that we will reach one of the appropriations bills on the calendar on Thursday or Friday of this week.

Mr. President, I hope to have a further announcement to make after 2 p.m. today with respect to the possibility of a unanimous-consent order for the scheduling of a vote on the resolution of disapproval of the proposed sale of AW ACS aircraft and F·-15 equipment to the Kingdom of Saudi Arabia. Due to the festivities in Yorktown, Va., today, it is not possible for me to have :final clearance on that t.ime, but I expect no difticulty with it. If things go as I expect, I will off er a unanimous-consent request for a time certajn for debate and disposition of the resoiution of disapproval on A WACS as a package. I expect that will be on the 28th Clf October.

As I said earlier, I expect that to be done in 1 day, since the statute provides a maximum of 10 hours of debate. A unanimous-consent request in that respect has been circulated on both sides of the aisle, I believe; and sometime in midafternoon I hope to be able to present that request to the Senate.

Mr. President, I know that the minority leader is concerned, as he should be, and as I am, about the progress of ap-

•This "bullet" symbol identifies statements or insertions which are not spoken by the Member on the floor.

24330 CONGRESSIONAL RECORD- SENATE October 19, 1981 propriations bills. I hope we will be able to begin on that series sometime this week. I will consult and confer w.ith him and with the chairman and ranking minority member of the Appropriations Committee as the opportunity presents itself today, to see how we can expedite those proceedings and move as rapidly as circumstances and time permits.

Mr. ROBERT C. BYRD. Mr. President, I thank the distinguished majority leader for his outline of the program. He has indicated that it is expected that one of the appropriation bills on the calendar would be called up this Thursday. Is he in a position to state whether that would likely be the Interior appropriations bill?

Mr. BAKER. Mr. President, I will have a meeting with the chairman of the Appropriations Committee later today. After that meeting, I will have a further report to make.

Mr. ROBERT c. BYRD. I thank the majority leader.

Mr. BAKER. Would the minority leader like me to yield the remainder of my time to him?

Mr. ROBERT C. BYRD. I thank him.

RECOGNITION OF THE MINORITY LEADER

The ACTING PRESIDENT pro tempore. Under the previous order, the Democratic leader is recognized.

THE UNITED STATES SENATE

THE "ERA OF GOOD FEELINGS": 1817-1824

Mt. ROBERT C. BYRD. Mr. President, today, continuing my discussions on the history of the Senate, I would like to examine the period from 1817 to 1824 which encompassed the two administra~ tions of James Monroe and the Fifteenth and Eighteenth Congresses.

In the fall of 1816, a caucus of Senate and House Republicans picked, as its presidential candidate, Secretary of State and former Virginia Senator James Monroe to succeed James Madison.

Grudgingly acknowledging that the party of John Adams and Alexander Hamilton had run its course, the Federalists made no serious attempt to organize a campaign. Their candidate was that party's long-time standard bearer, Senator Rufus King of New York. King was the only sena.tor left in Congress who had been a framer of the Constitution, and he was respected even by his enemies. But he su1Iered under no illusions. King knew that he would not become president. Monroe, by an electoral vote of 183 to 34, would be the first senator and fourth Virginian to hold the omce. Not that Monroe was a magnetic figure; on the contrary, he appeared amiable but colorless. As King later noted of his opponent, "He had the zealous support of nobody, and

Footnotes at end of article.

he was exempt from the hostility of everybody." 1

Rufus King was the last Federalist presidential candidate. His half-hearted campaign marked the end of an era. Federalism would survive only locally and in the careers of a few men like King, who remained its most eloquent spokesman in the Senate for nine more years. Thenceforth, as King knew, Federalists would have to be content with supporting "the least wicked section of the Republicans." 2

Shortly after his inauguration, Monroe made a goodwill tour through New England, offering reconciliation. Afterwards, the Federalist Boston Columbian Centinel reported:

During the late Presidential Jubilee many persons have met at festive boards, in pleasant converse, whom party politics had long severed. We recur with plea.sure to all the circumstances which attended the demonstration of good feellngs.3

The article was entitled "Era of Good Feelings." While the editors probably did not intend to speak for more than Boston, the phrase grew in popularity until it became synonymous with the administrations of James Monroe. Feelings of one kind or another indeed ran high during this era, but beneath the happv sur .. face, they were invar~ably not good.

In Congress, the era of Good Feelings got off to an unfriendly start. The House and Senate continued to meet in the Brick Capitol while repairs were being made to the Capitol. The Senate met on the first floor and the House on the second. When it came time to make preparations for the inauguration of Monroe, an irresolvable quarrel over whose chamber should be used broke out between the representatives and senators. Finally, as inauguration day drew near, a wooden platform was erected outside the hall. Fortunately, the day was mild when Monroe delivered his inaugural address to a crowd of eight thousand.

No sooner had the Fllft.eenth Oongress gotten underway when the troublesome question of compensation for members came up again. As I mentioned in my last talk on the Senate from 1809 to 1816, during the Fourteenth Congress the Senate and House had voted themc;elves an annual salary of $1,500, about a 300 percent increase over the $6 per diem for days Congress was, in seRsion they had received up until then. The furor that erupted across the Nation over what many considered exorbltant remuneration had led to the defeat of several senators and representatives the previous autumn. Chastened and fearful for their own seats should the people's anger not abate over the next 2 years, the congressmen decided to try to rectify the situation.

During January, 1818, the Senate and House tried to decide on a just compensation. Manv supported returning to a per diem salary, but with a per diem of $10 rather than $6. Though this would have meant a considerable reduction in pay from the $1,500 annual sum, many

constituents were not appeased. One indignant reader of the popular Niles' Weekly Register of Baltimore took that journal to task for supporting the $10 figure.

Can you seriously contend for ten dollars per diem to the members of Congress, as a reasonable compensation I It would appear from your remarks, that you think this necessary to induce a man of talents to attend, and enable him to live at "Washington as a . ,~ a. , .'I. 1. 1 W l1M a 1.::i scina, ~ ing epi the,t ! Is it not to be feared, that the efforts making to enable our members to live like gentlemen, will, in the end, destroy the morals, and ruin the republican institutions of our happy ' · ' " " . 'L 'n doLm·,.; pe'l' day may be necessary to support a gambler, or a prodigal, but neither of them are even conterminous to a. gentleman.

The letter-writer angrily went on: . .. in many parts of the United States

six dollars a day was sufficient to produce great competitions for seats in Congress .... at the old allowance we shall never be at a loss to find members, and such as are best qualified to serve us. Your high minded, dashing, loquacious men are by no means the safest and surest representatives of a republican people.'

Efforts to gain a $10 per diem · were defeated and the bill which the House passed on to the Senate provided for an $8 daily fee. Senators James Wilson and Mahlon Dickerson, both of New Jersey, sought to lower it still further to the old $6 rate, but they were defeated. Finallv, on January 13, 1818, the Senate voted to return to the per diem system at a rate of $8 per day. So hot an issue was congressional pay that the rate remained unchanged for almost f arty years! From 1818 until 1855, regardless of inflation and depression, boom and bust, senators and representatives received $8 each day Congress was in session.5

After his inauguration, Monroe and the House and Senate settled down to business. The confrontation between the president and Congress, with regard to their respective authority in the area of internal improvements, was instantly renewed. In his first annual address to Congress, Monroe made it clear that, while roads and canals were necessary, he agreed with his predecessor that Congress had no right to appropriate public money for such things. To enable Congress to do so, he believed, would require an amendment to the Constitution. That was a long and tedious process.

When it became bogged down in detail: the whole matter was dropped, but only temporarily. Monroe became preoccupied with foreign affairs, but the growing number of senators and representatives from the new western states would soon be heard from again.

Monroe's Secretary of State, John Quincy Adams, was trying to negotiate with Spain for the peaceful cession of Florida to the United States. Negotiations were proceeding nicely when extremely unsettling news began to reach Washington about the exploits of Andrew Jackson, the gangling young man from Tennessee who had served an undistinguished two-year term in the Senate two decades earlier. Jackson had

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24331 made quite a name for himself in the intervening years. He had captured the nation's imagination and risen to fame as the supreme military hero of the War of 1812, the victor of the Battle of New Orleans.

In 1817, however, Jackson's excessive zeal as commander of the Southern Division was bringing the United States to the brink of war with Spain. He had been sent south to punish the Seminole Indians who had been marauding in Georgia. He had orders to pursue them into Spanish territory if necessary to break up their bands. The overly-enthusiastic general sent a secret letter to Monroe, offering to reduce the whole of Florida in sixty days if the president wished. Monroe, who was sick in bed, never read the letter. Taking silence for consent, Jackson proceeded to make good his offer. In the midst of its negotiations with Spain, the State Department was horrified to learn that Jackson was busily capturing town after town in the very territory for which the government was negotiating. Before Jackson could be stopped, he had s·eized the Fort of St. Mark's, hanged two Indian leaders, court-marshalled and hanged two British adventurers, bombarded the fort at Barrances, and taken the city of Pensacola.8

Not surprisingly, Spain, the President, the Secretary of State, and the Congress were furious. Monroe's chagrined report to Congress on Jackson's exploits was referred to agitated House and Senate committees. If Monroe, despite his protests to the contrary, had actually authorized Jackson's expedition, he had grossly usurped Congress' power. And, if Jackson had not been so authorized, then he had wronged Congress. The final House report on the issue, however, vindicated the general. In the Senate, the report condemned Jackson.7

The announcement of the unexpected success of Secretary of State Adams' diplomacy made the whole matter a dead issue. Adams had negotiated a treaty with Spain which transferred Florida to the United States in return for the relinquishment of a dubious American claim to Texas. The treaty was unanimously approved by the Senate.8 The year before, the government had signed an agreement with England establishing the forty-ninth parallel as the boundary between the United States and Canada, and sanctioning the joint occupation of the Oregon country. The nation was expanding rapidly. And it was this expansion that precipitated the most bitterly fought crisis of the decade.

Since the War of 1812, four new states had joined the Union: Indiana in 1816. Mississippi in 1817, Illinois in 1818, and Alabama in 1819. The country to the east of the Mississippi River was filling up. Towns replaced forests in the North. and cotton fields were spreading out across the flatlands of the South. Men were moving beyond the Mississippi. Daniel Boone had been one of the first when he moved west in 1798 to escape civilized


Kentucky, but now a host of hardy pioneers followed. Hitherto, by an unspoken agreement in Congress, northern and southern states had been admitted in pairs as was the case with Indiana and Mississippi, as well as Illinois and Alabama. By 1819, all the land east of the Mississippi River, with the exception of the Michigan Territory, was divided by the Potomac and Ohio Rivers into two equal groups of eleven slave and free states.

Which would be the first trans-Mississippi state to seek admission to the Union? Would it be slave or free? The answer to the first question came swiftly. Late in December 1818, Missouri made its bid for statehood. But the process of arriving at an answer to the second question would violently split apart the Senate, the House, and the nation, and leave a wound that refused to heal.

The enabling act for statehood was drawn up in the House and mentioned nothing about slavery. The issue was not raised until February 13, 1819, when Representative James Tallmadge of New York arose and offered amendments prohibiting the further introduction of slaves into Missouri and emancipating, at age 25, all slaves thereafter born in the state. Tallmadge's specific motives in offering his explosive amendment remain unknown, but its effect was immediate. The battle over slavery had begun. Though he would not live to see his grisly prophecy come true, Representative Thomas Cobb of Georgia was correct when he shouted at Tallm'ldge, "You have kindled a fire which all the wa.ters ofthi:- ocean ca.nnl)t p11t. 011t. which seas of blood can only extinguish." 0

Tallmadge's amendments made sense to anti-slavery northerners. The Northwest Ordinance banned slavery in any state created from the territory north of the Ohio River. Missouri, however, had been settled mainly by southerners, many of whom had brought thP.!r slavec:; with them. The slave holders argued that it was unconstitutional for Congress to place restrictions on the citizens of a state as a condition of admittance. The anti-slavery forces, howP-ver. had the votes in the House. The Tallmadge amendments were adopted by a strictly sectional vote on February 16, 1819, and the amended enabling bill was sP-nt. to the Sen.ate. In the Senate, the southerners had the votes and, on FP-brui:i.rv ?.7. by votec:; of' 31 t.o 7 and 22 to 16. they struck out the amendmentc:; and returriert the bill to the House in its orig\nal form.10

At that point, the Fifteenth Congress had only two days remaining. The House restored the anti-slavery amendments, and the bill returned to the Senate. Again. the Senate struck thf>m out a!ld sent the bill back to the House. The House refused to concur in the Senate's action; the Senate remained obdurate. And so, on March 4, 1819, at the close of the Fifteenth Congress, the Missouri Enabling BUI died.

While the Enabling Bill h-ad been set aside, the awful paradox that slavery could have a legal existence in a land

of free men was now fully open to inspect10n. In northern cities, citizens decleared themselves astonished and horrified at the thought that the institution of slavery could travel westward across the Mississippi, though it had been doing so for many years. Southern pamphleteers were equally outraged at the suggestion that slavery could be prevented from ranging over the whole Louisiana Purchase.

During the framing of the Constitution. the Burr conspiracy, and the War of 1812, the tinder in the ano~aly of slavery in a democratic repubhc had threatened to burst into flame. Now that it had flared up into the open, Americans were forced to ask themselves not whether the fire could be extinguished, but whether the fire could be banked.

As historian George Dangerfield notes in his informative book, The Era of Good Fee1in9s. the T::tllmadge amendments and the series of town meetings, pamphlets editorials, and debates they excited, 'summoned the South into being. Prior to the Tallmadge amendments:

"those who dwelt south of the Ma.sonDixon llne might have been said to ha.ve, perhaps, a kind of cllma.tic fellowship. They had the sJ. rne lonz "' °'t s-11mmer.:>, the violent storms and unpredictable droughts; their winters were always severe, their up-country rivers froze solid from bank to bank .. · Svct>. w~arn .. :· :-'1 1i:: : d their r,~illnas and pr-ollferated their piazzas and balconies; encouraged the growing of staple crops, even while the rains a.nd heat defertlllzed the soil; a.nd it slow~d down the pace of their llfe. But no generalization could absorb their d ifferences at lea.st, no generalization based upon climate. Tbe southern states were a. patchwork of polltlcal a.nd social distinctions; dis·•inct.ions between the old South and new Southwest, between small farmers and planters, between merchants and manufacturers. Va.Hey warred with mountain, country with town, the Atlantic with the Gulf ... Everywhere there were contradicUons a.nd incompatlbllltles ... And yet all were loosely bound togethert.he Cree>le ari;;+or,ra,t of New Orleans, the liberal nationallst of South Carollna, the parvenu cotton-planter of Georgia, the hemp grower of Kentucky, the tobacco magnate of Vir~inia-all were bo1md t.o~<:?ther by the instituUon of slavery The Tallmadge Amendment, like a. nowerful spell, conjured this loo£ie bondage into a. tightness and coherence it was never a.fterward3 to lose." 11

Everyone knew that when Congress reconvened, the fie:ht over 1':1issouri would be renewed. But by the tune the Sixteenth Congress met on Monday, December 6, 1819, compromise seemed possible. With the consent of Massachusetts, of which it was then a part, the state of Maine had been organized, and in the fall of 1819, it appUed for admission to the Union. This offered an opportunity to revert to the old system of admitting free and slave states in pairs. The fire was further stni<:ed , however, when another move was made, this time in the Senate by Jonathan Roberts of Pennsylvania, to forbid the importation of slaves into Missouri.

The Senate debate that followed raged for three weeks. It took place back in familiar territory. The Capitol, its scar-

24332 CONGRESSIONAL RECORD- SENATE October 19, 1981

red freestone gleaming with fresh white paint, wa.s habitable for the .fir3t time since the British had put it to the torch in 1814. The new galleries overflowed with spectators. Vice Pre·;ident Daniel Tompkins graciously permitted several ladie3 onto the Sena-i;e floor. Indignant House members, visiting the chamber, found the ladies' voluminous skirts billowing over the sofas and chairs usually reserved for them.

The Seniate debates on the Missouri question began on January 13, 1820. The air was charged with acrimonious electricity. Senator James Barbour of Virginia announced that the subject under discussion was an ignited spark, which would produce an explosion that would shake the Union to its center. Senator Harrison Gray Otis of MasS'achusetts pointedly replied that the pine fores ts of Maine, if set a.fire, would bum with as fierce a fiame as the grasslands of Missouri. These innuendos, followed by certain remarks regarding the duoious behavior of New Englanders during the War of 1812, were hardly calculated to restore harmony to the chamber. When Pennsylvania's Jonathan Roberts invoked the Declaration of Independence and urged his fellow senators not to admit Missouri "with her features marred as if the finger of Lucifer had been drawn across them," any chance of peaceful discussion seemed to have vanished forever.12

At first, the Southern forces were led by William Pinkney of Maryland, who, wearing elegant ruffled sleeves and tinted gloves, was the picture of leisure class ease. Rufus King, then sixty-five, led the Northern fight for Roberts' amendments. Debate initially focused on constitutional issues. He·re the Southern senators were on stable ground. They seemed unusually adept at interpreting the Constitution and could do so in a dignified way. When Northerners began to argue that slavery was morally wrong, however, the Southerners were thrown off guard. Their attempts to refute this charge led them into sinister extravagances.

The new twist in Southern logic could first be detected in late January. Senator Nathaniel Macon of North Carolina was its chief spokesman. Macon praised Southern gentility and gradually began to paint a picture of bucolic plantation life. Macon lauded the South and its institutions and told his colleagues, "I wish that he <Senator James Burrill of Rhode Island, an anti-slavery senator) and the gentleman from Pennsylvania <Senator Roberts) would go home with me, or with some other Southern member, and witness the meeting between the slaves and the owner, and see the glad faces and the hearty shaking of hands." Macon declared that, "The old ones <slaves) are better taken care of than any poor in the world, and treated with decent respect by all their white acquaintances." He argued that "the owner can make more free in conversation with his slave, and be more easy in his company, than the rich man,


where there is no slave, with the white hireling who drives his carriage." 13

Here were the beginn~ngs of a systematic defense of slavery, not as a necessary evil, but as a positive good. Macon ·s new theme was elaborately embroidered by other Southern senators. On January 26, Senator William Smlth of South Carolina made a speech that was characterized by a horrified Senator Benjamin Ruggles of Ohio as "going farther than he had ever heard any gentleman go before." 14 Smith was a strict Jeffersonian, with a bitter and sarcastic tongue. H;s speech is a landmark in the history of the Senate because it was the first open and impassioned justification of slavery ever made in the chamber. In his long harangue, f.'mith set out to prove that slavery was a system blessed by the Lord. "This." said Smith referring to slavery, "was the law given by the God of Abraham, the God of Isaac, and the God of Jacob ... Christ himse1f gave his sanct.'.on to slavery." 1 ~· No 01~her senator.;; h;id ever gone so far. But now there would be no turning back.16

In February 1820, Rufus King replied to Smith in two sneeches that were masterful but devoid of the .fierv rhetorjc the spectators in the galleries loved. Some Southern senators understood Ki.ng to have said that he felt himself degraded at having to sit in the same chamber with men who owned slaves, and they hated him for it. What King had really said was that he felt inferior because "the citizens of the states where slavery prevails possess a greater portion of political power, then the citizens of states in which slavery is excludert," and that he did not wish to increase the humiliation by extending slavery.17

K!ng's actual words hit as sPnsitive a nerve as his nerceived words. What was at stake in the Missouri question was more than slavery. It was a question of rolitical power. The Senate stood evenly balanced, eleven Northern states and eleven Southern states. If both MaJne and Missouri were admitted as free states. the f'outh and its "peculiar instituti-on" would surely be overrowered. From the South's perspective, it was a fight for survival. Missouri must be a siave state.

The Southerners in the Senate were better organized. more learned, and more supple in debate than their Northern co1.league.r;. Eve!'.l. RnJus King ha'> to ~onfess that the Northern senators "fight Militia a,gaimt R,~gular.s." is On. February 17, the Thomas Amendment passed the Senate by a vote of 34 to 10 and, with an enormous siv.h of relief. the proposed compromise was sent off to the House.1~

The press had b~gun to call the deHbera tions on the Missouri questlon "the Misery Debate." After a week of bitter day and night sessions in the House, a conference committee worked out a twopart compromise that included the Thomas Amendment and admitted Missouri as l't slave state and Ma;ne as a free state. The measure passed both houses and received President Monroe's signature on March 3, 1820.

With the passing of the Missouri Compromise, manv naively thought that the slavery question was settled forever. In fact, it remained settled only until the next session of Congress, when Missouri presented its new state constitution to the House and Senate for approval. The delegates to Missouri's constitutional convention had copied the constitution of the state of Kentucky almost verbatim. Almo-. t. but no~ 0nlte. There were two clauses unique to the Missouri constitution that outraged anti-slavery congressmen. One forbade the state legislature from interfering with slavery in any manner, and the other prevented "free negroes and mulattoes from coming to and settling in this state, under any pretext whatsoever." In view of the fact that there were several states in which blacks were free men and citizens, the latter clause seemed a gross violation of the federal Constitution's guarantee that "the citizens of each State shall be entitled to all the privileges and immunities of citizens of the several states."

The Senate avo!ded the difficult issues posed by the Missouri constitution by adding only one proviso and passing it on to the Hou:~e . The pro·viso, offered by Senator John Eaton of Tennessee, stated, "That nothing herejn contained shall be so construed as to give the assent of Congress to any provision in the Constitution of Missouri, if any such there be, whi-ch contravenes that clause in the Constitution of thr. United States which declares that 'the citizens of each State shall be entitled to all privileges and immunities of citizens of the several States.'" :!O

Eaton's proviso was intentionally toothless. Basically, it allowed Congress to admit a state to the Union and at the same time withhold its assent from that state's constitution. It adroitly avoided the crucial question : Could the people of Missouri prohibit th9 citizens of another state-for example, Massachusetts! rom crossing their borders? 21

In the House, a Southern motion to accept th~ Missouri constitution was defeated, 79 to 93, on De.-cember 13, 1820, touching off six weeks of wild and angry debate.22

The Missouri question was still unsettled in February 1821, and it threw into pandemonium efforts to count the electorial ballots. During the fall of 1820, almost incidentally, a presidential elect~on had been held. Monroe, who had managed to stay out of the Missouri controversy, was the only serious candidate. Monroe received t.he vote of every elector in the nation except that of former Senator William Plumer of New Hampshire, w~10 though1~ that George Wac;h:ngton should be the on~.y president honored by 2. unanimous election, and, thus, cast his vote for John Quincy Adams.23

On February 14, 1821, in the midst of the Missouri debates, the Senate proceeded to the House chamber for the formal counting of the electoral votes. All went quietly until the vote of Missouri, the statehood of which was still being contested. It was instantly challenged. Half a dozen representatives leaped to their feet; others joined in; soon the

October 19, 1981 CONGRESSIONAL RECORD- SENA TE 24333

whole House was in an uproar. Amid the hubbub, a Senator was heard calling out that the Senate ought to withdraw. Vice President Tompkins quickly put the barely audible motion, declared it carried, and led the retreat of the Senate from the disgraceful scene. Later in the afternoon, after the candles in the chamber had been lit and the tumult had finally died down, the Senators returned. As soon as the Vice President started to announce the electoral result, a shouting match broke out again. The Speaker managed to keep order long enough for the Vice President to make the announcement of Monroe's victory in tho prescribed form, after which the Senate again hastily withdrew.24

With two weeks left in the Sixteenth Congress to settle the Missouri question, Henry Clay, who had recently stepped down as Speaker, put together a special joint Senate and House committee of twenty-three members to try to work out a compromise. The committee reported out a recommendation almost identical to Eaton's earlier proviso. Missouri would be admitted under an obligation to respect "the right and privileges of all citizens of the United States." Most realized that this clause was not likely to be enforced to pro~ect a sin,,.le free b~ack who should venture over Missouri's borders, but the recommendation was accepted nonetheless.

Missouri, with its offensive constitution had at last become a state. The nation breathed .easier, once again believing that the issue of slaverv had been put to rest for good. The aged Thomas Jefferson, home at Monticello, saw the Compromise for what it truly was, "a ft.re bell in the night." The Missouri Compromise bought the nation only a nineyear respite from the bitter, divisive contest over slavery before the bell would toll again.

After the stormy sessions of the Sixteenth Congress, the senators welcomed the quiet, routine sessions of the Seventeenth Congress. The years 1821and1822 were far from dull, but political maneuvering was more evident outside the chamber in the corridors of the Capitol and in private homes, where plots were laid over dinners and brandy.

With the final disappearance of the Federalists in 1820, when they failed to nominate a presidential candidate, many idealists thought they saw the end of the whole partv system and the coming of a Utopia when leaders would be chosen purely on the basis of merit. Monroe happily predicted: "Surely our government may get on and prosper without the existence of parties." Thomas Jeffer~on, however, did not share his fellow Virginian's optimii:;m. "You a.re to1d, jn~eed ." he wrote to Albert Gallatin, then in France, "that there are no longer parties among us; that they are all now amalgamated; the lion and the lamb lie down together in peace. Do not believe a word of it." 25

Events proved Jefferson correct. The ~ollapse of the Federalists was the pre-


lude to the breaking up of the Republican party into many factions that once had been tenuously united by opposition to a common foe. Monroe had barely been inaugurated a second time before each of these factions began to groom one of their own as his successor. By the time the Seventeenth Congress met in December 1821, each of the three leading cabinet members, Secretary of State John Quincy Adams, Secretary of Treasury William Crawford, and Secretary of War John C. Calhoun, as well as Henry Clay, temporarily retired from the Congress, had a group of ardent supporters working on his behalf. These four men, with Andrew Jackson as a pessible dark horse, were open candidates three years before the next election! So much for the "Era of Good Feelings!"

The second session of the Seventeenth Congress was overshadowed by the prepresidential cabals. The Crawford faction seemed to have a slight edge, but its hopes dimmed in the summer of 1822 when the nerve-wracking campaign took its toll. Crawford, tall, handsome, and only fifty-one years old, suffered a paralyzing stroke which left him nearly blind and only in partial possession of his mental faculties. Monroe kept Crawford on as Secretary of Treasury for the next year, but all Treasury documents bore a facsimile stamp of his signature, which his daughter helped him press to the papers. Meanwhile, Crawford's partisans minimized the seriousness of his condition, and zealously continued their campaign to make him president. 28

Earlier in the spring of 1822, death carried off one of the Senate's most prominent orators and dandies, William Pinkney of Maryland, only fifty-eight. His last speech on the floor had been his masterful reply to Rufus King on the Missouri question. Fittingly, a new senator who would soon also win fame as a brilliant orator, Thomas Hart Benton of Missouri, offered a moving eulogy. Pinkney, who had died in Washington, away from his home and family, fell, said Benton, "like the warrior, in the plentitude of his strength, and on the field of his fame." 21

William Pinkney was truly a remarkable man. At the age of thirteen, he was forced to drop out of school when his father's property was confiscated due to the latters' loyalist sentiments. According to legend, young Pinkney favored the colonists' cause and often eluded parental vigilance to mount guard with the Continental soldiers. After the Revolutionary War ended, Pinkney's oratorical skill came to the attention of Justice Samuel Chase who took him in hand and steered Pinkney to a career in law.

Pinkney spent the remainder of his life working to overcome the consequence of his interrupted education. While S'tationed in London as a United States Claims Commissioner, he deliberately attended parliamentary and court nes '3ion<; iri an effort to absorb the erudition displayed there. He studied Latin and Greek and developed a life-

long passion for reading dictionaries. The effort was not was·ted. His skillful oratory and mental agility aided Pinkney's rapid rise to commissioner, Minister to Great Britain, and Attorney General in 1811.

Writing under the pseudonym "Publius", Pinkney vigorously supported the War oI 1812, and, as a maj'Or in the Maryland militia, commanded a battalion of r'iflemen and was seriously wounded in the arm. Following the war, he served briefly in the House before his appointment as Minister to Russia. Pinkney returned from Russia in 1818 and entered the Senate in 1819. It was during his years in the Senate that Pinkney achieved his reputation ·as a maior interpreter of the Constitution.

While he ably represented the Southern interests in the Missouri debates in the Senate chamber on the Capitol's second ftoor, it was in the Supreme Court chamber below that he performed his greatest work in arguing cases at the bar. He was counsel in seventy-two Supreme Court cases and acQuired one of the most lucrative practices of his time. In both the Senaite and the Court, Pinkney's years of self-improvement paid off handsomely. After one of his speeches, Justice Story wrote, "I never, in my whole life, heard a greater speech; it was worth a trip from Salem to hear it . . . his eloquence was overwhelming."

During these years in the Senate and be.lore the Court, Pinkney's effected, extravgant rhetoric made him a vivid figure. Ladies crowded into the gallery to hear him speak. Excessively vain, he sought their approval as keenly as that of his colleagues. Though he toiled ceaselessly to polish his style and check his facts, Pinkney liked to creaite the impression that his wealth of knowledge was little but off-hand recollections. But woe to those who challenged him. Pinkney was inso.ent and a.rro·gant and only narrowly escaped a duel with a lawyer he had openly insu1'ted in court. For frequent discourtesies to Daniel Webster, the latter boasted of extorting an apology under threat of a beating.

Pinlrney was as vain about his appearance as about his eloquence. He had square shoulders, erec•t carriage, and intense blue eyes, but most conspicuous were the deep furrows in his face and the heavy circles under his eyes which he sought to conceal with cosmetics. He worse corsets to diminish his bulk.

Pinkney's demise on February 25, 1822, was almost turned into a burlesque by the eccentric John Randolph, a representative and later senator from Virginia. Two years earlier, Randolph had made himself indecorously cons9icuous at the funPral of Commodore Stephen Decatur. killed in a duel in Washington, by causing his horse to prance about the grave. Bv nremattirelv announcing Pinknev's death, Randolph led the House to declare a day of mourning for the senator while he was still alive.

Volumes of euloo:y atte~ted to Pinkne~··s fflme, once he was aet1rnlly dead. Chi.ef Justice Marshall proclaimed him. "The greatest man I ever saw in a Court

24334 CONGRESSIONAL RECORD- SENA TE October 19, 1981

of Justice." Thirty years after Pinkney's death. Chief Justice Taney could still say, "I have heard almost all the great advocates of the United States, both of the past and present generation, but I have seen none equal to Pinkney." 28

Being a senator in the early 1800's wac:; ha7.iardous duty. Th:is eig'h!t-year-period under investigation, the Fifteenth to the Eighteenth Congresses, witnessed the deaths of six other senators besides Pinkney. Two were still in their thirties. Pinkney's predecessor, the aggressive Federalist edit.or. Alexl'.l.nder Hanson of Maryland, was only thtrty-three when he died on April 23, 1819, after two years in the Senate. Ill-healith prevented Hanson from taking an active part in the Senate's business. During the War of 1812, he had been badly beaten by a Baltimore mob. enraged at the anti-administration, pro-English stand of his newspaper, the Federal Republican. William Trimble of Ohio, who had distinguic:hed himc:;elf for gallantry during the War of 1812, was only thirty-five when he died in 1821 after two years in the Senate.29

Like Trimble, James Burrill of Rhode Island died in Washington. far awav from home and loved one.c;. Burrill, f ortv-eight, was given a memorable funeral in the old Senate Chamber down the hall. Nicholas Ware af Georgia had been in the Senate for three vears when he died in 1824 at age fiftv-five. Elijah Boardman of Connecticut had enlisted in the RevoJ11tionary Army at age seventeen. He died in 1823, at age sixtvthreo duririg his second year in the Senate, while on a visit to Boardman, Ohio, a town he had f ounded.30

The oldest and most prominent senator who died in office during this period was John Tay}or of Virginia. who wac; seventy years old when he passed away during the recess in the summer of 1824. He, like Senator Boardman, was one of the last of the handful of Revolution~ry soldiers, having fought under Lafayette, still serving in the Senate. Ta~rlor had just been returned to the Senate for the third time by the Virginia Jesrislature after a long absence. His first term in th~ Senate had been during George Washington's first administration, in 1792. when hn filled the pro<;t vacated by the illness of Richard Henrv Lee. An earlv supporter of Jeff erc;onian Repuhlicanism, thromrh h 1s writings Ta·rlor became one of the foremost philosophers of agrarian Uberalism.81

The opening of the Eighteenth Congress was a memorable one. On its second dav, December 2, 1823. the senators and representatives received the most important presidential mes"age in many years, in which President Monroe spelled out the farsighted prici!'lles of the Monroe Doctrine. The Doctrine, largelv the work of Secretary of State John Quincy Adams, was specifically aimed at Russia's expansionist designs on the Pacific Northwest and at threats by the Holy Alliance to appropriate Spanish possessions in Latin America. But, more generally, Monroe us·ed the Doctrine to pro-

Pootnotes at end of article.

claim to all the world that, "the American continent,s, by the free and independent conditton which they have assumed and maintain, are henceforth not to be considered as subjects for future colonization by any European powers" and that European intervention in the Western Hemisphere would be viewed as a "manifestation of an unfriendly disposition toward the United States." 32

Among the new and able senators in the Eighteenth Congress was Robert Hayne of South Carolina, the magnificent orator de~stined to cross swords with Webster in one of the most memorable congressional debates of the century. Back in the Senate after long absences were John Taylor of Virginia who had left in disgust over the Sedition Acts, and John Lloyd of Massachusetts.

Also back in the Senate, but difficult to recognize as the backwoodsman of twenty-five years earlier, who had sat in the Senate when it still 'met in Philadelphia, was the Hero of New Orleans, Andrew Jacl{son. Let us look more closely at the route that led the lean, unsmiling Jackson to the Senate a second time and at his early experiences in Washington, for, in many ways, they are typical of the hardships and joys experienced by his c•o'1leagues.

Although Jackson had "retired" to his Tennessee estate with his beloved wife, Rachel, after his brilliant military maneuvers in New Orleans and Florida, the nation was alive with speculation that he would be the next pres'ident. His friends energetically fanned the fires of popular support while Jackson's enemies, and he had made many, worked equally hard to stamp them out.

The first test of Jackson's strength was whether or not he could unseat Tennessee's senior senator, John Williams, in 1823. Many of the General's supporters urged him not to attempt it, as a failure could be disastrous, but although Williams had a clear headstart, Jackson plunged ahead. When the state legislature convened on the morning of October l, 1823, to choose a senator, Jackson's forces made a desperate attempt to obtain a two-day postponement to solidify their position. But the famed frontiersman, Davy Crockett, then a member of the state legislature and soon to become a representative, was a lifelong enemy of the General's and successfully fought the delay. Crockett's colleagues were confronted with the choice of reneging on their pledges to Williams, a power in eastern Tennessee, or repudiating the gray-haired hero. When the roll call ended, Jackson had triumphed over Williams, 35 to 25.33

After notification of his victory Jackson wrote a friend, "I ·have been elected senator, a circumstance wh~ch I regret more than any other in my life. To leave Mrs. Jackson fills me, as well as her, with much regret." Jackson was undoubtedly s-orry to part from Rachel, but, as Marquis James notes in his biography, The Life of Andrew Jackson, Jackson was personally gratified by his victory and not loath to be the focus of the national limelight once again. He

was, however, totally unprepared to leave home that November. It was cotton ginning time, a planter's busiest season, when expenses were greatest and debts heaviest. Jackson had to accept a loan from a friend to def ray the cost of the Journey.:u.

Jackson, fi'fty-six years old, set out on the 860-mile journey to Washington on horseback, accompanied by John Eaton, thirty-three, his good friend and Tennesser/s other senator. Except for one day when a mailcoach afforded refuge from the rain, the two senators remained in the saddle a!l the way to Staunton, Virginia. At Fredericksburg, they boarded a steamboat which arrived in Washington just after dawn on December 3, 1823.

Like most of his colleagues in the Senate, Jackson was reluctant to subject his wife to the rigors of travel to the far-off capital. At each stop along the way to Washington, however, he wrote anxious letters back to Rachel. I would like to read to you just a few words from these letters from a senator to his wife because I think they show a tender side of the General, whose statue, in cold bronze here in the Capitol's rotunda down the hall, looks so strong and stern.

From Staunton, on November 28, 1823, Jackson wrote home: My I.i0ve

I have been greeted by the people wherever I have halted ... This through Virginia (a Crawford stronghold) I did not calculate on ... Were you only with me I could be satisfied-But should providence once more permit us to meet, I am solemnly resolved, with the permission of heaven, never to separate, or be separated from you in this world.

The day he arrived in Washington, Jackson wrote Rachel: My Love

I have not heard from you . . . and am anxious to receive a letter ... I have been treated with marked attention . . . Altho thi • ls gratifying ... my heart ls with you and fixed to Dome'ltric Life ... wl +1hout you this wm be a Tedious and unpleasant winter ... write me often and believe me to be your affe-Otionate husband.SG

Like . most other senators, General Jackson took up lodgings in one of Washington's many boarding houses. Along with Senator Eaton, he took modest rooms at the house run by Major William O'Neale. It was there that he met the Major's pretty daughter, Peggy, who, when she married Senator Eaton, would nearly wreck Jackson's firs•t administration as cabinet members, urged on by their wives, took sides on the question of Pe~gy's virtue.

Though Jackson claimed he sought to live inconspicuously in Washington, he quickly became the most sought-after man in town. He complained to Rachel, "There is nothing done here but visiting and carding." Eaton had to help Jackson with his voluminous correspondence, even writing to Mrs. Jackson when the General was exteremely busy. Shortly after settling into their rooms, Eaton wrote her:

The general is in very fine health, and just as good spirits .... He is constantly in motion to some dinner party or other, and to-

October 19, 1981 CONGRESSIONAL RECORD- SENA TE 24335 night stands engaged at a large dancing party at General Brown's.3o

Despite his grumblings, Jackson always liked to have people around him and enjoyed the Washington social whirl. For evening wear, he even ordered a pair of fine black milled cashmere pantaloons and had his dress coat spruced up with new silk-covered buttons.37 While he enjoyed the company of friends, Jackson was not oblivious to the fact that his social appearances did no harm to his cause as a candidate.

On the frontier, Andrew Jackson had made his· reputation by methods that were uncompromising and direct. Now, as a senator, Old Hickory found himself on a stage which called for a more subtle skil1s of diplomacy and negotiation. In his younger days, Jackson had been involved in numerous duels. He still carried, buried deep in h ]s shoulder, a bullet put there in 1813 at the climax of an argument with two brothers from the state of Missouri, one of whom was now his Senate colleague, Thomas Hart Benton. Benton was an enormous man. He was also vain, arrogant, and pugnacious, but he was an able senator, a spellbinding orator, and the West's most articulate spokesman.

Jackson took his seat on the Senate floor only to notice that the adjo~ning chair was occupied by his old enemy, Benton. Perceiving the situation, several senator,s offered to exchange places with either man, but both refused, just as they refused to recognize each other's existence. A few days later, Jackson was named chairman of the Committee on Military Affairs and Benton was named a member of the same committee. One day, as a meeting of the committee broke up, Benton exchanged civilities with the chairman, and asked about Mrs. Jackson's health. In the old days, Benton had been a favorite of Rachel Jackson's. Shortly thereafter, the two men found themselves face to face at the Executive Mansion. Benton bowed and Jackson held out his hand.38

From these signs, Speaker Henry Clay, also estranged from the General, concluded that Jackson had "resolved upon a general amnesty" and soon found that conciliation was held out to him, too. These events damaged the widely circulated stories of Jackson's bitter hatreds and frontier etiquette. "It will afford you great pleasure to know," Eaton wrote Mrs. Jackson, "that all his old quarrels have been settled ... The General is in harmony and good understanding with everybody." A surprised Daniel Webster wrote his brGlther, "General Jackson's manners are more presidential than those of any of the candidates. He is grave, mild and reserved. My wife is decidedly for him." Senator Elijah Mills of Massachusetts, who had violently opposed Jackson on the Florida question, considering "him little advanced in civilization over the Indians with whom he made war,'' confessed to Mrs. Mills that "these opinions <were) unfounded ... He is exactly the man with whom you would be delighted." 30

Though busy cultivating his presidential prospects, Jackson did not neglect his Senate duties. No senator was more

Footnotes at end of article .

faithful in his attendance than he. He listened carefully but rarely spoke. In his first six months in the Senate, Jackson took the floor :mly four times and altoge~her spolrn less than twenty minutes: once to recommend a New Orleans veteran fol' a pension; twice to urge construction of military roads; and once to support 2, bill to purchase armaments. While silent, until he resigned in October 1825, for financial reasons, Jackson voted on every important piece of legislation, consistently supporting internal improvement bills.' i

Another senato!" of the Eighteenth Congress was the wily Martin Van Buren of New York who had been a "freshman" with Benton in 1821. Van Buren's fortunes would soon become intricately linked with those of the Hero of New Orleans. It would be difficult to imagine greater contrasts between a state's two senators than those between New York's Be:i:or senator, Rufus K ing, and Martin Van Buren. King was then sixty-eightyears-old; Van Buren was forty-one. King represented the last stand of the Federalist party. Van Buren, a Republican, would preside over the birth of the Democratic party that would propel him into the White House. Van Buren arrived in Washington well in control of his state's party apparatus. By judicious use of the spoils system, he had cunningly built an extremely powerful New York political machine to rival that of his enemy, Governor DeWitt Clinton. Van Buren's political dexterity had earned him the well-deserved nicknames of "the Red Fox of Kinderhook" (his home town), and "the Little Magician." 41

As the members of the Eighteenth Congress sought to deai with the implications of the Monroe Doctrine and new tariff legislation, the frenetic presidential campaigning was foremost in their thought. All of the candidates were aware of a. growing anticaucus sentiment in the nation. Instead of the congressional caucus method of selecting a presidential nominee, a larger and larger number of voters urged that the state legislatures or even the people themselves be permitted to instruct the electors.

In an effort to head off this popular movement, 66 of the 261 senators and representatives called a caucus on the evening of February 14, 1824, and nominated the enfeebled Crawford and Albert Gallatin as the regular Republican party candidates. The result was obviously useless, since a clear majority of the Congress supported other candidates. Indeed, the farcical cau~us caused such an outcry that it was the last one held to nom:nate a preJidential candidate.4

:i

With the majority of the Congress and his own ill health against him, Crawford's chances for victory looked slim indeed. Hoping to jnsure his foe's defeat, Senator Ninian Edwards of Illinois, who had recently been appointed minister to Mexico, just before leaving to take his post, sent a letter to Speaker Clay accusing Crawford of malfeasance in office. Crawford's supporters took up the challenge and the House sergeant-atarms was dispatched to bring Edwards, who was already on his way to Mexico, back to te3tify. Edwards' pursuer had to

travel 1,500 miles before he overtook the former senaitor, but overtake him he did. Once back in Washington, however, Edwards failed miserably to substantiate his charges.'3

Through the paralyzed Secretary of Treasury had the satisfaction of knowing that his reputation remained unblemished, when there was no sign of his recovery, the election tide continued to turn against him. Among his opponents, Adams controlled New England and, more tenuously, New York; Jackson had the support of Pennsylvania and parts of the South; Clay's following outside Kentucky was uncertain; Calhoun, foreseeing failure, withdrew, accepting the vice presidential position from both Adams and Jackson. The twenty-four states voted at va.rious times during the fall of 1824. In eighteen states, the voters, rather than the legislatures, instructed the electors for which of the four nominees they were to vote.

Shortly after the second session of the Eighteenth Congress convened on December 6, 1824, it was clear thJ.t no candid·ate had a majority of votes. Jackson ran first with 99 electoral votes; Adams had 84; the ailing Crawford 42; and Clay 37. Instead of withdrawing in favor of Jackson, Adams decided to stay in the contes-t, and the election was thrown into the House as it had been in 1801."

Henry Clay, if he could not be president, could now be president-maker by throwing his influence to either Jackson or Adams. All other business of Congress ground to a halt as bargaining and intrigue reached new heights. At last, Clay announced that he would support Adams. No sooner had he done so, however, when rumors began to fly that Clay had entered into an "unholy bargain" with Adams, who, in return for Clay's votes, haid allegedly promised to name him Secretary of State. While the rumors were never subst•antiated, Adams, elected pre3·ident on Fabruary 9, 1825, did little to allay them when he actually did name Clay to the post!G Jackson's supporters, rightly claiming that their candidate had been the choice of the people, kept the vicious innuendos alive and bided their time for the next four years.

The contested election overshadowed all other issues during the la.st days of the Eighteenth Congress. Whatever "good feelings" rema.ined from the happy aura that enveloped the beginning of Monroe's administrations eight years earlier evaporated entirely in the new spirit of factionalism and acrimony.

Briefly, at the end of 1824, "Good Feelings" in the Congress, indeed in the entire nation, were at least temporarily revived by the return of General Lafayeitte, after an absence of forty years, visiting the young nation the liberty of which he had pledged his life to secure. La.fayette and his son, George Washington Lafayette, had arrived in America, at the government's invitation, in August. As Thomas Hart Benton described the General's triumphant journey:

He was received with unbounded honor, affection, and gratitude by the American people. To the survivors of the Revolution, it was the return of a brother; to the new generation, born since that time, it was the apparition of an historical character, familiar

24336 CONGRESSIONAL RECORD-SENATE October 19, 1981

from the cradle; and combining all the titles to love, admiration, gratitude, enthusiasm, which could act upon the heart and the imagination of the young and the ardent. He visited every State in the Union, doubled in number since, as the friend and pupil of Washington, he had split his blood, and lavished his fortune, for their independence. His progress through the States was a triumphal procession, such as no Roman ever led up-a procession not through a city, but over a continent-followed, not by captives in chains of iron, but by a nation in the bonds of affection.ta

The General's tour brought him to Washington in December 1824. On December 9, at one o'clock, an important precedent was set in the Senate. General Lafayette became the first distinguished foreign dignitary to be accorded the privileges of the ftoor.'1 In accordance with a prearranged plan, the General was escorted into the chamber by a special committee and introduced by Senator James Barbour of Virginia, the committee's chairman. The senators arose from their seats and remained standing until the General was seated in a chair to the right of Vice President Daniel Tompkins. Then the Senate adjourned by unanimous consent so that the senators might individually pay their respects to their honored visitor.'3

Among those senators who stepped forward to greet Lafayette were four who felt a special bond, having served with him in the Revolutionary War. They were Senators Rufus King of New York, James DeWolf of Rhode Island, Samuel Smith of Maryland, and John Chandler of Maine, the latter two of whom had gone on to attain the rank of General.49

A few days later, while Lafayette continued his tour, the Senate took up the question of an appropriate gift from the nation to the General to show the love and gratitude of the American peonle. The special committee to examine the question, chaired by Senator Hayne, suggested that the sum of $200,000 and a township of land, 24.000 acres, would be a suitable gift.00 Immediately, objections were raised. Senator Nathaniel Macon of South Carolina reluctantly rose to object, not to the amount but to the principle behind the gift. Macon said he yielded to no one in his love and admiration of Lafayette, but, he considered the General as having been, during the Revolution, "a son, adopted irito the family, taken into the household. and placed, jn every respect, on the same footing with the other sons of the same family ... That General Lafayette made great sacrifices, and snent much of his money in the service of this country, I as firmly believe as I do any other thing under the sun . . . but this was equally the case with all the sons of the family. Many native Americans spent their all, made great sacrifices, and devoted their lives in the same cause." 51

Descending to a crasser plane, S<>nators Ethan Brown of Ohio aI'ld James Noble of Indiana obiected to the large sum of money involved. When put to a vote. the measure passed the Senate by a vote of 37 to 7, was sent to the House where it was passed. and sent back to the Senate. On December 23, Jed bv Lafa:vette's old comrade in arms, Senator emith, the bill unanimously passed this Senate and, be-

fore he sailed for France in September, Lafayette was presented with these tangible proofs of the nations thanks.5 2

De.spite the lingermg bitterness the election had engendered, the l!;ighteenth Congress encicd on a v1s10nary note. Monroe's last message to the Congress stressed the importance of Amenca's Pacific Coast interests, in danger of bemg usurped by the British, and recommended ·the establishment of a fort at the mouth of the Columbia River. While the bill passed the House, in the Senate, it was turned to ridicule by Senator Mahlon Dickerson of New Jersey. Dickerson pointed out that Oregon could never conceivably become a sta•te because its representatives, even if traveling twenty miles a day, would need 350 days to get to Washington and back. The territory was separated from the United Staites, Dickerson told his colleagues, by virtually impassable deserts and mountains. Its occupation was useless and impractical.

Not so, cried Thomas Hart Benton, the West's champion. "I answer, the advantages will be the securing of the fur trade of the Columbia, the Rocky Mountains, and the upper Mississippi; ... preventing the Russians and British getting control of the Indians on the Columbia; . . . a naval station for us on the Pacific; ... Mississippi and the Pac fie; . . . and, communication between the valley of the chief of all, the exclusion of foreign powers from Oregon." Impractical and useless? Benton cried, Nonsense, he told his colleagues, and forecast, "Within a century from this day a population greater than that of the present United States wm exist on the west side of the Rocky Mountains." 53

At such wild talk, the other senators shook their heads. This w .esterner must be mad. The station at the mouth of the Columbia was disapproved. Time, however, proved the prophetic Benton, rather than the scoffing Dickerson, accuraite. Though neither Benton nor any other senator who listened to his forecast in the Senate chamber in 1825 lived to see ~ t his !1redictio"1 came true r '.ght on schedule. The census of 1820 revealed a nation of 9,638.000 inhabitants. A century laiter, in 1920, as Benton foretold, th~ nopu1at.;on of the Wesrtern sta+e~ alone stood at 9.214,000. In the years that followed his defense of the fort ·on the Columbia, both Benton and the West would become forces to be reckoned with.54

NOTES TO "ERA OF GOOD FEELINGS" 1 King to Jeremiah Mason, March (n.d.)

1818. cited on page 352 of Ernest, Robert . Ru.Jus King: American Federalist (Ch~el HiH: 1968).

2 Ibid. ~ Co 7umbian Centinel, July 12. 1917. Bos

ton, ct+.,ed on pao-e 95 of Dan!!.er'fl.e1d Ge0rP.'e. The Era of Good Feelings (New York: 1952).

'Niles' Weekly Register, Ba.J.timore; Janu-ary 19. 1818, page 313.

5 Annals of Congress, 15th Congress, 1st sess., January 13, 1919, page 109.

0 Bates. Ernest, The Story of Congress (New York: 193'l). pa.ges 104-105. For detailed disauc;sion of Jacl<'!Son's exoloi+s and the famous "Rhea letter" see Dangerfie1d. ch~p+ers 3 and 4, •and Curtis. Ja.mes, Andrew Jackson and the Search of Vindication (New York: 1976). Chapter IV.

1 Senate Journal, 15th Congress, 2nd sess., February 24, 1819, page 300.

s Senate Executive Journal, 15th Congrea..s, 2nd sess., Februa.ry 24, 1819, page 178.

u Annals oj Congress, Hith ()ongress, 2nd sess., i· ebru.a..ry 16, 1819, page 1204.

10 House Journal, 15th Congress, 2nd sess., February 16, 1819, page 275; Senate Journal, 15th Congress, 2nd sess., Februairy 27, 1819, page: 321-322.

u Dangerfield, pages 204-205. 1~ Annals of Congress, 16th Congress, 1st

sess., pages 99-127. u Ibid., page 226. u Ibid., pa.ge 274. u Ibid., pages 269-70. ie Dangerfield, paiges 218-221. 11 Ernst, pages 369-371; Dalllgerfield, p ·&ge

226. l :h a.rle :> R. King, ed., (New York: 1894-1900). Charles R. King, ed., (New York: 1894Xl900) , VI, page 339.

··' .::;.,naie Journal, 16th Congress, 1st ses3., pages 160-161, 166.

c •Annals of Congress, 16th Congres3, 2nd sess., pages 43-44.

21 Dangerfield, page 233. ~J Annals of Congress, 16th Cong;ress, 2nd

sess., page 670. la Josephy, Alvin, History of the Congress

of the United States (New York: 19'75). page 160.

.• Bates, pages 109-10; Annals of Congress, 16th Congress, 2nd sess., pages 1147-66. ~Bates, page 111. :e Mooney, Chase C. William H. Crawford

(Frankfort: 19'74), page 247. rn Benton, Thomas Ha.rt. Thirt11 Years'

Vtew (Boston: 1883), page 19. za Biographical 1nforma.tlon from Diction

ary of American Biography (New York: 1946), Volume XIII, pa.ges 626-628; The National Cycyopedia of American Biography (N'ew York: 1907), Volume V, pa.ge.s 373-374; Baltes, page 113.

2e Biographical Directory of the American Congress (Washington: 1971); Dictionary of American Biography (New York: 1946), Volume VII-VIII, page 231.

ao Dtctionary of American Biography (New York: 1946), Volume III-IV, pages 325-326; Biographical Directory of the American Congress; National Cyclopedia of American Biography (New York: 1897), Volume lV, page 153.

'1Diction.ary of American Biography (Neiw York: 1946), Volume XVII, pages 331-333. ~'Annals of Congress, 18th Congress, 1st

sess., pages 22-24. 11 James Marquis. The Life of Andrew

Jack1on (Indianapolis: 1933), Volume II. page 61.

a' Ibid., page 62. as Andrew Jackson to Rachel J1a.ckson., No

vember 28, 1823, and DecemJber 3, 1823, quoted in James, page 62.

"John Ea.ton to Ra.ohel, Decem'ba- 18, 1823, quoted in James, page 63.

3'7 James, page 63. :is Ibi d , p9.<!~3 65-66. at Dan.iel Webster to Ezekiel Web9tier, Feb

ruary 2, 1824, and Elijah Mills to Mrs. Mills, January 2, 1824, quoted in Ja.mes, page 66.

'° Jame<J, page 78. u Rem1n1, Robert. Martin Van Buren and

the Making of the Democratic Party (New York: 1959).

'~ Josephy, page 167. '~ Bat.':'s. pap.-~ 117. "Annals of Congress, 18th Cong;ress, 2nd

sess., page 526. "Ibtd.., page 527. .. Benton, page 29. '1 c:or ..... ~+~ n.r;sc<>ll1J11."0U<: Do~uments, 52nd

Congress, 2nd ~ .• Volume 7, No. 68, paige 42.

•s Debates in Congress, 18th Congress. 2nd sees., page 3.

October 19, 1981 CONGRESSIONAL RECORD- SENA TE 24337 4~ Sargent, Nathan. Public Men and Events

(Philadelphioa: 1875), pages 91-92. "°Debates in Congress, 18th Congres-s, 2nd

sess., page 12. ~1 Benton, pages 30-31; Debates in Con

gress, 18th Congress, 2nd ses3., p,a.ges 28-33. 0 2 Debates in Congress, 18th Congress, 2nd

se3s .• page 56. 63 Jbid., pages 669-95, 709-11. 54 Historical Statistics of the United States

(Wash:lngt,on: 1976), Volume I, pages 8, 22 .

Mr. ROBERT C. BYRD. Mr. Presi-dent, does any Senator wish to yield?

I am ready to yield back my time. Mr. BAKER. I yield back my time. If the Senator will yield to me, I yield

back the remainder of my time remaining under the standing order.

Mr. ROBERT c. BYRD. Mr. President, I yield back the remainder of my time.

ORDER OF BUSINESS Mr. BAKER. Mr. President, I under

stand that Senators seeking recognition on special orders are detained away from the Chamber.

I ask unanimous consent to reclaim my time under the standing order for the purpose of suggesting the absence of a quorum.


Mr. BAKER. Mr. President, I suggest the absence of a quorum charged against my time.

The ACTING PRESIDENT pro tempore. The clerk will call the roll.

The bill clerk proceeded to call the roll.

Mr. S'.I'EVENS. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.


RECOGNITION OF SENATOR McCLURE

The ACTING PRESIDENT pro tempore. Under the previous order, the Senator from Idaho is recognized.

SENATE JOINT RESOLUTION 115-TO APPROVE THE PRESIDENT'S RECOMMENDATION FOR AW AIVER OF LAW PURSUANT TO THE ALASKA NATURAL GAS TRANSPORTATION ACT OF 1976

<Introduced by Mr. McCLURE, for himself, Mr. JACKSON, Mr. STEVENS, and Mr. MURKOWSKI.)

Mr. McCLURE. Mr. Presldent, I am pleased to .ioin with mv colleagues Senator STEVENS, Senator MURKOWSKI, and Senator JACKSON to introduce the joint resolution of approval for t.he waiver of law proposed by President Reagan which is needed to exoedite the construct.ion and initial operation of the Ala<;ka Natural Gas Transportation System. Approval of this waiver by the Senate and the Houc:;e is a critical step in assuring the expeditious completion of this project by the private sector under private financing.

The rapid completion of this proiect is important not only for this Nation's e~o-

79-059 0-85-35 (Pt. 18)

nomic well-being, but also for our national security.

The Prudhoe Bay field, located on the north slope of Alaska, contains proven recoverable reserves of natural gas which conservatively total 26 trillion cubic feet.; this is equivalent to about 4.5 billion bal'rels of oil. This field is the largest single gas reservoir ever discovered on the North American continent and it contains about one-eighth of the United States known reserves of gas. This field alone is capable of providing gas markets located in the lower 48 States with more than 2 billion cubic feet of gas per day over a 25-year period.

In addition to the proven reserves of natural gas located in the Prudhoe Bay field, independent experts estimate that there are somewhere in the range of 200 trillion cubi.; feet of additional reserves of gas located elsewhere in Alaska yet to be discovered. Without the construction of the Alaska Natural Gas Transportation System, however, none of the natural gas located in Alaska will be able to be transported to, and used in the lower 48 States; instead it would be shutin and lost forever.

The economic and national security consequences of a failure to complete this transportation system would be staggering. A brief review of our energy situation and the implications of our continued dependence on foreign petroleum is in order.

During the first 7 months of 1981, the United States relied on foreign sources for nearly 5.7 million barrels per day of oil. While this is a significant improvement over the nearly 9 million barrels per day of oil we imported during 1977, our current level of imports represents a more significant economic strain on our economy as well as an increased security threat to our Nation than we have ever encountered previously.

In 1973, this Nation imported slightly more than $8 billion of foreign energy, accounting for less than 12 percent of our total imports of merchandise. By 1977, we imported $45 billion worth of foreign energy, accountiing for about 30 percent of our merchandise imports. During 1980, this Nation's imports of energy cost us nearly $83 billion, and accounted for 34 percent of our total imports of merchandise. And, it should be noted, these imports of energy were 31/2 times larger than our entire 1980 balance of trade deficit of $24 billion. During the first 7 months of 1981, our energy imports totaled more than $49 billion, again about one-third of this Nat!on's total imports of goods, and edging toward four times our entire balance of trade deficit of nearly $14 billion.

It is only too evident that this Nation's imports of petroleum have played a significant part in our continuous adverse ba~ance of payments which, in turn, has weakened the value of the dollar, increased the flow of imported go::>ds, worsened our rate of inflation and significantly lessened the ability of our domestic companies to compete in the international market.

More importantly, however, these imports of foreign petroleum have increasingly been coming from unstable regions

of the world. Just prior to the oil crisis of 1973, 27 percent of the crude oil that the United States imported came from the Middie East; in January of this year more than 39 percent came from this region. And in addition to the crude oil that we import directly from this region are the petroleum products we import from other countries which are refined from oil produced in the Middle Ea.st.

As was exemplified during the recent Iranian revolution and accompanying Iraq/Iran war, some of the foreign suppliers of the oil which we overly depend upon are both unstable and only too willing to use the oil weapon to further their political interests.

From even this cursory examination of the Unit()d States vulnerability to foreign petroleum supply interruptionswhether they be intentional or accidental-it is only too evident that this Nation's economic well-being and nat10na1 secur1ty rests far too much in the · hands of foreign interests. The completion of the Alaska Natural Gas Transportation System can do much to relieve this country from this intolerable situation.

The Alaska Natural Gas Transportation System will have an initial capacity of 2 billion cubic feet of gas per day, and c'3.n be expanded to move as mi1ch as 3.2 billion cubic feet per day. The movement of 2 billion cubic feet of Alaskan natural gas to the lower 48 will displace nearly 400,000 barrels per day of imported oil, a savings of somewhere in the range of $7 billion per year as well as a major reduction in our foreign petroleum dependence.

Ultimately when the system is expanded to transport 3.2 billion cubic feet of gas per day, as much as 600,000 barrels per day of foreign oil could be displaced thereby saving this Nation well in excess of $11 billion each year of operation and insulating us even further from the uncertainties of unstable foreign petroleum production.

It is without question then, that the completion of the Alaska Natural Gas Transportation System is in this Nation's economic and national security interests. Failure to build the system would expose the country to unacceptable economic consequences, it would increase our vulnerability to the uncertainties of foreign production, it would result in the loss of this enormous resource from our base of energy reserves, it would deny domestic markets access to domestic energy, and moreover, it would jeopardize the economic recovery of our economv.

It is for the5e reasons, Mr. President, that I urge the Members of the Senate to join wtth me and my colleagues to support the passage of the joint resolution of approval of the waiver package propo<;ed by the President of the United States.

The introduction of this resolution culminates 6 months of active review, discussion, and negotiations among the four of us. with the pipeline sponsors, the financial community. and retween ourselves and the administration and the leadership of our counterpart House committees. We jointly wrote to the


President on July 24 and again on September 14 urging him to consider and send to the Congress a waiver of laws necessary to enable private financing of the pipeline. Since spring, the administration has been engaged in a parallel dialog with the Canadian Government, including a number of direct discussions between the President and Prime Minister Trudeau.

The President on October 7 announced his decision to send to Congress a waiver package similar to the one we forwarded to him on July 24 and again on September 14. Last Thursday, October 15, Congress formally received the President's waiver package, thus triggering the 60-day congressional review and approval procedure under the Alaska Natural Gas Transportation Act of 1976.

The Senate joint reso!ution of approval we are introducing today must be enacted, with both Houses of Congress approving, prior to the expiration of the 60-day period. Three days of hearings in the Energy and Natural Resources Committee on the resolution will begin on Thursday. I believe all of the cosponsors here are confident that the resolution ultimately will be enacted, and hopefully enacted before the end of this session of Congress.

All of us are pleased, I am sure, that the President decided to send us this particular waiver package, which preserves intact our sub3tantive recommendations to him. The Alaska gas pipeline will open access to proven gas reserves on the North Slope which equal 15 percent of domestic gas reserves and will deliver 5 percent of our current annual gas consumption to the lower 48 States for a period of 20 to 30 years.

Such access and delivery will make a major contribution to our national energy security, the economic growth of America, and certainly our national security. Also, as the President cabled to Prime Minister Trudeau and noted in his formal transmittal statement, the project is- ·

A symbol of U.S.-Canadian ab111ty to work together cooperatively in the energy area for the benefit of both countries and peoples (and) this same spirit can be very important in resolving the other problems we face in the energy area.

Perhaps what all of us believe is most important about this specific package is that it will provide a positive opportunity for private financing of the pipeline, rather than any Federal Government assistance. Legal barriers to gas producer participation in financing the project would be modified to allow such participation, while retaining appropriate safeguards, thus insuring needed equity financing for construction. Also, potential legal impediments to adequate debt financing are modified to increase the security of such investments in the billing arrangements and in needed regulatory predictability.

We are convinced that the combination of these several modi.ftcations, which the President found to be necessary under the law "to permit expeditious construction and operation" of the pipeline, will support the early negotiation of a

viable financing plan with needed debt and equity for the pipeline.

I believe we are also convinced that these modifications, which will be implemented and enforced by the Federal Energy Regulatory Commission under strict regulatory procedures, carefully balances the very best interest of this Nation, including gas consumers, participating :financial institutions, the participating pipelines, producers and sponsors, as well as internationally important Canadian interests.

On that basis, we will urge our colleagues in the Senate and the House of Representatives to review and consider most carefully this package and the pipeline. Having done so, we are confident that they will agree with us to approve the President's proposal by enacting our Senate joint resolution in the next 60 days.

Thank you. Mr. JACKSON. Mr. President, I am

pleased to join three of my colleagues today in introducing a joint resolution of approval for the President's recommendation of a waiver of law package for those laws that impede private financing of the Alaska Natural G~.s Transportation System.

I do so for one s~mple reason: Unless we act to approve the waiver package, there is no other way to get the pipeline built.

Building a pipeline to transport this Nation's single largest reserve of natural gas from the North Slope of Alaska to markets in the lower 48 States has long been recognized to be in the national interest. We first said so in 1973, when we passed legislation authorizing construction of the trans-Alaska oil pipe-1 ine. That legislation paved the way for negotiatioins with Canada over the natural gas pipeline route. The result of those negotiations is embodied in the route of the pipeline under consideration today.

We said so again in 1976, when we pas5ed th~ Alaska Natural Gas Transportation Act taking the selection of a pipeline route out of normal bureaucratic channels to expedjte a final decision on the matter bv having the President and the Congress make the route decision.

We said so again in 1977, when we approved the President's decision und~r the 1976 act selecting the Alcan proposal as the preferred transportation system.

We said so again in 1978, when we passed the Natural Gas Policy Act, which contained several provisions designed to encourage construction of the gas pipeUne project.

We said so again in 1980, when we passed a concurrent resolution to reassure our neighbors to the north that we would see thts pro~ect to completion.

Finally, we must say once again that the pipeline project is in the national inerest and needs to be built. Unless we do so, all of our efforts to date to provlde for a privately financed natural. iz:as pipeline from Alaska will prove to be in va;n.

The stakes involved in this decision go far beyond the 26 trillion cubic feet of

recoverable natural gas reserves in Prudhoe Bay. The basic decision involved is whether we can find a way to enable construction of a privately financed natural gas pipeline to proceed. If we can, it will open up the entire northern part of the North American continent-in both the United States and Canada-to natural gas exploration and development. If we cannot, we will, in effect, be locking up not only the Prudhoe Bay reserves, but also an estimated 200 trillion cubic feet of undiscovered recoverable natural gas resources elsewhere in Alaska, and an equally great potential in northern Canada.

Last fall, the Canadian Federal Government relying on assurances from both the President and the Congress that we were still committed to completion of the entire Alaska Natural Gas Transportation System, authorized additional exports of natural gas. Some of that gas is already fl.owing through portions of the western leg of the system which were "prebuilt" to utilize the Canadian gas. The early construction phase of the eastern leg of the system is also underway. Over $2 billion of private capital have already been committed to the prebuild based upon our assurances that we remain committed to the project. Failure to meet this commitment would constitute a major breach of faith on the part of the United States and would have severe international repercussions.

I know that my colleagues will hear a great deal about this waiver package in the 8 weeks ahead. Committees of jurisdiction in both the Senate and the House have already scheduled hearings on the waiver proposal. We shall go into great detail in the coming weeks on the specifics of each aspect of the waiver proposal.

I do not propose to go into great detail about each provision in the waiver package today. However, I do want to comment on two aspects of the waiver proposal before a lot of erroneous inf ormation gets spread around and becomes conventional wisdom.

The financing mechanism contemplated by the package is likely to be the most controversial part of it. Indeed, it has already given me some pause. I personally would not have supported the proposal if there were any other means to get this tremendous undertaking underway.

The waiver would allow the Federal Energy Regulatory Commission to approve a tariff for the pipeline system that might result in consumers paying a small portion of the cost of the system in advance of gas deliveries. I use the word ''might" on purnose, for I certainly hope that construction will proceed in the manner contemplated today by the engineers and that completion of all parts of the system will occur simultaneously.

The billing commencement date mechanism in the package would reaujre the FERC to determine when it is most likely fm: the ent;re syc:;tem to begin oneration. If the entire system is not complete as of that date, purchac;ers of Alaska gas could be charged according to a minimum bill

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24339

tariff for the gas conditioning plan in Alaska or for the pipeline segment in Alaska. They could also be charged according to a full cost of service tariff for the pipeline in Canada. This latter treatment conforms to Canadian law and regulatory decisions to date.

First, I want to stress that Alaska natural gas purchasers would not be required to pay any return of, or on, the producers' or the pipeline companies' equity investment in the gas conditioning plant or the Alaska pipeline segment of the project until the entire system is complete. That equity investment will be completely at risk until the project is completed.

The banks told us categorically that they would be unable to raise the funds for the project without this mechanism. Frankly, they asked for even more generous treatment but I, for one, could not agree to support anything that goes any further.

Second, I want to stress that the waiver package does not mean that potential Alaska gas purchasers would be locked into paying the tariff forever if the project were not completed. It simply means that FERC could not act to change the minimum bill tariff in the manner that would impair payment of the debt, taxes, and operating expenses. I have no doubt that a future Congress would take appropriate action if it appeared likely that the project would not be completed. We are simply saying that Congress will judge what to do if the project should fail, rather than the bureaucrats. On a project of this size and importance, I believe that is perfectly appropriate.

Mr. President, this waiver package and this pipeline system must be looked at as part of the larger effort we must make to lessen our dependence on insecure foreign sources for our basic energy needs. It is in this larger context that I look at this proposal.

This proposal goes to developing our own energy resources so that, over the long haul, we can strengthen both our economy and our national security. In my view, we have no choice but to proceed and to act favorably on the President's recommendation. I hope that my colleagues will agree with me and that they will support the joint resolution we are introducing todav.

The ACTING PRESIDENT pro tempore. The Senator from Alaska is recognized.

Mr. STEVENS. Mr. President, today I join Senators McCLURE, JACKSON, and MuRKowsKI in introducing this joint resolution to approve the President's wa;ver package submitted pursuant to the Alaska Natural Gas Transportation Act of 1976 CANGTA). We are introducing this resolution in a binartisan effort to insure that every opportunity is given to allow private financing for the Alaska Natural Gas Transportation System CANGTS).

We have dealt with th•s project specially in Congress and at the executive level for two reasons. The first reason is that in 1968 the largest single discovery of oil and natural gas ever made on the continent of North America was made

at Prudhoe Bay on the North Slope of Alaska.

Second, our experience with the immense financial and regulatory demands of the trans-Alaska oil pipeline indicated to Congress that special treatment had to be granted for any proposed natural gas pipeline. As Senator JACKSON has explained; the purpose of ANGTA was to provide a means for making a sound decision with respect to the selection of the Alaska gas transportation system. It was intended to expedite construction and initial operation by streamlining agency decisions, limiting judicial review and providing the mechanism by which the President and Congress could waive laws that pertain to the transportation system.

In 1977, the Federal Power Commission CFPC) recommended that the President select from two overline proposals which would carry Alaska natural gas across Canada to the lower 48 States.

On September 20, 1977, the United States and Canada signed an agreement on "Principals Applicable to a Northem Natural Gas Pipeline," which established the terms and conditions which would apply to ANGTS in Canada and the mechanisms by wh:ch the two countries would cooperate on this joint project. Two days later the President issued his decision selecting the Alaska northwest proposal as the best means to bring Alaska gas to the lower 48 States. Approximately 1 month later, Congress approved the Presidential decision. (J.J. RAS. 621, Public Law 95-58).

Finally in 1980, Congress passed the concurrent resolution <S. Con. Res. 104) expressing the "sense of the Congress that the system remains an essential part of securing this Nation's energy future and, as such, enjoys the highest level of Congressional support for its expeditious construction and completion by the end of 1985."

This project entails a 4,800 mile pipeline system stretching from Prudhoe Bay, across Canada to terminals in Illinois and California. With an estimated total of about $40 billion, it would be the largest privately financed project in the history of man. This pipeline will br·ng 26 trillion cubic feet of gas-13 percent of our Nation's total gas reserves to market in the lower 48 States.

We are well on the way to anproval of this project. Conditional FERC certification, approval of design specifications, tariffs, operating agreements by the FERC and the right-of-way grant from the Department of Interior have already been obtained. The State of Alaska is acting expeditiously to process perm•.tting requirements in the State. The design and engineering of this pipeline is essentially complete. What remains is financing.

The waiver of law sent to us by the President pursuant to section 8(g) of ANGT A is targeted on those specific provisions of law impeding the ability of the private capital market to finance this project. Congress can assist the President and our Nation by removing these obstacles through congressional approval of the waiver.

Some are questioning the need for this natural gas. I would point out to them that beginning in 1967, and continuing each succeeding year up to the present, U.S. natural gas consumption has exceeded additions to proven reserves. We currently have proven natural gas reserves (including Alaska) below 200 trillion cubic feet.

Current gas production is about 20 trillion cubic feet per year, giving the United States a reserve life of less than 10 years. Conventional lower 48 gas production is expected to decrease despite accelerated drilling activities and productivity. The amount of gas discovered and produced is on a continuing decline. We must provide supplementary sources of gas to maintain our current supply level. It is the resounding consensus of all facets of our Government that gas from Alaska will be needed to augment supplies produced in the lower 48 States.

This project will replace imported oil. This project will create jobs for American workers and orders for U.S. businesses. Construction of this project will require a work force of 13,000 workers. Additionally, the project will help Canada maintain needed supply through gas exports to the United States and will strengthen our relationship with that nation.

Although there have been some disagreements recently in energy policy, the United States and Canada are inextricably bound to one another in areas of mutual interest, such as energy resource development. We need to emphasize this pipeline as a basis for ongoing cooperation with Canada.

Alaska gas is not subject to OPEC prices or embargo. The gas is to be distribu~ed to 45 States and will provide benefits to a wide variety of U.S. gas users. Moreover, construction will demonstrate to the rest of the world the deep commitment of the United States to discovering and developing secure domestic sources of energy. Estimates indicate we will produce a net national economic benefit of $40 to $90 billion through construction of this gas line.

I am particularly concerned that the failure to pass this waiver and the potential destruction of financing this pipeline might be regarding further exploration and development in the frontier areas of Alaska. We are all aware that the Department of the Interior has installed as one of the cornerstones of this country's energy policy-its Outer Continental Shelf development plan. Over the next 5 years, InteriOT plans 16 Outer Continental Shelf lease sales off Alaska. Approximately 70 percent of all the Outer Continental Shelf leases will be off Alaska. Obscure names to most Americanssuch as Diapir, Beaufort, Chukchi, the Navarin basin, and the North Aleutian Shelf are targeted for development and represent some of the highest priOTity areas in this Nation for oil and gas exploration.

Furthermore, leasing is to commence in the high potential national petroleum reserve--Alaska, in December. with future leases to occur in numerous upland areas of the State over the next decade.


By most estimates, onshore and off ~hore Alaska will provide one barrel of 011 for every barrel discovered in the rest of the United States. I ponder the questionwhat incentive is there to search for these hydrocarbons if there is no means of delivering the resources to market?

In a letter sent by Under Secretary of Interior, Donald Hodel, to Vic~ President GEORGE BUSH on July 24 of this year, the Department informs the Congress of the changes it felt were necessary in the outer Continental Shelf leasing schedule:

The location of sale areas with respect to regional and national energy markets has been considered. The Department of Energy (DOE) has advised us that the location of a supply region lacking existing transportation facilities should not be viewed as constraints to the outer continental shelf leasing process. Only with proven reserves can expenditure for new .transportation facillties be made. History has shown that once significant discovery ls made in an area without prior production, transportation networks will be designed to meet the requirements for expeditious production of the discovery.

We risk changing history through failure to act on this project. I submit to you that a discovery of 26 trillion cubic feet of proven natural gas reserves is greater than Rigniftcant. It is the larg·est single natural gas reserve discovered on the North American Continent. It is proven and is ready to be brought to market. A consortium of producers and sponsor companies have spent nearly $1 billion in Alaska and Canada preparing to bring the product to market. Yet, we stand today at a juncture where construction of this project is in doubt. One thing is certain, failure to pass this joint resolution approving the Pres~dent's waiver will send the signal loud and clear to our energy industry, financial markets, Canadian allies, gas consumers, and indeed the world thfl.t thls country is not committed to the expeditious production or even discovery of essential energy resources. Moreover it will set this project back 10 to :!.5 years at a minimum.

There is little point in investing the vast amount of capital required to explore frontier areas in Alaska if our Government is not committed to take steps necessary to f acmtate transuortio11 of the resources once discovered. What motivation or incentive is there to drill in the Beaufort Sea, or the Navarin basin, or the national petroleum reserve of Alaska if there is substantial fear that we as e, government are not wedded to the proposition that every effort must be made to provide a clear resource to areas of demand.

The challenge is being made that this project is not economic at this time. My answer to that is that this oroiect can provide natural gas for the next 25 years in the lower 48 at coc;tc; rang-ing from $4.13 to $5.67 per milUon Btu'sin 1980 dollars. A1though the initial cost of procuring Alaska natural gas may be higher than comoeting ~ourcec; of sunulv, over thg,t 25-vear period. this Dl"Of P.Ct will provide th~ lowec;t cost ns:itural gas in the country. An average estimate for the cost of oil over the same time is

approximately $9 per million Btu's-in 1980 do:lars-the Alaska Natural Gas Transportation System will be providing a relatively inexpensive source of energy to consumers.

This analysis docs not even consider the potential 100 to 200 trillion cubic feet of estimatsd reserves remaining to be discovered in Alaska. The major portion of that potential is expected to be discovered on the North Slope and can conceivably be served by this transportation system. This is what we are really se~king to provide.

Regardless of future discoveries, the 26 trillion cubic feet of proven reserves that would certainly be served by ANGTS is sufficiently large to attract investment by the three principal North Slope gas producers-Arco, Exxon, and Sohio, of approximately $9 billion in total financing responsibility. That is; these companies are willing to participate if Congress passes this waiver permitting them to do so and financing can be obtained.

Congress is currently poised to make a decision with irreversible effects on the future development and exploration in frontier areas in Alaska. The President's waiver of law is designed to allow domestic and foreign institutions to provide financing for a $40 billion project. Due to the enormous scope of this project, project sponsors cannot obtain sufficient financing domesticallv and must seek the vast majority of debt capital abroad.

We are, therefore, in need of creating a legal and regulatory framework that would offer suffic;ent certaintv +,.., r.'):nvince international lending institutions that this project is competitive in relation to other world class investment opportunities.

Significantly, the Soviet Union has constructed approximately 6,000 miles of 56-incb gq,c; pipelines between 1976 and 1980. Furthermore, the Russians plan to Jay roughly 10,000 miles of 56-inch ptpe from fields in western Siberia to central and western areas of European Russia between 1981and1985. There is no doubt the Siberian pipeline and other Soviet pipeline projects will compete with the capital and supply markets in the industrialized world to accomplish the Russians' objectives. The question is the degree by which their efforts can be offset.

This waiver of law adonted by the President w;ll remove barriers that currently :rrohi.bit private ftnancing and will permit expeditious issuance of the final certiftcq,te authorizing the complet;on of ANGTS. This waiver will accomplish the essential obiectives of permitting equity participation by North SJope producers in the pipeline proiect. allowing the Federal Fnergy :Rersulat.orv r.ommic;si.on to approve. at its discretion, a tariff alJowing sufficient certaintv to warrant t.he enormous sums needed for private financing, and enable the Federal Energy Regulatory Commission <FERC) to expedite t.he issuance of a ~nal certificate of public necessity and convenience.

Altnough there are seven s:oecif'lc issues ra;sed in th~s wai.ver. only two h!'!ve seemed to draw substantial opposition

from Members of Congress or private interest groups. The first controversial item is the issue of "regulatory certainty." This waiver is designed to assure lenders that authority of the Federal Energy Regulatory Commission to modify or rescind orders cannot be implemented such that the income which would serve as security for loans would be reduced below the level necessary to retire the principal of the loan and to pay the interest thereon.

There is a body of law that indicates the current authority of FERC to take such an action. It can hardly be expected that sums of the magnitude required by this pipeline project can be obtained if FERC is able to change the project tariff in a manner that would reduce revenues below the level necessary to service project debt. In fact, it is inconceivable that prudent lenders would take such a risk in the face of the broad discretion current1y vested in FERC.

The most contentious element of the waiver is the issue of billing commencement. Under existing law, consumers cannot be billed until the entire pipeline is complete from the exit point of th3 conditioning plant through Alaska to Canada to the connecting point with thP. prebuilt sections at Calgary. This means, in effect, that consumers cou!d be billed prior to gas actually flowing through th~ pipeline.

This is pursuant to the President's decis'.on and report to Congress on t!lJ Alaska Natural Gas System in September 1977. This waiver incorporates the conditioning plant into the pipeline system and separates the system into three discrete segments. Billing upon completion of any one of the three segment;; can commence only after a date determined by FERC upon wh'ch the entire project, including the conditioning plant. can reasonably be completed. Consumers will not be responsible for any exoense until that time.

At that date, consumers could be resnonsible for the full cost of service for the CaT'adian rort;on of the pipeline presuming the ·conditi.on!ng :rlant segment, the Alaska pipeline segment from the Canadian border to the conditioning plant, or both Alaska segments are not completed. The reason full cost is appropriate for the Canadian segment is the commitment of the orior administration to Canada to provide such a tariff as a means of securing financing for the Canadian portion of the project.

In contrast, the Alaska pioeline segment, which is constituted bv pipeline from the Canadian border north to the conditionlng plant at Prudhoe Bay, can upon com'l"'letion after the date determined by FERC, receive what is known as minimum bill. Minimum bill permits recovery of the actual operation in maintenance expenses, current taxes, and amounts necessary to service debt, including interest and scheduled retirement of debt. This is assuming one of the other three segments is not completed.

The same analysis aoplies to the conditionin!5 nlant. It must be noted that no return on equity can commence unti.l gas is flowing. Therefore, there is tremendous incentive upon the equity participants in

October 19, 1981 CONGRESSIONAL RECORD- SENA TE 24341 this project to expeditiously complete the project. This waiver does not grant the equity participants in the project 1 cent until they have fulfilled their obligation to provide gas to consumers in the lower 48.

The issue then is what amount of risk is the con.sumer really absorbing in this project? The answer is, the consumer is assuming a minimal portion of the risk of delay in this project. Not only is there an incentive against project delay built in by the failure of the waiver to provide any return of equity until completion of the entire system, but also there is the additional guarantee of completion provided by the requirement that the entire pipeline segment in Alaska from the border of Canada to the conditioning plant at Prudhoe Bay be completed prior to any precommencement billing.

The same requirement is placed upon the conditioning plant segment as a prerequisite for preconditioning billing. The consumer is therefore endowed wit:\} the dual protection of the minimum bill concept while being guaranteed that the most significant portion of this pipeline must be entirely complete prior to any billing. This concept falls far short of construction work in progress <CWIP), that has been sought by patential lenders for this project.

I wish to quote the President's synopsis accompanying his waiver package:

It is critical to the energy security of this country that the Federal Government not obstruct development of energy resources on the North Slope of Alaska.

This project is a c·atalyst for future energy development and will help us meet our demand for gas in the 1980's, 1990's, and into the next century. Additionally, this project will offset foreign oil and enhance national security derived from a reduction from our dependence on foreign oil.

The Alaska Natural Gas Transportation System will create .iohs for the U.S. workers and orders for U.S. businesses and in fact provide a net national economic benefit that has been estimated at $40 to $90 billion. Finally, the natural gas pipeline will benefit U.S. consumers by reducing the overall costs of their energy requirements, providing an energy resource of the cost that will decline over time, and at a rate less than that of foreign oil and perhaps other domestic oil and gas resources, and offers a reliable source of domestic energy to 45 States not subject to OPEC price increases or embargo.

I wholeheartedly join my colleagues in offering this resolution approving the President's waiver. We must lay aside the regulatory and legal obstacles clearly impeding private financing of this project. I am confident, concerning what is at stake, that the Congress will act expeditiously to do so.

The ACTING PRESIDENT pro tempore. Under the previous order, the Senator from Alaska <Mr. MuRKowsKI) is recognized for not to exceed 15 minutes.

Mr. MURKOWSKI. Mr. President, today it is my privilege to .ioin Senators McCLURE, JACKSON, and STEVENS in the introduction of the resolution of approv-

al for the "waiver package" proposed by the President to facilitate the construction of the Alaska Natural Gas Transportation System.

Mr. President, in my mind, this is one of the most important pieces o.f legislation that will come before the 97th Congress. Swift action and approval of this resolution by the Congress will help insure the completion of a project that will bring an estimated 26 trillion cubic feet of natural gas from Alaska to the "lower-48."

I might mention, too, Mr. President, that this project is the choice of the environmental community over the other two proposed routes, namely, the Canadian Arctic gas route and the El Paso route which involved gas liquefaction.

Mr. President, I can think of no other project at this time that would have a more dramatic effect on the U.S. economy than the expenditure of $40 billion on this project, which will have such a vast effect on employment in our country, initiating some 16,000 jobs.

Mr. President, that is just the beginning. It is estimated that up to 10 times the amount of proven natural gas reserves, that is, 26 trillion cubic feet of proven reserves, can be made available through increased exploration and development in the Alaskan Arctic over the next 20 years.

Without a means to bring this tremendous resource to market, we deny ourselves the opportunity ·to displace expensive and unreliable sources of forelgn oil.

I do not have to reiterate the painful lessons of past oil shortages and the energy-related political events tha.t have shaped recent history. Senator McCLURE, my good friend and chairman of the Energy Commi'ttee, has already spoken a'bout the importance of this project -to our goal of energy independenr.e. Although the world presently has a socalled "energy glut," no responsible person-and certainly not the U.S. Government--can rely on this tenuous glut. It could very well disappear tomorrow, or next week, or next month. Our country, relying principally on private enterprise, must continue to develop aggressively new, domestic sources of energy to fuel our economy.

The contribution which this proposed gas pipeline can make to America's economic well-being and America's national security is truly significant. Completion of the project, therefore, is a matter of national importance. Congressional approval of President Reagan's "waiver package" by adoption of tihe resolution we introduce today will move the project toward completion.

Mr. President, much has changed since 1977 when President Carter presented his decision and report to Congress on the Alaska Natural Gas Transportation System. I believe Senator JACKSON will elaborate on the signiftcance of tha:t point and the subsequent need for a waiver package given today's circumstances. Inflation has pushed the projec·t's cost estimates upward, and financing arrangements have and will continue to become increasingly complex due to the global monetary situation. This gas transportation system in its entirety will

cost over $40 billion in "as spen:t" dollars if completed in 1986 as now projected. It will be the most extensive privately tmancea. proJect m tne history of the free world.

With these enormous capital costs, deve.1.oping a sumc~ent and workable financing plan has 'been and will continue to be a great cihallenge. The spansors, the gas producers, the pipeline companies, and a number of financial institutions have already had many discussions in this regard. Members of Congress who have been working on this "waiver package" have certainly become well aware of the unprecedented financial commitment it will take to compete the project.

The "waiver package" or terms of financing, includes several key provisions. Flrst, it is now clear that the gas producers will need to have an equity or ownership interest in the project. Given the tremendous financial requirements of a project of this magnitude, equity participation by the energy industry is crucial. The current prohibition against producer equity participation is based on antitrust concerns which can be addressed at the t ime of final FERC certifica·tion of the project. Therefore, sufficient antitrust protection will be insured.

Other waivers address the question of regulatory certainty. The financial community requires some assurance that the income stream which serves as security for their loans will not be reduced below the level necessary to repay the debt. Essentially, th '.s waiver simply precludes the Federal Energy Regulatory Commission from undercutting the security of the loan through future modification of the project tariffs in such a way as to seriously endanger debt servicing.

During the course of the lengthy discussions on the "waiver package," it also became clear that minimal assurances against the risk of noncompletion of this 4,800-mUe pipeline system must be provided. The Canadian National Energy Board has already approved the tariff for the Canadian pipeline segment, wh~ch provides for the recovery O'f "full cost of service" upon com pl et; on and commission of that segment of the pipeline. This is in keeping with an agreement between President Oarter and the Government of Canada which was reach-ed prior to the prebuilding of' some of the Canadian segments of the pipeline that hwe since been done. Additionally, financial experts who have studied the Alaskan segments of the project-the $6 billion gas conditioning plant and the $21 billion Alaska pipeline-have without except:on indicated that some minimal assurance to investors for operating ' expenses. taxes, and debt service will be necessary if financing for this enormomly expensive project is to be forthcoming.

After reviewing this situation carefully and considering the advice of financial experts, Senators working on this "waiver package" and the administration have included as proposed a procedure in the "waiver package" Which will enable the Federal Energy Regulatory Commission under very lim1ted circumstances and very specific terms to develop a tariff that will provide for an


assured minimal fl.ow of revenues to investors prior to the completion of the entire system. The 1977 Presidential decision proh:_bited such a tariff.

The propased "waiver package" would permit FERC to approve, in irts discretion, a tariff permi1tting billing to commence for the gas conditioning plant, the Alaskan pipeline segment, and the Canadian segment of the pipeline system upon their individual and separate completion and commissioning 'buit not before a target completion date es:tablished by FERC as the most likely date f'or the transportation system oo begin operation.

feet of natural gas to meet our country's energy needs and reduce our dependence on foreign energy sources is truly unthinkable.

Moreover, if we fail to develop the means to bring 26 trillion cubic feet of known natural gas reserves to market, then all of our discussions of accelerated gas leasing in Alaska are purely academic. This applies to offshore wells in Alaska as well.

FERC would be authorized to permit the U.S. sponsors to charge a minimum bill to recover actual aperating and maintenance expenses, current taxes, and debt service, including interest and scheduled debt retirement after the 'target completion date set by FERC and upon completion and commissioning of each of the two individual segmentsthe gas condi·tioning plant and the Alaskan pipleline segment. FEiRC would also be authorized, consistent with the tariff ail.ready approved bv the Oanadian Energy Board, to permit Canadian sponsors to charge the full oost of service, including a return on equity, after the target completion date set by FERC and upon completion and commissioning of the system in Canada.

Contrary to certain statements about this part of the "waiver package," it would not reassign the risk of noncompletion of the entire pipeline project to consumers. Hather, the risk of noncompletion would be shared between investors and consumers. Investors would continue to assume the risk of noncompletion for their respective segments. If any segment were not completed, the investors in t;ha;t segment would bear the loss associated with its noncompletion. Consumers would assume the responsibility for the repayment of debt only after the target completion date and completion of one or more segments. Equity would continue to remain at risk until service commences. That is some $6 billion worth of equity risk.

Mr. President, this very limited authority for FERC to approve billing before the entire system is completed is not an opportunity to place on consumers the entire risk of noncompletion of this transportation system. U.S. sponsors, at most, would be able to recover necessary operating expenses, taxes, and debt service-not return on equity-upon completion of one or the other of the two segments in Alaska and only after the target completion date set by FERC.

The financial community has made it as clear as it can be that without this limited FERC authority, the enormous capital which must be raised for this project will not be forthcoming. That is the bottom line, Mr. President.

I sincerely doubt-given the impetus which will develop to complete the project once it is underway-that billing prior to completion of the entire system will ever occur. However, in evaluating such a possibility, the risks of not having this vital project completed must also be considered. Not to build this project which will deliver nearly 26 trillion cubic

There is another consideration that demands we act quickly to pave the way for the pipeline's financing and construction. The Soviet Union is embarking on the construction of a 3,600-mile natural gas pipeline from Western Siberia into Western Europe. This pipeline is expected to cost the Soviets approximately $10 billion and the West European :financial community will probably be supplying a significant portion of this financing.

It is unlikely that both the Soviet and Alaskan pipelines can be financed during the same time frame due to the immense capital requirements involved and the current global monetary and economic situation, in addition to the availability of pipe which would come from roughly the same sources. There is an additional important reason for us to adopt this "waiver package" and proceed with financing arrangements for the Alaskan pipeline now.

Moreover, Mr. President, I believe that it would be regrettably ironic if the Senate failed to approve this package and we fa:led to move ahead with the projects financing and construction. The Western Europeans who will receive the Soviet natural gas are clearly willing to rely upon an energy l)OUrce which-in a poHt1cal context-may be viewed as potentially unreliable. Nevertheless, the Western Europeans and the Soviets are moving ahead. We, on the other hand have an opportunity to develop our owr{ domest'c, secure source of energy. It would be irresponsible for us to fail to do so.

America is fortunate to have the unparalleled technological capability to e_'l:tract ~nergv from seemingly inaccessible regions. If we fail to take advantage of our ~echnological advantage by not completmg the Alaskan pipeline we shall fail to achieve a greater degr~e of en~rgy independence while the Soviet Umon strengthens its own position. This is a consequence I do not beEeve we can a1ford.

Finally, Mr. President, I want to reiterate the importance of this project to our relationship with Canada. We have made a substantial commitment to the Canadians, and we have repeatedly assured them in numerous legislative or

· executive actions . that this pipeline would be built. Relying upon these assurances, the Canadian Government authorized additional natural gas exports and the sponsors in Canada undertook to prebuild portions of this system in anticipation of construction in Alaska. Expectations are high throughout the Canadian Government and private sector. Any perceived unwillingness by our Government to take reasonable steps to promote this project will certainly be

interpreted as a breach of faith, if not a breach of international agreement. We may needlessly rlsk harm to our already delicate commercial relationship with Canada.

As President Reagan indicated in his October 6 telegram to Prime Minister Trudeau:

This (Ala.ska Natural Gas Pipeline) project is ~mportant not only in terms of its contribution to the energy security of North America, it is also a symbol of U.S.-Canadian ab111ty to work together cooperatively in the energy area. for the benefit of both countries and peoples.

Mr. President, we are at a crucial juncture. Simply put, if we fail to act and approve this resolution, we are denying ourself the opportunity to achieve a greater degree of energy independence. That is not an alternative, Mr. President, that I can live w~th, and I am certain my Senate colleagues will share that conclusion and support this resolution.

ORDER OF BUSINESS Mr. JACKSON. Mr President, I sug

gest the absence of a quorum. The ACTING PRESIDENT pro tem

po.,.e. The clerk will call the roll. The legislative clerk proceeded to call

the roll. .......... ·. i.:>C .. :IMITT. Mr. President, I ask

unanimous consent that the order for the quorum call be rescinded.

The PRESIDING OFFICER. Without objection, it is so ordered.

Mr. SCHMITT. Mr. President, a parliamentary inquiry.

The ACTING PRESIDENT pro tempore. The Senator will state it.

Mr. SCHMITT. Is it necessary to get unanimous consent to proceed for 3 minutes?

The ACTING PRESIDENT pro tempore. At this point, it would be. The next order of business is for the majority leader to be recognized for 15 minutes.

Mr. SCHMlTT. Mr. President, I ask unanimous consent that I may be permitted to proceed for 3 minutes.


<The remarks of Mr. SCHMITT at this point in connection with the introduction of legislation are printed under Introduction of Bills and Joint Resolutions.)

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

The PRESIDING OFFICER (Mr. ANDREWS). The clerk will call the roll.

The legislative clerk proceeded to call the roll.

Mr. PROXMIRE. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.


ROUTINE MORNING BUSINESS The PRESIDING OFFICER. The Chair

will advise the Senator that under the previous order there will now be a period for the transaction of routine morning business for not to exceed 30 minutes

Oct-ober 19, 1981 CONGRESSIONAL RECORD- SENATE 24343

with statements therein limited to 5 minutes each.

Mr. PROXMIRE. Mr. President, I appreciate that. What I am going to do now is simply go ahead with some morning business, which I happen to have. I am waiting for Senator HELMS and Senator HUDDLESTON to come to the floor for a colloquy on the dairy issue, but until they come to the floor l will desist on that issue.

SENATOR HOWARD METZENBAUM: LEADER OF THE ANTI-INFLATION FIGHT THROUGH COMPETITION Mr. PROXMIRE. Mr. President, the

No. 1 economic problem facing this country is still inflation, and the best tool we have to fight inflation is vigorous competition. That is why Senator HowARD METZENBAUM of Ohio is servinig this country's economic interests so well. Senator METZENBAUM has been the chairman of the Senate Subcommittee on Antitrust, Monopoly, and Business Rights.

He has been an eminently successful businessman himself. He understands from solid and successful experience the vital importance of vigorous antitrust enforcement to competition and of competition to stable prices. Our best regulator by far is competition. It has served this country spectacularly through our long climb to become the dominant economic power on Earth.

Why have we won this preeminent economic position? Other countries have more people, more resources. But no country throughout its history has more consistently stressed competition and enacted laws to secure it more faithfully than the United States.

Senator METZENBAUM has wrnten an article which appeared in yesterday's New York Times. He documents, in spades, the charge that the Reagan administration has turned its bacl{ on the enforcement of our antitruc;t Jaws bv appointing as Chief of the Antitrust Division of the Justice Department William F. Baxter.

Mr. President. you have to read the Metzenbaum article to fully understand the devastating effect thls appointment will have on competi.ti.ve pricing in this c01mtry and how ironic. at a time when our No. 1 economic problem is inflat;on and when the best way to fight inflation is through competition, that this administration, while professing it~ belief in the free market, should virtually drop enforcement of our antitrust laws.

Mr. President. I hooe every Senator wnl read thjs excellent article bv Senator MET?.ENBAUM. I ask unanimous consent t.hat it be urint~d in t.he :F?Ecmm.

There being no objection. the art;cle was ordered to be printed in the RECORD, as follows:

[From the New York Times, Oct. 18, 1981]

MERGERS AND ACQUISrrIONS: Is WILLIAM BAXTER ANTI-ANTITRUST?

(By Howard M. Metzenbaum) The Rei:i.gan Whlt.P. House has a penchant

for entrusting administration of our most important laws to those who belteve they should not be enforced. Nowhere ts this bet-

ter illustrated than in the case of Willia:m F. Baxter, chief of the Justice Department's antitrust division.

In his first months in office, Mr. Baxter has announced that he will ignore what one of his top assistants. conceded was "clear judicial precedent" from the Supreme Court that manufacturers cannot set the retailers' price. He has also said he will ignore equally clear Supreme Court rulings against mergers and other arrangements in the chain of production or distribution of a product.

Describing such precedents as "rubbish," "misguided," "not well enformed," he has sent signals to the business community that mergers heretofore considered beyond the pale are now permissible.

According to a partner at the investment banking firm of Dillon, Read & Company, this. reversal by the nation's top antitrust official "should spark a 10 percent to 15 percent pickup in merger activtty." And Mr. Baxter says he plans to intervene in private antitrust suits on tbe side of the dP.fendant.s and to review old consent decrees to undo controls that he thinks his "misguided" and overly "activist" predecessors went too far in obtaining.

He has agreed to drop the landmark suit against rthe American Telephone and Te1egranh Company, which he said he would "litigate to the eyeballs,'' in return for two conditions of the kind he had earlier !ndlcated were totally inadequate. To date, he has filed no suits not already started by his predecessors, and has dropped two.

Mr. Baxter's views have also confused corporate counsel. At a. meeting of the American Bar Association in August, attorneys, noting the dtrrerences between Mr. Baxter's view and Supreme CoUI'lt precedents that have never been overturned or even questioned, asked how an attorney could sensibly advise a client.

All of this has been done without going to Congress. Is it any wonder. that true to the blparitlsan tradition of antitrust, Republicans and Democrats alike have warned about a policy that, in the words of Senator Slade Gorton, Republican of Washington, amounts to "a signal to the business community that violwtions of current law will be tolerated?"

The Baxter policies are a single-minded ..1.pplication of University of Chicago style economics. Those pollcies look only to deductively inferred economic efficiencies in evaluating business arrangements, and disdain the entire political and. social dimension of our antitrust laws. They assume thait almost anything business does ls rational and therefore right.

This economic philosophy has little basis in fact, and even less support in statute and case law. It is inconsistent with the entire antitrust tradition.

Consider mergers for example. Mr. Baxter finds nothing wrong with vertical and conglomerate mergers that have no substantial horizontal effect and finds nothing disturbing about merger trends or merger waves. He thinks that only inefficiently managed companies are taken over and that mergers usually result in a transfer of "assets ... into the hands of those managers who employ them most efficiently."

"Rubbish,'' to use one of Mr. Baxter's favor! ta expressions. Many mergers-particularly of the conglomerate and vertical varietyare highly inefficient. The Mobil Corporation has lost hundreds of millions of dollars on its Mont5omery Ward acquisition. The Exxon Corporation bought the Reliance Electric company for $1.3 billion in order to manufacture and market a new energy-saving motor device, only to conclude a year later that the device was a dud. One merger consultant recently conch1ded that seven out of 10 mergers are disappointing and as many as 30 per:::ent are total failures.

Why? Because many corporate managers today have a short-run horizon. They are

professional managers, financiers, and the like. They understand price-earnings ratios, leveraged buy-outs, and the world of finance. But they are not really production-oriented, which is hard and risky.

In an article in the Harvard Business Review, a European businessman said that American companies seemed "more interested in buying other companies than they are in selling products."

That's why, contrary to Mr. Baxte.r's notions that mergers come from acquired-company inefficiencies, acquisition-minded executives look for highly profitable companies.

Mr. Baxter's lack of concern for vertical mergers and distribution arrangements, except where there are obvious horizontal consequences, ls just as unrealistic. Recent economlc analysis shows clearly how vertical mergers can damage competition. The Baxter view also ignores defensive and contagious vertical integration that blocks entry and makes it hard for small competitors to survive.

Of even greater concern ts Mr. Baxter's complete disdain for Congress' repeated emphasis on the social and political dimension of the antitrust laws. He purports to know nothing about how to measure corporate power and has suggested that if Congress ts concerned about size and power, it ought to pass a law about that.

But Congress has already passed such a law. Not once but at least four times: The She.,.ma'1. Antitrust Act of 1890, the Federal Trade Commission Act of 1914, and Clayton Acts of 1914 and 1950, which the Supreme Court has interpreted many times in the s::i.me way. And it is indisputable that every time the social aspects were crucial.

Mr. Baxter may think this ls rubbish, but it's the law. One Republican Senator put it: "Any approach that amounts to a change in existing law must first come before Congress."

At root, Mr. Baxter's view is that whatever buc:iness does is right, what's good for General Motors must be good for the country. Our antitrust laws are premised on a different philosophy and Mr. Baxter should not be in charge of enforcing them.

GENOCIDE CONVENTION DOES NOT REQUIRE EXTRADITION

Mr. PROXMIRE. Mr. President, when I first began to make my daily speeches urging Senate ratification of the Genocide Convention, I did not imagine that 14 year~ later it would be necessary to refute the identical charges initially leveled against this worthy document.

For over 30 years the Senate has withheld approval from a convention which reryresents a noble and worthwhile princinle. Although refuted on innumerable occasions, the objections to the treaty still persist. The latest attempt to refute the worthiness of the Genocide Convention comes from the "White Paper on the Genocide Convention," a document distributed by the liberty lobby.

Among the old criticisms which once again appear in this paper is the allegation that, if ratified, the Genocide Convention will allow the extradition of American citi7.ens for trial by an international court. This, the article paints out, would jeopardize the constitutional rights of any American who was actually extradited.

ThP, simple fact is that there is no provision for extradition within the Genocicle Convention. Ratification of the treaty would not affect existing extradition treaties to which the United States is

24344 CONGRESSIONAL RECORD-SENA TE October 19, 1981 a party. As stated in the understanding accompanying the treaty:

Nothing in Article VI shall affoct the right or any state to bring to trial before its own tribunals any of its nationals for acts committed outside the State.

No international tribunal capable of prosecuting any American or other individual exists at the present time. Any future international court would be created only as the result of a new treaty. Both the ratification of such a treaty, and American acceptance of its jurisdiction would require Senate consent. It 1s inconceivable that the U.S. Senate would approve of the creation of an institution which might jeopardize the rights of American citizens.

The objections to the Genocide Convention are not based on a true appraisal of the meaning of the document itself. Yet, for over 14 years. I have watched with increasing unhappiness as these same issues are constantly reinvoked. It is time to ftnally lay these criticisms to rest permanently, and to ratify the Genocide Convention.

The Genocide Convention is nothing more than an attempt to extend international protection of human rights in a more concrete and meaningful way. Over 80 nations have already ratified this convention. The United States is overdue in its ratification of this meaningful document.

Mr. President, I yield the floor. Mr. BAKER addressed the Chair. The PRESIDING OFFICER. The ma

jority leader is recognized.

THE DEATH OF MOSHE DAYAN Mr. BAKER. Mr. President, I was

deeply saddened to hear Friday of the death of Gen. Moshe Dayan. With his loss, the world at large is a poorer place.

As a soldier and a statesman, Moshe Dayan captured the imaginations of people throughout the world. As an Israeli born in Galilee, he captured the hearts of his countrymen. For those of us who admired him and who respect the State he so ably def ended, no one more personifies the indomitable spirit of Israel than Moshe Dayan.

Mr. President, I and a number of my colleagues had the opportunity to visit with General Dayan this past April in Jerus!llem. Although he appeared frail, the animation and imagination that characterlz;ed Moshe Dayan had in no way diminished. The time that we spent with him in the King David Hotel was a truly memorable experience.

It occurred to me then that the soldiers who become truly great, who become leaders honored throughout the world, are the soldiers who, in the final analysis, were men of peace-men who yearn for peace perhaps more deeply than those who have never borne the calamity of war.

As a leader in a region that has known too often such calamity, and as a man for whom the defense of his Nation was paramount, Moshe Dayan was s.bove all a man of peace. As he said to us in April:

We (the Arabs and the Jews) have to live with each other, not in confiict with each other.

Peace will come to the Middle East only when all its leaders can realize and acknowledge his greatness and his wisdom.

Mr. President, I yield the floor.

THE WAR ON CANCER Mrs. HAWKINS. Mr. President, I am

sure that everyone in this Chamber shares my concern over the articles on "The War On Cancer" currently being published in the Washington Post and in hundreds of other newspapers across the Nation. These reports of deaths and injuries related to the National Cancer Institute's anticancer drug development program are particularly disturbing to me as chain:nan of the Labor and Human Resources Committee's Investigations and General Oversight Subcommittee which has been investigating the NCI's anticancer drug development program for the past 7 months.

I wish to announce, Mr. President, that, on November 3, 1981, the Investigations and General Oversight Subcommittee will conduct another public hearing on these very same matters and more. The next hearing, originally sch~duled for mid-October, was necessarily postponed until November 3. This new hearing is the logical next step after more intensive investigation by the subcommittee staff.

The subcommittee's investigation of the NCI's drug development program and the Food and Drug Administration's regulation of the program was accelerated in April of this year foll.owing an exch_ange of correspondence between Dr. J. Richard Crout, Director of the FDA's Bur~au of Drugs, and Dr. Vincent T. De Vita, Jr., Director of the NCI.

In a letter to Dr. DeVita, dated April 6, 1981, Dr. Crout was sharply critical of NCI for having delayed the reporting to Ji'.DA _and ~o the NCI-sponsored physic1a:n~mvest1gators of cancer patient fataht1es and injuries related to treatment with three anticancer drugs.

m a.\idition, :.Ur. Crout questioned whether those patients who had participated in experiments with these drugs were sufficiently brlefed on the hazards prior to giving their consent. In addition, he questioned the adequacy of the NCI's control over distribution of the experimental drugs. These matters were brought up during my subcommittee's first hearing on the national cancer program on May 21, 1981.

Therefore, I am particularly pleased that the Washington Post has subsequently followed up in depth on these issues raised in my subcomm.i.ttee. During his testimony, in April, Dr. DeVita assured the subcommittee that there had been a "misunderstanding"' between the NCI and the FDA and that the matter had been '"resolved."

However, as the subcommittee's investigation progressed over the next several months, it became all too clear that there still were serious deficiencies not only in the NCI's drug development'program, but also in the FDA's regulation of the NCI's anticancer drugs.

Since the subcommittee will hold another hearing on November 3 to examine

and clarify its new findlngs, I do not believe it is appropriate for me to comment at this time on the specifics. However I will state that the moJt serious probl~m identified by the subcommittee's investigation is the lack of an adequate program for monitoring hundreds of NCIsponsored human exper~ments involving 95 new anticancer drugs. Judging from the evidence gathered during the subcommittee's investigation, I wonder whether the automobile manufacturers of Detroit might have better monitoring systems for their products than does the NCI for its drug development program on human beings.

ln July of this year, when program deficiencies at the NCI and the r•rDA began to surface, I informed DHHS Secretary Richard S. Schweiker of my fear of a potential threat to the health and safety of cancer patients who volunteer to participate in NCI-sponsored drug experiments. As a re.;u1t, !Jr. i!.dward i'if. Brandt, Assistant Secretary for Health at DHHS, appointed a special tas!c force to review and evaluate the NCI's drug development program and the FDA's role as regulator. If I may, Mr. Pre!:iident I would like the exchange of correspondence between Secretary Schweiker and Dr. Brandt and me and between Dr. lJeVita and Dr. Crout to be made a part of the RECORD and ask unanimous consent to do so at thls point.

There being no objection, the letters were ordered to be prlnted in the RECORD, as follows:

U.S. SENATE, Washington, D.a., July 9, 1981.

Hon. RICHARD s . SCHWEIKER, Secretary, Department of Health and Human

Services, Washington, D .a. n-·tt :'~'!. S'P.': 0 "<:TO.'!.Y: As we agreed yester

day in our telephone conversation concerning •• • , • ~ ~. ;,;..;.; ~ fO.i.' ~ornpo.:ary as:>ignmen t o! a physician-scientist from the Department o! Health and Human Services (DHHS) to the Subcommittee staff, I am writing to provide you with examples of such temporary assignments executed in the recent past by the DHHS. Enclosed ls a listing of several examples.

I fully understand your concern !or not wishing to set a precedent in such matters, as expertise in science and medicine ls a premium in the Federal system. However, I am sure you can appreciate the necessity for such expertise in the Subcommittee's investige. tlon of the National Cancer Institute's Investlgational New Drug (IND) Program.

.As you know, the Subcommittee several months ago initiated an inquiry into the policies, practices and procedures o! the National Cancer Institute. Recent findings have prompted me to direct the Subcommittee staff to focus on the NCI's IND program.

In May of this year, the Subcommittee staff obtained copies of an exchange of corre::;pondence between Dr. J. Richard Crout, Director of the Bureau of Drugs within the Food and Drug Administration (FDA), and Dr. Vincent T. DeVita, Jr., Director of the NCI. In a letter dated April 6, 1981, Dr. Crout brought to Dr. DeVlta's attention a problem regarding the NCI's !allure to report in a timely fashion to the FDA adverse drug reactions of cancer patients who had participated in NCI-sponsored clinical trials. Dr. Crout raised other concerns with the NCI's IND program, including delays in submission to the FDA of annual progress reports on clinical trials, the adequacy o! patient ln!ormed consent, and control over the distribution of inve::;tlgational drugs. Subsequent correspondence between Drs. DeVlta and Crout

October 19, 1981 CONGRESSIONAL RECORD- SENATE 24345 would appear to have resolved these issues. I am enc.Losing for your reference photocopies of the correspondence between Drs. Crout and DeVita.

Despite this latest understanding reached between the NCI and the l<·DA, recent events and discoveries pertaining to the NCI's IND program have given me cause for great concern over the integrity and efficiency of the program, which impacts on more than 35,000 cancer patients annually. The following a.re examples of incidents involving NCI-sponsored clinical trials and in vestige.tors:

1. On February 18, 1981, the NCI reported to the FDA that an adult patient had suffered renal failure following treatment with chlorozotocin, an investigational drug similar in chemical structure to methyl-OCNU, which also has been shown to cause renal failure.

2. The NCI reported to the FDA on March 25, 1981, that the use of methyl-CCNU may have caused acute leukemia in three patients.

3. A report from the NCI to the FDA, dated June 17, 1981, stated that four patientsthree adults and one child-had developed congestive heart failure after receiving the drug dihydroxy-anthracenedione (DHAD). At least one of the three adults died of heart failure, and all three had been treated on a "protocol" not approved by the NCI.

4. On June 16, 1981, the NCI reported to the FDA the use of a radio labeled drug in four patients without an NCI-approved IND. The drug, which the NCI supplied to a pharmacologist, was to have been used for animal studies and not for clinical trial.

5. The NCI reported to the FDA on June 19, 1981, that a clinical trial, utilizing the drug deoxycoformycin (DCF), had been conducted without NCI approval.

6. Four adult patients died of liver failure after receiving the drug Indicine N-Oxide (INO), and at least two children died of liver failure possibly caused by the administration of INO.

My concerns are further buttressed by the contents of an internal NCI memorandum, which, in pa.rt, states that there ls a "lack of compliance with FDA regulations in the misuse of NCI lnvestigational agents." The memorandum contains several examples and states, "There are many others like this." The memorandum further states: ". . . I believe that I cannot ask our NCI staff to do the jobs of both meeting FDA regulations and of insuring the safe and coordinated development of our new agents while allowing this misuse of investigational agents to continue."

As Chairman of the Investieations and General Oversight Subcommittee, I am resolved to conducting a thorough and constructive inquiry into the NCI's IND program. But, again, I wish to emphasize that such an inquiry requires expertise in complex matters of biomedical research and the regulation thereof.

In light of the Subcommittee staff lacking in such expertise, it would be most heipfal 1! you could arrange to have a suitably qualified employee o! the FDA assigned :m temporary duty, and at the expense o! the FDA, to the Subcommittee staff !or a period not to exceed 90 days. Specifically, I am requesttng such temporary assignment of Dr. Michael Hensley o! the Division of Scientific Investigations at the FDA. My reasons fc.r requesting Dr. Hensley are: he ls familiar with the NCI's IND program; he personally does not object to such a temporary assignment; and he and his work product are known to Subcommittee staff.

Further, I am requesting that the temporary assignment of Dr. Hensley to the Subcommittee staff be executed at your ·n.rly convenience in response to the continuing potential threat to the health and safety of patients.

Should you wish to have further discussion on tn1s matter, p.e..se a.o noG hesHi:t.ve to Cil.11

me. 1\1.1.r . .iames .r·. Michie of the Subcommittee sta.i may be reached by your staff at 2':1:'i-8189.

Thank you for your cooperation. Sincerely,

PAULA HAWKINS, U.S. Senator.

INDIVIDUALS TEMPORARILY AsSIGNED The following is a listing of individuals

who were temporarily assigned from their positions with the DHHS to perform tasks for the U.S. Congress, and who remained on the DHHS payroll during such temporary assignment:

1. Dr. Robert Graham, a DHHS physician, was assigned to the staff of the Subcommittee on Health and Scientific Research for a period of more than one year during the 96th Oongress.

2. Dr. George Hardy, a DHHS physician, was assigned to the staff of the House Suboonuni ttee on Health and the Environment during the 96th Congress.

3. Dr. David Banta, a DHHS physician, served for a three-month period on the staff of the Office of Technology Assessment of the Oongress in 1978.

4. Dr. Fred Bergmann, a DHHS scientists, was assigned to the Office of Technology Assessment of the Congress for a six-month period in 1979.

DEPARTM~T OF HEALTH AND HUMAN SERVICES,

Washington, D.C., October 2, 1981. Hon. PAULA HAWKINS, U.S. Senate, Washington, D .C.

DEAR SENATOR HAWKINS: Thank you for the opportunity to meet with you on September 23 and to discuss your concerns relative to the role of the Public Health Service in the development of new anti-cancer drugs. On the basis of our discussion last week, I have appointed a special task force to conduct a 90-day examination of National Cancer Institute (NCI) and Food and Drug Administration (FDA) policies and procedures for the monitoring of investigational new drugs (INDs). I have named Lowell Harmison, Ph.D., as Chair of .the task force and have selected and appointed participants with the necessary breadth of management and scientific expertise to address the complex issues you have raised.

Dr. Harmison and other members o! my staff met with Mr. Jim Mitchie, Ms. Terry Parker, and Mr. Tim Jenkins of your staff on September 29. Based on this and earlier discussions with Mr. Mitchie, the goals of the task force will be:

1. to assess NCI management systems for monitoring new INDs.

2. to assess FDA's review of NCI activities relative to these drue'S, and

3. to develop reoommendations for improvement that may stem from the findings of the task force.

Regrettably, the · task force review cannot be completed prior to the Subcommittee hearings schedule:i for later this month; nevertheless, we will resoond to anv inquiries of the Subcommittee as completely as possible. I }('now you share my interest in providing the task force with adequa.te time to thorou~hly examine these issues and make appropriate and viable recommendations for improvement.

I will be meeting with Dr. Harmison on a bi-weekly basis during the course of this review and will be pleased to meet with you a11ain to keep you informed of our progress. I solicit your continued interest and suppor.t in improving the aualitv and standards for the care of cancer oatlents.

Sincerely yours, EDWARD N. BRANDT, Jr., M.D.,

Assistant Secretary for Health .

DEPARTMENT OF HEALTH AND HUMAN bE&VICES,

ApriL ti, 1981. Re: IND 7681/semustine-methyl CCNU.

I.ND 4090/ lomustine-Cee.1.~ l.i. IND 969/ carmusGine-BiCNU.

Dr. VIN..:ENT T. DEVITA, Director, National Cancer Institute, National

Institutes of Health, Bethesda, Md. DEAR La. DEVITA: I am writing to draw

your attention to a problem we have encountered regarding the re~orting of adverse reactions to FDA and to the clinical investigators performing Phase I and II studies under the sponsorship of NCI. Our specific concern was precipitated by the finding that neither FDA nor clinical investigators were advised in a timely fashion of renal toxicity in human subjects receiving nitrosoureas. Such a toxicity might have been anticipated in view of the animal findings with BiCNU and Methyl CCNU. In addition we have other concerns about delays in incorporation o! the nephrotoxicity in clinical protocols, delays in submission of annual pro6re55 reports to FDA, the adequacy of patient informed consent, the reporting of adverse reactions to the institutional review board (IRB) responsible for NCI's intramural studies, as well as continuing review of ongoing studies by the !RB, and control over dist ribution of investigational drugs.

As you know, representatives of FDA and NCI have met periodically over the past few years to discuss issues of mutual interest regarding the study of anticancer agents and to develop a working relationship between our respective staffs. These meetings led, in part, to publication in the Federal Register on May 1, 1979 o! a Memorandum of Understanding Relative to Anticancer Drug Development. In this MOU the Division of Cancer Treatment (OCT) agreed to comply with all applicable laws and regulations pertaining to the sponsorship o! investigational drugs for clinical trial. OCT also agreed to maintain with the Bureau of Drugs of the FDA a Master File which is to include DCT's plan for data reporting. DCT has filed such a plan with FDA. This plan includes a detailed flow chart on DCT's mechanism for dealing with adverse reactions when they are reported by investigators, describes the reporting responslb111tles of investigators and also states that the Cancer Therapy Evaluation Program of the DCT ls obligated to report any serious adverse reactions to FDA within 15 days.

Detailed below are areas where we feel that some of the commitments made ln the YOU and described in the Master File have not been met in the case of the ni~rosourea studies. Many of these observations were brought to the attention o! Dr. Bono and Dr. Poster of NCI by Dr. Hensley of our Division of Scientific Investigations in a meeting on June 6, 1980 when they were shown pertinent documents and correspondence. We recognize that you may have ta,,.en corrective action already in many instances.

A. Requirement for promot reporting of se!'lou s adverse reactions to FDA.

21 CFR 312.1 (a) (6) rem1ires that sTJonsors of investigatlonal new dru~s oromptlv lnve"ti!7ate and re'Jort to the FDA and to all i~vesti<>"ator.::; anv ftndi"'!?S associated wit:h the Use of t 1he dru~ that may SU~R"eSt Sil;?nlficant hazards. contraindications. side effects, and pr<:?c'3.utions pertinent to the safety of the drug.

On August 21, 1978 FDA received a complaint from a n:ot.her alle<dni.?; that her chlld d"veloped kidney failure followin!.?; treatment of brain tumors with methyl CCNU. She also told us that on August 22, 1974 she signed a consent but was lnfo!'IIled of two side effects only, nausea and a.plastic anemia. IND 7681 records as of 1978 did not identify renal toxicity in humans as an adverse re9.ction.

In our follow-up of this complaint we


learned that the Investigational Drug Branch (IDB), DCT lhad been notified as early as November l, 1977 and several times during 1978 regarding renal abnormalities observed following human use of nitrosoureas (methyl CCNU and BiCNU) .

By letter dated November 1, 1977 Dr. H. B. Neustein of Chlldren's Hospital, Los Angeles notified Dr. Andrew Turrisi of the IDB of renal toxicity in a patient treated with BiCNU.

By letter dated May 19, 1978, Dr. Abraham Lieberman of New York's Bellevue Hospital (Baldwin's group) notified Dr. Thomas Strike of the Brain Tumor Study Group (BTSO) of NC of renal toxicity in four patients treated with methyl CCNU and BiCNU. Dr. Lieberman stated that the purpose of this letter was to notify the BTSG and the FDA to the real dangers of long term chronic ther~py witih these nitrosoureas. This letter was acknowledged by Dr. Turrisi on June 15, 1978.

In a letter dated November 13, 1978 Dr. Jensen-Akula, IBD, reminded Dr. Richard Fisher, Senior NCI Investigator, Medicine Branch of a previous conversation regarding renal pathology in a patient treated with methyl CCNU at the Clinical Center. This letter also referred to "several reports of nitrosourea induced renal failure" (from Dr. William Harmon of Boston Children's Hospital, Dr. Hagelson of the Medical College of Virginia and Dr. Neustein).

F1DA, however, was not officially notified of such an adverse effect until March 2, 1979 in a cover letter from Dr. John Penta, Head, Drug Regulatory Affairs Section, IDB, NCI, to our Dlvision of Oncology and Ra.cf.iopharma.ceutica.l Drug P.roducts.

B. Requirement for prompt reporting of serious a;dver.se reactions to clinical investigators.

21 OFR 312.1 (a.) (6) not only requires reporting of adverse findings from IND studies to FDA, but to all investigators. There was a considera'ble delay in the reporting of the renal toxicity to both extra.mural and intramural investigators. As a result of various inspections conducted by FDA and a review o! some IND files we have observed the lfollowing situations:

1. 'Jntramura.l investigators. Dr. Jensen-·Akula in his November ·13, 1978

letter to Dr. Richard Fisher stated, " .... it does a;ppea.r that the nitrosourea.s have the ca.pa.city tb J.nduce renal damage if given for a long enough period o.r time." Distribution of this letter shows a. carbon copy directed to "Drug file Me CONU adverse drug reaction." Thus this official notification to Dr. F\isher occurred about six months after Dr. Lieberman's letter to NCI.

It was not until May 29, 1979, that Dr. Richard Fisher, Medicine Branch, COP/DCT/ NOT. notified Sta.ff, Medicine Branch, COP/ Dar/NCT. that" ... to date we know that at leaJSt one patient treated at this institution has developed chronic renal .failure in the absence of other Fnown causes." In this memo, Dr. Fisher detailed sipecifi·c measures to monitor trenal function of study subje·cts and noted th.at the conc::ent fo"'Ill for this study wm be appropriately modified.

2. Extra.mural investigators. Although the Bra.in Tumor Study Group

investigators were a.pppa.rent1y sent a copv of Dr. Lieberman's letter on June 7, 1978 it appears that it wa.s not until early 1979 that all methyl OCNU investigators were informed Of renal to'1.citv a.c;soclated wtt.h lt.s use. (A memo from Dr. Jensen-Akula dated February 23, 1979 informed all Investigators).

C. 'Delay In revision of protocols. There appears to have been a delav in in

corporating the findings of renal toxicity into clinical protocols.

Dr. Richard I. Fisher ~·as a principal investigator in clinical research prefect No. 76-C-151, "Therapy of Patients with Mall•mant Melanoma." conducted at NCI. The protocol for this continuing study, approved by the

NCI Clinical Research Subpa.nel on November 27, 1978 mentions that no renal toxicity attributable to methyl CCNU had been observed in man. A status report for this project dated October 18, 1978 states that no new hazards or serious discomforts were experienced and that a literature search disclosed no new hazards releva.n t to the protocol. In addition, Protocol No. 2091 lMay 2, 1980 revision in IND 4595/CeeNU) for a Northern California. Oncology Group (NCOG) study states that renal toxicities have not been a problem of clinical significance in man.

In contra.st, an undated Drug Master Sheet (appendix III, page 17) for Southwest Oncology Group study No. 7983 states that some cases of mild kidney damage have recently been observed in children, therefore kidney functions should be monitored.

D. Requirement for submittal of annual progress reports to the IND.

21 CFR 312.1 (a) (5) requires that the sponsor of an IND submit to the FDA accurate progress reports of investigations and significant findings at reasonable intervals not exceeding one year.

A review of the IND files for numbers 4595 and 969 shows that there have been no annual progress reports since October 20, 1977.

Also, although NCI did not withdraw IND 969 until March 27, 1980, there were no reports of renal toxicity associated with BiCNU treatment in the record.

No progress reports for IND 7681 were filed between October 20, 1977 and March, 1979. A progress report was filed in March, 1979.

E. Informed Consent Requirements. Section 505(i) of the Food, Drug & Cos

metic Act requires that the clinical investigator obtain the consent of the study subjects. "Consent" is defined in 21 CFR 310. 102(h) to include, among other things, the hazards involved.

The consent forms for Dr. Fisher's project No. 76-C-151, "Therapy of Patients with Malignant Melanoma", approved November 27, 1978, made no reference to the potential rislt of renal disease with nitrosourea. treatment.

F. Requirement for continuing review of studies by IRB and for reporting of adverse reactions to IRBs.

Assurances that an IRB will conduct reviews at intervals appropriate to the degree of risk, but not exceeding one year, a.re required by 21 CFR 312.1 (a) (2) item lOC. The regulation also requires that the clinical investigator report to the IRB any severe adverse reactions.

An FDA inspection of the NIH/NCI/Clinical Subpanel on November 20, 1980 revealed that adverse reactions were not always reported to the IRB but were reported to the Clinical Director of NCI. This Inspection also noted that reviews of ongoing studies are performed bv the Clinical Director of NCI, rather than by the IRB, as required by FDA regulations for studies Involving lnvestigational drugs.

G. Control over distribution of lnvestiga.tiona.l drugs.

The NCI was apparently unaware that Dr. Jaffe, who was resoonslble for the treatment of the child whose mother is<;ued the complaint that initiated FDA's review of renal toxicity with methvl CCNU. was using the :lrug in clinical trials. He had received the drug from an unFnown source and apparently was performing a cllnical trial outside of a.n approved protocol. We understs.nd, however, that as of January 24. 1978 NCI has been following written guldelin<?s for the sponsoring and monitoring of INDs which would decrease the llkellhood of such a. situation in the future.

On the basis of these findlng-s we ask that DOT/NC! take t:t>e steps necessary to a.ccompllsh the following:

Review your mechanism for reporting of adverse reactions to all appropriate .Parties, agencies and clinical investigators to assure that it is functioning in a. timely manner in accord with the plan described in NCI's Master File. We recommend that the ·system be audited periodically to assure that it ls meeting its objectives. In addition steps should be ta.ken to assure that new clinical protocols contain all serious adverse reactions previously identified.

Provide FDA with timely and accurate annual reports for all IND's.

Provide institutional review boa.rd (IRB) procedures which assure project reviews appropriate to the degree of risk, but not exceeding intervals of one year and assure that serious adverse reactions a.re reported to the IBR.

Please inform us within 30 days of receipt of this letter as to the actions you have already taken or plan to take to accomplish the above. My staff a.nd I will be pleased to meet with you and your staff, should you desire it, to discuss our findings and your proposed actions.

Sincerely yours, J. RICHARD CROUT, M.D.,

Director, Bureau of Drugs.

DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE,

Bethesda, Md., May 8, 1981. Dr. J. RICHARD CROUT, Director, Bureau of Drugs, Food and Drug

Administration, Rockville, Md. DEAR DR. CROUT: I am writing in response

to your letter of April 6, 1981, in which you raised a. number of questions concerning the nephrotoxicity discovered with the drug, Methyl CCNU, as well as other points a.bout NCI's sponsorship of drug trials and its reporting to the FDA. I wm respond in order to each of the points in your letter.

A. Requirements for Prompt Reporting of Serious Adverse Reactions to FDA

As you noted in your letter, the NCI Drug Master Plan includes a detailed flow cha.rt for dealing with potential adverse drug reactions. When possible adverse reactions a.re reported by an investigator, the NCI drug monitor is required to check the clinical information a.bout the drug and to convene the lnhouse Adverse Drug Re.action Committee which may then decide to classify the adverse drug reaction as "definite," "possible" or "not likely." In the case of the initial reports on Methyl CCNU brought to the attention of our staff, the extremely long time intervals between drug administration and renal lesions, as well as the existence of multiple other factors, raised serious questions concerning a direct relationship betwE:en the drug and the reaction. Because of these uncertainties, the NCI decided to classify the renal insufficiency as "possible but not definite drug reaction" and at the same time develop additional information before fillng an Adverse Drug Report with the FDA. Nonetheless, the NCI notified members of the Brain Tumor Study Group and the major users of the drug. It was not until early in 1979 that definitive information, consisting of the written report from Dr. Harmon, led the NCI staff to conclude a clear relationship. At that point, a.bout 1,100 Investigators carrying out treatment with tl°'e drug were notified of the adverse reaction, and a. formal Adverse Drug Reaction Report was filed with the FDA.

One might conclude that the time involved In carrying out this evaluation was greater than should have been the case, but I must point out that reactions occurrin~ after such a long period of drug treatment in cancer patients a.re not at all easy to classify. Although animal toxicology studies with M~thvl CCNU and the other nltrosourea.s clearly showed evlcience of a.cute renal toxicity. the la.ck of such effects In early cllnlcal trials suggested that the animal toxicology

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24347 studies represented false-positive results. we believe we have been responsible in reporting adverse drug reactions when firm conclusions have been drawn concerning such possible reactions. Incidentally, I have been unable to find any reference ito a specific 15-day reporting time in our Drug Master Plan.

We have reviewed our system of reporting of adverse drug reactions, and we believe it is functioning well at this time. This can be best described by detailing the steps we have taken with a recent Adverse Drug Reaction Report. During March of 1981, the NCI became aware of a number of cases of acute leukemia in patients previously treated with Methyl CCNU. The FDA was notified by telephone during the last week of March and more formally in writing within several days. At the sa.me time, a letter was mailed to all investigators (approximately 1,000) utilizing Methyl CCNU, cautioning them that this complication had been observed. Simultaneous1y, we initiated a chart review of the major clinical studies employing this drug in adjuvant settings similar to that of the original cases. When this review is completed, it should be possible to determine the incidence of leukemia among several thousand patients treated with Methyl CCNU. A panel of hematopathologists ls being convened to review the slides from these cases, following which it is anticipated that the results of this investigation wlll be presented for publication in a medical journal as well as through the Division of Cancer Treatment Bulletin. If it ls determined that a positive association has been established, we wlll file a formal Adverse Drug Reaction Report. In addition, other steps wlll be taken, including: 1) any new protocols submitted utilizing this agent wlll be required to include this complication in the protocol text as well as in the informed consent, 2) the guidelines protocol for Group C distribution will similarly be modified, and 3) we wlll establish an ongoing surve1llance of the existing protocols in which patients may be at risk for this complication. We believe this repres~mts a maximum effort on the part of DCT to pursue a potential adverse drug reaction.

Furthermore, the NCI ls now taking additional steps to assure that the oncologlc community remains aware of the general procedures for reporting possible adverse drug reactions. A notice is currently being prepared for mailin~ to all NCI investigators detaillng their responsibilities to report adverse dru~ reactions to NCI. In addition, the NCI has reminded the Chairmen of the clinical coopel'ative groups of their responslblllties in this area and has asked them to communicate this to their membership.

Finally, we intend to review these procedures annually fQr adverse drug re·actions reuortlnci; in order to identify 1any prohlems. This would be done one to two months prior to updates of the Drug Master Plan. In summary, the NCI believes that this system is functioning to a. manner appropriate to the purpose of informing investigators as well as protecting patients from unneeded harm.

B. Requirement for Promnt Reuorting of Serious Adverse Reactions to Clinical Investigators

1. Intra.mural In'vestigators As noted in Part A, we did not con'llder

the adverse drug reaction of Methyl CCNU to be est.ablished until February 1979, even though Dr. Jensen-Akula.'s letter of November 13, 1978. suggested that it was a possib111ty. In attempting to review what occurred between February 1979 and May 1979, however, we find that there probably had been some lack of communications bE>tween our Cancer Therapy Evaluation Proj:!'ra.m and our intramural Clinical Oncology Program. We cannot determine the exact cause of the nroblem, but we have taken steps to a.'lsure that it does not occur again. For instance,

we will insure that without exception all intra.mural protocols are entered into the computer file in our In vestiga.tiona.l Drug Branch, so that the intramural investigators wlll automatically receive any notices that a.re sent to extramural investigators. This apparently was the problem in the case under question.

2. Extramural Investigators As you note, the Brain Tumor Study In

vestigators were notified in June 1978 of a possible adverse drug reaction. Other investigators were not notified because, as stated a.bdve, the relationship had not yet been firmly established. As also noted in Part A, once the relationships had been confirmed, all investigators were notified.

C. Delay in Revision of Protocols With regard to the revision of the intra

mural protocol, the comments in Part B.l. are relevant. Thus, Dr. Fisher did not incorporate a change in his protocol until official notification of the adverse drug reaction had been received by the intramural Clinical Oncology Program, which apparently did not occur until May 1979. I have no specific explanation for the protocol from the Northern California Oncology Group, but we will insure through careful monitoring that changes in protocols are made as soon as information Ju.stifies such action.

D. Requirement for Submittal of Annual Progress Reports to the IND

we have recently reviewed all of the IND's under NCI sponsorship and did, indeed, find some for which annual re - orts were overdue. It is my understanding that all annual reports are currently up-to-date, and we will see to it that this situation persists.

E. Informed Consent Requirements With regard to the intramural project.

the comments in Parts B and C nertain. F. Requirements for Continuing Review of

Studies by !RB and for Reporting of Adverse Reactions to IRB's

A March 23, Hi81, letter from Dr. Petriccfani to Dr. Lipsett pointed out that not only NCI but a.11 of NIH was apparently opera.ting under procedures that were not consistent with FDA regulations. The NIH has now changed its rules so that we wm be tn compliance with FDA regulations in this regard.

G. Control Over Distribution of Investigational Drugs

As we have discussed on many previous occasions. the NCI procedures for controlUng the distribution of investigational drugs during the early 1970's left much to be desired. This ls one of the reasons that NCI and FDA developed the current distribution plan. As you noted in your letter, our present procedures provide much tighter control over drug distribution, and we believe the problems that were apparent during those early years wm not occur in the future.

In summary, I belleve that our investigation of the nephrotoxicity of Methyl CCNU was carried out in accordance with the spirit o! our Master Plan. although there may be some differences of opinion concerning the speed at which that investigation proceeded. As noted above, we have made certain changes in our overall procedures that we belleve will improve our monitoring of poRsible adverse reactions and our general oversight of investigationa.l drug studies.

I would be happy to discuss these matters with you at your convenience.

Sincerely yours. VINCENT T. DEVITA, Jr., M.D.,

Dtrector, National Cancer Institute.

DEPARTMENT OP HEALTH AND HUMAN SERVICES,

June 9, 1981. VINCENT DEVITA, Jr., M.D. Director, National Cancer Institute, Bethes

da, Md. DEAR DR. DEVITA: Thls replies to your let

ter of May 8, 1981, in which you described

certain procedural changes you have ma.de to improve the monitoring of lnvestigationa.l new drug studies, particularly the monitoring of possible adverse reactions. ln addition you described the circumstances relating to the identification of the nephrotoxiclty of Methyl CONU and the dissemination of information a.bout this adverse effect.

We believe that, when the prospect of renal toxicity of Methyl CONU was first ral£ed, NCI had an obligation under both FDA regulations and its own Drug Master Plan to report this possible reaction promptly to the FDA and to all cllnlcal investigators, rather than a wal ting more definitive data.

Section 312.l(a) (6) of FDA regulations states ''The sponsor shall promptly investigate and report to the The Food and Drug Administration and to all investigators any findings associated with use of the drug that may suggest significant hazards, contra.indications, side effects and precautions pertinent to the safety of the drug." (Underlining added) (See Attachment A)

You have said, "We have been responsible in reporting adverse drug reactions when firm conclusions have been drawn concerning such possible reactions." Such a statement overlooks one of the principal purposes of the lnvestigational new drug regulations. These regulations require that adverse reaction reporting shall not await a time consuming evaluation and shall not exclude certain categories of investigators.

The adverse drug reaction (ADR) flow chart from the Drug Master File dated January 24, 1978 indicates that the ADR form ls to be submitted to FDA as well as to all investigators receiving the drug, while the classification process ls going on. (Attachment B) This is consistent with item 31, page 20 of your Master File which states that the Cancer Center Director ls to report to CTEP "any serious adverse drug reaction immediately upon its occurrence. CTEP ls legally obligated to renort to FDA within 15 days." (Attachment C) Tncidentally. the 15 day rule applies to marketed drugs [310.300(b) (2) ]; for investlgatlonal drugs the rule is "prompt" reporting (for alarming findings, "immediate" reporting) [312.1 (a) (6)]. The memorandum of understanding between NCI and FDA effective February 5, 1979 also indicates that NCI wlll comply with all applicable laws and regulations pertaining to lnvestiga.tional drug sponsorship. (Attachment D)

In your letter of May 8, 1981 you noted the recent occurrence of a.cute leukemia in several patients treated with Methyl CONU and stated that you notified us and the clinical investigators promptly, with the inquiry into a. possible relationship proceeding after the notification. We a.re pleased to hear this.

We note your commitments to timely submission of annual reports and to compliance with JRB regulations. We agree with you that in recent years there has been an improvement in NCI's control over the distribution of lnvestlgationa.l drugs.

You have described in some detail the steps you have taken to improve the monitoring of adverse reactions and dissemination of information. To pr:went any future misunderstanding with respect to reporting requirements for adverse reactions, however, I am requesting your written assurance (a.) that the portion of NCI's Drug Master File shown in Attachment B to this lett~r reflects ~urrent and continuing NCI practice, (b) that NCI agrees to report adverse reactions to FDA under the conditions and time limits stated in FDA regulations, section 312.l(a.) (6) for lnvestigationa.l drugs and section 310,300(b) (2) for marketed drugs, and (c) that page 20 of the NCI Drug Master File s~own in Attachment C ls amended to be in conformance with the above noted FDA regulation.

I do not consider a meeting on this issue


as necessary if such assurance is received, but I would of course be pleased to meet if you feel it would be helpful.

Sincerely yours, J. RICHARD CROUT, M.D.,

Director, Bureau of Drugs.

ATTACHMENT A PART 312-NEW DRUGS FOR INVESTIGATIONAL

USE Subpart A-Exemptions From Section 505(a) Sec. 312.1 Conditions for exemption of new drugs

fol' investigational use. 312.5 Confidentiality of data and informa

tion in an investigational new drug notice (IND).

312.9 New drugs for investigational use in laboratory research animals or in vitro tests. Subpart B-Controlled Substances

312.10 Availability of records. Subpart C-International Research

312.20 Clinical data generated outside the United States and not subject to a "Notice of Claimed Investigational Exemption for a New Drug."

AUTHORITY: Secs. 502, 503, 505, 701, 52 Stat. 1051, 1052, 1053, 1055, as amended (21 u.s.c. 352, 353, 355, 371) (5 u.s.c. 554) unless otherwise noted.

SOURCE: 39 FR 11712, Mar. 29, 1974, unless otherwise noted. Subpart A-Exemptions From Section 505(a) § 3•12.1 Conditions for exemption of new

drugs for investigational use. (a) A shipment or other delivery of a new

drug shall be exempt from section 505 (a) of the act if all the following conditions are met:

( 1) The label of such drug bears the statement "Caution: New drug-Limited by Federal (or United States) law to investigational use."

(2) The person claiming the exemption has filed with the Food and Drug Administration a completed and signed "Notice of Claimed In ,1estigat1onal Exemntion for a New Drug" in triplicate, with the information shown below in Form FD-1571; and not less than 30 days have elapsed following the date of receipt of the notice by the Food and Drug Administration; and the Food and Dr11g Administration has not, prior to expiration of such 30-day interval, requested that the sponsor continue to withhold or to restrict use of the drug in human subjects. The 30-day delay requirement may be waived by the Food and Drug Administration upon a showing of good reason for such waiver. Form FD-1571 Department of Health, Education, and Wel

fare, Food and Drug Administration Notice of Claimed Investigational Exemption

for a New Drug Name of sponsor -----------Address

Name of investigational drug------To the Secretary of Health, Education, and

Welfare, For the Commissioner of Food and Drugs, 5600 Fishers Lane, Rockville, MD 20857. Dear Sir:

The sponsor, ------------submits this notice of claimed investigational exemption for a new drug under the provisions of section 505 ( i) of the Federal Food, Drug, and Cosmetic Act and § 312.1 of Title 21 of the Code of Federal Regulations.

Attached hereto are: 1. The best available descriptive name of

the drug, including to the extent known the chemical name and structure of any new drug substance, and a statement of how it is to be administered (if the drug has only a

code name, enough information should be supplied to identify the drug.)

2. Complete list of components of the drug, including any reasonable alternates for inactive components.

3. Complete statement of quantitative composition of drug, including reasonable variations that may be expected during the investigational stage.

4. Description of source and preparation of any new drug substances used as components, including the name and address of each supplier or processor, other than the sponsor, of each new drug substance.

5. A statement of the methods, fac111ties, and controls used for the manufacturing, processing, and packing of the new drug to establish and maintain appropriate standards of identity, strength, quality, and purity as needed for safety and to give significance to clinical investigations made with the drug.

6. A statement covering all information available to the sponsor derived from preclinical investigations and any clinical studies and experience with the drugs as follows: C,HAPTER I-FOOD AND DRUG ADMINISTRATION

a.. Adequate information about the preclinical investigations, including studies made on laboratory animals, on the basis of which the sponsor has concluded that it is reasonably safe to initiate clinical investigations with the drugs. Such information should include identification of the person who conducted each investigation; identification and qualifications of the individuals who evaluated the results and concluded that it is reasonably safe to initiate clinical investigations with the drug and a statement of where the investigations were conducted rand where the records are available for inspe::tion; and enough details about the investigations to permit scientific review. The preclinical investigations shall not be considered adequate to justify clinical testing unless they give proper attention to the conditions of the proposed clinical testing. When this information, the outline of the plan of clinical pharmacology, or any progress report on the clinical pharmacology, indicates a. need for full review of the preclinical data before a clinical trial is undertaken, the Department will notify the sponsor to submit the complete preclinical data. and to withhold clinical trials until the review is completed a.nd the sponsor notified. The Food and Drug Administration will be prepared to confer with the sponsor concerning this action.

b. If the drug has been marketed commercially or investigated (e.g. outside the United States), complete information a.bout such ·distribution or investigation shall be submitted, along with a complete bibliography of any publications •about the drug.

c. If the drug ls a combination of previously investigated or marketed drugs, an adequate summary of preexisting information from preclinical and clinical investigations and experience with its components, including all reports available to the sponsor suggesting side-effects, contralndica.tions, and ineffectiveness in use of such components. Such summary should include an adequate bibliography of publications about the components and may incorporate by reference 8111Y information concerning such components previously submitted by the sponsor to the Food and Drug Administration. Include a statement of the expected pharmacological e-'fect'> of the combinations.

d. I.f the drug ls a radioactive drug, sumcient data. must be available from fl,nimal studies or previous human studies to allow a. reasonable calculation of radiation absorred dose upon administration to a. human being.

7. A copy (one in each of the three copies of the notice) of ·all informational material. Including label and labeling, which is to be supplied to ea.ch investigator. This shall in-

elude an accurate description of the prior investigations and experience and their results pertinent to the safety and possible usefulness of the drug under the conditions of the investigation. It shall not represent that the safe.;y or usefulness of the drug has been established for the purposes to be investigated. It shall describe all relevant hazards, contraindications, side effects, and precautions suggested by prior investigations and experience w1 th the drug under investigation and related drugs for the information of clinical investigators.

8. The scientific training and experience considered appropriate by the sponsor to qualify the investigators as suitable experts to investigate the safety of the drug, bearing in mind what is known about the pharm.i.co1ogica.1 action of the drug and the phase of the investiga.tional program that is to be undertaken.

9. The means and a. summary of the training and experience of each investigator and of the individual charged with monitoring the progress of the investigation and evaluating the evidence of safety and effectiveness of the drug as it is re~eived from the investigators, together with a statement that the sponsor has obtained from each investigator a completed and signed form, as provided in subparagraph (12) or (13) of this paragraph, and that the investigator is qualified by scientific training and experience as an appropriate expert to undertake the phase of the investigation outlined in section 10 of the "Notice of claimed investigational exemption for a new drug." (In crucial situations, phase 3 investigators may be a:ided and this form supplemented by rapid communication methods, and the signed Form FD-1573 shall be obtained promptly thereafter.)

10. An outline of any phase or phases of the planned investigations and a description of the institutional review committee, a.s follows:

a. Cltnical pharmacology. This is ordinarily divided into two phases: Phase 1 starts when the new drug is first introduced into man--only animal and in vitro data are available-with the purpose of determining human toxicity, metabolism, absorption. elimination, and other pharmacological action, preferred route of administration, and safe dosage range; phase 2 covers the initial trials on a limited number of patients for specific disease control or prophylaxis purposes. A general outline of these phases shall be submitted, identifying the investigator or investigators, the hospitals or research facilities where the clinical pharmaco~ogy will be undertaken, any expert committees or panels to be utilized, the maximum number of subjects to be involved and the estimated duration of these early phases of investigations. Modification of the experimental design on the basis of experience gained need be reported only in the pro5ress reports on these early phases, or in the development of the plan for the clinical trial, phase 3. The first two phases may overlap and, when indicated, may require additional animal data before these phases can be completed or phase 3 can be undertaken. Such animal tests shall be designed to take into account the expected duration of administration of the drug to human beings, the age groups and physical status, as for example, infants, pregnant women, premenopausal women, of those human beings to whom the drug may be administered, unless this has already been done in the original animal studies. Jf a drug ls a radioactive drug, the clinical pharmacology phase must include studies which wm obtain sufficient data for dosimetry calculations. These studiPs shouM e·.ralue. te t.:he excl'etion, whole body retention, a.nd organ distribution of the radioa~tive material.

b. Clintcal trial. This phase 3 provides the assessment of the drug's safety and effec-

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24349 tiveness and optimum dosage schedules in the diagnosis. treatment, or prophylaxis of groups of subjects involving a given disease or condition. A reasonable protocol is developed on the basis of the facts accumulated in the earlier phases, including completed and submitted animal studies. This phase is conducted by separate groups following the same protocol (with reasonable variations and alternatives permitted by the plan) to produce well-controlled clinical data. For this phase, the following data shall be submitted:

1. The names and addresses of the investigators. (Additional investigators may be added.)

ii. The specific nature of the investigations to be conducted, together with information or case report forms to show the scope and detail of the planned clinical observations and the clinical laboratory tests to be made and reported.

111. The approximate number of subjects (a reasohable range of subjects is permissible and additions may be made), and criteria proposed for subject selection by age, sex, and condition.

iv. The estimated duration of the clinical trial and the intervals, not exceeding 1 year, at which progress reports showing the results of the investigations wili be submitted to the Food and Drug Administration.

c. Institutional review committee. If the phases of clinical study as described under 10 a and b above are conducted on institutionalized subjects or are conducted by an individual affiliated with an institution which agrees to assume responsibUity for the study, assurance must be given that an institutional review committee is res'Jonsible for initial and continuing review and approval of the proposed clinical study. The membership must be compris~d of sufficient members of varying background, that is, lawyets. clergymen, or laymen as well as scientists, •to assure complete and adequate review of the research project. The membership must possess not only broad competence to comprehend the nature of the project, but also other competencies necessary to judge the acceptability of the oroject or activity in terms of institutional regulation, relevant law, standards of professional practice, and community acceptance. Assurance must be presented that neither the sponsor nor the investigator has participated in selection of committee members; that the review committee does not allow participation in its review and conclusions by any individual involved in the conduct of the research activity under review (except to provide information to the committee); that the investigator will re~ort to the committee for review any emergent problems, serious adverse reactions, or proposed procedural changes which may affect the status of the investigation and that no such change wlll be made without committee approval except where necessary to eliminate apparent immediate hazards; that reviews of the study wm be conducted by the review committee at intervals appropriate to the degree of risk, but not exceedilllJ 1 year, to assure that the research project is being conducted in compliance with the committee's understanding and recommendations; that the review committee is provided all the information on the research project necessary for its complete review of the pro.1ect; and that the review committee maintains adequate documentation of its activities and develous adequate procedures for reportin~ its findings to the institution. The documents maintained by the committee are to include the names and qualifications of committee members, records of information provided to sub1ects in obtaining informed consent, committee discussion on subst-antlve issues and their resolution, committee recommendations, and dated reports of successive re-

views as they are performed. Coples of all documents are to be retained for a period of 3 years past the completion or discontinuance of the study and are to be made available upon request to duly authorized representatives of the Food and Drug Administration. (Favorable recommendations by the committee are subject to further ap ~roprlate review and rejection by institution officials. Unfavorable recommendations, restrictions, or conditions may not be overruled by the institution officials.) Procedures for the organization and operation of institutional review committees are contained in guidelines issued pursuant to Chapter 1-40 of the Grants Administration Manual of the U.S. Department of Health, Education, and Welfare, available from the U.S. Government Printing Office. It ls recommended that these guidelines be followed in establishing educational review committees and that the committees function according to the procedures described therein. A signing of the Form FD-1571 wm be regarded as providing the above necessary assurances. If the institution, however, has on file with the Department of Health, Education, and Welfare, Division of Research Grants, National Institutes of Health, an "accepted general assurance," and the same committee is to review the proposed study using the same procedures, this is acceptable in lieu of the above assurances and a statement to this effect should be provided with the signed FD-1571. (In addition to sponsor's continuing res'Jonsibility to monitor the study, the Food and Drug Administration wlll undertake investigations in institutions periodically to determine whether the committees are operating in accord with the assurances given by the sponsor.)

(The notice of claimed lnvestlgational exemption may be limited to any one or more phases, provided the outline of the additional phase or phases ls submitted before such additional phases begin. This does not preclude continuing a subject on the drug from phase 2 to phase 3 without interruption while the plan for phase 3 ls being developed.)

Ordinarily, a plan for clinical trial wlll not be regarded as reasonable unless, among other things, it provides for more than one lndependent competent investigator to mainta.in adequate case histories of an adequate number of subjects, designed to record observations and permit evaluation of any and all discernible effe~ts attributable to the drug in ea.ch individual treated, and comparable records on any individuals employed as controls. These records shall be individual records for ea.ch subject maintained to include adequate information pertaining to ea.ch, including age, sex, conditions treated, dosage, frequency of administration of the drug, results of all relevant clinical observations and laboratory examinations made, adequate information concerning any other treatment glv~n and a full statement of any a.dverse effeots and useful results observed, together with an opinion as to whether such effects or results are attributable to the drug under investigation.

11. A statemerut that the sponsor will notify the Food and Drug Administration if the investigation is discontinued, and the reason therefor.

12. A statement that the sponsor will notify each investigator if a new drug application ls approved, or if the investigation ls discontinued.

13. If the drug is to be sold, a full explanation why sale ls required and should not be regarded as the commerclaliza tlon of a new drug for which an application ls not approved.

14. A statement that the sponsor assures that clinical studies in humans wlll not be initiated prior to 30 days after the date of receipt of the notice by the Food and Drug

Administration and that he wlll continue to withhold or to restrict clinical studies if requested to do so by the Food and Drug Administration prior to the expiration of such 30 days. If such request ls made, the sponsor wlll be provided specific information as to the deficiencies and will be afforded a conference on request. The 30-day delay may be waived by the Food and Drug Administration upon a showing of good reason for such waiver; and for investigations subject to institutional review committee approval as described in item lOc, above, an additional statement assuring tha.t the investigation wlll not be initiated prior to approval of the study by such committee.

Very truly yours.

(Sponsor)

(Indicate authority) 15. When requested by the agency, an en

vironmental impact analysis report pursuant to ~ 25.1 of this chapter.

16. A statement that all nonclinical laboratory studies have been, or will be, conducted in compliance with the good laboratory practice regulations set forth in Part 58 of this chapter, or, if such studies have not been condueted in compliance with such regulations, a statement that describes in detail all differences between the practices used in conducting the study and those required in the rt'gulations.

(This notice may be amended or supplemented from time to tlm13 on the basis ::>f the experience gained with the new drug. Progress reports may be used to update the notice.)

Provided, however, That where a new drug limited to lnvestlgatlonal use ls proposed for shipment to a foreign country for clinical investigation, in lieu of the filing of a "Notice of Clalrr.ed Investigatlonal Exemption for a New Drug" (Form FD-1571), the Commissioner will authorize the shipment of the drug if hn receives, through the Department of State, a formal request to allow such shipment, from the government of the country to which the drug is proposed to be shipped. This request shall specify that said government has adequate information about the drug and the proposed investigational use, and ls satisfied that the drug may legally be used by the intended consignee in that country. This provision is applicable only where the drug is to be used for purposes of clinical investigation and does not apply where it is intended for commercial marketing or use in routine medical practice.

(3) Each shipment or delivery is made in accordance with the commitments in the "No+-ic~ of claimed investigational exemption for a new drug."

(4) The sponsor maintains adequate records showing the investigator to whom shipped, date, quantity, and batch or code mark of each such shipment and delivery, until 2 years after a. new drug application is approved for the drug: or. 1f an application ls not approveel, until 2 years after shipment and delivery of the drug for 1nvestigat1onal use is discontinued and the Food and Dr1 ig Administration has been so notified. Uprm the request of a. scientifically trained and properly authorized emoloyee of the Department at reasonable times, the sponsor makes the records referred to in this subparagraph and in paragraph (a) (2) of this section available for inspection, and upon written requests submits such records or copies of them to the Food and Drug Administration. If the lnvestlgatlonal drug ls subject to the Comprehensive Drug Abuse Prevention and Control Act of 1970 adequate precautions are ta.ken, including storage of the 1nvest1ga-


tional drug in a securely locked, substantially constructed cabinet, or other securely locked substantlally constructed enclosure, access' to which i11 limited, to prevent the:!:t or diversion of the substance into illegal channels of distribution.

(5) The sponsor monitors the progress of the inveatigations and currently e.-aluates the evidence relatmg to the safety and elfectiveness ot' the drug as it is obtained from the investigators. Accurate progress reports of the inveatigations and significant findings together with any significant changes Jn the informational material supplied to investigators, shall be submitted to the Food and Drug Administration at reasonable intervals, not exceeding 1 year. All reports of the investigation shall be retained until 2. years after a new drug application is approved for the drug; or, if an application is not approved, until 2 years after shipment and delivery of the drng for investigational use is discontinued and the Food and Drug Administration so notified. Upon request of a scientifically trained and properly authorized employee of the Department at reasonable times, these reports shall be made available for inspection, and on written request copies of these reports shall be submitted to the Food and Dru~ Administration.

(6) ••• (7) If the investigations adduce facts show

ing that there is substantial doubt that they may be continued safely in relation to the drug's potential therapeutic effects, the sponsor shall promptly discontinue the investigation, notify all investigators and the Food and Drug Administration, recall all stocks of the drug outstanding, and furnish the Food and Drug Administration with a full report of the reason for discontinuing the investigation. The Food and Drug Administration will he prepared to confer with the sponsor on the need to discontinue the investigation.

(8) The sponsor shall discontinue shipments or deliveries of the new drug to any investigator who has repeatedly or deliberately failed to maint ain or make available his records or reports of his investigations.

(9) The sponsor shall not unduly prolong distributirn of the drug for investigational use but shall submit an annlication for the drug pursuant to section 5ni-tb) of the act (or give reasons for not submit.Ung such application. or a statement that the in"estigation has been discontinued and the reasons therefor):

(1) With reasonable nromntnec::s aft.er finding that the rP.snlts of S"Ch in"es+:ta<1Jlon appear to establish the safety and effectiveness of the drug;; or

(11) WltMn 60 davs after recelnt of a written reauest for such an application from the Commissioner.

(10) Neither ' the suonsor nor anv nerson acting for or on behalf of the s""onsor shall disseminate any promotional material representing that the drug being distributed interstate for lnvestigational use ls safe or useful for the nurnoses for which it is under investigation. This regulation is not int.entied to restrict the full exchange of scientific information concerning the drug, including dissemination of scientific findings in scientific or lay communications media; its sole intent is to restrict promotional claims of safety or effectiveness by the sponsor w·hlle the drug ls under investigation to establish its safety or effectiveness.

(11) The suonsor shall not commercially distribute nor tE>st-market the drug until a new-dru~ anplication is approved pursuant to section 505(b) of the act.

( 12) The sponsor shall obtain from each investigator involved in clinical pharmacol~;:m ~ signed statement in the following

Form FD-1572 Department of Health, · Education, and

Welfare, Food and Drug Administration Statement of rm.estlgator (Clin!cal Pharmacology)

Name of investigator ---------------------Date ------------------------------- ··-----Name of drug ---------------------------To supplier of the drug:

Name ---- ---------------- ------- -- ··- -Address ------------------------------

Dear Sir: The undersigned, ----------------------•

submits this statement as required by ~-.ec- · tion 505 (1) of the Federal Food, Drug, and Cosmetic Act and § 312.1 of Title 21 of Code of Federal Regulations as a condition for receiving and conducting clinical pharmacology with a new drug limited by Federal l or United States) law to investlgational use

1. A statement of the education and tralning that qualifies me for clinical ph9.rmacalogy.

2. The name and address of the meclical school, hospital, or other research facility where the clinical pharmacology will ~e conducted.

3. If the experimental project is to be conducted on institutionalized subjects or ls conducted by an individual affiliated with an institution which agrees to assume· responsib111ty for the study, assurance must be given that an institutional review committee ls responsible for initial and continuing review and approval of the proposed clinical study. The membership must be comprised of sufficient members of varying background, that .is, lawyers, clergymen, or laymen as well as scientists, to assure complete and adequate review of the research project. The membership must possess not only broad competence to comprehend the nature of the project, but also other competencies necessary to judge the acceptab111ty of the project or activity in terms o·f institutional regulations, relevant law, standards of professional practice, and community acceptance. Assurance must be presented that the investigator has not participated in the selection of committee members; that the review committee does not allow participation in its review and conclusions by any individual involved in the conduct of the research activity under review (except to provide information to the committee); that the investigator will report to the committee for review any emergent problems, serious adverse reactions, or proposed procedural changes which may affect the status of the inivestigation and that no such change wm be made without committee approval except where necessary to eliminate apparent immediate hazards; that reviews of the study will be conducted by the review committee at intervals appropriate to the degree of risk, but not exceeding 1 year, to assure that the research project ls being conducted in compliance with the committee's understanding and recommendations; that the review committee is provided all the information on the research project nece3sary for its complete review of the pro~ect; and that the review committee maintains adequate documentation of its activities and develops adequate procedures for reporting its findings to the institution. The documents maintained by the committee are to include the names and qualifications of committee members, records of information provided to subjects in obtaining informed consent, committee discussion on substantive issues and their resolution, committee recommendations, and dated reports of successive reviews as they are performed. Copies of all documents are to be retained for a period of 3 years past the completion or discontinuance of the study and are to be made available upon request to duly authorized re'Jresentati,'ves of the Food and Drug Admlnis-

tratlon. (Favorable recommendations by the committee are subJect to further • • •

• • • of the Phase I Working Group and on occasion to selected qualiiied investigators (e.g. pe.3r-reviewed cooperative group members), who have a specl.u.c concern with the development of the drug. Interested investigators, after discussions with the Chief, IDB are in\ilte.:.i. to pre,tJare !'ha.se I protocols.

Tha Drug Monitor Team for these studies is a team composed of the Chief, IDB and a member of the staff of the IDB (see Appendix 1 for CV's of lDB Staff members).

The Drug Monitor Team is responsible for the direction and evaluation of clinical trials with the drug from their onset. ,As a rule, they wm have been involved in the preparation of an investigator's brochure and have participated in deliberations prior to Decision Network Ill. '!'heir responslbllities include actively analyzing information on drug studies, obtained by letter, telephone conferences, and travel if necessary. They review all protocol studies with the drug, assemble the report for Decision Network 4, maintain a file of drug information, drug protocols and reports, and prepare annual reports to the FDA.

If adverse drug reactions occur, individual patient records are submitted to IDB for analysis.

The analysis of ad verse drug reactions in Phase I as well as other phases of in vestigatlon ls carried out following a well structured flow mechanism. (Appendix 2).

Protocol studies in Phase I wm be approved by the Chief of the IDB who is the project officer of the Phase I contractors and coordinator of the Phase I Working Group. This group ls constituted by investigators with experience in both clinical oncology and pharmacology, as well as the preclinical drug development studies.

b. The Phase I Working Group. 1. Membership Criteria Individuals may be considered for member

ship on the basis of the follo':",ing qualifications: (a) Principal Investigators or Key Personnel of Phase I contracts, (b) Chiefs of the Clinical Branche~ of the DCT, and (c) other • • •

ATTACHMENT C

• ·• • of the number and characteristics of the patients entered, the number of courses, the type of responses seen, the duration of responses, the toxicity parameter results, conclusions and future plans. If an annual report ls not submitted after a letter of warning, no further drug wm be supplied for the study.

h. To assure the quality of the data ls such that it may support an NDA and that patient report forms will be available on all study entries, for two years after either an NDA has been approved or the IND has been closed. They are to be supplied to NCI upon request.

1. To report to the investigational drug•••.

1. Any serious adverse reaction immediately upon its occurrence. CTEP is legally obligated to report to FDA within 15 days.

2. Any alterations in the protocol design. 3. Termination of the study. 4. Respons1b111ties of the DCT, NCI; a. To insure that approved protocols are

limited to drugs in Group B. b. To amend approved protocols to the

IND, as they are received. c. To insure that Investigator qualifica

tions (Form FD-1573) are complete. d. To send investigational drugs to the in

vestigators in amounts consistent with protocol needs.

e. To integrate these annual reports into the NCI annual report to FDA.

f. To send clinical brochures, annual reports and other drug information to the Center Directors.

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24351 d. Independent Investigators (Discontin

ued) Prior to March 1, 1977 protocols from independent investigators were accepted for study. The large number of these protocols, the lack of staff to review and monitor them, and the lack of research value of most of them has lead the • • •

ATTACHMENT D Anticancer Drug Development; Memoran

dum of Understanding with the National Institutes of Health.

Agency: Food and Drug Administration. Action: Notice. Summary: The Food and Drug Adminis

tration (FDA) has executed a memorandum of understanding with the National Inst!-

. tutes of Health (NIH). The purpose of the memorandum is to set forth coopera,ttve working arrangements regarding anticancer drugs developed by NIH and regulated by FDA.

Date: The agreement became effective February 8, 1979.

For further information contact: Gary Dykstra. Compliance Coordination and Policy Staff (HFC-13). Food and Drug Administration, Department of Health, Education, and Welfare, 5600 Fishers Lane, Rockville, Md. 20057, 301-413-3470.

Supplementary Information: Pursuant to the notice pubished in the Federal Register of October 3, 1974 (39 FR 35697) stating that future memorandums of understanding and agreement between FDA and others would be published in the Federal Register, the agency is issuing the following memorandum of understanding.

Memorandum of Understanding Relative To Anticancer Drug Development.

The Division of Cancer Treatment, National Cancer Institute, as a result of its mission, has a substantial and continuing effort of anticancer drug development, the regulation of which comes under the purview of the Food and Drug Administration, primarily but not exclusively within the Bureau of Drugs. A substantial amount of the information available to the Division of Cancer Treatment and to the Bureau of Drugs, acquired by each in the pursuit of their missions, is of common interest to these organizations. In the past, both have been keenly aware of this community of interest and have had extensive informal and effective interchanges of views and of information on a wide variety of problems. Such informal interchanges should and will continue and both organizations encourage the members of their staff to provide the utmost assistance and cooperation in all appropriate areas. In addition, in order to aid in the maintenance of a harmonious, direct working relationship between these two sister organizations, both charged with responsibllities relating to public health, it is believed that a formal Memorandum of Understanding is desirable. The following specific agreement~ between the National Cancer In8titute and the Food and Drug Administration are made to achieve these objectives.

Commitment of the National Cancer Institute:

1. The National Cancer Institute designates the Director, Division of Cancer Treatment as the primary contact on matters of policy relative to anticancer drug development. Members of his/her staff responsible for specific aspects of the Drug Development Program will carry on day-to-day contact with their counterparts at the Food and Drug Administration as appropriate.

2. As sponsor of investigational drugs for clinical trial, the Division of Cancer Treatment agrees to comply with all applicable laws, regulations, and any other legal requirements pertaining to such sponsorship.

3. The Division of Cancer Treatment w111 transmit 1to the Bureau of Drugs pertinent information genera.ted by the activities of the Division of Cancer Treatment. This will include Cancer Treatment Reports and copies

of the minutes of pertinent meetings, e.g. the New Drug Liaison Meetings and the Phase I Working Group Meetings. 'Ihese minutes are not to be considered a substitute for the annual progress reports required for each IND.

4. The Division of Cancer Treatment will designate a member of its staff as a liaison to FDA's Oncology Advisory Committee and wm send members of its staff to other Food and Drug Administra.tion meetings, as appropriate, in order to aid communication between the .two organizations.

5. The Division of Cancer Treatment will maintain with the Bureau of Drugs a Master File, which wm include a detailed descripUon of its overall plan of anticancer drug development, its system of clinical monitoring, its system of drug distribution and data reporting, pertinent information on Division of Cancer Treatment staff, and other background information normally included in

. individual Notices of Claimed Investigational Exemption for a New Drug (also known as Invest1ga.t1onal New Drug Applications).

When any portion of the Master File is proposed to be revised in a significant manner, the Division of Cancer Treatmerut wm, prior to such revision, provide a draft copy of the proposed alteration for the Bureau of Drugs' comment. Less substantive revisions will be provided to the Bureau of Drugs in finalized form and such revisions wm be sent with reasonable promptness. The Division of Cancer Treatment agrees to maintain the Master File in a manner which keeps it current, ·to add information as it believes necessary, or as requested by the Bureau of Drugs, to delete items which are no longer pertinent or active, and to submit to the Bureau of Drugs on or about January 1 of ·each year a list of the documents it considers to be in the Master File and a certication of their currency and accuracy.

Commitment of the Food and Drug Adminlstra tion-

1. The Food and Drug Administration designates the Associate Director for New Drug Evaluation, Bureau of Drugs, as its pri.niary contact for matters of policy regarding anticancer drugs. Members of his/ her staff wm interact with appropriate Division of Cancer Treatment staff for day to day matters.

2. The Bureau of Drugs will designate appropriate members of its staff as Liaison ·to the Decision Network, the Phase 1 Working Group, and the New Drug Liaison Meetings and other pertinent meetings of the Division of Cancer Treatment, to aid communication between the Bureau of Drugs and Division of Cancer Treatment.

3. In recognition of the posLtion occupied by the Division of Carlcer Treatment in antitumor drug development, and in view of the serious nature of ·the disease, the Bureau of Drugs agrees to cooperate with and assist the Division of Cancer Treatment in the furtherance of its objectives, to the degree permitted by regulation and law.

4. The Bureau of Drugs agrees to accept the Master File submission of the Division of Cancer Treatment as applicable to all anticancer investigational drugs sponsored by the Division of Cancer Treatment. Information in the Master File w111 thus be incorporated by reference into all Notices of Claimed Invest1gat1onal Exemptions (IND's) for anticancer drugs sponsored by the Division of Cancer Treatment.

5. The Bureau of Drugs agrees to bring any deficiencies of problems with the Master File to the attention of the Division of Cancer Treatment as part of its review and approval of that Master File rather than as comments on specific IND's. If, after a reasonable period needed for correction of the Master File, such correction is not forthcoming the Bureau of Drugs shall inform the Division or Cancer Treatment which of its IND's may be

adversely affected and subject to administrative action.

Commitment of both the National Cancer Institute and the Food and Drug Administration:

.If the Director, Division of Cancer Treatment, National Cancer Institute and the Associate Director for New Drug Evaluation, Bureau of Drugs, cannot agree on the appropriate contents of the Master File, or the approvabillty of the Master File or of any application sponsored by the National Cancer Institute, or on any other matters related to the regulation by the Food and Drug Administration of drugs sponsored by the National Cancer Institute, the matter shall be brought to the attention of the Director of the National Cancer Institute and the Director of the Bureau of Drugs. These persons are then responsible for jointly resolving the matter, either directly or by consultation with, or referral to, the Director of the National Institutes of Health and the Commissioner of Food and Drugs. Absent such resolution, final resolution of the matter rests with the Commissioner of Food and Drugs.

Dated: January 12, 1979. For the Food and Drug Administration.

Donald Kennedy, Commissioner, Food and Drug Administration.

Dated February 5, 1979. For the National Institutes of Health.

Donald S. Frederickson, Director, National Institutes of Health.

Effective date. This Memorandum of Understanding became effective February 5, 19-79.

Dated April 25, 1979. OFFICE OF HUMAN DEVELOPMENT SERVICES

Regional Adoption Resource Centers Dem-onstration Program-Program Announcement No. 13652-791; Availab111ty of Grant Funds·.

Agency: Administration for Children, Youth and Fammes, Office of Human Development Services, DHEW.

Subject: Announcement of availability of grant funds for the Regional Adoption Resource Centers demonstration program.

Summary: The Administration for Children, Youth and Fam111es (ACYF) announces that applications are being accepted for Regional Adoption Resource Center grants for Fiscal Year 1979. This program ls authorized under Pub. L. 95-260, the Child Abuse Prevention and Treatment and Adoption Reform Act of 1978 (Title II, Adoption Opportunities, 42 U.S.C. 5113).

Dates: Closing date for receipt of applications is July 16, 1979.

Scope of this Announcement: This program announcement is one of two

which will be issued under Title II of Pub. L. 95-206 for Fiscal Year 1979. The second is Demonstration Grants for National Adoptive Parent Organizations to Expedite Adoption of Children with Special Needs which will be announced separately in the Federal Register.

Program Purpose: The purpose of the Regional Adoption Re

source Centers Demonstration Program is to develop a coherent, coordinated and comprehensive adoption resource information exchange system throughout the United States.

Program Goals and Objectives. The goal of the demonstration program

is to establish a Regional Adoption Resource Center in each of the ten (10) HEW Regions. The network of Regional Adoption Resource Centers is intended to be a major component of HEW's activities directed toward carrying out the provisions of Title II of Pub. L. 95-268.

Applications for projects should indicate that the proposed project will achieve or is capable of achieving all of the following program objectives.

Identify and assess the adoption resources and practices within the geographical

24352 CONGRESSIONAL RECORD-SENATE October 19, 1981 boundaries of the HEW Region in which it operates.

Establish a Regional adoption information clearinghouse in each of the HEW Regions.

Provide a regional resource to assist and fac111tate the growth and development of a national adoption information exchange system.

Fac111tate inter-State and lntra-3tate communication and coordination of program innovations and adoption planning processes.

Establish and/or improve adoption and adoption related training programs in the States and other agencies and organizations in the Region with direct and indirect involvement in adoption services.

Assist States and local agencies and organizations within each Region to address Region-specific objectives for improving and ex.pandlng adoption services.

• • • between foster care and adoption services.

Provide support and financial assistance to parent groups in the planning, improving, developing and carrying out of programs and activities related to adoption. (Applicants wm be responsible for conducting a competitive grant award process and awarding subgrants to parent groups.)

Performance Standards: . Within six months after the grant award

for the Resource Centers, the Children's Bureau wlll develop performance s~andards based on the goals and objectives contained in this priority statement and in the approved applications. The Children's Bureau wlll also develop the necessary forms and procedures for reporting. The purpose of these standards and the reporting system ls to provide program accountab111ty to the government and the Congress for the $2.766 mlllion which has been allocated to these grants.

The performance wlll seek to measure the efficiency of program planning, the type and quantity of services provided, the recipient feedback on the ut111ty of services provided. The performance standards wlll be self-administered. The Steering Committee for each Regional Center wlll be responsible for the quality and timeliness of the assessment. The deslged Government Project Officer and the assigned Regional Office staff person wlll be responsible for validating assessment findings.

Eligible Applicants: Public and private nonprofit organiza

tions, including institutions of higher learning may apply for a grant under this announcement. The applicant must provide a written assurance that it has been physically located in this geographic region it proposes to serve for a minimum of one year prior to the time the application is submitted. Applications received without this assurance will be considered nonconforming and will not be reviewed. Appllcations for grants to serve in a HEW Region ( s) other than the one from which the application ls submitted wlll be considered ineligible.

Required Capab111ties: The appllcant must demonstrate its inter

est and capab1llty as an organization to continue to maintain and improve child welfare services. This grant wlll serve to enrich and augment the applicant's child welfare services. • • •

DEPARTMENT OF HEALTH AND HUMAN SERVICES,

June 11, 19B1. Dr. J. RICHARD CROUT, Director, Bureau of Drugs, Food and Drug

Administration, Rockville, Md.

DEAR MR. CROUT: I am writing in response to your letter of June 9, 1981, regarding the reporting of the Methvl CCNU nenhrotoxicity. As I have indicated previously. I belleve our actions with regard to this occurrence were .based on some misunderstandings as embodied in the Master File.

I wish to assure you that our current procedures involve prompt reporting to the FDA and all investigators using the drug of any potential adverse drug reactions, whether or not they can be identified as drug related. Investigations of the circumstances of the case will follow this report. We wm modify relevant portions of our Master File to reflect clearly that this ls indeed the procedure that ls and wlll be followed. I believe the flow chart which you included as Attachment B. ls somewhat ambiguous, and we will modify that as well.

I am pleased that you agree with the efforts we have taken to provide for timely submission of annual reports and to comnly in all ways with FDA regulations. Although a specific meeting to discuss the reporting of adverse drug reactions may not be necessary at this time, I stlll believe that frequent meetings between FDA and NCI etaff to discuss relevant issues should be continued.

Sincerely yours, VINCENT T. DEVITA, Jr., M.D.,

Director, National Cancer Institute.

Mrs. HAWKINS. This special DHHS task force initiated its investigation several weeks ago and will report ts findings to Secretary Schweiker and to the Investigations and General Oversight Subcommittee within 90 days or, at the latest, sometirrne in December. In the meantime, the subcommittee will 0ontinue to prepare for its hearing on November 3, and to monitor the progress of the NCI and the FDA in correcting deficiencies caused in their respective programs.

In a related topic, Mr. President, I can think of no other research program more vital to humanity than the search for the answers to cancer. We must continue to accelerate the war on cancer, but with new direction.

However, I am outraged when I read a quotation from a very prominent cancer researcher of many years, who stated that "We have been on a plateau for about 10 years. That has been the length of life of the war on cancer." "We have been inching ahead. It is almost like building a pyramid."

And to quote the director of the Mayo Clinic, "We have hit on some areas more or less by luck. We have accomplished a lot, but it has been like swatting at flies with a sledgehammer. It has been rather blind, I suppose, as far as end products are concerned. It has been a bust. But then so has the overall treatment of cancer." We have spent billions of doHars in the war on cancer. I say that this war must take new direction.

In addition, when mistakes are made and deficiencies come to light, especially those deficiencies that can lead to lifethreatening situations, we must be sure that immediate corrective action is taken.

This, Mr. President, is the purpose of the subcommittee's next hearing. It is my hope that the subcommittee's hearing will do much to insure that research with anticancer drugs does not endanger the lives and well-being of cancer patients.

CONCLUSION OF MORNING BUSINESS

The PRESIDING OFFICER. Is there further morn'ng bus:ness? If not, morning business is closed.

POSTPONEMENT OF DAIRY PRICE SUPPORT ADJUSTMENT AND WHEAT REFERENDUM The PRESIDING OFFICER. Under

the previous order, the Senate will now resume consideration of the pending motion to proceed to the consideration of H.R. 4612, which the clerk will report.

The bill clerk read as follows: A motion to proceed to the consideration

of H.R. 4612, a bill to temporarily dela.y the October 1, 1981, increase in the price support level for milk and to extend the time for conducting the referendum with respect to the national marketing quota for wheat for the marketing year beginning June 1, 1982.

The Senate resumed consideration of the motion.

The PRESIDING OFFICER. Under the previous order, the Senator from Wisconsin <Mr. PROXMIRE) is recognized.

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

The PRESIDING OFFICER. The clerk will call the roll.

The bill clerk proceeded to call the roll.

Mr. PROXMIRE. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.


Mr. PROXMIRE. Mr. President, as I understand it, the pending measure is H.R. 4612, the milk price support legislation.

The PRESIDING OFFICER. The senator is correct.

Mr. PROXMffiE. Mr. President, I am about to have a colloquy with my distinguished colleagues, Senator HELMS, the chairman of the Senate Committee on Agriculture, Nutrition, and Forestry, and Senator HUDDLESTON, the ranking minority member of that committee.

If this colloquy goes along as I expect it will, then I would like to make additional remarks of my own after the colloquy and then proceed to passage of H.R. 4612 on a voice vote.

Actually, Mr. President, I anticipate that the colloquy itself can be quite brief indeed. I would simply like to ask the Senator from North Carolina (Mr. HELMS) and the Senator from Kentucky (Mr. HUDDLESTON) this question:

In the conference on the 1981 farm bill, would they, as the leaders of the Senate conferees, be willing to explo e with the other conferees the possibility of adopting, for the current marketing year, a continuation of a support level of not less than $13.49 per hundredweight?

That, of course, is the present law. Since October 1 of this year, the 1949 act has been in effect, and that is the present law.

As Senators know, of course, the Senate version of the 1981 farm bill has a dairy provision calling for a price support level of $13.10 per hundredweight for the current marketing year. The House, as we know, has adopted the so-called Bedell amendment, which also set the support price at $13.10 per hundredweight for 1982.

But since the Congress had not agreed on a new farm bill by October 1, the price support level automatically jumped to 75 percent of parity or $13.49 per hundredweight on that date.


In view of the $13.49 level now prevailing and because of the severe hardships facing dairy farmers if the Congress sticks with $13.10 in the new farm bill-and I will have more to say about this latter point in my remarks following the colloquy-I am asking my distinguished colleagues, Senator HELMS and Senator HUDDLESTON, the question I posed a moment ago.

As I said, Mr. President, if the chairman of the Agriculture Committee and ranking minority member can respond in the affirmative to this question, then I am prepared to see H.R. 4612 go to passage on a voice vote following additional remarks I would like to make after the colloquy.

The PRESIDING OFFICER. The Chair will state that the pending business before the Senate is not the consideration of H.R. 4612, but, rather, the motion to proceed to the consideration of H.R. 4612.

Mr. PROXMIRE. I appreciate that. The Chair is very correct. I did not phrase my statement correctly. I understood it to be the motion to take up the bill, but we can have a colloquy at this time.

The PRESIDING OFFICER. The Senator is correct.

The Senator from North Carolina. Mr. HELMS. Mr. President, I thank

the Chair. I listened carefully to the inquiry by

the able Senator from Wisconsin <Mr. PROXMIRE), who is my friend and with whom I have worked closely since I came to the Senate. I can certainly assure the Senator that when we go to conference on the 1981 farm bill, this Senator will keep an absolutely open mind on the problems that every Senator has. In the case of Senator PROXMIRE, that would especially be so because of my understanding of his particular problem with respect to the dairy price support provision.

I must level with him and all other Members of the Senate on this question, Mr. President. As I view the budgetary restraints, I cannot assure him that I am optimistic that a higher dairy support level can be achieved than the one approved in the State bill; but I tell him as my friend and my colleague that I am certainly willing to reexamine and evaluate the 'Senaite position on the support level for the 1982 marketing year.

That evaluation should take into consideration all sorts of things, such as the trends in dairy production, projected parity levels, anticipated stock accumulations and more recent cost estimates from the Department of Agriculture and the Congressional Budget Office, all of which I know the Senator understands.

Mr. President, I have high regard for the Senator and commend h;m for his outstanding concern for America's dairy farmers. However, I hope that he will understand that the conferee's consideration will be somewhat constrained for the 1982 :fl.seal year. There are also formidable procedural obstacles to going to a support level above that in the Senate bill for 1982-a level now tentatively adopted by the House of Representatives.

Let me give the Senator this further assurance: I shall carefully monitor the dairy situation and, if milk production is reduced more than expected in future years, I shall certainly recommend appropriate adjustments to increase incentives for dairy production.

Mr. HUDDLESTON. Mr. President, I commend the distinguished Senator from Wisconsin for the dramatic manner in which he has called the attention of this body and the American people to the plight of the dairy farmer in the United States. I, too, certainly want to assure .him that I shall explore with the other conferees the possibility of adopting a minimum support level of $13.49 for the current milk marketing year. The distinguished Senator from Wisconsin has highlighted a number of facts concerning the dairy farmer that merit the attention of Congress and, as the Senator has pointed out, the $1~.49 :figure represents 75 percent of parity.

Again, I shall have to sA.y, as the distinguished Senator from North Carolina did, that it is impossible to give assurances that we shall accomplish that purpose or get the conference to agree to a substitute that will contain the level suggested by the Senator from Wisconsin. I might call the Senate's attention to the fact that in marking up the farm bill, the Committee on Agriculture, Nutrition, and Forestry tentatively agreed to a m ;nimum price level of 75 percent of parity.

However, upon reconsideration, the committee-while leaving unchanged existing law which requires that milk be supported at a level between 75 and 90 percent of parity-authorized the Secretary of Agriculture to support the price of milk at not less than 70 percent of parity if the Secretary estimated for any :fl.seal vear that net Government price support purchases of milk and dairy products would cost more than $500 mtllion or exceed 3.52 billion pounds. Too, under the committee-reported bill, adjustment of the support price upward to 70 percent of parity on April 1 of each year would have been required if the support price had fallen below 70 percent of parity.

It proved impossible on the Senate floor to maintain the language of the committee-reported bill, and the administration's proposal of a $13.10 minimum was adopted.

Moreover, Mr. President, while the provisions of the Senate-passed bill and the tentative agreement reached by the House are different with respect to the level of price support for the 1983 through 1985 marketing years, the two Houses are in agreement with respect to the minimum level for the 1982 marketing year.

Thus, as the Senator from Wisconsin undoubtedly recognizes, there wou1d be formi.dable procedural problems fro~ the standpoint of the Houc;e in agreeing to a minimum level of price support in excess of $13.10.

However, no problem is insurmountable, and I certa!nly shall be willing to explore during the conference on the farm bill the possibility of agreeing to a higher level.

Mr. PROXMmE. Mr. President, I thank, from the bottom of my heart, my two good friends, the Senator from North Carolina, the Chairman, and the ranking Member, the Senator from Kentucky. I appreciate very much what they have said. I know that they, too, recognize the plight of the dairy farmer. Too few Members of Congress and too few people among the public understand how devastating that will be if we do not make an adjustment here. I realize the f ormidable problems the two Senators have discussed. I realize they are formidable. I discussed those problems with people in the House and people on the staffs of the committees and they are very difficult indeed. But as the dist:nguished Senator from Kentucky said so well, they are not insurmountable and I very much appreciate the willingnesc; of both Senators to give this consideration.

Mr. HELMS. Mr. President, will the Senator be willing to have the bill called up?

Mr. PROXMIRE. Yes; I am willing to have it called up by unanimous consent. I want to speak on it before we act on it, which I understand will be by voice vote.

The PRESIDING OFFICER. The question is on agreeing to the motion to proceed to consideration of the bill, H.R. 4612.

The motion was agreed to. The PRESTDING OFFICER. The clerk

will state the bill. The bill clerk read as follows: A b111 (H.R. 4612) to temporarlly delay the

October 1, 1981, increase in the price support level for mllk and to extend the time for conducting the referendum with respect to the national marketing quota for wheat for the marketing year beginning June l, 1982.

The Senate proceeded to consider the bill.

Mr. HUDDLESTON. Mr. President, H.R. 4612 temporarily will set the level of price support for milk at $1 'UO per hundredweight for milk containing 3.67 percent butterfat, which is the l~vel at which the price of milk was supported during the 1981 marketing year. This level will last until November 15, 1981.

MILK PRICE SUPPORT

Permanent law and the Omnibus Budget Reconciliation Act of 1981 require a minimum milk price support level be~inning October 1 of 75 percent of parity. However. the conferees on the Budget Act recognized that "the support price for milk would need to be reconsidered along with the support price for other commodities during consideration of the farm bill in order to meet the budget targets in the concurrent budget resolution for the :fl.seal year ending September 30, 1982."

The minimum milk price support level for the 1982 through I 985 marketing years under the omnibus farm bill passed bv the Senate on Seotember 18 is $13.10 per hundredweight, the same as the 1981 marketing year level and that provided under H.R. 461~. The House of Representatives. in its deliberations on its version of the omnibus farm bill. has agreed to a mi.nimum orice support level of $13.10 for the 1982 marketing year.

However, it appears unlikely that Con-


gress will be able to complete action on the omnibus farm bill until sometime in November.

On October 1, the Secretary of Agriculture, acting under existing law, _announced that the support level for milk was being set at 75 percent of parity$13.49 per hundredweight-effective October 1.

The effect of H.R. 4612 if enacted, would require that the support level revert to $13.10.

The enactment of H.R. 4612 will not, in my view, affect in any way the ultimate resolution by Congress of the minimum level of price support for the 1983 through 1985 marketing years. While the provisions of the Senate-passed bill and the tentative agreement reached by the House are different with respect to the level of price support for the 1983 through 1985 marketing years, the two Houses are in agreement with respect to minimum level for the 1982 marketing year-which is $13.10 per hundredweight. As I stated earlier, in response to Senator PROXMIRE'S question, I am willing to explore during the conference on the farm bill the possibility of agreeing to a higher level than $13.10.

However, I think that it would be misleading to our dairy farmers for Congress to permit the price support level for milk to remain at $13.49, and, within a few weeks, enact legislation that would mandate a decrease in the level of support. Therefore, I support the enactment of H.R. 4612. ADJUSTMENT NEEDED IN MILK MANUFACTURING

MARGINS

Mr. President, a matter of deep concern to me at a time when action is being taken to freeze the support level for milk is that the actual prices that dairy farmers receive for their milk may be below the required support price.

I am particularly concerned about the manufacturing margins used by the Commodity Credit Corporation in determining its purchase prices for dairy products. The CCC purchase price should cover the manufacturing margin, which is the annual average cost of manufacturing butter, nonfat dry milk, or cheese, as well as the cost of the milk used in manufacturing these products.

If actual manufacturing costs exceed the margin, a manufacturing plant selling to the Commodity Credit Corporation will not receive sumcient revenue both to cover its costs and pay to farmers a price for their milk that equals the support level.

There has not been an adjustment in manufacturing margins since October .1979, even though manufacturing costs have increased by over 30 percent for some products purchased by the Commodity Credit Corporation. The result has been an average U.S. manufacturing milk price well below the announced support level since April 1980.

The manufacturing margins, therefore, Mr. President, should be increased to enable plants to pav farmers the support price provided under the law. Further, the Secretary of Agriculture periodically should review and make adjustments in the manufacturing margins and other factors to assure that CCC purchases will

continue to provide manufacturers revenues to enable them to pay farmers a price not less than the support price. · Mr. PROXMIRE. Mr. Presiden't, I want to take this opportunity to emphasize what the Senate, the press, and the general public simply do not understand: Dairy farmers in Wisconsin and elsewhere will suffer savage cuts in their net income in the Senate version of the 1981 farm bill, as few Senators appreciate.

Mr. President, a 4-year freeze on dairy prices-and that is what it is, as I am going to point out-will be a disaster for the Nation's dairy farmers. But this is exactly what will result if the farm bill supported by the administration and passed by the Senate becomes law.

What does the Senate version of the farm bill do to the Nation's dairy farmers? Mr. President, the farm bill that we passed not long ago means that, for the next 3 years, dairy prices would remain at the same level they achieved on October l, 1980-over 1 year ago.

That is a 4-year freeze on da.iry prices. Mr. President, let me say that agatn: The Senate has passed a farm bill that saddles our dairy farmers with a 4-year freeze on dairy prices.

Let us look e.t the effect this freeze is already having on our dairy farmers. Since the freeze began-over 1 year ago the Consumer Price Index has risen over 12 percent.

But the prices paid by dairy farmers .have risen even more. Assuming that prices continue to rise during the next 3 years at 1 O percent e. year, Mr. President, that will mean a loss in net income to the average dairy farmer in this country of a disastrous 70 percent. And net income is what the dairy farmer must live on.

This could mark the beginning of the end for the family dairy farm in America. Anet. it may well destroy the dairy price support system that has performed so well for the last 32 years.

Mr. President, are we fully aware of what we are doing to the dairy farmer? By freezing the price the dairy farmer can receive for his milk from October 1, 1980, until at least October 1, 1984, we are making the dairy farmer and his family the prime victims of economic injustice in this Nation.

I challenge anyone in this body or in the press, or anyone in this country, for that matter, to demonstrate to me that any other significant group in America faces anything like that kind of economic catastrophe.

We are strapping the dairy farmer with a 4-year price freeze for his product while-at the very same time-this Nation is undergoing the worst peacetime inflation in our history.

This will mean-according to an analysis prepared at the University of Wisconsin-that the average dairy farmer will endure a 70-percent cut in his net income.

Obviously, Mr. President, the living expense facing the dairy farmer will continue to increase as he tries to survive with this cruel slash in his net income.

I point out what this means to a typical dairy farm family. The dairy farmer

and his family with $15,000 for living expenses last year will find that by 1984 they have less than $5,000, and that $5,000 in 1984 dollars will buy far less than $5,000 will buy today. Under the Senate bill, I calculate that the typical dairy farmer will sink far below-in fact, 'to about one-half-the poverty level.

Mr. President, dairy farmers are not unskilled, common laborers. These are not incompetent, inemcient producers. These dairy farmers work longer and harder than any other workers in our country today. Those cows have to be milked twice a day, 7 days a week, 52 weeks a year. The dairy farmer typically grows most of his own feed. So he has to plant and harvest his crops. He has to repair and maintain his equipment.

Last year, the University of Wisconsin made a study of the hours a typical dairy farmer and his wife and children worked in June of 1980. Their finding: 135 to 150 hours per week, in aggregate. That is not one person, of course, because there are only 160 hours in a week. The family together-the husband, wife, and children, in aggregate-worked those hours.

And even with 80 percent parity which they enjoyed at that time, their hourly income was 15 percent less than the minimum wage. Do they produce productively? Consider, Mr. President, that when the 1949 law-which in the absence of the enactment of the 1981 b111 becomes the governing statute for dairy price supports-was passed 32 years ago, we had some 406,000 dairy farms in this country. Today, what do we have? Maybe 400,000, 300,000, 200,000? No; today, we have only 166,000 dairy farms. So most of them, almost two-thirds, have been weeded out.

The great majority of those farms are family farms, so labor, like the number of farms, has declined by more than 60 percent, and yet these 166,000 dairy farms last year produced 10 percent more milk than 406,000 dairy farms produced in 1949. That constitutes a proud record of increased productivity. It means that virtually every marginal inefficient dairy farmer has left the business. The dairy farmers working now have proven themselves the most efficient dairy farmers in the Nation, in the toughest kind of weeding out process. So they work hard and are extraordinarily efficient.

But that just begins to tell the story. In this capitalist country, to warrant a return we require two other elements: A capital investment and substantial risk. Mr. President, unlike the vast majority of Americans the dairy farmer must make an investment and a big one-several hundred thousand dollars-and he runs the kind of risk that would scare the pants off most businessmen. Weather, crop failure, a sickness in his herd can wipe out the most emcient and diligent farm family overnight. So there you have it, every possible ingredient that we require in our economic system of success. Hard work? Yes, hard, grinding, day after day, unremitting toil. Efficiency? Yes, an astonishing record of improvement in productivity, possibly unmatched by any substantial economic group in America. Investment? A big and growing investment requirement as the cost of

· ~


every kind of equipment farmers buy has continued to climb. And risk? Yes, indeed, a constant, painful, often heartbreaking risk, far beyond what most business endure. And their reward for all this? A meager income, barely enough to keep their head above water.

Now, what happens with this 1981 farm bill? Two-thirds of their meager income ripped away; forced to live on less than $5,000. In 1984 dollars, that will not even cover the income a welfare family will receive, and that will be the last of these, the hardest working, most efficient people in our Nation.

What I have not said is that that farm bill we have had in effect-the dairy price support system we have had in effect since 1949-has been good for the consumer. Dairy prices have risen less than the price of other food, have risen less than the Consumer Price Index, one-half as much as wages have risen. The consumer has been served. The cost to the taxpayer has been one-twentieth of 1 percent of the budget.

Mr. President, this 1s a modest program. It keeps the family farmer going. It provides the most vital and important food we have. During the time this law has been in effect, the percentage of income that the typical American family has spent for dairy products has dropped from 4 to 2 percent because of the efficiency and hard work of the dairy farmer, and this is the thanks he gets.

Mr. President, that is what the Senate farm bill imposes on the dairy farmer.

At this point, as we know, the House has acted on the dairy section of its version of the 1981 farm bill.

I spoke about the House farm bill dairy provisions a few days ago, and I will not repeat those remarks again here today. What the House has done represents a serious setback for the dairy farmer. What the Senate has done represents a catastrophe.

So once agatn, Mr. President, I plead, beg, request-whatever it takes-that our Senate conferees on the farm bill keep foremost in their minds how devastating the Senate version would be for dairy farmers.

My State happens to have 25 percent of all the dairy farms in the country-44,000 dairy farms. Those dairy farms provide the very heart of our rural Wisconsin. This will be disastrous not only ~or Wisconsin dairy farmers, if this goes mto effect, but for all the rural oowns in our State as well. It is ridiculous, because we have a law on the books that has served the consumer and the taxpayer well, and we should abide by it.

Based on any reasonable standard~nd. simply on fair play and a sense of Justice and equity-the Senate conferees should accept the House dairy provisions as a base and try their best to move to $13.49 a hundredweight from that point forward.

On Monday, September 28, I delivered a 16-hour speech on the floor of the Senate. P~ople ask me why I did it. Well, why did I? Mr. President, part of the a?swer lies in the plight of the Wisconsm dairy farmer. I spoke to protest sinking t~is country more than a trillion dollars mto debt, and signaling contin-

ued inflationary and high interest rate policies. What does that have to do with the dairy farmer? Answer: Everything.

The dairy farmer's typical income will drop from $15,000 a year to $5,000 a year, under the 1981 farm bill. Why? Because of the terrible ravages of this inflation. If my amendment somehow had been adopted and we had limited the debt to $995 billion, we woultl have given the country the one clear, hard signal it needs to convince it that we meant business about fighting inflation: a balanced budget. And on that balanced budget we could develop the kind of stable pricing and wage policy that could slow and even stop inflation. Then the dairy farmer would not need a price support increase.

If next year and 1983 and 1984 bring no inflation, the dairy farmer could make it even with this 1981 farm blll. But we all know the cruel truth.

We have adopted inflationary policies that will guarantee a huge Federal deficit th~s year and next year and probably in 1984. We have no effective antitrust policy. We have no dedication to free trade that can help hold down prices. We have no incomes policy, that is, no policy of wage or price restraint. With these feeble economic policies, anyone with commonsense knows that prices wEI continue to rise and rise sharply during the next 3 years and with the freeze in dairy farm prices we have riveted into this farm bill that spells ruin· for thousands of productive, efficient American dairy farms.

Mr. President, I have objected for some days now to any unanimous-consent action by resolution to permit the administration to put the terms of this farm bill into effect for dairy farmers before the bill becomes law, because I have hoped that my objections would strengthen the resolve of the HouseSenate conferees to accept the House version and use the $13.49 base which is now the law and now in effect. Such a decision would mean that dairy farm prices would be frozen for 1 additional year at their present legal level not for 3 more years.

An additional 1-year freeze would be painful and cruel for dairy farmers, but it would not be disastrous. A 3-year freeze would be just that-disastrous. I hope and pray that message has gotten through. Let us fight inflation, yes. Let us hold down spending, yes indeed, but let us not load such a grossly, pathetically unfair burden of fighting inflation on a single group of producers, especially when those producers have aJready done so much to make this a productive and strong nation.

The PRESIDING OFFICER (Mr. GoRTON) • The Senator from North Carolina is recognized.

Mr. HFLMS. Mr. President, H.R. 4612 will stabilize dairy supports at the current level of $13.10 until November 15, 1981-less than 30 days from now.

The intent of this measure is simply to preserve the status quo for an additional period of time, since it is taking longer than expected to enact a new farm bill. Once it is enacted, the new bill will set the support level for 1982 and future years.

In the farm bill already passed, the Senate has decided that the support level for 1982 should be $13.10.

The House has adopted-by a vote of 400 to 14-an amendment to their farm bill which would, among other things, likewise set the support level for 1982 at $13.10.

There were other dairy amendments offered on the House floor-some higher and some lower in the out-years than the level which was finally adopted. But in one respect, every amendment was alike. Each amendment would allow the support level for 1982 to remain at $13.10.

Those Members of the House of Representatives who have the highest concern for dairy farmers offered the amendments to increase the support level in future years, but even these Members concede that the support level for 1982 should remain at $13.10.

Why then is the actual support level today above $13.10?

The reason is that the House has not yet completed consideration of all parts of the new farm bill, although the dairy section has been voted on. In the meantime, a provision of 1949 law-which will be superseded by both the House and Senate bills once they are enacted-requires an increase.

The serious problems facing dairy farmers which the Senator from Wisconsin described will not be solved by a higher support level between now and November 15 of this year.

Both the House and Senate have gone on record that the support level for 1982 should be $13.10. A temporary increase above that will only create disorder and invite abuse of the marketing system.

Enactment of this measure will merely eliminate a needless, costly, temporary increase in supports which will have no real benefit to dairy farmers.

I urge its adoption. Mr. President, I yield to the able junior

Senator from Wisconsin. Mr. KASTEN. I thank the Senator for

yielding. Mr. President, once again the 3.dmin

istration has targeted our Nation's dairy farmer to receive the impact of cuts in the agriculture area.

Not only did the dairy industry and its thousands of farmers, 45,000 alone in my home State of Wisconsin, take the brunt of the initial cuts in any programwith the cut-off of the April 1 adjµstment, it is now being singled out again to take a cut-the elimination of the October 1 adjustment.

It is now after October 1. The adjustment has gone into effect and now the administration wants to eliminate it. Why not wait until we have a farm bill enacted into a "farm law." Let the House of Representatives finish work on its farm bill, go to conference with the Senate, and then put the dairy program into effect. That is what is fair. If there are going to be adjustments in the farm programs, let them go into effect as a package-that was the argument used by proponents of the Senate farm bill when we debated it here on this floor. Do not single out the dairy farmer to take cuts. It is not fair, and I oppose such a move.

Back in March, when we debated the elimination of the April 1 price adjust-


ment I stood here and stated that Wisconsi~'s dairy farmers were willing to take cuts, make sacrifices as it were, but that they were not wllling to stand alone in those cuts. They wanted equity. Cuts in all programs, agriculture and nonagriculture, needed to be made. Fortunately, we are starting to get Government off the backs of our people. We have made positive steps toward a balanced budget and I am proud to have been part of that process.

We are now looking at additional cuts in the Appropriations C'ommittee-12 percent across the board. Those are hard cuts; there will be difticult decisions made, but they will be made. But, those cuts are going to be made across the board. That is my point-do not single out any one individual or group of individuals.

Critics of the dairy industry complain about its high costs, and they are high, but let us take a look at the facts.

The fact is, dairy farmers in 1980 received an 8-percent increase in pricepretty reasonable I would say.

The fact is, costs to dairy farmers in 1980 of various commodities, interest, taxes and labor increased by 12 percent.

It does not take a skilled mathematician to figure out that there does not seem to be very much profit in that type of equation.

Retail sales of milk in the United States totaled approximately $16 billion in 1980; $3 billion went to Wisconsin. Think of the economic impact those sales make on local communities and States in terms of employment, taxes, and sales.

The dairy price support program provides stability for dairy farmers throughout the United States and a dependable, level supply of milk for our Nation.

The stability that I am talking about is especially critical for the young dairy farmer and those young farmers contemplating entry into the dairy industry. Without a good solid support level it is virtually impossible for a yot!llg farmer to obtain financing for the tremendously capital intensive dairy effort.

Dairy farms are on the decrease, in fact farming is on the decline, a situation we must not allow to continue. According to USDA :figures the number of farm operations reporting with one or more milk cows-the smallest farm to the largest-has declined steadily between 1975 to 1980 <the most current figures available) from 443,610 farms to 335,270-a staggering decline of some 108,000 farms. I would wager to say, Mr. President, that this decline is not endemic to the dairy industry, but does in fact apply to other farmers growing other commodities.

But what we are talking about todav is the dairy farmers and the Government's price support program.

There is nothing wrong with the program itself. Arguments can be made over this level of rarity versus another level of parity for the program, but the dairy price support program works. The problem then, Mr. President, is not the dairy program, but rather the economy, especially high interest rates that are destroying so many of our farmers.

The Federal Government, in order to make purchases under the support program, has to go into the marketplace to borrow money at high interest rates, competing against other commercial and private borrowers for precious dollars. So the action of this body needs to be directed at reducing the Federal Government's demand for money; reducing inflation and high interest rates, and not at the dairy price supr ort program.

Mr. President, I once again urge my colleagues to oppose the administration~s attempts to eliminate the October price adjustments. Let us wait for the farm bill conference report and vote on the total farm package and not single out the dairy farmer for cuts in a program he needs and is working.

Mr. BOSCHWITZ. Mr. President, I wish to associate myself with the remarks of the distinguished junior Senator from Wisconsin and with the remarks of the distinguished senior Senator from Wisconsin and associate myself in the efforts that they are making to retain the $13.49 price level.

I agree with them on the number of farms as they decline, that the pressures are put upon dairy farmers, particularly those in our neck of the woods, which are small farms which are removed from the market and where the individual family farmer is really the basis of our economy. That is why we feel so strongly in this matter.

So I associate myself with the remarks of Senator KASTEN and Senator PROXMIRE in their efforts to retain the higher level of parity support.

Thank you, Mr. President. I yield the floor.

The PRESIDING OFFICER. The bill is before the Senate and open to am~ndment. If there be no amendm~nt to be offered, the question is on the third reading and passage of the bill.

The bill <H.R. 4612) was ordered to a third reading, was read the third time, and passed.

Mr. HELMS. Mr. President, I move to reconsider the vote by which the bill was passed.

Mr. BOSCHWITZ. Mr. President, I move to Jay that motion on the table.

The motion to lay on the table was agreed to.

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

The PRESIDING OFFICER. The clerk will call the roll.

The legislative clerk proceeded to call the roll.

Mr. PELL. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

The PRESIDING OFFICER. Without objection, it is so ordered/

UNITED TIONS: HOME

STATES-SOVIET RELASECURITY BEGINS AT

Mr. PELL. Mr. President, on this past Friday evening, I had the good fortune to hear Thomas J. Watson, former Ambassador to the Soviet Union, deliver a remarkably informed, prescient, and thoughtful Ogden lecture at Brown Uni-

versity. I believe particularly important was the point he made that, unless courses and policies are changed, nuclear war with the Soviet Union appears very likely. Because of the importance of his speech and the creative recommendation he made of setting up a nonpartisan high level Commission for National Security Policy to try to get a grip on the situation, I believe my colleagues would be interested in his ideas. For that reason, I ask unanimous consent that Ambassador Watson's speech may be entered in the RECORD at this point.

There being no objection, the speech was ordered to be printed in the RECORD, as follows: UNITED STATES-SOVIET RELATIONS: SECURITY .

BEGINS AT HOME I'm pleased to lead off this year's Ogden

lecture series because it's devoted to the problems of U.S.-Soviet relations-the most important topic to Americans I can think of. This vital relationship embraces the posstb111ty of the total destruction of American and Soviet societies simultaneously.

While the Soviet Union has been creating the capab111ty to destroy our country, we have continued to spend vast resources to improve our ab111ty to destroy them.

Long ago both nations passed the point of sufficiency-the capacity to infiict nearly total annihilation on the other, no matter who attacks first.

Neither country wants war. Yet both countries continue to build more and better weapons, and to maneuver !or marginal advantages, as though World War III would be just another episode in mankind's history.

Common sense tells responsible leaders and ordinary citizens alike that the next World War will be the last war !or centuries and a total global catastrophe. Why, then, do we not address the problem with the urgency and vision it demands? Why do we attempt quick fixes which come back to haunt us? Why do we pretend nuclear war can be won?

Americans certainly find all manner of fault with Soviet policies. most of it justified. I find the relationship difficult in the extreme. But that evades the issue. I! the world goes up in flames, it wm be no consolation thait the few survivors, can put the blame !or the disaster on the Russians.

Today, more than ever, national security begins at home. Americans must pull themselves together and create policies that wm steer the rest of the world, friend and foe alike, willingly or unw1111ngly, out of the jungle and down the road towards peace and security.

For several decades now we have fallen short in our effort to do so. Tonight I want to discuss a few of our !allures, to draw some conclusions from them, and to offer a proposal for modestly improving the process of establishing our national security policies and priori ties.

Although I wm focus on mistakes and shortcomings, let me malre clear at the outset that I believe our country has also taken great strides forward since World war II. For instance the bipartisan consensus on such momentous issues as the Marshall Plan, aid to Greece and Turkey, resisting aggression in Korea, and the opening to China.

But the going has been getting tougher here at home. A consensus ls hard to come by. Bipartisanship is a rare occurrence. U.S. policy, driven often by political considerations, has begun to wheel and circle, rather than leading the world on a straight path.

We need a means to develop a far-sighted vision of the most important national interests. We must find a way of bringing our

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24357 wisest and most judicious thinking to the life and death questions affecting the very survival of our country.

As we look backward in order to see more clearly how best to move into the future, let's begin at the end of the forties and the early fifties; in the depths of the Cold war.

Under both Presidents Truman and Eisenhower, domestic politics and demagoguery throttled intell1gent debate on our China policy and threw the United States and China into a pattern of hostmty which lasted two decades. For twenty years our China policy served Soviet interests and undermined our own.

Under President Eisenhower we made a different kind of mistake. In part as a result of the decision not to put up an earth satellite before the Soviets put up their Sputnik, national security policy became a political football. The Democrats warned that the Russians were coming, raised alarms a.bout a missile gap, and urged vast increases in military spending to counter it. President Kennedy discovered after the election that the "missile gap" was imaginary. But the rhetoric sank into the consciousness of many Americans, and made it still more ditncult to think coldly and unemotionally about the best way to deal with the Soviets.

Both Presidents Kennedy and Johnson may have suffered from a curious fact of American political life: Democrats are often more susceptible than Republicans to false charges of "softness" in dealing with Communist regimes.

President Kennedy, for example, seemed to feel it necessary to play it "tough" in dealing with Communists as reflected in his approval of the Bay of Pigs disaster. It was only after the catharsis of the Cuban missile crisis, in which Kennedy eye-balled the Soviets down, that he felt able to start moving toward a new era in U.S.-Soviet relations. It is a great tragedy that he didn't live to pursue the effort.

America's attention became riveted to Vietnam, especially under President Johnson. Although the Soviet Union was rapidly developing the capab111ty of destroying us, as we had the ca.pab111ty to destroy it, and the Sino-Soviet split was opening new opportunities to deal with China., we did not put our best efforts into coping with those important problems. Instead, we concentrated on a noble but hopeless attempt to assist a. third-rate country in an area of little intrinsic interest to us.

Our mistakes crippled our a.b111ty to a.ct decisively in future crises, damaged the confidence of our youth in this country and its objectives, and presented to the world a picture of rebelllon and helplessness. That unhappy chapter ls behind us now, but it surely lllustr:i.tes the need for more wisdom in our policy-making process.

President Nixon did not have a ready solution for Vietnam, and In fa.ct added to the domestic conflict over the issue. He did, however, come to office with a coherent strategy for dealing with the Soviet Union and China. He also was determined to control the process, and shrewdly chose Henry Kissinger both to flesh out his pollcy and to implement It. His initial success in coming to terms. with the Chinese, then using that success as leverage in coming to terms with the Soviets. mustrates t.hat a well-thought-out foreign policy, implemented with style , consistencv. and determination, can succeed in U.S. polltics.

Nixon drew on a passive but deep publlc yearning to move away from dangerous confrontation. But his Administration also made mistakes. For example, in the first SALT negotiations we did not nress for a ban on multiple warheads (MIRVs} on Intercontinental missiles at a time when the U.S. had the capa.blllty but the Soviets did

not. We missed the chance to prevent the Soviets from MIRVing their big missiles because we chose to preserve the short-term advantages we then possessed.

President Ford was in no position to salvage detente, despite his boldness in going to meet Brezhnev in Vladivostok and attempting to restart the stalled negotiations on the SALT II agreement. But domestic politics, compounded by Soviet intransigence in the SALT negotiations, posed a serious obstacle: Ford faced a. tough struggle in his own party for the Presidential nomination, a struggle in which being tagged a.s prodeten te was a. decided disadvantage.

I a.m proud to have served in President Carter's Administration. He made a monumental contribution to peace in the Middle East through his personal efforts on behalf of the Camp David accords. He brought with him to the Oval Otfice the most generous and humane of instincts. But on some key issues he failed to turn those good instincts into good policy.

He made excellent individual appointments in the defense and foreign policy fields, but his team seemed unable to pull together on the same pa th toward the same goal. Differences in basic philosophy went beyond the na tura.l and heal thy tensions stemming from institutional differences. Moreover, the National Security Council played a competitive rather than a guiding or coordinating role. Carter had neither a. Kissinger, fully in tune with the boss and carrying out their jointly created policies, nor a. Bundy or Scowcroft, skillfully bringing together the views of the bureaucracy to fac111ta.te decisions.

A consistent and sensible national security policy ls not necessarlly well served by Presidential elections and the transition from one Administra.tion to another. At the beginning of the Carter Administration the usual transition difficulties were complicated by the continuing SALT II negotiations and related weapons decisions.

Wben Secretary Vance went to Moscow in the spring of '77, he carried with him President Carter's unique proposal for deep cuts in strategic weapons. This was understandable in view of Carter's own lncllnitions as well as the strongly held views In Congress, but prudent advisers would have-in fact may have-counseled against too abrupt a change In the directlou.

The Carter Administration's rough beginning need not have caused permanent difficulty If the overall thrust of U.S. policy had been to deal consistently with the Soviet Union as an equal even while fighting ha.rd at the negotiating table. Unfortunately, the Administration chose to play the "China. ca.rd" Instead of keeping the card in its hand where it was a. valuable asset. Whlle normally diploma.tic relati~ns ma.de good sense, It was counter-productive to develop mllltary ties and start hinting a.bout sales of mmtary equipment. Playing our trump card engendered Soviet suspicion and animosity without benefittlng the United States.

Eventually, the Soviets even came to doubt that the Carter Administration really supported ratification of the SALT II Treaty. Unfair perhaps, but the event often cited to me as the last straw was the crisis over the Soviet brigade In Cuba., which arose in the fall of 1 Q79 during the final pre'?arations for the SALT ratlfica.tlon fight In the Senate. The Soviets apparently concluded that the sudden surfacing o! this Issue-which involved the type vf equipment in the hands of Soviet training troops stationed in Cuba. since the early sixties-was a. delibente attempt to postpoue or sabotage SALT ratification.

The real explanat ion ls that a minor Issue was inflated by domestic polltics, particularly Frank Church's bitter campaign for reelection In Idaho, and the Admlnlstr ... tion's belie! that a. tough sta.nd would better serve the ratification effort.

An example o! a different problem in Presidential declsionma.klng has carried over from the Carter Administration to the present: the MX decision. It became clear in 1977-78 that the Soviets had improved the accuracy of their big mlssll<s, and that our Minuteman and Titan mlsslles therefore would soon be theoretically vulnerable.

The search tor a solution to this U.S. vulnera.blllty was thorough and employed the best technical expertise avalla.ble. President Carter delved into the technical and strategic detalls, and finally settled on a plan. But the American people had grave doubts about the practicality of basing MX In the desert, whlle some strategists warned that the Soviets could simply bulld as many warheads as we bulld shelters and thereby nullify the plan. I believe President Carter could have benefited from common sense advice on this Issue.

President Reagan has reacted with sound Instincts against the desert basing plan !or the MX. The presidential decision announced at the beginning of October confirmed that there is no new land-based survivable system In sight, that submarines are the best bet for survivablllty, and that submarine mlsslles can be acquired that wlll do whatever we formerly relied on land-based mlsslles to do.

It ls too early to comment in detall on the Reagan Administration's foreign and defense policies and the way they a.re developed. But already there are Indications that this Administration may have problems of consistency not unlike its predecessors. Despite Its a.ntl-Sovlet position, domestic political considerations led It to llft the partial embargo on grain sales, without any apparent concessions in return. This action helped confirm the Soviets' belief that the Americans a.re not prepared to make sacrifices to back up their tough talk, particularly when domestic politics or commercial interests are involved.

This Admlnlstratlon, like some of its predecessors, shows the beginnings of tendencies to make security commitments first and trying to develop domestic support for them later. It's terribly Important, as we continue to rebulld our country's confidence in the Government's leadership in national security and foreign policy, and as we try .to strengthen our reputation for consistency and rellab111ty abroad, to move carefully on this score. Any additional security guarantees or threats o! military action in the Middle East, the Persian Gulf. or elsewhere should not only follow constitutional processes, but should also engage the attention ot those parts of our society which wm have to make sacrifices to Implement the guarantees. I have In mind particularly the young people o! 011r country.

In these few e:iramples of policy problems over the past 35 years. you wlll have noted that domestic politics and bureaucratic infighting came up several times as obstacles to good policy. Yet these are both essential elements of our system.

By its very nature. our Executive Branch includes advoca.tes who become adversaries. We want our defense people to recommend the weapons they think are needed, we want our arms controllers to try to slow down the arms race; both groups are trying to improve U . .S. security. We want our diplomats to counter the Soviets a.round the world but also to recommend ways to make the U.S.Soviet relationship less dangerous. We want the CIA's best intelligence assessments, not tallored to flt policy requirements.

We elect our President to listen to these diverse interests and their recommenda.tions and to c'leclde what course the country wlll follow. We expect him to t.a.ke account not only or ha.rd facts and cold calculations Of national interest, but also competing domestic interests (guns versus butter} and the inclinations o! U.S. public opinion. In


particular, he has to deal with the views and moods of Congress, and get Congressional approval of his actions. It is a. superhuman task.

To sum up the problem, we Americans want to eat our national security cake and have it too. We value diversity of opinion and cultivate clashes of views, but we also want consistency, a. policy based on facts rather than emotion, a policy which takes the long view of national interests. We may at times deplore the effect on sensible na.tional security policy of both domestic politics and intera.gency differences, but we will not give up the political system which is the source of our strength.

Oa.n we square the circle? can we improve the process without d·amaging our democratic system?

A critic should keep quiet unless he can sugges·t a solution, so here's mine. We need a mechanism which helps our leaders and citizenry choose, out of a welter of confiicting views, a clear, consistent na.tional security policy which takes account of complex technology and strategic calculations, meets our long-term national interests, but at the same time ls understood and supported by our people. We want the Soviet Politburo's consistency and steadiness of basic philosophy and long-term purpose, but with the responsiveness to popular will possible only in a democracy.

What the President needs in order to make such policy decisions, and what Congress needs to judge his choices properly is informed and judicious advice:

Advice which takes account of but rises a.bove the parochial concerns of those charged with specific aspects of our national security;

Advice which flows from broad concerns for the national good rather than from narrow personal views or private political ambitions;

Advice which looks to the long term rather than to domestic political pressures of the moment, yet reflects the deeper aspirations of Americans and thereby helps create a strong national consensus.

Others have suggested mechanisms for providing th~t advice. General Maxwell Taylor has long advocated a National Policy Council. Senator William Fulbright proposed that a body be created, somewh&t like the Supreme Court but with advisory rather than legal authority, to give advice on U.S.Soviet relations.

My own suggestion is to create a Commission for National Security Policy along the following lines:

First, its focus ought to be on national security policy broadly defined with principal attention to the Soviet Union as the main problem. It should embrace U.S. weapons procurement and the use of military force as well as political and economic problems. Plans regarding the Persian Gulf, the Middle East, NATO, Japan and China, to name just a few issues, would be examined when appropriate. But the Commission should focus only on those issues which constitute policy watersheds.

Second, the Commission would be large enough, say 10 persons, to provide a good mix without being unwieldy, Commissioners would be appointed for staggered ten-year terms, to assure continuity and independ- · ence. Nonrenewable appointments would be made by the President and confirmed by the Senate. The Commissioners should be individuals, Democrats and Republicans, of demonstrated abll1ty and integrity, they ~hould be fam111ar with national security issues. and well attuned to main streams of American public opinion. They should drop any outside ties and thus should speak only for themselves. The Commission should be treated as a full-time activity, and Commissioners should have no future political ambitions. The Commission should have access

to all information available within the Government.

Third, the Com.mission should have independent status established by legislation, perhaps along the lines of the Civil Rights Commission, and would not be subordinate to either the President or the Congress. Both the President and the Congress could seek the advice of the Commission on matters in its competence, and its recommendations could be issued in classified form if necessary. Split recommendations might emerge, with dissents spelled out if desired. The Commission should also be empowered to render advice even when not asked, if necessary by means of public hearings.

Could such a Com.mission have made a difference in the past? I believe it could.

It could have gained support for a China policy based on U.S. interests over the long haul.

It would have provided the continuity on the Bay of Pigs planning that might have given the new Kennedy Administration pause, and could have provided -balanced backup for the President's task force during the Cuban missile crisis.

It might have added a voice of reason in Vietnam policy discussions.

It could have stood up for long-term concerns versus short-term advantages in the argument over banning MIRVs. It might have added balance on the side of caution during the beadiest days of Nixon's detente, and Ford could have leaned on it for advice and support for a policy of sober detente.

It could have eased the Carter transition; helped President Carter cope with the confiict in views among his own advisers; helped to conclude that putting the MX in the desert may have looked good technically, but answered the wrong question.

It could also have given President Reagan a respected and private sounding board for his .policy ideas. On one major issue-the A WACS sale to Saudi Arabia-it could have raised questions privately which are now being discussed publicly. And once the decision to go ahead with the sale was made the Commission cculd have helped develop a national consensus.

It could, in the future, help the whole country look carefully at military commitments that might lead to involvement of American troops abroad or to nuclear war, to make sure beforehand that the people and the leaders of our country agree on our national priorities, agree that a given issue or place is worth fighting for, even risking our country for. The Middle East, for example, offers both opportunities and dangers. The Administration and Congress should welcome calm, private advice on those issues from a Commission such as I propose.

Finally, some people take comfort from the fact that it has been 36 years since the first thermonuclear explosion, and during th.at period the bomb has never been used in a war. Unhappily, I can take no comfort from that whatsoever. I have worked with thermonuclear weapons part-time for two years, and recently have spent fifteen months in dealing with the Soviet Government in Moscow.

From this perspective, as I look back to that first explosion in July 1945, I .am forced to say that we have .constantly been moving closer and closer to the brink. Jn the present dangerous situation, every step we take in the national security field, and every publlc remark, should be carefully analyzed in advance. Until we are able to make the relationship more stable, our leaders need wise counsel and deep analysis of the plans presented for their consideration.

Jn short, we need a new, strong, and vital non-partisan approach to assuring that the wisest possible advice and the greatest common sense are used in deciding our national security policies. Such advice and

counsel must be removed entirely from "politics as usual."

The time ls late. My own feeling is that we will not avoid a thermonuclear holocaust if we do not develop some viable new approach for bringing wisdom and consistency into our foreign relations decisions. The dangers of today wm not tolerate a continuation of the political practices of the past 35 years.

ARAB GULF PROGRAM Mr. HAYAKAWA. Mr. President, we

have read much about the impact of OPEC oil prices on the balance-of-payments problems of developing countries. We have also heard many stories of conspicuous consumption on the part of Arab sheiks in London, Paris, and the famous resorts of the West. Financial analysts also inform us that wealthy Arabs are buying up our finest buildings and farmlands.

While all this may be true, the negative image created is not the whole story, as I was happy to learn from a recent article in the October 5, 1981, issue of Newsweek. It tells the story of Prince Talal Bin Abdul Aziz Al-Saud, brother of King Khalid of Saudi Arabia. With an initial contribution of $60 million from the House of Saud, Prince Talal has founded the Arab Gulf program. Six other Arabian Gulf states-Bahrain, Qatar, Oman, Kuwait, Iraq, and the United Arab Emirates-are contributing the balance of the $200 million fund. The program will be administered by agencies of the United Nations, with priority attention being given to education, health, and the problems of women and children in the Third World.

Prince Talal, known as the "humanitarian prince," has long been involved in social causes in the Middle East. His work is totally apolitical and nonsectarian. While sensitive to charges that OPEC countries have not done enough to help less-developed countries, Prince Talal also feels the West should do more. Given the steadily declining Western aid levels, I would agree. Both OPEC nations and the West have the capacity to increase their foreign assistance-in their own self-interest and for the benefit of the poor majority of mankind. Meanwhile, at a time when the news from the Middle East is full of unrelenting violence, it is heartening to note the example of one crusader who is helping his fellow man.

I ask unanimous consent to place this account of Prince Talal and his Arab Gulf program in the RECORD.

Thank you, Mr. President. There being no objection, the article

was ordered to be printed in the RECORD, as follows:

A PRINCE FOR PAUPERS

Alexander Haig may believe that it ls "simply unrealistic" for the poor nations of the troubled South to count on much more help from their richer neighbors to the North. But not everyone else does. In a private ceremony in the wood-paneled omces of U.N. SecretaryGeneral Kurt Waldheim ten days ago, Prince Talal bin Abdul Aziz al-Saud, 51, brother of King Khalid of Saudi Arabia, handed Waldheim a pledge for $40 mlllion. It was the down payment on the Arab Gulf Program, a modest $200 m1llion effort by rich Arab states to help the Third World through the United Nations.

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24359 Sometimes called the "humanitarian

prince," Talal decided last year to do something about the "morally unacceptable" gap between rich and poor countries. With an initial $60 million from the House of Saud, he oersuaded six other Arabian Gulf sta.tesBahrain, Qatar, Oman, Kuwait, Iraq and the United Arab Emirates-to join him. President Saddam Hussein of Iraq simply handed him a blank check, and one Saudi family anonymously gave a private donation of $6 million. "I never mention money," says Talal. "I talk instead about poverty and hunger in the world." The funds will go to U.N. agencies, with Talal's special concern for children making UNICEF a prime beneficiary.

To those who know him, Talal's latest effort comes as no surprise. As a young prince in the 1950s, he fought to abolish slavery in Saudi Arabia and founded its first girls' school. In the decade since, Talal has funded several Saudi hospitals and schools, as well as backed UNICEF projects in the Third World. He promises a "totally apolitical" policy for his new program. "It does not matter if the needy are Christian, Muslim or Jewish," he says. "Politics makes such distinctions, humanitarianism does not."

Talal is sensitive to charges that the Third World has suffered from OPEC price hikes and that the Arabs have not done enough to help. But he thinks singling out the Arabs is "absolutely unfair"; the West, he says, "is not doing enough" either. When other states charged $41 a barrel for oil last year, Talal says, the Saudis sacrificed $15 billion by keeping theirs at $32. "The oil-producing nations" could do much more," he concedes, "and we are trying to remedy that situation." The program's $200 million may not be much in relation to the enormous sums required for economic development, but Talal asks a fair hearing for the new effort: "The journey of 1,000 miles starts with the first day." The nations of the South can't do much with proverbs-but the petrodollars are sure to be welcome.

THE STRUGGLE AGAINST COMMUNISM

Mr. GORTON. Mr. President, I ask unanimous consent to have printed in the RECORD a statement issued by the Washington State Chapter of the Congress of Russian-Americans, Inc.

There being no objection, the statement was ordered to be printed in the RECORD, as follows: CONGRESS OF RUSSIAN-AMERICANS, INC.,

Long Island City, N.Y. On November 7th the rulers of the Soviet

Union will celebrate the 64th anniversary of the "Great October Socialist Revolution". On this tragic anniversary of the Bolshevik takeover in Russia, the Congress o1 Russian Americans reiterates its continued concern for the condition and destiny of all people living under Communist rule. Sixty four years a.go a tragedy occurred which scarred not only the Russian nation but also the entire free world: Lenin and his minority party overthrew the democratic Provincial Government of Russia. Two months later the Bolsheviks dissolved the freelv elected Constituent Assembly, in which they had polled only 25 percent of the vote and renamed tne nation the Union of Soviet Socialist Republics.

Despite tlhe bitter struggle waged in the ensuing Civil War, which lasted more than three years and was followed by numerous peasant and worK:er uprisings aci:ainst the Communist domination, Lenin and his succesciors were able to con.!'olidate their iron hold over the people that make up the USSR. Moreover, since World War II, Communist leaders have added to their empire most of

Eastern Europe. This tyranny has caused millions of deaths and untold suffering in t'he prisons and concentration camps ot the Gulag Archipelago, and has kept life at a subsistence level for most of the population.

The Soviet build-up of armaments in conjunction with foreign policy aimed at spreading the Communist system wherever possible has caused the threat of world war to hang over the United States and the free world for several decades. Furthermore, unsolicited Soviet meddling in the affairs of the developing nations continues to cause serious foreign policy problems faced by t:Jhe United States and its allies.

For sixty four yea.rs Russian immigrants have repeatedly warned the world of the dangers of Communism. Too often they have been not only misunderstood, but even mistaken for Communists. As a result, the word "Russian" has ironically become synonymous with the words "Soviet" and "Communist". Moreover, despite being the first and foremost victim of Communism, the Russian nation is not even included on the list of captive nations.

Thus, in light of the ever-increasing threat of Communist domination we appeal to all people of good will to join us in condemning the inhuman and evil nature of Communism, reminding ourselves of all the people deprived of their basic human rights, defending those pers~cuted for their religious beliefs, and praying for the souls of the millions of victims of Communist terror in all captive nations.

MESSAGES FROM THE PRESIDENT Messages from the President of the

United States were communicated to the Senate by Mr. Saunders, one of his secretaries.

EXECUTIVE MESSAGES REFERRED

As in executive session, the Acting President pro tempore laid before the Senate messages from the President of the United States submitting sundry nominations which were referred to the appropriate committees.

(The nominations received today are printed at the end of the Senate proceedings.)

PRESIDENTIAL APPROVALS A message from the President of the

United States reported that he had approved and signed the following acts and joint resolution:

On October 9, 1981: S. 1033. An act granting the consent of

Congress to the agreement between the States of Nort h Carolina and South Carolina establishing their lateral seaward boundary.

S. 1181. An act to increase the pay and allowances . of members of the Armed services, and for other purposes.

On Oct ober 14, 1981: S. 1712. An a.ct to extend the time for con

ducting the referendum with respect to the national marketing quota for wheat for the marketing year beginning June 1, 1982.

S.J. Res. 98. Joint Resolution to authorize and request the President to issue a proclamation designating October 16, 1981, as "World Food Day".

On October 16 . 1981: S. 304. An act to amend the Tnternational

Travel Act of 1'961 t o establish a national tourism policy, and for other purposes.

On October 17, 1981: S. 917. An act to a.mend title 38, United

States Code, to increase the rates of disability compensation for disabled veterans,

to increase the rates of dependency and indemnity compensation for the surviving spouses and children of disabled veterans, to authorize the Administrator of Veterans' Affairs to guarantee home loans with provisions for graduated-payment plans, to increase the maximum amount payable under the Veterans' Administration automobile assistance and specially adapted housing assistance programs, to expand eligibility for memorial markers, to require advance notification to Congress regarding certain Veterans' Admlnistration reorganizations, and to limit expenditures of medical appropriations in connection with contracting out studies; and for other purposes.

PETITIONS AND MEMORIALS The following petitions and memorials

were laid before the Senate and were ref erred or ordered to lie on the table as indicated:

POM-E02. A joint resolution adopted by the Legislature o! the State of Oregon; to tho Commlttee on Appropriations:

"SENATE JOINT MEMORIAL 9 "Whereas the State of Oregon has a claim

recognized by a favorable decision in 1908 by the U.S. Court of Claims for substantial expenses incurred in furnishing troops and aiding the United States in maintaining the comm.on defense of the Oregon Trail, miners and settlers during the Civil War period· and

"Whereas other states received reimb~rsement for Civil War related claims, totaling $44,725,072.38 by March 15, 1892; and

"Whereas the State of Oregon repeatedly submitted appropriate claims for reimbursement pursuant to several Acts of Congress each accompanied by supporting vouchers and affidavits; and

"Whereas the claims of the State o! Oregon were approved by Robert Lincoln during his tenure as the U.S. Secretary of War and by the boa.rd of war claims examiners· and

"Whereas the United States Sen~te passed legislation three times before 1933 to authorize the payment of the claims of the State of Oregon; and

"Whereas the claims of the State of Oregon have never been paid and are now 1ong owing; and

"Whereas the State of Oregon seeks only equivalent dollar values, which is estimated to be in excess o! $1,300,000 (approximately); now, therefore,

"Be It Resolved by the Legislative Assembly of the State of Oregon:

"(1) The Congress of the United States is ur!!'ed to enact legislation granting the equivalent dollar value which ls estimated to be in excess of $1 .300,000 which payment will be accepted as full satisfaction of al'l claims against the United States arising out of the situation described in the Preamble.

"(2) A copy of this memorial shall be transmitted to each member of the Oregon Congressional Delegation."

POM-503. A petition from a citizen of Akron, Ohio, urging Congressional cooperation in Presicffmt Reagan's efforts to strengthen the National Defense; to the Committee on Armed Services.

POM-504. A joint resolution adopted by the Legislature of the State of Oregon; to the Comml ttee on Commerce, Science, a.nd Transportation:

"SENATE JOINT MEMORIAL 6 "Whereas the °t'e!lch~s of Lincoln County,

Oregon, were used by at least 20.000 students for marine education programs in 1980; and

"Whereas the number of visitors using Lincoln County beaches is expected to grea+ly increase within the next decade: and

"Whereas Lincoln County has an increas-ing number of large commercial fishing ves-


sels, operating in inclement weather and increasing the risk of accident; and

"Whereas the North Lincoln Hospital has the nation's highest incidence of hypothermia caused by cold water exposure; and

"Whereas the nearest existing United States Coast Guard helicopter stations are in North Bend and Astoria requiring one hour to respond to an emergency in Lincoln County; and

"Whereas shorter response time could have saved at least three lives in Lincoln County in 1980 alone; now, therefore,

"Be It Resolved by the Legislative Assembly o/ the State of Oregon:

"(1) The Congress of the United States is memorialized to establish a fieet of United States Coast Guard helicopters in Lincoln County.

"(2) A copy of this memorial shall be sent to the President of the United States and to each member of the Oregon Congressional Delegation."

POM-505. A joint resolution adopted by the Legislature of the State of Oregon; to the Committee on Environment and Public Works:

"SENATE JOINT MEMORIAL 14 "Whereas the United States economy is de

pendent upon domestic and international trade; and

"Whereas waterborne commerce plays a dominant role in United States foreign trade: and

"Whereas the United States ports represent a definable inciustry which directly employs over one million persons; and

"Whereas the Federal Government collects over $6 billion annually in customs duties at United States seaports; and

"Whereas the Congress is presently discussing legislation involving shallow-draft and deep-draft user charges; and

"Whereas user charge legislation must be developed with far better knowledge about the impacts than ls available now, including the results of the Section 205 study and addl.Jtlonal studies of the impact of prooosed legislation on the port system, on the ·communities which operate port facilities, on the overall transportation system of the United states and on the national economy· and

"Whereas the primary objectiv~ of any transportation or port development legislation should be to improve the nation's transportation system and to improve our position in world markets; now, therefore


"(1) That the Congress of the United States is memorialized, if any legislation relating to maritime transportation or port development is enacted, to adopt legislation that shall:

"(a) Maintain a vigorous, competitive tra.n<>nortat.lon system;

"(b) Maintain the existing maritime transportation as part of the federal waterways system with charges administered by the Federal Government·

"(c) Minimize lnfiatiO:U, economic dislocation and unnecessary increases in fuel consumption;

"(d) Minimize the impact on United States competitiveness in world markets·

" ( e) Minimize shift of cargo to' Canada or other foreign ports; and

"(!) Minimize disruption to the relative competitive position of ports.

"(2) That the Congress of the United States ls further memorialized, in adop·tlng any legislation authorizing user charges to require that user charges: '

" (a) Apply only to new construction beyond the existing system·

"(b) Be imposed on a partial cost recovery basis a.nd that the level of partial recovery be determined by the results of the studies of

the impact of user charges on the national economy;

"(c) Be assessed on a uniform basis; "(d) Be phased in over a period of years;

and "(e) Be subject t.o further study with re

gard to need, deslrabillty and altarnatlves."

POM-506. A resolution adopted by the House of Representatives of i.t.e Commonwealth of Massachusetts; to the Committee on Finance: "RESOLUTIONS MEMORIALIZING THE CONGRESS

OF THE UNITED STATES RELATIVE TO THE SOCIAL SECURITY SYSTEM AND BENEFITS

THEREOF

"Whereas, since its inception the Social Security System has served as a basis of financial security for mllllons of American workers; and

"Whereas, the Social Security System has afforded American citizens the prospect of dignity and freedom from fear during their later years; and

"Whereas, nearly one million Massachusetts citizens currently derive earned benefits from said system; and

"Whereas, nearly 700,000 citizens in the Commonwealth are over 65 years of age; and

"Whereas, the President of the United States and others have indicated their commitment to preservation of benefits to current participants in said system; therefore be it

Resolved, that the Massachusetts House of Representatives urges the President of the United States and the Congress to make every effort to alleviate the fears of those millions of Americans who would be adversely affected by any reductions in said benefits and to maintain the levels of benefits promised to the Nation's elderly, disabled, widows, and children which are essentiil.l to the integrity of said system: and be it further

"Resolved, that copies of these resolutions be forwarded forthwith by the Clerk of the House of Re!)resentatives to the President of the United States, the Presiding Officer of each branch of Congress and to the Members thereof from the Commonwealth."

POM-507. A resolution adopted by the Common Council of the City of Syracuse, N.Y., relative to social security benefits; to the Committee on Finance.

POM-508. A joint resolution adopted by the Legislature of the State of Oregon; to the Committee on Foreign Relations:

"SENATE JOINT MEMORIAL 5 "Whereas the unleashing of nuclear weap

ons in warfare would cause untold death, suffering and destruction; and

"Whereas the continued development, testing and production of nuclear weaponry and related delivery systems increase distrust and apprehension among nations as well as the "Otential magnitude of any international confiict; and

"Whereas our nation's environment is threatened by the mere preparation for nuclear war because:

"(1) According to the Department of Energy, 98.8 percent by volume of all high-level radioactive wastes come from mmtary nuclear programs; and

"(2) The proposed MX nuclear missile system will reouire 14 million acres of land 12 percent of the totlll annual water run-off in that area, 10,000 miles of heavy duty roads, and twice the amount of cement required to build Hoover Dam; and

"Whereas governmental spending for nuclear weaponry and related delivery systems would be spent more wisely in peacefUl pursuits: now, therefore,


" ( 1) That the Congress of the United

States request the President of the United States:

"(a) To propose to the Soviet Union a mutual freeze on all further testing, production and deployment of nuclear weapons and of missiles and new aircraft designed primarily to deliver nuclear weapons; and

" ( b) If such a freeze ls mutually agreed upon, to transfer the funds that would have been used for those purposes to peaceful, nonnuclear use.

"(2) That a copy of this memorial be transmitted to each member of the Oregon Congressional Delegation."

POM-509. A resolution adopted by the House of Representatives of the Commonwealth of Massachusetts; to the Committee on Foreign Relations: •"'RESOLUI'IONS MEMORIALIZING THE PRESIDENT

OF THE UNITED STATES AND THE CONGRESS

To PROVIDE AID TO THE PEOPLE OF POLAND

"Whereas, the People of Poland, already enduring great hardship and suffering as a result of their desire for freedom, face further deprivations of the staples of life as winter approaches, thus, grievously affecting the thirty-five mlllion citizens of the brave, but tragic, nation; and

"Whereas, the United States of America shares a common bond of kinship with more than ten million Americans proudly claiming Pol·ish ancestry, and with all Americans mindful of the aid which ou:r Nation received in our hour of need f.rom Polish patriots such as Pulaski and Kosciuszko during our own strugg·le for independence; and

"Whereas, the National Security Council, contrary to the recommendations of the Secretary of State and the National Security Advisor, has voted not to aid Poland as part of the administration's budget cutting efforts, thus placing the United States on a parallel co;,ir~e with the Soviet Union which has likewise refused aid to the Poles; and

"Whereas, the senior Sena tor from Massachusetts has initiated efforts to provide substantial aid to Poland; therefore be it

"Resolved, That the Massachusetts House of Representatives urges the President of the United States and Congress to endeavor to address the needs of the People of Poland through the provision of food, fuel and medical supplies delivered to the people in the most effective and e:icped.ttlous manner possible; and 'be i·t fw-ther

"Resolved, That the United States seek the cooperation of the international community in this effort; and be it further

"Resol1:ed, That copies of these resolutions be forwarded by the c1erk of the House of Representatives to the President of the United States, the Presiding Officer of each branch of Congress and to the Members thereof from the commonwealth."

POM-510. A resolution adopted by the Committee on Labor and Economic nevelopment o.l t he House of Representatives of the State of Washington, relating to the AWACS ~~le and lts effect on State jobs, income, and revenues; to the Committee on Foreign Relations.

POM-511. A joint resolution adopted by the Legislature of the State of Oregon; to the Select Committee on Indian Affairs:

"SENATE JOINT MEMORIAL 12 "Whereas the congressional decision in

1953 to terminate the Federal Government's r~sponsib111ties to those Indian tribes listed at 25 U.S.C. 564 et seq. and 691 et seq. has had significant, long-lasting and deleterious effects in Oregon; and

"Whereas the Federal Government since 1970 has substantially repudiated the policy n:f termination in as much as both the executive and legislative branches have increasingly recognized federal responslbilltles to Indian tribes and have sought to

October 19, 1981 CONGRESSIONAL RECORD-SENA TE 24361 strengthen tribal abllities to respond to Indian needs; and

"Whereas Congress has never ex;pressly renounced the termination philosophy embodied in House Concurrent Resolution 108; and

"Whereas the vestiges of this 111-advised action continue to plague 'terminated' Indian tribes and their members in Oregon and to thwart tribal efforts to improve social. political and economic development a.nd selfsumclency; and

"Whereas the disastrous effects of this policy are stlll evident in the relationships of Indian tribes and their members witli state and local governments in Oregon; now, therefore,

"Be it Resolved by the Legislative Assembly of the State of Oregon:

"(l) The Congress of the United States is memorialized to repudiate formally the policy which iresulted in the termination of the Federal Government's recognition of, and faithful execution of its trust obligations towards, certain Indian tribes.

"(2) The Congress of the United States is further memorialized to establish equitable procedures for the restoration as quickly as possible of recognition of those Indian tribes whose federal recognition has been terminated.

" ( 3) A copy of this memorial shall be transmitted to the President of the United States and to each member of the Oregon Congressional Delegation."

POM-512. A joint memorial adopted by the Legislature of the State of Oregon; to the Committee on the Judiciary:

"SENATE JOINT MEMORIAL 4 "Whereas mUlions of Americans are dis

abled by various kinds of handicaps; and "Whereas the disabllities of handicapped

persons substantially limit their life activities; and

"Whereas despite physical or mental limitations many handicapped persons have or have the ab111ty to lead very productive lives; and

"Whereas many limitations upon the activities of handicapped persons are not because of physical or mental d1sab111ties, but because of the limitations placed upon their lives due to discriminating practices; and

"Whereas discriminating practices against the handicapped can be changed through the legislative process thereby alleviating some limitations now existing in the lives of handicapped persons; now, therefore,


"(1) We urge the Congress of the United States to enact legislation that will result in an elimination of discriminating practices against handicapped persons. We specifically urge the Congress of the United States to amend Title 42, United States Code, section 2000, referred to as the Civil Rights Act of 1964, to effectively include handicapped persons within the protection of the Act.

"(2) A copy of this memorial shall be transmitted to the President of the United States and to each member of the Congressional Delegation."

POM-513. A petition from a citizen of San Antonio, Tex., relating to House Resolution 1454, the Gay Blll of Rights; to the Committee on the Judiciary.

POM-514. A resolution adopted by the City Council of Boston, Mass., relating to the Voting Rights Act of 1965; to the Committee on the Judiciary.

POM-515. A petition from a citizen of Marks, Miss., relating to sup.port of s. 613, to take the first major step to end union violence in America; to the Committee on Labor and Human Resources.

POM-516. A joint resolution adopted by the Legislature of the State of Montana; to the Committee on Labor and Human Resources:

"JOINT RESOLUTION

"Whereas, the Legislature recognizes the ongoing Importance of the mining industry to Montana, as well as to the entire nation; and

"Whereas, the existence of the small mine operator, who plays an important part in the mining industry, ls endangered by the impact ot the "Federal Mine Safety and Health Act of 1977" (P.L. 95-164); and

"Whereas, the act defines a mine as any area of land from which any minerals are extracted, both on the surface and underground, including the lands, excavations, and other fac111tles used In the work of extracting such minerals, which definition not only covers the commonly thought of mining activities such as coal, silver, and molybdenum operations but also includes activities such a.s sand and gravel excavation; and

"Whereas, the act has caused a further erosion of basic states' rights by excluding any participation by a state in the regulation and inspection of mines relating to safety and health standards; and

"Whereas, there are distinct differences in mining operations across the nation, whicb are best understood and regulated on a state level rather than the national level because national legislation is often infiexible or incompatible with state needs and conditions; and

"Whereas, the right of a state to develop its own regulatory program and to perform its own inspections of mines relating to safety and health standards should be preserved; and

"Whereas, mining industry accident statistics have shown significant improvement under cooperative programs with state agencies, private industry, and labor.

"Now, therefore, be it resolved by the senate and the House of Representatives of the State of Montana:

"That the Congress of the United States is urged to enact amendatory legislation that would return to states the right to regulate or participate in the regulation of mines relating to mine safety and health standards.

"Be it further resolved, That copies of this resolution be sent by the Secretary of State to the President of the United States. to the President of the Senate and the Speaker of the House of Representatives of the Congress of the United States, and to each member of Montana's Congressional Delegation."

POM--517. A joint memorial adopted by the l.·eglslature of the State of Oregon; to the Committee on Labor and Human Resources:

"SENATE JOINT MEMORIAL 7 "Whereas the Legislative Assembly has de

clared it to be the public policy of the State ot Oregon that dimethyl sultoxlde and its compounds and mixtures be available in Oregon for prescriptive use by licensed physicians; and

"Whereas the Legislative Assembly has enacted law that provides for the safe importation, manu1'actu,.e. dir;;tri">ution, E?ale Pnd use ot dimethyl sulfoxlde within the State of Oregon; and

"Whereas the Food, Drug and Cosmetic Act (15 U.S.C. 301) and the Fair Packaging and Labeling Act ( 15 U.S.C. 1451) prevent citizens of the State of Oregon from the full enjoyment of those rights granted by the government of this state; now, therefore,

"Be It Resolvea by the Legislative Assembly of the State of Oregon:

"(1) The Congress of the United States and the United states Food and Drug Adm1_nistratlon are memorialized to take appropriate action to remove any federal impediments to the full implementation of Oregon law governing dimethyl sulfoxlde.

"(2) A copy of this memorial shall be sent to the President of the United States, and to each member of the Oregon Congressional Delegation.

POM-518. A petition from a. citizen of H111, New Hampshire, relating to ending union violence in America; to the Committee on Labor and Human Resources.

POM-519. A petition from a citizen of Sedro-Woolley, Washington, relating to union violence in America; to the Committee on Labor and Human Resources.

POM-520. A petition from a citizen of Liberal, Kansas, relative to outlawing monopoly bargaining in the Federal service; to the Committee on Labor and Human Resources.

POM-521. A petition from a. citizen of Summit, New Jersey, relative to outlawing monopoly bargaining in the Federal service; to the Committee on Labor and Human Resources.

POM-522. A petition from a citizen of Haines, Arizona, relative to ending monopoly bargaining in the Federal service; to the Committee on Labor and Human Resources.

POM-523. A petition from a citizen of Colchester, Vermont, rehtive to ending monopoly bargaining In the Federal service; to the Committee on Labor and Human Resources.

POM-524. A joint memorial adopted by the Legislature of the State of Oregon; to the Committee on Veterans' Affairs:

"SENATE JOINT MEMORIAL 11 "Whereas clv111an citizens of the United

States were recently held hostage in Iran together with American mmtary personnel; and

"Whereas this demonstrated again that in areas of confiict or In times of war certain civilians often share the same dangers and hardships as members of the Armed Forces of the United States; and

"Whereaa In every war in which this nation has engaged there have been clv111an citizens Imprisoned or interned for extended periods of time; and

"Wherear;; such imprisonment or confine· ment constitutes deprivation suffered by reason of American chlzenship and constitutes service in behalf of this nation; now, therefore.


"(l) The Congress of the United States ls memorialized to adopt legislation that, tor the purposes of all laws administered by the United States Ve' erA.ns' Administration, wlll confer upon c1v111an citizens of the United States who were forcibly detained or interned by a foreign government or power tor longer than one year during a period of war between that government or power and the United States the status of a person who served in the active mmtary, naval or air service of the United States.

"(2) A copy of this memorial shall be sent to the President of the United States and to each member of the Oregon Congressional Delegation."

REPORTS OF COMMITTEES The following reports of committees

were submitted: By Mr. ROTH, from the Committee on Gov

ernmental Affairs: Special report of the Permanent Subcom

mittee on Investigations entitled "Home Health Oare Fraud and Abuse" (Rept. No. 97-210).

Mr. ROTH. Mr. President, on behalf of the Senate Committee on Governmental Affairs. I submit a report of its Permanent Subcommittee on Investigations entitled "Report on Home Health Care Fraud and Abuse."


This report reflects the extensive investigation performed by the Permanent Subcommittee on Investigations in the spring of 1981 under my chairmanship. In the report the subcommittee details problems in the home health care program as administered by the Health Care Finance Administration in the Department of Health and Hwnan Services. Specifically, in the report the subcommittee finds that the current retrospective cost-reimbursement system, as it applies to not-for-profit agencies, lends itself to fraud, waste, and abuse. The report makes a variety of recommendations for improvements which are noted in a summary of the report which I ask unanimous consent to be included in. the RECORD.

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

SUMMARY OF REPORT: HOME HEALTH CARE FRAUD AND ABUSE

The Report of the Permanent Subcommittee on Investigations details problems in the home heal th caire program as a.dministet"ed by the Health care Flna.nolng Administration (HCFA). The central investigative focus of the Permanent Subcommittee on Investigations' inquiry dealt with the Chicago operation by Michael Morrisroe of five non-profit home health agencies and four profit-making subcontractors of those agencies. The PSI report detaJ.ls proof of the following:

( 1) Morrisroe con trolled the opera.ti on of all five home health agencies through a number of nominees who were used by Morrisroe to shield his true owne·rship from the HCFA (Health Care Finance Administration).

(2) Morrtsroe's control over the five home health agencies enabled him to direot the agencies' use ot the four profit-ma.king subcontractors which he also controlled.

(3) Morrisroe's ab111ty to a.void oompetition by directing business to the four subcontractors was complemented by his efforts to blll the federal government ait inflated rates for the services of the S1Ubcontraotors.

(4) Because of his dominant position, Morrisroe was able to divert the unlawful proceeds of this operation to his personal control. This involved the use of a nonexistent offshore tax shelter.

(5) The current retros:t>ective cost reimbursement system ut111zed by HCFA offered no substantial deterrent to Morrisroe's efforts:

(a) There were no incentives which forced Morrisroe to require competition for S1Ubcontractor services.

(b) Hundreds of thousands of dollars were lost because HCFA could not recover overcharges from the profit-ma.king subcontractors.

(c) HCFA failed to take the appropriSlte administrative action to exclude the Morrisroe agencies from participation in Medicare when it was determined that substantial overbilling abuses had occurred.

The major program findings of the PSI investigation into home health care a.buses are:

(1) Alternatives to the current retrospective reimbursement system need to be considered in order to promote competition.

(2) Clearer guidelines and definiticns need to be provided to reduce costs. For example, terms such as "CO"t related to patient care" and "reasonable costs" need to be carefully reviewed to provide maximum guidance to agencies and intermediaries.

(3) Audits by fiscal intermediaries must be maintained in order to identify unscrupulous or was.teful agencies and subcontractors.

(4) Home health patients need to have a greater knowledge not only of the services

available to them through alternative agencies but also of the cost of such services.

(5) HCFA needs to pursue aggressively through administrative action (i.e. exclusion) those providers who engage in corrupt or excessive practices.

By Mr. PERCY, from tne rr:-1""'-'':t.~ie c~

Foreign Relations, without amendment, and. without recommenci.atio.1:

S. 754. A bill to require tha.t most-favorednation treatment be granted only to the products of countries which have· not expropriated U.S. citizens' property without compensation therefor (Rept. No. 97-211).

EXECUTIVE REPORTS OF COMMITTEES

The following executive reports of committees were submitted:

By Mr. PERiCY, from the Committee on Foreign Relations, with understandings:

Additional Protocol I to the Treaty for the Prohibition of Nuclear Weapons in Latin America. also known as the Treaty of Tlateloloco, signed on behalf of the United Sta.tes of America on May 26, 1977 (Ex. Rept. No. 97-23).

By Mr. HATCH, from the committee on Labor and Human Resources:

Mr. HATCH. Mr. President, for the Committee on Labor and Human Resources, I report favorably a nomination list in the PubLc Health Service which has previously appeared in the CONGRESSIONAL RECORD and, to save the expense of printing them on the Executive Calendar, I ask unanimous consent that they lie on the Secretary's desk for the information of Senators.

The PRESIDING OFFICER. Without objection, i-t is so ordered.

(The nominations ordered to lie on the Secretary's desk were printed in the RECORD of January 5, 1981, at the end of the Senate proceedings.)

INTRODUCTION OF BILLS AND JOINT RESOLUTIONS

The following bills and joint resolutions were introduced, read the first and second times by unanimous consent, and referred as ind'cated:

By Mr. HEINZ (for himself and Mr. BENTSEN):

S. 1746. A blll to reduce the duty on the pesticide commonly known as Dicofol; to the Committee on Finance.

By Mr. SCHMITT: S. 1747. A bill to amend section 4124 of

title 18, United States Code, relating to the purchase of prison-made products by federal de".)artments, to allow in certain cases, the purchases of similar products from small businesses; to the Committee on the Judiciary.

By Mr. HATCH (for himself and Mr. QUAYLE):

S. 1748. A blll to exempt certain fixed contribution multi-emplover pension plans from title IV of the Em!lloyee Retirement Tncome Security Act of 1974; to the Committee on Labor and Human Resources.

Bv Mr. CHAFEE: S. 1749. A bill to amend the Internal Reve

nue Code of 1954 with respect to the deductib111ty of certain payments to officials and employees of foreign governments; to the Committee on Finan~e.

By Mr. McCLURE <for himself. Mr. JACKSON, Mr. STEVENS, and Mr. MURKOWSKI) !

S.J. Res. 115. Joint resolution to approve the President's recommendation for a waiver

of. law pursuant to the Alaska. Natural Gas. Transportation Act of 1976; to the Committee on Energy and Natural Resources.

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Mr. SCHMIT!': S. 1747. A bill to amend section 4124

of title 18, United States. Code, relating to the purchase of prison-made products by Federal departments, to allow, in certain cases, purchases of similar products from small businesses; to the Committee on the Judiciary. PURCHASES FROM PRISON INDUSTRIES AND SMALL

BUSINESSES

Mr. SCHMITT. Mr. President, I am introducing today a bill designed to give the private sector and the public sector relief from the inemclencies that sometimes result from old laws left untended too long.

On May 8, 1930, the Senate passed H.R. 7412. Among other things, this bill provided for the establishment of the Federal Prison Industries, Inc., otherwise known as the FPI. The purpose of the FPI was to give the Attorney General "authority to establish ~ndustries in the Federal correctional institutions so that he may provide useful and stimulating employment for every inmate and sell the products of their labors to some Government depart.ment or establishment." That is a quote from the House committee report.

Providing corrective and rehabilitative emplo·;ment for inmates is very important. I do not believe many in this body, if any, will disagree with that.

However, the report makes one other i;;oint. Representative GRAHAM, at that time chairman of the House Judiciary Committee, received a letter from the Attorney General and parts of that letter were included in the House report. The Attorney General, with the concurrence of the House committee, wrote that the FPI should "alleviate the appalling amount of idleness among the inmates without competing either with outside labor or private business." The committee went on to make it mandatory for Federal agencies to sell the goods at current market prices.

In 1981, Mr. President, the intent of the law wrought by our predecessors is no longer being served. The FPI has a huge backlog of orders, the quality of materials delivered is poor, the cost of the FPI's products is high, and the cost to the taxpayer is high.

The reason for this is simple. The Federal prison system is not in the business in the same way that private industry is in business. It is in the bus!ness of rehabUitating convicted criminals, not in producing qualitv products in a timely manner. As it has a monopolv over the sale of some products to the Federal agPncies. it has no incentive to produce t\melv, high aual.itv. and c05t competitive products. It is not the primary mission of the FPI to be efficient.

The bill that I introduce today addresses a solution to some of these problems.

For example, in my State of New Mexico, there is a small group of craftsmen

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24363 who operate a small business, Oja Caliente CJ.·a.ft.smen. '1he l''orest 8ervice has from time to time waded through the mire of regulations and obtained a waiver; from the FPI which allowed the Oja Caliente Craftsmen to produce signs for the Forest Service roads. The foresters tell me the signs were high quality, timely, and inexpensive. I have visited this small plant and agree totally with this assessment. They wished that they could deal with Oja Caliente all of the time and throughout the Forest Service, rather than just in this isolated region.

It seems that this is the case elsewhere, especially in the Western States. Much of the developing forest land is in the West while most of F'PI's capacity is in the East. This imuoses very high delivery costs and long leadtimes on every order going to the FPI. The taxpayer pays all of these costs.

The bill that I introduce today solves these problems without stepping outside of the intent of the original framers of the law. My bill provides that for orders under $20,000, the agency in question may deal directly with a private contractor. This will allow the big orders to still go to the F'PI and maintain their capacity while allowing the smaller ord~rs to go to the business sector, especially the small business sector. The bill further provides that all orders must be shinped within 120 days of receipt of the orders. If the FPI cannot guarantee this timely manufacture date, the order must be given an automatic waiver and handed over to a private contractor; or if the FPI has an order outstanding to the particular agency office that has gone unfilled for 120 days, the office may again deal with a private contractor.

This bill will give the FPI the incentive to become more efficient and comp~te for orders on a timely basis. It will give small businesses more business and reduce the taxpa:ver's burden by removing any old inefficiency based on an old law.

Mr. President, I ask unanimous consent that the bill be printed in the RECORD.

The PRESIDING OFFICER <Mr. RunMAN). The bill will be received and ap~ropriately referred; and, without object10n, the bill will be printed in the RECORD.

s. 1747 Be it enacted by the Senate and House

of Representatives of the United States of America in Congress assembled, That section 4124 of title 18, United States Code, is amended by-

(1) designating the first undesignated para.graph as subsection (a} and the second undeslgnate<l paragraph as subsection (b} · and '

(2) adding at the end thereof the following new subsection:

"(c} Nothing in this section shall prohibit the purchase of products from other sources when-

( 1} the order is for items amounting to $20,000 or less; or

( 2) a previous order is unfilled within 120 days; or

(3) the delivery of such products to a common carrier or other agent of transfer cannot be guaranteed by the Federal Prison Industries, Inc., within 120 days of the order.

If the conditions of the preceding sentence are met, it shall not be necessary to

obtain prior clearance from the Federal Prison Industries, lnc.".

By Mr. HATCH (for himself and Mr. QUAYLE):

S. l 74b. rt IJ • .u to t:xempt certain fixed contribution multiemployer pension plans from ti tie IV of the Employee Retirement Income Security Act of 1974; to the Committee on Labor and Human Resources. MULTI-EMPLOYER PENSION PLAN STABILIZATION

ACT OP 1981

Mr. HATCH. Mr. President, today I am introducing a bill, the Multi-E~ployer Pension Plan Stabilization Act of 1981, to amend both the Multi-Employer Pension Plan Amendments Act of 1980 and the Employee Retirement Income Security Act of 1974. I am pleased that Senator QUAYLE is joining with me in cosponsoring this legislation.

In an e.tf ort to stabilize multiemployer pension plans, Congress passed the Multi-Employer Pension Plan Amendments Act of September 26, 1980, which req.uires an employer who wholly or partially withdraws from a pension planfor example, sells his business or moves facilities from the jurisdiction of one pension plan to another-to pay his prorata share of unfunded vested liabilitr to the plan. This payment, known as ~ithdrawal liability, is not limited, and m fact, may exceed the company's net ~orth. For example, in the Johnson case m the U.S. District Court for the northern district of Illinois, Johnson's withdrawal liability to the Central States Pension Plan alone amounted to $16 -658,936.94. The amount alone greatiy exceeds Johnson's net worth of $6,821,-714 as well as the new worth of its parent, ~epublic Industries, Inc., which, includmg Johnson is $7,544,399. In the Transport Motor Express case in the same Federal district court, the amount of claimed withdrawal liability of over $8 mill:on exceeds by about $4.4 million the $3.6 million remaining from the liquidation of TMX. This is not fair.

The Amendments Act changed pension participation in two crucial ways for employer contributing to multiemployer plans. First, the 1980 Amendments Act makes a withdrawing employer liable for 100 percent of its net worth; prior to 1980, withdrawal liability, except in the remote event of a plan termination, was an unknown concept. Second, withdrawal liability is now triggered by whole or partial withdrawal from a plan· before liability was imposed only in the eveni of plan termination, not employer withdrawal.

Numerous practical problems have emerged because of the 1980 Amendments Act.

First, the Amendments Act disrupts normal business practices. Because the employer's withdrawal liability is often so large-in some cases over $13,000 per employee-it effectively prevents unionized companies from going out of business or liquidating. Often, the cost of withdrawal liability exceeds a company's net worth. Obviously, a liability of this magnitude prevents the sale of a company's assets. It prevents companies in some cases from moving facilities from

.J

one jurisdiction to another. In short, it ctisrupts ousmess operations.

Second, the Amendments Act restricts company growth. Unionized companies may accumulate partial withdrawal liabilities brought on by acquisitions, sale of assets, or relocation of facilities. Pension plan trustees can reach back to the corporate-controlled group to siphon off the assets of affiliated companies. In addition, the financial accounting standards board shortly will consider requiring union employers to footnote their potential pension liability on their financial statements. This could drastically reduce the ability of the company to borrow money. For many small businesses, the inability to borrow money could result in liquidation-which again triggers withdrawal liability.

Third, the Amendments Act will damage multiemployer pension plans. Obviously, to the extent that contributing companies are endangered financially the plans are endangered. Moreover. and contrary to its intention, the imposition of withdrawal liability as prescribed by the Amendments Act will damage multiemployer plans becaui:;e thf> hw•P "'0+ 0 ntial liability will discourage new employers from entering the plan. Without the normal replacement of employers and participants, multiemployer plans will face decline and ultimately insolvency. Finally, pension plans are not collecting withdrawal liability, for example, the Central States Pension Plan has made assessments against approximately 100 employers in an amount of $95,000,000. No collections have been made to date; only lawsuits have been filed.

Fourth, the Amendments Act changed pension plan rules in the middle of the game. Since the mid-1950's, most unionized employers only negotiated contributions in their collectiw~ ba"'P,'a.ining agreements. The promise of benefit levels was never made in the bargaining agreement, that was made by the trustees of the plan. Moreover, in the trust agreements, the employers' liaibility was limited to tJheir contributions. This was understood by the union as well as the employer.

In 1974, Congress redefined multiemployer plans as defined benefit plans. This aeition imposed a liability of up to 30 percent of the employer's net worth in the event of plan terminaition. No liability was impos·ed for employer wi·thdrawals.

In the Amendments Act of 1980, Congress increased this liability to 100 percent of an employer's net worth, either in the event of an employer's withdrawal from the plan or the plan's termination. The result is to revoke the pension plan provisions of thousands of collective bargaining agreements and impose upon the employer a greater liaibiUty than both he and the union agTeed to in their contract.

Finally, :and perhaps most significantly, the Amendments Aot will damage employees• retirement 'benefits. Probably, the major criticism of this bill is that it will uninsure the retirement benefits of 7 to 8 million emplovee participants in multiemployer plans. This is ndt true. Prior to the imposition of any


insurance of retirement bene:fits-eitlher mandatory or discreti'Onary-tihe incidence of benefit loss of retirees from multiemployer plans was less than onehundredth of a percent.

This was confirmed in a Department of LaJbiOr study of mul'tiemployer plans in 1973. Prior to availaJbililty of Government insurance, smaller plans •about to become insolvent were merged int.o larger, more solvent pension plans. Presently, however, bec·ause of the great magnitude of withdrawQJ. liability, employers are res-isting union organization more strenuously. Moreover, employers who become organized, .are refusing to contribute to multiemployer pension plans. Some employers aire signing union contraclts which do not provide for retirement benefit.s at all. Thus, the irony is that more employees will. lose retirement benefits as a result of the Amendments Act.

For those reasons, I am introducing the Multi-Employer Pension Plan Stabilization Act of 1981. This bill will remove employers who have only negotiated contribution levels in their collective bargaining agreements prior to Aprll 29, 1980, from the withdrawal and plan termination insurance provisions of title IV of ERISA. This will be accomplished by redefining such plans as fixed contribution multiemployer plans.

This action returns the responsibility of such plans to the freedom of the collective bargaining system. Some employers have negotiated benefit levels tn their collective bargaining agreement. In this case, the provisions of title IV of the Amendments Act and ERISA would apply. Some employers only have negotiated contribution levels in their collective bargaining agreement. In this case, the provisions of title IV of the Amendments Act and ERISA would apply. Some employers only have negotiated contribution levels in their collective bargaining agreements. In this case, the provisions of title IV of the Amendments Act and ERISA would not apply. In both cases, employers would be responsible for what they agreed to in their bargaining agreements with the union.

In addition to holding employers responsible for precisely what they promised in their collective bargaining agreements, the Multi-Employer Pension Plan Stabilization Act of 1981 will restore normal business practices. Once again, employers will be able to sell or move facilities without triggering huge withdrawal liabilities. Without partial withdrawal liability, company growth will be unimpaired. An employer's liability to borrow also will be unimpaired.

With the removal of the huge withdrawal liability disincentive to join multiemployer plans, the lifeblood of new employers and participants will return to multiemployer plans. Thus, the likely damage to the retirement benefits of employee participants in multiemployer plans will be removed.

There would not be any benefit forfeitures under this proposal. Current benefit levels would be payable at the same levels as at present. As in the past, future plan terminations would be merged into other plans without the occurrence of benefit loss. Only the em-

ployer's liability would be limited to the employer's contribution levels.

What would happen is that the trustees would have to be more fiscally respcnsible in setting benefit levels. If this occurred, there would be a substantial increase in the financial security provided by these plans. In turn, this would make the Pension Benefit Guaranty Corporation's insurance guarantee under title IV unnecessary. Minimum funding requirements and vesting requirements in other sections of ERISA would remain intact.

It is evident that this is an important bill. I anticipate that the Committee on Labor and Human Resources will be holding hearings on this legislation in the near future.

Mr. President, I ask unanimous consent that the bill be printed in the RECORD.

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

s. 1748 Be it enacted by the Senate and House of

Representatives of the United States of America in Congress assembled, That this Act may be cited a.s the "Multlemployer Pension Plan Sta.blllza.tion Act of 1981 '~ EXEMPTION OF CERTAIN FIXED CONTRIBUTION

MULTIEMPLOYER PENSION PLANS FROM TITLE IV OF ERISA

SEC. 2. (a.) Section 4001 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1301) ls amended-

(1) by inserting "(other than a fixed contribution multiemployer plan)" after "means a plan" the first time It appears 1n para.graph (3) of subsection (a.);

(2) by inserting "or a. fixed contribution multlemployer plan" after "multlemployer plan" in para.graph (2) of subsection (c); and

(3) ·by adding a.t the end thereof the following new subsection:

"(d) For purposes of this title, 'fixed contribution multi-employer plan' means a plan-

"(A) to which two or more unamlla.ted employers are required to contribute,

"(B) which ls maintained pursuant to one or more collective bargaining agreements, and

"(C) with respect to which such collective bargaining agreements on April 29, 1980 or on the date of plan establlshment if later:--

"(!) fixed the rate of contrl.butlons to the plan, and

"(11) did not fix any pension benefits under the plan."

SEc. 3. The effective date of this Act is April 29, 1980.

By Mr. CHAFEE: S. 1749. A bill to amend the Internal

Revenue Code of 1954 with respect to the deductibility of certain payments to officials and employees of fore;gn governments; to the Committee on Finance. DEDUCTIBILITY OF CERTAIN PAYMENTS TO OFFI-

CIALS AND EMPLOYEES OF FOREIGN GOVERNMENTS

• Mr. CHAFEE. Mr. President, today, I am introducing a bill which is an amendment to the Internal Revenue Code.

Mr. President, section 162(c) of the Internal Revenue Code provides that any payment by a U.S. taxpayer to a foreign official that would be illegal under U.S. law if it applies is not deductible. Thi.s provision applies to the payment regard-

less of whether U.S. law applies to the payment or the payment is legal in the country in which it is made.

The bill would amend section 162(c) to provide a payment to a foreign official would only be nondeductible if it violates the Foreign Corrupt Practices Act. This change harmonizes the Internal Revenue Code with the provisions of domestic law governing payments to foreign officials.

Mr. President, I ask unanimous consent to have a summary of the bill and a copy of the bill as introduced printed in the RECORD.

s. 1749 Be it enacted by the Senate and House of

Representatives of the United States of America in Congress assembled, That paragraph (1) of section 162(c) of the Internal Revenue Code of 1954 (relating to lllega.l payments to government officials or employees) ls amended-

( 1) by striking out "the laws of the United States if such laws were applicable to such payment and to such otncial or employee" and inserting in lieu thereof "the Foreign Corrupt Practices Act of 1977", and

(2) by striking out "(or would be unlawful under the laws of the United States)" and inserting in lleu thereof " (or would be unlawful under the Foreign Corrupt Practices Act of 1977) ".

SEc. 2. The amendments made by this Act shall apply to payments made after the date of the enactment of this Act.

SUMMARY AND EXPLANATION OF THE CHAFEE BILL

Paragraph (1) of Section 162(c) of the rnterna.l Revenue Code of 1954 is a.mended by striking out .. the laws of the United States if such laws were applicable to such payment and to such omclal or employee" and inserting in lieu thereof "the Foreign Corrupt Practices Act of 1977." e

By Mr. McCLURE (for himself, Mr. JACKSON, Mr. STEVENS, and Mr. MURKOWSKI) :

S.J. Res. 115. Joint resolution to approve the President's recommendation for a waiver of law pursuant to the Alaska Natural Gas Transportation Act of 1976; to the Committee on Energy and Natural Resources.

(The remarks of Mr. McCLURE, Mr. JACKSON, and Mr. STEVENS on this legislation appear earlier on today's proceedings.)

ADDITIONAL COSPONSORS s. 1018

At the request of Mr. CHAFEE, the Senator from Arkansas <Mr. BUMPERS) and the Senator from Massachusetts <Mr. TsoNGAS) were added as cosponsors of S. 1018, a bill to protect and preserve fish and wildlife resources, and for other purposes.

s. 1131

At the request of Mr. DANFORTH, the Senator from Vermont <Mr. STAFFORD) was added as a cosponsor of S. 1131, a bill to require the Federal Government to pay interest on overdue payments and to take early payment discounts only when payment is timely made, and for other purposes.

s. 1215

At the request of Mr. PROXMIRE, the Senator from New Mexico CMr. Do-

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24365 MENICI) was added as a cosponsor of S. 1215, a bill to clarify the circumstances under which territorial provisions in licenses to distribute and sell trademark malt beverage products are lawful Under the antitrust laws. '

s. 1427

At the request of Mr. GARN, the Senator from Florida <Mrs. HAWKINS) was added as a cosponsor of S. 1427, a bill to reduce financing cost to cities, counties, and States by amended section 5136 of the revised statutes to permit national banks to underwrite and deal in revenue bonds issued by State and local governments, and for other purposes.

s. 1634

At the request of Mr. COCHRAN, the Senator from Mississippi <Mr. STENNIS), the Senator from New Mexico <Mr. SCHMITT), and the Senator from New Jersey <Mr. WILLIAMS) were added as cosponsors of S. 1634, a bill to incorporate the National Federation of Music Clubs.

s. 1635

At the request of Mr. WEICKER, the Senator from Michigan <Mr. LEVIN) was added as a cosponsor of S. 1635, a bill to delay the application of revenue ruling 81-216 until January 1, .1983.

SENATE JOINT RESOLUTION 93

At the request of Mr. HAYAKAWA, the Senator from New Hampshire <Mr. RunMAN) and the Senator from Minnesota (Mr. BOSCHWITZ) were added as cosponsors of Senate Joint Resolution 93, joint resolution to clarify that it is the basic policy of the Government of the United States to rely on the competitive private enterprise system to provide needed goods and services.

NOTICES OF HEARINGS SUBCOMMITTEE ON FORESTRY, WATER RESOURCES,

AND ENVIRONMENT

Mr. HAYAKAWA. Mr. President I wish to announce that the Senate Agriculture Subcommittee on Forestry, Water Resources, and Environment will hold a hearing on S. 705 on Thursday, October 22, at 10 a.m. in room 324 Russell Building. S. 705 authorizes the Secretary of Agriculture to convey certain national forest lands when he determines it to be in the public interest.

Anyone wishing to testify should contact Denise Alexander or John Cozart of the Agriculture Committee staff at 224-2035.

AUTHORITY FOR COMMITTEES TO MEET

SUBCOMMrrrEE ON LABOR

Mr: BAKER. Mr. President, I ask unarumous consent that the Subcommittee on Labor of the Committee on Labor and Human Resources be authorized to hold a markup hearing on s. 1182, the Longshoremen and Harbor Worker's Compensation Act, during the session of the Senate at 10:30 a.m. on Wednesday. October 28.

The PRESIDING OFFICER. Without objection, it is so ordered. COMMITTEE ON ENERGY AND NATURAL RESOURCES

Mr. BAKER. Mr. President, I ask unanimous consent that the Committee on Energy and Natural Resources be authorized to meet during the session of the

Senate on Wednesday, October 21, to hold a business meeting on pending calendar business.


SUBCOMMITTEE OF AGRICULTURE CREDIT AND RURAL ELECTRIFICATION

Mr. BAKER. Mr. President, I ask unanimous consent that the Subcommittee on Agriculture Credit and Rural Electrification of the Committee on Agriculture, Nutrition, and Forestry be authorized to meet during the session of the Senate on Tuesday, October 20, at 9:30 a.m. to hold a hearing on bidding, purchasing, and election procedures of electrical cooperatives.


ADDITIONAL STATEMENTS

THE NEED FOR CHANGES IN THE FOREIGN CORRUPT PRACT!CES ACT • Mr. HEINZ. Mr. President, the Foreign Corrupt Practices Act was recently addressed by Alexander W. Sierck, former Director of Trade Policy for the Antitrust Division of the U.S. Department of Justice, before a meeting of the world trade institution's program on antitrust compliance for the multinational company. Mr. Sierck's thoughtful analysis regarding the need for changes in the FCPA is most timely now that the Banl· ing Committee has reported S. 708 anc'I will shortly be bringing it to the floor. I submit Mr. Sierck's remarks to be printed in the RECORD.

The remarks referred to are as follows: THE NEED FOR AND PROSPECTS OF CHANGE IN

THE FOREIGN CORRUPT PRACTICES ACT

The FCPA has proven to be a major disincentive to U.S. firms seeking to increase exports, particularly in the Middle East and in developing countries. The FCPA has also proven to be a significant impediment to domestic operations of U.S. firms as a result of their being, as publicly owned companies, subject to costly and ambiguous accounting and recordkeeplng requirements.

On March 12, 1981, Senator Chaffee introduced a blll, S. 708, to amend and clarify the Foreign Corrupt Practices Act (FCPA), enacted in 1977. There is a good prospect that the Congress will enact reform of FCPA in 1982. The Senate Banking Committee by a 11-4 vote on September 16th has already reported out of committee a blll that embodies many of the changes in the Chaffee blll. It is virtually certain that other amendmends wlll be proposed on the fioor of the Senate, many with a realistic prospect of adoption. Moreover, the House w111 begin Hearing of the Senate Committee on Finance. However, Rep. Timothy B. Wirth, Chal,rman of the House Banking COmmittee's Subcommittee on Finance, is urging a thorough study on the need for any change before considering current proposals to reform of FOPA.1 In its July 8, 1981 international trade policy ste.tement,2 the Reagan Ad.ministration placed a high priority on reform of FCPA.

1 Wall Street Journal, p. 8, col. 1, September 17, 1981.

2 Attached to the opening statement of Ambassadors W1111am E. Brock, U.S. Trade Representative, Before a Joint Oversight Hearing of the Senate Committee on Finance and the Senate Committee on Banking, Housing, and Urban Affairs on U.S. Trade Policy, July 8, 1981.

Thus it is timely for U.S. exporters now to consider how they can improve upon the current reform proposal and how they can best assure prompt passage of such legislation.

In reviewing current law and. proposed legislation, I wm first discuss the FCPA's accounting provisions and then its antibrlbery provisions. In doing so, I will also suggest some areas where further legislative change may be appropriate.

1. The Recordkeeplng and Accounting Provisions of FCPA:

Section 102 of the FCPA requires all issuers of securities, 1.e., publicly held companies, regardless of whether engaged in the export trade, to (1) make and keep books, records, and accounts which in "reasonable detail" accurately and fairly re,fiect transactions and dispositions of the firms assets, and. (2) devise and maintain a system of internal controls sufficient to accomplish various statutory objectives, e.g., "to maintain accountab111ty for assets." See § 13(b) (2) of the Securities Exchange Act of 1934, 15 U.S.C. § 78m(b) (2). The SEC is responsible for administering this section of FCPA.

Current law does not condition Uab111ty for violating these recordkeeplng obligations on a requirement that the failure be a "material" one. Nor does current law condition liab111ty on proof of a knowing violation. The Chafee bill would do so in both instances. With respect to the addition of a "materiality" proviso, it must be understood that, in other areas of securities law, e.g., in the context of disclosure obligations, the term has never been, and probably never can be, defined with precision; as a result, the applicab111ty of the materiality standard in this context will be determined only on a case-by-case basis.

However, the version of the blll that the Senate Banking Committee reported out, largely under the leadership of Senator Heinz, incorporates the "knowing violation" provision but not the one as to a "materiality" limit. Instead, as a compromise, the Committee substitute a requirement that companies only keep a "system of internal accounting controls.'' This ls a less exacting standard than FCPA now requires.

Critics of the materiality test fear that, if such test were incorporated, it would be quantitative test, thus removing from the Act's coverage even large payments by the biggest U.S. corporations. It ls worth noting that some, particularly immediately after Watergate, contend that even small megal payments can be material for they refiect on the judgment of management and can, in any event, place large amounts of business in jeopardy.a

The b111 contains another ambiguity similar to one involving "materiality." It also requires that records, in essence, only be kept in "reasonable" d.eta.11. But the bill, either as proposed or as reported out of the Senate Committee, does not define what is reasonable in that context.

Current law imposes recordkeeping controls without regard to cost/benefit considerations. In commenting on the Chafee bill in June, SEC Chairman Shad recommended. that firms not be required to change or improve their existing controls unless the firms determine tha.t the economic benefits wm "significantly" exceed the costs,' a limit that

3 See e.g. "Disclosure Rules and New Concerns," January 16, 1975 (Atlanta., Ga.) and "The Disclosure Philosophy." February 20, 1975 (New York, N.Y.). both speeches by former SEC Chairman Ray Garrett, Jr., and. "Truth or Consequences," speech by former SEC commissioner John R. Evans, May 15, 1975 (Denver, Colo.).

'Written statement accompanying the testimony of SEC Chairman John S. R. Shad, before joint hearings of the subcommittees on secl11'i ties and. on finance and. monetary


neither the Cha.fee bill nor the Senate Banking committee mark-up now contains.

2. The Antibribery Provisions of FCPA: Widespread post-Watergate concerns about

the payment by U.S. firms of bribes overseas were the impetus for passage of FCPA. Congress enacted FCPA with virtually no dissent from its members after the SEC uncovered large-scale foreign bribery involving the secret slush funds of more than 400 U.S. corporations. In 1975 and 1976, for example, Lockheed paid more than $106 million in socalled commissions to boost its exports of airplanes. Included was a. large payment to Prince Bernhard of the Netherlands to infiuence his recommendation on Dutch fighter plane purchases.

Sections 103 and 104 of FCPA impose civil and criminal penalties for bribery of foreign government officials by U.S. citizens and u.s.based businesses. See 15 U.S.C. § 78dd-1 and -2. Thus these provisions a.re applicable to all U.S. persons and :tLrms, not just to firms otherwise subject to SEC jurisdiction as publicly traded companies. These provisions a.re administered by both the SEC and the Justi<:e Department, with the latter having exclusive authority to bring criminal prosecutions. The two agencies, however, have periodically disagreed in their interpretations of important provisions of the FCPA.

A. Issues Relating to Intent: Under current law intent to violate the

antibribery provisions is not a.n element of proof. Further, current law imposes sanctions whenever a person has "ireason to know" that an illegal payment is being made; the apparent rationale for this provision is to ensure that the U.S. person does not avoid the law simply by use of a so-called "independent" agent to make the bribe.

The Chafee bill, as well as the Senate Banking Committee's September 16 mark-up, removes the "reason to know" provision. This will make it easier for U.S. firms doing foreign business through agents, pa.rticula.rly those paid on a commission basis, to a.void exposure under FCPA so long as they use an objective set of rules, i.e., a checklist, to make sure that their a.gent is not securing business by bribery.

The Senate Banking Committee's September 16th mark-up replaced the ires.son to know standard with compromise language drafted by Senator Heinz that makes it unlawful to direct or authorize a "third party to make a payment, gift offer, or promise of something of value expressly or by a oou.rse of conduct." Heinz added language to be included in the committee report with the bill to indicate that the phrase "by a course of conduct" is intended to close the look-theother-w .. l.y loophole that the "reason to know" standard closed, but spells out situations that would not be covered, i.e., continued employment of one who has ma.de lllegal payments Jn the preceding five years. Other situations not covered include merely hiring a pers·on wtth ties to a foreign government official or paying higher commissions than were customary.

The Chafee bill does not require proof of specific intent as an element necessary for civil or criminal 11ab111ty under the antibribery provisions. Thus, Justice could, in its discretion, still bring a criminal as well as a civil suit against essentially negligent conduct; this might be particularly significant in the context of a U.S. person using foreign sales agents. Certainly, at least with respect to criminal prosecutions, the Justice Department should be required to prove specific intent.

B. Exempted Payments: FCP A now contains an exception to the

basic proscription against bribes of foreign government o1Hcials for so-c'h.lled "grease

policy of the Senate Committee on Banking, Housing, and Urban Affairs Concerning S. 708, June 16, 1981.

payments," i.e., payments to those whose duties are essentially ministerial or clerical. An example would be a payment to a customs o1Hcial to speed the processing of a customs document. Senator Chafee's bill would not end this exemption.

Section 6(b) of Senator Cha.fee's blll, as well as the September 16th mark-up, would, however, widen the scope of exemptions to the antibribery prohibition by also including as exempt:

[A)n item of value that constitutes, or is intended as no more than, an item given as a courtesy, a token of regard and esteem, or in return for hospitality, and does not include marketing activities or expenses related to the demonstration or explanation of products or operations of a domestic concern, including travel and lodging, if such marketing activities, demonstrations or explanations, or related expenses pertain to the business presentation associated with the selling or purchasing of goods or services."

It takes practical and detailed knowledge of selling overseas, particularly in developing countries, however, to determine whether this exmption wlll prove to be su1Hciently broad and fiexible to refiect commercial realities. There is some risk that Justice could read the "courtesy gift" provision narrowly. The di1Hcult case is the $5,000 piece of jewelry that may appear necessary to give in some countries, particularly if a non-U.S. competitor has done so. What the bill in its current form at least would do is permit U.S. firms to pay the lodging and travel expenses of government o1Hcials as part of a marketing effort or in satisfying the terms of a contract relating to, e.g., inspection trips and the like.

The committee mark-up also preserves Section 6(b) of the bill, which provides that no payment is proscribed "which is lawful under the laws and regulations" of the country in which the foreign official who is the intended recipient se·rves. Of course, bribes are illegal in virtually all countries. The problem with this well-intentioned change is that in many developing countries the antibribery laws are either construed more narrowly than their language would suggest or are simply rarely enforced. Moreover, our major trading partners, e.g., France, Germany, do not have similar prohibitions against bribes ma.de outside of their respective territories.

Under current law the defense of extortion is available to persons charged with paying bribes. The re·ason is that in the extortion context the requisite corrupt intent is la.eking. Thus, an example where the defense would be available is a payment to a foreign o1Hcia.l to keep an oil rig from being dyna.mi ted. However, under current law the extortion defense is only available when a payment is ma.de to retain business. Moreover, enforcement officials maintain that under the current law the presence of mere "economic extortion," i.e., demands for payment not coupled with a threat of physical violence to persons or property, is not a defense to a bribery charge. The Cha.fee bill does not change current law in this regard, nor does the September 16th mark-up.

c. Administration of the Law: Section 7 of Sena.tor Cha.fee's bill would

give the Justice Department exclusive enforcement authority over the a.mended a.ntibribery provisions. Furthe·r, Section 8(b) of his blll requires the Justice Department to establish a business review procedure, and requires Justice to respond to requests for such opinions within 30 d·a.ys. Section 8(b) also provides that:

"An opinion that certain prospective conduct does not involve a violation shall be final and binding on all parties, subject to the discovery of new evidence."

Section lO(a) of the Cha.fee bill recites that it is the "sense of the Congress" that an international accord on corrupt payments

ls necessary. There have been some international discussions on this subject in connection with the UNCTAD negotiations on codes o! conduct; however, it is highly likely that at least the French will block any meaningful agreement in the near future. This ls significant because some members of the business community a.re urging the complete suspension of U.S. antibribery provislona until an international accord is reached.

Significantly also, the Chafee bill would add new protections to preserve the confidentiality of business records disclosed to the Justice Department in the course of an investigation of a firm's FCPA practices. The SEC has proposed that the blll should similarly protect documents submitted to the SEC in the course of an investigation of a firm's recordkeeping practices. Such a safeguard will reduce the burden on the agencies, as well as tl:~e submitting firms, of opposing Freedom of Information Act requests seeking access t o such records, particularly with respect to investigations where no enforcement action was taken.

Some thoughtful analysts of the Act, including former SEC Chairman Roderick Hills, argue that the entire antibribery section is redundant in view of the high standards of corporate governance by boards of directors; for example, the boards of directors of all New York Stock Exchange member companies must now have independent audit committees. They thus conclude that the Act's accounting and disclosure requirements a.re the government's most effective tool in discouraging corporate bribery abroad.G RECOMMENDATION AS TO PROPOSALS IN CHARGE

Firms interested in supporting change of the Foreign Corrupt Practices Act should, if they have not done so already, begin to work now with the Administration, particularly the Commerce Department and the Offi.ce of the U.S. Trade Representative, to make their views known. As exporters with practical experience in overseas markets, they doubtlessly have a unique and useful perspective on the realities of export competition, particularly in the Third World. Moreover, such effort by the U.S. export community remains essential to passage of FCPA reform legislation, for, as noted, it cannot be assumed that the House will be as anxious for prompt consideration of such legislation as the Senate has been. To that end, tlley should help develop support for the bill in the House, for example by working with the House Export Caucus in this etrort.e

RESIDENTIAL ENERGY TAX CREDITS

• Mr. HART. Mr. President, according t.o IRS figures, the residential energy tax credits have helped millions of Americans finance conservation and renewable energy investments. IRS statistics, compiled by the Energy Conservation Coalition and the Solar Lobby, indicat.e that nearly 11 million American taxpayers. claimed the credits on their tax returns through 1979.

For too long, the United States has seriously underinvested in both conservation and renewable energy. In large part this resulted from the disproportionate amount of Federal support given to conventional fuels in comparison to alternative energy supplies. Conservative estimates indicate the energy

~ Statement nf Roderick M. Hllls before the House committee on Energy and Commerce, Subcommittee on Telecommunications, Co.nsumer Protection and Finance on Oversight Hearings on the Foreign Corrupt Practices Act, September 16, 1981.

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24367 supply industries receive more than $6 billion in Federal subsidies each year-in liberalized depreciation, depletion allowances, low-interest loans, and other forms of Government support. By comparison, renewable energy sources and conservation have gotten short shrift. In 1982, for example, we will spend 19 times as much Federal money supporting nuclear power as we will on all renewable energy.

The residential energy tax credits provide a modest amount of support for

Conservation

Amount State Returns (thousands)

Alabama ______ ---------------- 154, 050 $12, 950 Alaska ________________________ 19, 941 l, 779 Arizona __ --------------------- 72, 677 5, 310 Arkansas ______ _________ _______ 75, 145 6, 548 California ______________________ 393, 853 34, 725 Colorado ______________________ 179, 176 16, 880 Connecticut__ __________________ 136, 400 21, 527 Delaware ______ __ _____ _________ 35, 987 2, 775 District of Columbia ____________ 31, 076 4, 039 Florida. _______________________ 153, 793 13, 740

~:~:iif_--~= ====== == == ====== ==== 165, 561 13, 530

692 50 Idaho __ ______ _________________ 39, 578 3, 234 Illinois ________________ -------- 631, 869 56, 453 Indiana _______________________ ·211, 323 24, 083 Iowa __________________________ 221, 666 17, 926 Kansas ______________ -- -- -- -- -- 124, 893 9,409

~;~~~~~~== == == == == == == == == == == 149, 336 11, 579 85, 857 7, 968

Maine _______________________ -- 68, 777 6, 481 Maryland ______________________ 280, 496 30, 923 Massachusetts __ ----------- ____ 421, 321 39, 218 Michigan---------------------- 592, 251 54, 623 Minnesota __ _________________ -- 372, 221 33, 425

~l~~~s~:r_~~== == ==== == == == == == == 55, 845 5, 179

271, 674 20, 717 Montana __ ____ ---------------- 41, 179 3, 293

conservation and renewable energy. The development of these energy sources should constitute the heart of our energy effort in the 1980's. For some time public opinion polls have suggested solar energy ranked No. 1 as the energy source the public wants to be developed "to meet our future energy needs." Conservation was ranked No. 2. Further, more than 250 Members of the House of Representatives and more than 30 Senators have declared their support for the residential energy tax credits by signing

congressional resolutions endorsing their continuation.

By providing an important boost to conservation and renewable energy development, the residential energy tax credits are helping to control rising energy prices and to reduce our dependence on foreign oil. IRS figures show that they have been extremely popular and I ask that the following State-byState breakdown of the use of the credits be printed in the RECORD.

The information follows: FEDERAL ENERGY TAX CREDITS THROUGH 1979

Renew3bles Conservation Renewables

State Amount

Returns (thousands) Amount

Returns (thousands) Amount

Returns (thousands)

622 $1, o~~ Nebraska ___ _________ __________ 89, 370 $7, 174 178 $180

242 Nevada _______________ ------ __ 23, 644 2, 654 486 664 7, 181 3, 771 New Hampshire ________________ 62, 531 6, 584 513 240

843 235 New Jersey __________________ __ 548, 097 55, 961 1, 168 621 16, 091 8, 698 New Mexico ______________ _____ 44, 116 3, 896 1, 949 1, 227

2, 195 1, 176 New York __ ------------------- 1, 119, 585 127, 453 5, 622 2, 603 2, 900 1, 151 North Carolina ____________ _____ 282, 442 22, 269 121 133

537 215 North Dakota __________________ 36, 160 3, 067 1, 055 773 200 25 Ohio ______________ -- -- ---- ---- 639, 562 58, 530 1, 970 757

3, 855 984 Oklahoma __ _______ ________ ____ 161, 732 14, 703 33 43 81 69 Oregon ____________ ____________ 110, 530 11, 371 1, 642 561

5, 349 3, 997 Pennsylvania ______ ------------ 664, 012 71, 850 4, 455 4, 106 448 161 Rhode Island ______ ------------ 64, 321 5, 388 126 7Z

1, 269 2, 167 South Carolina _________________ 131, 069 9, 337 312 300 86 115 South Dakota __________________ 39, 737 3, 028 258 54

1, 413 308 Tennessee ___________ ---------- 168, 830 14, 139 1 1 136 127 Texas _________________ -------- 339, 302 33, 844 1, 122 209

---- -- -- --190- -- -- ---- ----9i Utah ____________ -- -- ------ ---- 77, 071 6, 033 100 36

~r:gTn~~~ --~ == =~--~-~~ == == ======== 29, 230 2, 935 326 161

1, 138 614 283, 855 21, 606 347 559 951 549 Washington _______________ ------ 175, 728 18, 823 227 60

2, 140 1,621 West Virginia ___ ---------------- 52, 398 5, 846 -------Ti49 _________ Tiis9 812 282 Wisconsin __________ ------------ 362, 348 26, 600

2, 658 1, 698 Wyoming ______ . ________________ 26, 233 2, 448 83 103 -- -- -- -- -- --i--- ---- -- -- -- -6 Other ________________ ------ -- -- 3, 980 723 -- -- ---------------------- --

368 l~ Total_ _________ ---------- 10, 682, 520 994, 626, 000 76, 555 43, 834, 000

Note: Figures reflect total Federal tax credits claimed through 1979. Conservation credits Source: Compiled from Internal Revenue Service figures by the Solar Lobby and the Eneray began Apr. 15, 1977. Renewable credits began in 1979. Conservation Coalition.•

ACTIONS TAKEN BY SECRETARY WATT

e Mr. ARMSTRONG. Mr. President, I wish to bring to the attention of my colleagues and others who read the REcoRD a list of environmentally related actions taken by Interior Secretary Jim Watt. This list was pulled together by my staff from news clips and other information on departmental decisions made or implemented by Secretary Watt.

Those of us from the West who live in the public lands States are particularly sensitive to the need for balanced management of these important natural resources. In some circles, Secretary Watt has been criticized for trying to return to such a balanced policy after 4 years of policies characterized mostly by indecision and delay. As reflected in this list of actions, Secretary Watt has undertaken an energetic program to meet all of his responsibilities as chief steward of our Nation's public lands and resources.

In addition, Mr. President, I wish to bring to my colleagues' attention two articles concerning Secretary Watt. The first appeared in the Denver Post on September 16, and the second was printed in the Fargo Forum on September 14. I ask that these materials be printed in the RECORD.

The material follows: ENVIRONMENTALLY RELATED ACTIONS OR

ACCOMPLISHMENTS

1. Secretary Watt has announced he will seek Wilderness status for Arizona's scenic

Aravaipa Canyon, 22 miles northeast of Tucson.

2. Secretary Watt supported provisions on the Budget Reconciliation Act that phase out federally subsidized flood insurance for barrier islands, thereby discouraging development on the environmentally sensitive coastal barriers.

3. Secretary Watt approved the Bureau of Land Management's comprehensive multipleuse plan for the California Desert Conservation Area. and a. charter for BLM's new California Desert District Multiple-Use Advisory Council.

The COCA plan provides for the use and protection of 12 million acres of public lands a.d.ministered by BLM within the 25-milliona.cre California Desert Conservation Area, which includes about one-fourth of the State.

4. Secretary Watt unveiled a plan to provide greester protection to the endangered humpback whales in their summering ground in Glaoier Bay.

5. Secretary Wa.tJt has announced that he will ask the Migratory Bird Conserva.tion Commission to focus attention on continued funding for preserving wetland habite.t for ducks, geese, and other migratory birds.

On Oot.ober 7, the Commission, which is chaired by Secretary Watt, approved the acquisitiion of a new national wildlife refuge, Big Boggy, when funds become available. Big Boggy is located 20 miles south of Bay City, Texas.

6. Agents of the F11sb. and Wildlife Service, at the direction of Secretary watt, have acted to uncover black market operations that deal in endangered and protected American reptiles. The agents established a "sting" operation in Atla.n,t;a and transacted business with 175 people, Z7 of which have been arrested for violating Federal and state laws against collection, shipmenit, and interstate commerce in protected. species of reptiles.

7. Secretary Watt has voiced opposition to the U.S. Army Corps of Engineers DickeyLincoln School Lakes Project in Maine. The Interior Department objected on the grounds

that severe long-term a.dverae environmental impact will occur if the project is 1mplemented as proposed.

8. In response to a Genera.I Accounting Office report citing $1.6 billion in safety and health hazards for park visitors, Secreta.ry Watt directed the National Pa.rk Service to refocus its management activities to bring existing parks up to acceptable standards.

9. Secretary Watt proposed amending the Land and Water Conservation Fund to permit restoration of deteriorating park areas.

10. Secretary Watt announced trapping of California condors as the start of a "last ditch" captive breeding and research program designed to save endangered Califomia condors.

11. The Department of the Interior awarded a $4.1 million contract for construction of recreation facilities on the Wayne N. Aspinall Storage Unit of the Colorado River Storage Project.

12. Secretary W111tt pledged protection of the cape Hatteras Lighthouse from erosion by waves.

13. Prepared an inventory of properties in the U.S. th111t may qualify tor nomination to the World Heritage List.

14. caned for an inventory and orderly development of America's natural resources to avoid a crisis situ111tion where resources might be developed without regard to environmental considerations.

15. Secretary Watt has prepared a list of 32 Wilderness areas to be sent to the President for consideration and transmittal to Congresa.

16. Secretary Watt recommended to the President 111ppointmenit of noted conserve.-

24368 CONGRESSIONAL RECORD-SENATE October 19, 1981 tionist Tom Garrett .to the post of U.S. Deputy Commissioner to the International Whal-ing Commission. ,

17. Secretary W.a.tt announced the Golden Access ,passport which will a.J.low people wiho are physically dJ.sabled or blind to obtain free enJtry to national parks, monument.a, 'historic sites, and recreation areas. They will also receive 50 percent discounits on fees for l'ecreational activl.ities such as ca.mping and !boat launohing.

The new Golden Access Passport resul·ts from a. 1980 amendment to the Land •and Wa.ter Conservation Fund Act of 1965.

18. Conserva.tion programs for endangered and threatened species in 38 States and Terri torie.s have •been helped by $4 million in ma.tohing Fedeml grants for fiscal year 19811.

19. Preservation of historic America.n buildings has •been boosted significantly ·by a 25 pereent tax credit for historical rehabili·twtion provided in the New Economic Recovery Aot.

Federal tax incentives for historic preservation have stimulated more than $1.2 !billion in private investments since enacted in 1976; over 2,200 projects have qua.lifted nationwide for the incentives, including historic hotels, office 1buildings, faotories , and residential buildings. More than 12,000 new housing units haive been C·reated, more ithan 5,000 of them for low and moderate !IllCOme families. The program is administered by the Department of ithe In.terior's National Park Service and rthe Depal"tment of the Treasury. ·

The new investment tax credit will ibe availa.ble for projects beginning January 1, 19812; existsing historic preserva.tion tax incentives will be in effect through December.

20. Agreeing with challenges by environmental groups, the Stwte, and industry, Secretary Watts requested the Depal"ltment of Justlce to file a motion in ·the District Court of Utah seeking authority for :the DepartmenJt of the Interior to review a Carter Administration decision a.1lowing coaJ. surface mining in a major part of Utah's ALton Coal field.

21. Secretary Watt has reaftlrmecl the historic primacy of State water management in announcing the Depart~ent's repudiation of a contro~ersial 1979 legal opinion that oought to established ra so-called "Fed·eral non-reserved water rLght."

2~. Revised guidelines to select, c·lassify, and manage rivers in the na.tion·al wild a.nd scenic rivers system have been proposed jointly by .the Department of the Interior and the Department of Agriculture. The system provides Federal protection for ·the nation's outstanding rivers in order to preserve them for the use and enjoyment of present and future generations.

23. The Fish a.nd Wildlife Service has proposed guidelines to identify scenic vistas on Wilderness areas within the National Wildlife Refugee System that merit special air qualLty protection under the Clean Air Act.

24. Secretary has designated five properties National Historic Landmarks. They rare: The Old Stone Gate of the Chicago Un·ion Stockyards; the John Jay House in Ka.toneih, New York; the Old Waterworks in Bethlehem, Pennsylvania; ·the Folsom Powerhouse in Folsom, California.; and, the Sloss Blast Furnaces in Birmingham, Alaibama.

[From the Denver (Colo.) Post, Sept. 16, 1981) JIM WATT'S WESTERN EXPOSURE

(By Bill Homby) AB Secretary of the Interior Jim Watt treks

around the West, he may be demonstrating to regional audiences that he ls not the antiChrist, but it is doubtful that he is improving his image in the Eastern press. He probably doesn't expect and won't receive any better treatment from the New York Times

or the Washington Post when he gets back to Foggy Bottom than he has had so far.

Now as Watt's frtends and even the man himself :i.re ready to admit, some of his troubles stem from his own nature. He's a righteous man and one who comes on feisty. Watt would never be on the top of your list for a drinking buddy. an ambassador or maybe even a governor. assuming you think of such types as ones who should try to put on as many Band-Aids as they pick off scabs.

Watt ls a true believer used to the advocacy and conflict of the legal process. His trademarks l\re honesty, candor and bluntness. If he has a dagger for you, it's on his desk, not up his sleeve. Little wonder that the professional Washington environmental lobbyists licked their Ups at such a tempting target.

But their real war with Watt stems not from his politica.lly vulnerable personality but from his basic philosophy, which Ls consistent with the philosophy of the administration which picked him as its lightning rod.

Reagan, Watt, their mutual supporter and confidante Joe Coors of Colora.do, a.nd the other Coloradans that Coors has helped to ease into Washington resources management-they a.11 share some fundamental philo.sophic beliefs, which might be paraphrased as follows:

Private industry undar minimal government regulation can be trusted as much as any other sector of the citizenry to do what good citizens should to protect the environment under the more enUghtened standards of the 1980S.

The Western resource wealth of the country can be developed without permanently dl8.lnaging the environment, a.nd indeed our national interest will require that those resources be located and prudently developed over the short term of the next few decades.

Mrany aspects of resource management would be more economically and effectively handled if left to the risks and rewards of the free market system. that is to private enterprise, than they are now managed by a government system which does not hold its ma.niagcrs accountable as to economics or efficiency.

These beliefs are a direct challenge to almost a hundred years of conservation thinking in this country.

It was the thesis of Theodore Roosevelt, Gifford Pinchot and the other :fathers of conservation that big business Ls inherently rapacicus and incapable in the arts of good citizenship; that some natural areas a.re so precious that they can never be available to balanced development but must be sequestered for "future generations," and that a government bureaucracy is inherently more apt to act in the public interest than a market system seeking to maximize economic rewards.

Thus it's no surprise that the conservative establlshment o:f the environmental-conservation movement recognized Watt's dangerous radicalism right from the start. The massive petition and public relations drives of the Sierra Club a.nd the Wilderness Society, mounted when Watt was in oftlce only a few days , dwarf any such protest on their pa.rt to past appointments. In Wa.tt they see someone who has a fundamental threat to their beliefs, not just their programs. He has to be obliterated like Carthage.

Probably their vehement opposition has solidified Watt in oftlce. The administration oa.n hardly throw Watt out for saying what the administration thinks, and it ca.n hardly ea.se him out because he's stage center in a spotlight his enemies have created. So the end result of his Western tour is likely to be that Watt goes back to Washington convinced that a goodly portion of the homefolks are behind him, a.nd discovers that his opposition isn't impressed by that fact one bit.

But more important than the survival of Watt as an individual Ls the future of hls ideas. There is a significant body of opinion in thif: country, witness the election, that believes that the private business ca.n be a good environmental citizen, that all our resources should be developed, a.nd that government is not by some gift of God the best and only manager of resources "in the pu'blic interest."

Watt 's enemies might discover they can get rid of him but not his ideas. Their energy might be better spent coming to grips with the ideas than in castigating the individual.

[From the Fargo (N. Dak.) Forum, Sept. 14, 1981)

WATT'S POLICIES GREETED WARMLY BY WESTERN GOVERNORS

JACKSON, WYo.-Interior Secretary James Watt still the scourge of environmental groups, says most Americans are beginning to hear his message that conservation and development can coexist.

"I don't think they understand," he said of his most vocal opponents during a fourday swing through his native Wyoming, "but we're making progress."

"I'm tremendously encouraged by the support of Congress and by the support of the governors," he said near the conclusion of his trip.

Earlier, Watt told reporters in Casper he has helped draw public and congressional attention to changes he wants to make. "We've got the public's attention on managing resources, and that's critical to us."

Chanting, placard-carrying demonstrators greeted Watt on his trip, but some liked the Interior Secretary and his multiple use policy of managing the Nation's public lands.

In fund-raising appearances in Billings, Mont., and Gillette, Worland, Casper and Jackson in Wyoming, Watt drew large crowds of Republican Party faithful to share his pleasure a.t the Reagan administration's budget victories.

Aide Doug Baldwin said Watt is one of the most sought-after cabinet officers for speeches, in part because he is so controversial.

But the highlight of Watt's Wyoming trip was decidedly nonpartisan-his meeting with the 14-State Western Governors' Conference.

Governors of Western States, where most of the Nation's public land is located, have taken a wait-and-see attitude toward Watt, but he received a warm reception Friday after giving governors his "report card" and his attempts to satisfy concerns they voiced in February over land, water and energy issues. ·

Among Watt's major pronouncements: A reversal of a highly unpopular federal

claim on unappropriated water rights on federal lands.

A pledge to preserve and protect America's national parks with a $1 billion improvement program over the next five years.

A promise to continue the spirit of the "Sagebrush Rebellion" by giving states a greater voice in managing federal land.

The governors loved it. As Alaska's Jay Hammond put it, "The jury isn't in yet, but I sort of like you." The rest of the governors applauded.

"This is the most productive session I've ever seen," added Nevada Gov. Robert List, the conference chairman.

The Interior 8ecreta.ry also found some private time to enjoy the beauties of Grand Teton National Park-his favorite, he confessed-and Yellowstone National Park, where he picnicked and rode a horse along the Firehold River.

However, Watt was given poorer grades by environmental groups, and they complaine<l bitterly that he refused to talk directly about

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24369 proposed oil and mineral development in w11-derness areas, including some close to Yellowstone and Grand Teton.

Protestors in Yellowstone claimed their First Amendment rights were abridged when they were confined to a parking lot far from Watt's walking tour of the Old Faithful area.

Many, however, joined the entourage of reporters, following Watt, and some resorted to wisecracks and catcalls.

Throughout it all, the 43-year-old, balding Watt wore a large smile.

"That's free speech, I guess," he said in Yellowstone.

He told reporters earlier, he has paid "a personal price" in taking the brunt of criticism of Reagan administration environmental policies and had seen his positions distorted by opponents: "I don't believe another Interior Secretary has been as well known as soon as I've been known," he said.

But Watt also said he is buoyed by polls showing his basic policies popular with the vast majority of Americans. And he delighted in noting that of 220 organized groups he deals with regularly, fewer than 10 have called for his removal.

"The pendulum of decisionmaking was way in left field," said Watt, and he had tried to swing it back to center.e

WE MUST DEAL NOW WITH ACID RAIN

• Mr. KENNEDY. Mr. President, I am pleased to join in sponsoring s. 1706, the Acid Deposition Control Act, and I commend Senator MITCHELL and the other supporters of this legislation for the act.lion they have taken.

According to the old adage, "What goes up, must come down." But in the case of air pollution "What comes down is even worse than what goes up.'' When Congress considered the Clean Air Act in 1977, evidence concerning the impact of air pollution on rivers and lakes was not clear. Since then, a consensus has developed in the scientific community that a new phenomenon oo.lled "acid rain" is having a serious impact on waters throughout the Northeast United States and Canada.

Acid rain is a term used · to describe snow, rain, or dust that contains more acid than normal rainfall.

It is produced when pollution from stationary sources such as powerplants or automobiles is emitted into the atmosphere. The most important of these pollutants is sulfur dioxide, which is principally emitted by coal-fired electricitygenerating plants. In the atmosphere, sulfur dioxide is transformed into sulfuric acid and nitric acid.

Increasing air pollution has caused a tenfold increase in the acidity of rain each decade since World War II. Fish life is either killed directly by the cverhigher acidity in the rain which :flows into the lakes and ponds, or dies indirectly because the sensitive food chain of millions of microorganisms is destroyed by the increasing acidity of the rain.

The acid rain that has fallen on the Northeast in the past several decades has killed the fish life in over 100 lakes. Acid rain is most severe in areas that do not have chemicals in the soil to neutralize the acidity. These natural chemicals, called buffers, generally are not present in the high altitude lakes of the North-

79-059 0-85-36 (Pt. 18)

east and areas such as the southeastern part of Massachusetts, Cape Cod, and the areas around Springfield and Holyoke.

Most of the acid rain affecting the Northeastern United States appears to come from air pollution sources in the Midwest. Many of these existing pollution sources have not been cleaned up, in spite of the Clean Air Act. When the 1977 changes in the act were achieved, it was assumed that midwestern utilities would be required to clean up their facilities. However, through a series of delays and court suits, these utilities have managed to avoid reducing their overall emissions. In fact, some of the utilities have made the situation better in the Midwest, but worse in the Northeast, by installing tall smokestacks. These tall stacks reduce health problems close to the powerplant, but make the health and acid rain problems hundreds of miles away worse when the pollution finally reaches the ground.

We should move now to deal with acid rain. The severe dimensions of the problem are now sufficiently clear that we must act--not only to prevent future increases in pollution in our region, but to reduce existing levels.

We must do this in a manner sensitive to economic costs. I look forward to the study by the Joint Tax Committee analyzing financial assistance which can assist in the cleanup. Current cost estimates are only a very small percent of the cost of oil decontrol over a similar period. Yet, some of the most vociferous critics of this legislation are also among the most ardent proponents of oil decontrol. I believe that S. 1706 is an effective measure to deal with the critical problem we face, and I am proud to support it.•

ALTERNATIVES TO CURRENT ANTI-INFLATION POLICY

• Mr. HART. Mr. President, we are searching for policies to bring down inflation and interest rates, to bring us quickly out of our -Jurrent recession, and to return the American economy to a path of sustained output and productivity growth. The cun·ent approach of loose fiscal policy and tight monetary policy is not the way to achieve these goals.

As I suggested last week, we should consider policies which act more directly on wage and price decisions, such as those discussed in the series of studies on wage/ price policies commissioned by the Center for Democratic Policy. One that deserves particular attention is "Alternatives to Current Anti-Inftation Policy: A Look at PreVious Suggestions and a Not-So-Modest Proposal," by Daniel Mitchell.

Mr. Mitchell favors institutional changes which would increase the sensitivity of wages and prices to monetary and fiscal restraint. Greater worker participation in management and profit sharing could help realine workers' interests in ways that contribute to greater wage and price :flexibility.

Also, since profit sharing and similar plans have been supported by Congress in the past for other purposes, Mr. Mitch-

ell proposes that practitioners and researchers should design such wagesensitizing plans, using tax incentives to encourage their adoption. He also stresses the need for Government to avoid encouraging cost-plus pricing in product markets. Antitrust policy, he says, should be adapted to contribute to greater price :flexibility.

One benefit for labor in greater wage :flexibility, Mr. Mitchell argues, is that ailing industries can avoid massive layoffs by generally moderating wages instead. The payoff for America is lower inflation, higher economic growth, and the maintenance of our preeminent position in international markets. I ask that Mr. Mitchell's study be p,rinted in the RECORD.

The study follows: ALTERNATIVES TO CURRENT ANTI• INFLATION

POLICY: A LOOK AT PREVIOUS SUGGESTIONS AND A NOT-SO-MODEST PROPOSAL

(By Daniel J.B. Mitchell) The inflationary momentum built up tn

the 1970s remains a major issue. During the 1970s, it became commonplace for paliticians and policy makers to declare that the rate of inflation was the number one economic problem and that (presumably) sacrifices should be ma.de to reduce it. But the failure of government policy-despite the rhetoric-to reduce the rate of inflation produced a sense of pessimism among many economisU!. The optimism of the 1960s that the course of the economy easily could be controlled quickly faded. Not surprising'ly, a variety of noatrums for America's economic difficulties began to be offered.

This paper reviews some characteristics of recent inflation, most notably its variab111ty and its division into an underlying trend rate and volatile "shocks." The dimculty of controll1ng inflation through demand restraint (restrictive monetary and fiscal policy) is considered. Recent a'lternative suggestions for fighting i·nflation are described, ranging from controls and guidelines (including the newer "TIP" proposals) to the "supply side" approach. However, a skeptical view is expressed on the viab111ty of any of these alternatives as centerpieces of a new approach to reducing inflation.

It is argued that the fundamental problem has been that the "signals" emanating from monetary and fiscal restraint are not sumciently heeded by wage and price setters to produce the desired deflationary effect. What is needed is support for institutional changes which wm increase sensitivity to the signals. This approach entails monitoring wage and price decisions-though not for the purpose of jawboning-and the pinpointing of the ca uses of unresponsiveness.

Finally, some suggestions are made for encouraging greater responsiveness. Where possible, cost-plus pricing and other llmiU! on price responsiveness should be discouraged. In the labor market, there should be encouragement of collective-bargaining innovations and personnel management pdlicies which make employee compensation more sensitive to the demand for labor. The current practice of making partial and total layoffs the main response to economic fluctuations-while wages remain aloof-needs to be altered. Recent interest in worker participation in management and worker participation in the economic fortunes of the employer can be harnessed as part of an anti-inflation program.

INFLATION VOLATILITY

Although the 1970s are perceived as a decade of inflation, the inflation rate during the


24370 CONGRESSIONAL RECORD-SENATE October 19, 1981 1970s in fact was quite varied. Measured by the Consumer Price Index (CPI), the rate of inflation was declining from 1969-1972. It then accelerated markedly, reaching a rate of over 12 percent in 1974. Thereafter, inflation declined to less than 5 percent in 1976 and then began to accelerate, again crossing into double-digit levels by the end of the decade.1

Thus, while the trend was up (the inflation rate at the end of the decade was higher than at the beginning), tucked within that trend is the fact that inflation rates can ch~nge markedly over comparatively short periods.

The apparent changeability of the inflation rate poses a problem in terms of public perceptions of alternative antl-lnfiatlon strategies. Much of the fluctuation of the inflation rate around its trend can be attributed to such phenomena as "shocks" to world oil prices, sudden changes in the value of the dollar, and movements in farm and are not closely related to monetary and fiscal commodity prices. These phenomena often are not closely related to monetary and fiscal policy. Yet their timing can serve to discredit current policy (even if sensible) or to give credence to faulty po1.1cles. (If President Ford had waited a year before issuing his "WIN" buttons, their appearance would have coincided with a marked decline in apparent inflation, perhaps enshrining button wearing as a permanent fixture of American economic policy I)

THE "UNDERLYING" RATE OF INFLATION AND REAL ECONOMIC DISTRESS

It was natural, given the volatile nature of exogenous inflation factors during the 1970s, that economic policy makers would seek to focus public attention during periods of accelerating inflation on the "underlying" rate concept. Stripped to its essentials, the underlying rate of inflation concept was advanced by officials of the Carter Administration in one of two ways. Either a widelyused price index such as the CPI was "adjusted" to remove the impact of the volatile price components such as food, energy, and interest rates, or a wage index was used. The latter was justified on the grounds that prices over long periods tend to behave as markups over unit labor costs-i.e., wages adjusted for productlvity.2

Unfortunately, when the underlying inflation rate is below the actual rate, purchasing power may well be adversely affected. This adverse impact occurs precisely because wages do not respond immediately to volatile price increases. Thus, emphasis on the underlying concept-whlle defensible for policy-making purposes-created the public impression that government officials simply were ignoring real economic distress. In effect, Carter Administration officials were telling the public that it wasn't really cold in December because, on a. seasonally-adjusted basts, the temperature in December was the same as in June I

Periods o! divergence of the underlying and actual rates of inflation in the 1970s also created the public impression that inflation is inevitably synonymous with the loss of individual purchasing power. Yet the losses of purchasing power which occurred were largely the result of relative price changes rather than absolute increases in the general price level. For example, during 197·3-75, the energy component of the CPI rose about 43 percent and the overall index rose about 21 percent. Wages (including fringes) rose by only 20 percent, producing a real wage loss of about 1 percent. If it somehow could have been arranged that non-energy prices in the CPI had fallen by 3-4 percent, and that nominal wages had been cut by 1 percent, the CPI would have shown no overall price increase, just an increase in energy prices offset by a fall in other prices. There would have been no ag-


gregate inflation, but the same adverse real consequences that actully occurred would have been felt. The cause of the distress was the shift in fucome distribution to foreign and domestic energy producers, not inflation per se. Because our economic system ls not conducive to cuts in nominal wages and general declines in all non-energy prices, the shift in income distribtuion was accompanied by inflation. But it was not inflation which produced the decline in purchasing power, rather it was the action of a foreign oil cartel.

CONVENTIONAL ANTI-INFLATION POLICIES, INFLATION MOMENTUM, AND RECESSION

Inflation has become associated in the public mind with forms of economic distress other than loss of purchasing power of the hourly wage. When inflation accelerates, pressures quickly rise on policy makers to contain or reverse the acceleration. The conventional response to such pressures is for government-including the Federal Reserve-to impose a demand restriction through monetary and fiscal policy. Pressures for such a demand restriction will be particularly strong if the root cause of the initial economic distress 1s a relative price and income shift which the public erroneously blames on inflation. In the case of the 1973-75 oil episode, the loss of domestic purchasing power due to rising energy prices was itself an automatic limitation on consumer demand. This limitation was further reinforced by a restrictive macroeconomic policy, producing a sharp recession.

The recession consequences of demand restriction fiow from the short-run unresponsiveness of wages and many prices to falling demand. As will be discussed below, inflation can develop a considerable momentum. Even after the brakes are applied, wages will keep increasing despite rising unemployment, and prices will keep rising despite growing excess capacity. A restriction of nominal demand is thus translated into a real decline in output. To the initial economic distress which provoked the demand restriction, there is added the further distress of recession. These real consequences of conventional anti-inflation policy may ultimately produce public pressures to ease up and even to re-stimulate the economy. If the initial cause of the infiation acceleration was an exogenous shock, the shock may have ended or even reversed, making it appear that inflation ts declining. However, the underlying infiation rate may have been little affected by the restriction in demand and re-stimulation may increase it.

OTHEB PROPOSALS FOR FIGHTING INFLATION

There is a widespread view among economists that use of demand restraint for anti-infiation purposes ts likely to be a prolonged and painful experience, although one which ultimately would be successful if not reversed by political pressures generated by economic slack. Econometric models based on past experience suggest that such slack does tend to slow the rate of price advance, although the effect predicted in any time period varies from model to model. To the extent, however, that conventional models produce pessimistic predictions about the length of time needed to reduce the rate of inft.atlon to an "acceptable" level, it ls natural that alternatives to traditional demand restraint are often debated. LEARNING TO LIVE WITH INFLATION THROUGH

INDEXATION

One posslb111ty that has been discussed is to avoid the pains of demand restraint by adapting to infiation. In fact, many adaptations to inflation have occurred. Wages in many union contracts are adjusted.automatically in response to movements in the CPI. Various government benefits, most notably Social Security, also are indexed. Interest rates tend to incorporate an inflation expec-

tations component, thus providing compenaation to lenders for the decline in the value of money. Variable rate loans, in addition, provide protection fo1· lenders against unrorseen changes in interest and inft.ation rates. Federal income tax rates are slated to be adjusted for "bracket creep," the increase in the real tax burden produced by the combination of progressive tax rates and inft.ationary income growth.

Because the public associates inflation with real economic distress, open advocacy of learning-to-live-with-inflation has not been politically appealing. In addition, many would argue that it is impossible fully to adapt to inflation. Universal indexing of wages, prices, assets, 11abll1ties, and taxes ts an appealing notion theoretically, but would be ailficult to achieve in practice. Indexing brings a host of problems of its own. Groups which are not properly indexed could receive windfall losses and gains, depending on the errors in their formulas. The construction of the price index itself can become a controversial issue-as has already happened to the CPI-and in general, shifts in income dietribution would become poll ticalized.

Widespread. indexing could intensify infiation under two circumstances. First, to the extent that the current rate of infiation became more tolerable, resistance to further increases in inflation might be weakened. Second, exogenous inflation shocks-say, sudden upward boosts in OPEC oil priceswould be quickly transmitted into domestic wage and price setting. However, indexation is not necessarily inflationary; exogenous price shocks could be negative. For example, bumper harvests could cause declines in fa.rm prices. In such cases, the defiationary impulse would be transmitted into wages and nonfarm pl'llces. Moreover, the antl-infiationary pressures from restrictive monetary and fiscal policy-if m.aintainedcould be more effective in the !ace of indexation.::

In short, while universal indexation is not achievable, the current forms of indexation that do ·exJ.st are not inherently inflationary. Rather their impact on inflatdon depends on economic oircumstances. If proposa.Is to encourage indexation should not be viewed as a quick fix for inflation, neither should proposals to discourage the lndexa.tdon that currently exists be so viewed.

EMPHASIZING THE "SUPPLY SIDE"

A relatively recent cr.iti<:ism ot the demand-restraint approach to inflation ls that increase in "supply" would have an antiin:flatlon effect without the painful side effects. Since ~·more" 1s more attractive than "less," the supply-side approach has proved a.ppeallng. However, the connection between the supply side and inflation is tenuous. If more supply meant less inflation, the rate of inflation since the industrial revolution should have generally been declining, since per-capita consumption and production ("supply") historically have risen.

A1'though precisely what is meant by the supply-side aipproach ls often unclear, ilts most prominent .recommendation ls that taxes should .be cut, rather than raised, in the face Of inflation. Proponents argue that tax cuts wm release a greater supply o! labor and ca.pita! investment. There is some uncertainty about how this alleged supply increase ls linked to reducing inflation. if the linkage ls based on creating excess supply, then there ls little difference between demandrestraint policy or supply-expansion policy in terms o! any anti-inflation eft'ect. However, there ls an empirical issue of just how much supply can be increased through tax cuts. The connection between tax rates and labor supply at the aggregate level is dubious, particularly given the magnitude of tax cuts that might feasibly "be considered. Capital investment can only come on line

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24371 slowly. Thus. Lf the goal is to create excess supply, demand restraint is empirtca.Uy a more powerful instrument for doing so.

An alternative inteiipreta.tion of the supply-side a.pproa.ch-a.t lea.st a.s far as capital investment is concerned-is that by stimulating investment, government can raise productivity growth. Higher productivity growth could :result in .lower unit labor cost increases g.iven a fixed rate cxf wage increase, which could permit a. slower rate of price inflation. This is clearly a. long-run argument and one that could make on:iy a modest contribution to lowering inflation quickly. It might be noted that most monetarists reject a unit labor cost approach to Inflation; hence, the supply-side justification of the anti-inflation aspects of current policy conflicts with views held by many Reagan administration policy makers.

REDUCING THE SCOPE OF GOVERNMENT

There wppears to be considerable pu.bliic sentiment for the notion that excessive goverrunent involvement in economic life is a cause of inflation. 'Many legitimate objections can 'be raised concerning the desira'bil1 ty and effectiveness of the social and regulatory progr.a.ms which the Reagan administration has sought to reduce. However, the linkage between such programs and inflation is tenuous. tAs a first approximation, government progira.ms wll1 ·be inflationary only id' they induce inflationairy monetary and fiscal policies.' For example, the inflation that accompanied the mmtar·y buildup surrounding the war in Vietnam was not the byproduct of war per se. Rather it resulted f:rom a f.allure of monetary and fiscal policy to prevent private and nonmilitary spending !from competing with the scarce resources ddverted to the war effort.

In the absence of a.n inflation problem, the Reagan administration would have been committed to a reduction in the role of government in economic regulation and income maintenance. Public concern with inflation. however, was ha.messed to obtain the particular package of tax cuts and reductions tn nonmmtary expenditures which Congress recently enacted. It should be said, however, that previous administrations a.lso he.ve sought to harness the inflation issue when it suited their purpose.

GUIDELINES AND CONTROLS

In the U.S. and in other industrialized countries, there have been periodic bouts of direct government intervention in wage and price setting. Sometimes the intervention takes the form of llega.Ily-manda.ted cemngs on wage a.nd price adjustments as occurred during World Wa.r II, the Korean Wa;r, and under the Nixon Administration. Sometimes the intervention is based on "voluntary" appeals, jawboning, and moral suasion as during the Kennedy and Johnson Administrations' wage-price guideposts. Mostly recently, the Carter Administration mounted a guidelines program which combined both legal a.nd voluntary elements. Although compliance with the wage and price standards was voluntary, government contractors risked loss of their contracts if they could not document adherence to the rules. Thus, for some firms, compliance was virtually mandatory.

Although the official justification for direct intervention has va.ried from episode to episode, beginning with the Kennedy/Johnson guideposts, such programs have tended to be viewed by proponents as complements to monetary and fiscal policy. It is noted tha.t in the real world, wages and prices can and do rise despite significant economic slack. Classical economic theory suggests that in the face of slack (excess supply), wages and prices should fall absolutely. Hence, direct intervention programs are rationalized as attempts to make labor and product markets behave ~s if they were more classical than


they are. (Economics is one of the few disciplines in which when facts don't fit theory, one can hope to mandate a set of betterbehaved facts!)

A second rationalle for direct wage-price intervention is that the program itself may influence private expectations of future inflation. It ls widely held that inflationary expectations a.re themselves a source of inflationary behavior-1.e., the belief that inflation will continue in the future leads to wage and price decisions which perpetuate inflation. If so, anything that lowers such expectations would contribute to a lessening of infiation.

Direct intervention programs, however, are easier to propose than to design and operate. Thousands of wage and price decisions must be controlled or cajoled. The workload can easily overwhelm a small staff of civil servants and can entail significant administrative costs both for government and those who are regulated. Usua.lly, attempts a.re made to reduce the workload on the basis of exemptions by size, industry, or other criteria, or through the procla.ma tion of general rules which can be "self administered." The specifics of the exemptions and rules often have an ad hoc nature, since there is little in economic theory to provide guidance.

Programs of direct wage-price intervention tend to politicize what would otherwise be market or decentralized decisions. As such, obtaining cooperation from the public and from interest groups becomes a prominent consideration. Tripartite boards and advisory committees are generally established and considerable sk111 may be required to hold such boards and committees together. Generally, it becomes necessary to provide the program with sufficient "flexib111ty" to effect compromises and preserve a sense of "equity" and due process in wage and price adjudications. Mechanisms for exceptions, appeals, and reconsiderations must be incorporated into the program.

Direct intervention programs may lead to economic distortions The most prominent of these are shortages. Public tolerance for such shortages is quite limited. One need only recall the meat shortage of 1973 and the gasoline shortages of 1974 and 1979 to understand the political and economic damage that these inadvertent byproducts of direct intervention can produce.

Some markets and types of intervention are more prone to shortages and distortions than others. Nevertheless, if the direct intervention program does not quickly reduce the ongoing inflation rate, the probability of distortion will increase and the resulting public disenchantment may force an end to the effort. A truly massive program of the type imposed during World War II-a program which had an indefinite life (the duration of the war) and the ab1lity to counter public disenchantment with appeals to pa.triotismmight well be able to quell inflation, although at considerable cost. But in the absence of a national emergency, direct intervention is at best a temporary instrument to be applied on a transitional basis to lower the inflation rate. So far, even that limited objective has proven elusive.

Although the programs mounted in the past two decades had an influence on wage and/or price inflation during portions of their lives, it would be difficult to argue that prices today are lower than they would otherwise have been in the absence of those programs. The la.ck of a recent permanent success with direct wa.ge·-price intervention suggests that it should not be viewed as a. quick remedy for inflation. Further experimentation with direct intervention cannot be ruled out. However, any political leader who advocates such experiments ought to be a.ware of the potential costs and the difficulty in obtaining cooperation from wage and price setters. The courage to recognize a fa.lied experiment and to withdraw it should

also be a prerequisite. And the temptation to make such programs the central element in anti-inflation poUcy should be a.voided.

TAX-BASED INCOME POLICIES

A variant of direct intervention is the socalled "tax-based incomes policy" or TIP. The essence of TIP proposals is that the tax system should be used to encourage non-1nfla. tionary wage and/or price behavior. A wage or price setter who exhibited "good" behavior would either receive a monetary reward or avoid a tax penalty. In effect, a program of direct wage-price intervention would be inscribed in the federal tax code and administered by the Internal Revenue Service as a sideline. s

The appeal of the TIP proposal is that it seems to avoid the pitfalls of other direct intervention programs. Rather than worry a.bout obtaining cooperation, policy makers can simply sit back and watch wage and price setters "volunta.rlly" cooperate a.s they seek to avoid a penalty or obtain a reward. Instead of designing elaborate exceptions mechanisms, policy makers can permit wage and price setters to decide privately whether to comply with the rules. If there is strong reason not to comply, compliance can be avoided by simply paying the penalty or foregoing the reward. The program appears to 1be self-regulating-always an idea of appeal to economists-and seems to avoid need for bureaucracy.

Unfortunately, it is easier to propose a TIP in the abstract than to design an operational model. Any TIP plan must be written in legal language appropriate to a tax code and be capable of being administered by the IRS. Thus, all the technical questions that a.rise in a controls program arise under a TIP. Precise deflni tions of wage and price measurement must be provided. Because the price side tends to be more complicated than the wage side, interest in TIPs tends to focus on the wage side. Yet even here, the complexities of fringe benefits, merit and promotion plans, escalator clauses, etc. a.re considerable. Since tax revenue or expenditure is involved, rules to deal with these complexities must be enacted by Congress. It is quite possible that TIP incentives could lead to behavior that would create economic distortions, just as a conventional direct intervention might do. However, only an a.ct of Congress could alleviate the problem under TIP, whereas such corrections can generally be ma.de by executive flat under direct intervention programs.

The Carter Administration proposed a wage TIP known a.s "Real Wage Insurance" in 1978.6 Under this plan workers in units which complied with the 7 percent wage increase guideline would have been eligible for a.n income tax rebate if the rate of price inflation exceeded 7 percent. Had it been enacted, the plan would have incorporated many anomalies into the tax code. Moreover. it would have added yet another "uncontrollable" to the federal budget. Congress shelved the real wage insurance pla.norigina.lly intended a.s the centerpiece of the guidelines program-after a few committee hearings.

There a.re lessons to be learned from the Carter Administration's TIP wdventure. Because such plans a.re inherently complex in actual design, details of program design need to be seriously considered. It is difficult to prevent such plans from ma.king on a Rube Goldberg aura. Moreover, it is necessary to involve Congr.ess and those groups immediately affected at an early stage in preparing such proposals. Finally, it must be recognized that such plans do not eliminate the administrative and economic problems associated with other forms of direct wage-price intervention.

24:372 CONGRESSIONAL RECORD-SENA TE October 19, 1981

MONETARY ANNOUNCEMENTS AND DEMONSTRATIONS

One of the rationales noted above for direct intervention is the possible effect on inflationary expectations. It is interesting to note that this approach is accepted by policy makers in the Reagan Administration-not as a rationale for direct intervention but as a justification tor a consistently "tough" monetary policy. According to this view, the pessimism found in most econometric forecasting models concerning the effectiveness of monetary policy fol' infiation control is due to a mismanagement of monetary policy in the past. During the period over which the models were estimated, this argument goes, the Federal Reserve was unwilling to make reducing the rate of infiation its sole objective. Instead, it was also worried about high interest rates and unemployment. These other objectives prevented monetary policy from being "tight" enough for long enough. Wage and price setters came to learn that the Fed would "back down" before inflation truly had been brought under control and their resulting skepticism led them to expect continuing infiation and to act accordingly.

In order to undo the damage done by previous inconsistent policy-so the argument goes-the Fed must now prove its unfilnching willingness to fight intlation regardless of the consequences for other economic goals. There must be an announcement of this new intent and, if that p·roves unconvincing, ·there must be a demonstration of Fed toughness. This demonstration is to be made by limiting the growth of the money supply to a consistently low target. Obviously, it would be a happy circumstance if the announcement itself was so convincing that infiationary expectations were quieted and infiation quickly subsided as a result. The early experience with monetary policy under the Reagan Adminlstratfon, however, suggests that an announcement by itself is insumcient; long-term bond yields-which include an infiation expectations component-have remained stubbornly high, suggesting that the financial markets continue to expect an infiationary future. Thus, current Fed policy is now in the demonstration phase.

It is difilcult to disprove a theory which proclaims that the cast is not prologue. Only an actual test will sumce. However, in viewing the current experiment, two important points must be noted. First, to the extent that a prolonged demonstration proves necessary, the new view becomes indistinguishable. The conventional forecasting models predict that a long period of economic slack will tend to reduce the rate of infiation Second, it is the underlying rate of infiatio~ which must be matched. The peculiarities introduced Into the CPI by the inclusion of mortgage interest rates, the political winds in OPEC, and similar factors must be filtered out.

WHAT CAN BE DONE?

Like it or not, the American public wlll be subject to a test of the monetary announcement and demonstration approach. This is the central anti-infiation element of current economic policy, since fiscal policy is not being geared-despite some supplyside rhetoric-to anti-infiation purposes. It the administration backs off from its tough monetary policy before a substantial reduction in the underlying rate of inflation occurs, the doctrine will have been shown to have no real-world significance, whatever its theoretical appeal. Surely, no President has had a freer hand in trying such an experiment. It carrying out the experiment proves polltically infeasible for this administration, no future President could reasonably be expected to try it a.gain.

On the other hand, the formation of inflationary expectations is a process not well


understood by economists. Perhaps expectations will change after a few more months of experimentation. Perhaps America will have sumcient good luck with the exogenous elements of its price level to change opinions about the future course of price changes. Should either of these events occur, the Reagan Administration would be in a position to re-stimulate the economy or-as its spokesperson would. undoubtedly prefer to put it-to permit the natural strength of the economy to bring about a recovery. The political benefits that would accrue to the administration under such circumstances would be enormous and would permit the administration to pursue other elements of its economic and social policies which are not directly related to infiation. Such an outcome is by no means impossible. However, prudence and expectation suggest that formulation of an alternative anti-infiation program is desirable. THE ROOT OF THE PROBLEM: UNRESPONSIVE

WAGE AND PRICE BEHAVIOR

If monetary and. fiscal policy were more effective in fighting inflation than they apparently are, the infiation issue would not arise. A slight slowing of economic growth and a silght expansion of economic slack would be sumcient to produce absolute declines in wages and. prices, not just a slowing of the rate of increase. The textbook models of wage and price determination, with their intersecting demand and supply curves, suggest just such an impact. Yet the real world is not characterized by such markets. In the modern world, wages do not fall absolutely unless bankruptcy Is imminent, and even then there is considerable resistance. Certain commodity prices do exhibit up and down flexib111ty. However, there is a large component of pricing based on cost markups which does not exhibit classical flexib111ty. Monetary and fiscal restraint thus have a major impact on the volume of output, but only a limited effect on its price.

Demand restraint is a "signal" for wage and price setters. The problem has been that the signal is not sumciently heeded. Many of the suggestions for supplements to monetary and fiscal policy are really signal ·amplifiers. For example, through a guidelines program, the authorities publicize the signal-they make it louder in case anyone has not heard the message. The tough announcement approach is to follow policies which encourage listening to, and heeding of, the signal. Such an approach does not eliminate the primary need for the signal; if there is no message there can be no response. But it does emphasize strengthening the reaction to monetary and fiscal restraint, so that the exercise is less painful and quicker acting.

Below, a proposal will be made for increasing wage and price responsiveness to demand. However, it is important to note that any such proposal must have a symmetrical effect. Monetary and fiscal restraint would more quickly bring about inflation deceleration. But monetary and fiscal excess would lead to faster inflation acceleration. An important question is whether an increase in wage and price responsiveness to demand would reduce the rate of inflation over the Ion~ term, or simply increase its variab111ty.

There is good reason to believe that increased responsiveness would have a longterm intlation-reducing impact. However, the basis for this belief is as much political as economic. Consider a period such as the early 1960s when prices were rising at rates below 2 percent per annum. Starting from such a period, it was possible to stimulate the economy, reduce unemployment, and yet-initially--experience only a mild increase in the rate of inflation. Engrained expectations of low infiation and the unresponsiveness of wages and prices to demand made these results possible.

Once the 11111atlon acceleration set in,

however, prolonged economic slack was required. to bring the 11111ation rate back d.own. Given the understandable resistance to bearing the costs of such slack, an infiation ratchet-effect was the outcome, A sequence of "stop-go" episodes occurred, but after each episode the residual inflation rate was higher than it was before. Thus, a!ter the 1970 recession, the intlation rate was higher than it hacl been 1n the early 1960&. Attor the 1974-76 recession, the UUlation rate was higher than it had been in the early 1970&. Pressure is already building on the Reagan Administration to drop interest rates before infiation has decelerated to the levels of the mid 1970s.

Suppose the history of the 1960s and 1970s could be replayed., but with. more d.emandresponsive wage and price setting. Intlation in the laite 1960s would have accelerated faster than it did, as demand pressures rose. It is likely that policy makers, therefore, would. have responded faster and more effectively than they actually did.. Application of demand restraint would. have had a greater anti-intlatlon effect than actually occurred, with a. lesser rise in unemployment. Most probably, the episode would have brought inflation down to "acceptable" levels and the unemployment cost of d.oing so would have been substantially less than the cost of the partial correction of 1970.

The food-oil price shock of 1973-74, by itself, would not have produced a more rapid. rate of inflation than actually occurred with greater wage-price responsiveness to demand. If anything, the sudden jump in commodity prices had a demand-reducing effect. Other demand pressures had arisen during 1972, and. it is possible that greater price increases would. have been experienced (ignoring the wage-price controls then in effect). However. the demand-reducing effect of food-oil price boosts on wages and prices might have slowed inflation outside the food-oil sector. And, in any case, the recission of 1974-75 could have been less deep and produced a greater anti-intlation impact.

In short, with greater wage-price responsiveness to demand, the most likely outcome would have been a lower current infiation rate and a lower average inflation rate over the past decade and. a half. Policy makers would have felt the need to correct excessdemand situations more quickly than they actually did. And they would have found. it less costly to do so.

MONITORING FOR UNRESPONSIVE WAGE-PRICI: DECISIONS

Shortly after taking omce, the Ford Administration created the Council on Wage and Price Stab111ty (COWPS). A major function of COWPS was to "monitor" wage and price adjustments at a disaggregated level. The Carter Administration converted COWPS into the administering agency for its voluntary-mandatory guidelines program. Thus, when the Reagan Administration took omce, its antipathy to direct intervention led to the quick dismantling of COWPS.

Unfortunately, disaggregate monitoring of wage and price decisions is a function not carried out by the old-line statistical agencies on which government and private economists rely. Newspaper accounts of union wage settlements are frequently a babble o! confusing components of the agreementoften presented in ways designed to save face for one side or the other, or to promote ratification. Accurate measurement of the settlement ls not generally available. Nonunion wage adjustments receive virtually no publicity. Price adjustments receive attention only in certain "visible" industries. Even when publicized, such background factors as cost trends and market conditions may not be known.

Monitoring by itself is simply information gathering. In the past, even in the absence of a formal guidelines proil'aDl. there baa

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24373 been an attempt to use monitoring information publicly to embarrass wage or price setters whose behavior displeased the authorities. However, the basic function of monitoring is to pinpoint wage and price decision centers which seem chronically to ignore the signals of the marketplace, a.ndin particular-the signals entering the marketplace through monetary and fiscal policy. What government does with that information is another matter. Jawboning and publicity are not the only options. Presumably, the goal is to increase wage and price responsiveness, not to annoy or embarrass.

ANALYSIS OF UNRESPONSIVENESS

Monitoring can pinpoint areas of unresponsiveness to monetary and fl.sea.I s1gna.l.s. However, an important question is why such unresponsiveness exists. The reasons may vary from sector to sector. One explanation by the la.te Arthur M. Okun is especla.lly lnslghtful.7 Okun noted tha.t 'buyers a.nd sellers genera.lly do not deal with each other in a faceless auction market. Although cert&in commodities and raw ma.teria.ls a.re sold through a.uotion-type pl"OCesses, in most ma.rkets--and especially in la.bor marke~here ls a relationship between buyer and seller. According to Okun, both buyer and seller have a. stake in ma.inta.ining their relationship and therefore engage in an implicit understanding governing their conduct. For exa.mple, employers often find turnover (quits) of employees to be costly because of the searching, screening, and training expenses enta.iled in hiring rel)la.cements. Workers face obvious costs if they lose their jobs. Their implicit understanding is esta.blished to cover the rules of fe.ir treaitment that may be expected by workers in the future.

Exactly what "fair" means in any given clroumstance is unclear. However, in the labor market fair ls likely to imply tha.t wages wm be adjusted according to some stand&rd such as compensa.tion received by "similar" groups of workers, moveznents in the cost of living, etc. Socia.I norms favor protecting the incomes of senior workers. Hence, ln the face of a. recession, employers a.re unlikely to cut wages and they may not even ,a.Iter their wage-detennination formulas. Rather they simply la.y off the most junior workers. A fa.1.1 in dema.nd is thus translated into a layoff rather than a. change in wages. In the unionized portion of the l&bor market (roughly one-fourth of wage and salary employment), the implicit understandings are formalized in exp111ct contriacts.

Product-market norms of fairness reduce to cost-based pricing. There may be reluctance to "exploit" sudden shortfalls of supply or demand. Rather, demand fiuctua.tions a.re likely to be tra.nslBlted into la.gs in fill1ng orders, the favoring of old customers with limited supplies during booms, and into the pile-up of unsold inventories during downturns. As in the labor market, changes in demand lead to quantity adjustments which substitute-at least in part-for price adjustments.

Okun, and others who have written along slm1la.r lines, emphasize that such behavior is not irra;tional from the viewpoint of individual transactors, even if it fa.ils to squa.re with textbook supply-and-demand models. However, it does build into the economic system a potential for wage-price spirals and an ongoing inflation momentum which is ha.rd to halt. Business, labor, and the public genera.Uy complain about infia.tlon. Yet for individua.lly valid reasons they pa.rtlclpa.te in its perpetu.a.tion.

A STRATEGY TO INCREASE WAGE AND PRICE RESPONSIVENESS

It sometimes has been proposed that wage and price unresponsiveness ls due to a la.ck of competition. This observation follows f.rom the assumption Of "perfect competi:tiion" ·that

is fundamental to textbook supply-anddema.nd analysis. In the textbook world, buyers and sellers a.re essentially atomized. In the real world, atomizing existing firms ls not a possib111ty. Short of that, it ls not at all clear that moving from current levels of competition to somewhat more competition would be a. universal cure for price unresponsiveness. For example, suppose in the current automobile market Genera.I Motors were divided into two competing firms through an antitrust action. Even counting foreign competitors, the automobile market stm would be far removed from the textbook model of hundreds of producers oft'ering a homogeneous product. The pricing of automobiles might well not be much different from what ls currently the practice.

The.re are also markets in which there are many buyers and sellers, yet where textbook competition in pricing does not prevail. Buyers and sellers of the services of real estate brokers are numerous, and the brokerage services offered are relatively homogeneous. Yet the persistence of the 6-pe.rcent commission during the 1970s, in the face of an explosion of housing prices and wide variations in the volume of house transactions, ls remarkable. Another area where there are many buyers and sellers, but where textbook competition does not predominate in price setting, is the health-ca.re sector.

In some markets it may be the case that more competition would increase price responsiveness. Price responsiveness to fiuctuatlons in demand should be a criterion for antitrust decisions, providing there is good reason to believe that the proposed antitrust action would increase ,responsiveness. Simpleminded ana.Iysis of market she.res or visceral aversion to bigness are not useful criteria.

Government actions may themselves contribute to price unresponsiveness. Cost-plus contracting and reimbursement guarantees unresponsiveness or even perverse behavior, since average costs tend to rise as volume decrea.se.s. While it ls true that regulated utilities, health-care providers, and suppliers of products and services to government must make a "reasonable" profit over the long run to remain in business, it is not the case that they should be immune from loss in ea.ch and every subperiod.

Deregulation policy need not have much to do with inflation. The increased economic efficiency which ls often asserted to accompany deregulation might lead to lower prices, but not necessarily more fiexlble prices. However, where regulation has been largely a costplus affair, it ts quite possible that deregulation wm enhance price responslve],less to demand. Certainly, the impact on price responsiveness of a proposed deregulatory action ls a valid criterion for decision.

There undoubtedly are strong conatraints on the degree to which pricing can be made more responsive to signals from monetary and fiscal policy. However, even if a. large element of pricing ls simply based on cost markups, an important element of total costs is wage compensa tlon. Employee compensation accounted for 63 percent of the prlva.te gross national product in 1980 and 72 percent of private national income.s If greater responsiveness in wage determination could be induced, it ls reasonable to expect some refiection of this in price behavior.

The image of wage responsiveness to economic slack conjures up dark memories of industrial strife between employers and employees. Famous laibor disputes such as the Pullman strike of 1894 had their roots in resistance to wage cuts. Obviously, a return to the social upheavals of the late nineteenth and early twentieth centuries ls not desirable, nor ls it being advocated. But, if prices and wages were generally more responsive to economic slack, there need be no losses of real income. Indeed, periods of economic

Footnote& a.t end of article.

slack induced by deliberate monetary and fiscal policy could be less prolonged and less restrictive. On the other hand, if individual groups of workers are singled out for wage concessions, there will be relative wage slippage for those groups and the potential for resistance is increased. (This is why controls and guidelines have tended to rely on acrossthe-board wage norms for wage determination.)

Recently, there has been a rash of individual wage concessions in such diverse industries as a.utomoblles, tires, construction, newspapers, and airlines. Where overt concessions have occurred, the threat of imminent bankruptcy and resultant job losses have been the motivating factor. If the only way to induce a reduction in wage infiatlon ls to force major industries to near bankruptcy, then the Fed and the American worker are locked in to a. tragic game of economic chicken. It would bt:: far better if adjustments could be made under less drastic circumstances.

It ls common in the union sector for a component of the wage package to be contingent on external economic circumstanc~s. However, in the vast majority of cases, the only economic circumstances considered ls the increase in the Consumer Price Index. For major escalated union agreements expiring in 1981, almost one-third of the wage increase actually paid out resulted from operations of the cost-of-living clause.9 For many contracts, the ratio was much higher.

There ls no reason why contingencies other than inflation cannot be incorporated into union agreements or be made part of nonanlon wage determinations. Profit sharing has been included in a small proportion of union contracts in the past.10 In units where wage concessions have been made in recent years, however, some form of profit sharing often has been included. Profit sharing is apparently more common among nonunion employees, particularly management personne1.u

Any plan which gears a component ot compensation to either the economic "health" of the firm or to the general economic health of the economy will auto·· ma.tlcally make wages more responsive to business-cycle pressures (both up and down) a.nd 1tlherefore to signals from monetary and fiscal policy. Current discussions in the field of lalbor relations and personnel mana.gemen°t could provide a. vehicle to encourage such arrangements. Under the headings of "quality of working life" a.nd "worker participation in miania.gement" have come ideas about employee particLpaitlon in the economic returns of the firm. These ideas are not new~u.ch discussions a.nd experiments go back to the 1920s and before.12 But their resurfacing at this time could assist in a re-evaluation of the nature of the collective bargaining relationship (in the union sector) &nd good personnel managemenit (in the nonunion sector). There ls a ready-made consitituency for encouraging the use of profit sharing and similar arrangements.

How might such plans operate? Many a.1-ternative arrangements could 1be adopted. For example, a component of the wage (sa.y 80 percent) could be subject to norms.I collective 1ba.rgaining for union workers or unllaiteml employer determina.tion for nonunion workers. Thus, any wage adjustment negotla.ted or determined would apply to 80 percent of the base wage. The wa.ge increase applicable to the remaining 20 pereent could be determined by a formula. geared to profits, volume of output or sales, a profit-to-sales ratio, or some other cycllcally sensitive index. In a given. year, a. worker would receive an overall wage increase equa.1 to a. weighted average of the two components.

Consider a worker with a negotiated wage increase of, say, 10 percent. Suppose the worker's employer experienced a "poor" year and the formula for ithe 20 percent share

24374 CONGRESSIONAL RECORD-SENATE October 19, 1981 yielded only a 2 percent increase. The worker would receive an overall increase of 8.4 percent ( (10 % x .8) + (2 % x .2) =8.4% J. On the other hand, if the employer had a "good" year a.nd the formula for the 20 percent share indicated an 18 percent increase, the worker would receive an overall increase of 1'1.6 percent (10 % x.8) -t-(18% x.2) =11.6%).

O'bviously, important questions need to be resolved aibout an.y such arrangement. Clearly, an element of income variability results from tying a portion of wage compensation to an index such as profitabillty. The variability of the formula could be checked by placing various llmits on its operation, as is often done now with cost-of-living escala.tor clauses. There could be caps and floors on the increase determined by the formula.. For example, in the case cited above, a floor of zero might be ·a.pplled so that the worker could not receive less than 8 percent (10 % x .8). Irti might be noted, however, that t;o the extent that employers substituted wage ad1ustments for hours adjustments, workers might be less exposed to the income variability now associa.ted with layoffs. At the economy-wide level, t;o the extent that widespread use of such plans made monetary and fisoal policy more effective, the depth of recessions induced for ·anti-inflation purposes could be reduced. This effect would also alleviate a current source of worker income variability.is

Use of profit-sharing or similar arrangements which in.crease wage sensitivity to demand would not require ma.bipulation of collective-bargaining contra.ct durations. Indeed, the painful exercise of re-opening contl"aCts in time of crisis to renegotiate concessions might be eliminated. The formula would make the concessions automatically. A suggestion· which has sometimes surfacedbased on the observation that long-term union contracts show little wage sensitivity to demand-is that such contracts should be forbidden a.nd discouraged. There would be a severe cost to such a. shortening of union contracts since more frequent negotiations would probably increase the incidence of strikes. (It was primarily to avoid annual negotiations and strike risks that the modern long-term contract was formulated.) Moreover, 1 t is unclear tha. t if the cost were paid, substantial wage flexibility would result. Most nonunion workers are effectively on a one-year wage-determination cycles, but their wages have not been highly demandresponsive. And non-union workers make up about three-fourths of nonfarm wage earners. The long-term horizons in the union sector, moreover, would continue even in the absence of long-term contracts.u

One ot the nice features about profit-sharing plans and similar arrangements is that Congress ls already receptive to the idea of promoting worker participation in the economic health of the employer.16 In contrast, there is little receptivity to TIP schemes, guidelines, or controls. The Congressional interest has stemmed primarily from concerns a.bout productivity and the quality of working life. However, the argument that worker participation in the economic return of the firm is anti-infia.tiona.ry can only add to the appeal of the proposal.

Congress could encourage programs that gear wage compensation to economic circumstances through tax incentives, just as it has encouraged other forms of fringe benefits. It could even mandate such arrangements, say for employers above a certain size limit. Idea.my, a wide range of options should be available. The parties to collectiveba.rga.ining agreements or nonunion employers could then adopt arrangements suited to their own special situations.

At this point, it would be helpful to establish what the options should be. Should profits be used to index wages, or should other measures be used? Could industry or

economy-wide indexes be made available? Should there be limits on the wage variability permitted? What has been the experience under profit-sharing a.nd production-bonus plans now in existence? would it be better to use tax incentives or mandatory requirements to encourage such plans? Can special arrangements be ma.de for employees of nonprofit or government employers? 10

Since there are both options and problems which need study, a useful step would be to convene conferences of practitioners, academics, and government representatives to consider the alternatives. Recommendations could be made to Congress on the programs most worthy of encouragement based on the views expressed and the experiences of the parties who have already experimented with profit sharing and similar arrangement.a. Possible examples of contract language oould be developed and consultation offered to interested employers and unions in implementing flexible compensation plans. Rather than simply lament the infia.tion-perpetuation bias of existing institutions, it is time to explore significant institutional changes. A TRULY ALTERNATIVE ANTI-INFLATION POLICY

There a.re two temptations in attempting to frame an alternative to existing anti-inflation policy. One is to endorse some variant of the Reagan Administration's program (essentially tight money and loose fiscal policy) on the grounds that the program is currently popular. Clearly, if the policy works, or if inflation recedes for other reasons, the pressure to frame an alternative policy would diminish. However, a "me-too" approach is ultimately not much of a platform and provides the public with no choice. The second temptation is to concoct a rehash of previous alternatives-guidelines, controls, etc.-with some "new" wrinkle such as the TIP proposal. However, given public skepticism a.bout those alternatives and the gimmickry TIP plans inherently contain, the rehash "option" is also unattractive.

It is preferable to build an anti-inflation policy based on elements that have current appeal and thus will be given serious attention. Deregulation; use of market mechanisms; quality of working life and worker participation in management and in the economic returns of the enterprise; and innovations in collective bargaining are all topics being widely discussed at present, even apart from their implications for an anti-inflation policy. An approach which capitalizes on current interest in these topics has the potential for capturing the public's imagination. It avoids the heavy-handed interventionism of the past, which has lost its appeal.

The centerpiece of anti-Inflation policy should be a combination of strategies to increase wage-and-price responsiveness to the signals emana. ting from monetary and fiscal policy. Some form o! monitoring of wageand-price decisions would be a useful adjunct to such a program, If ~uidellnes are used at all, they should be couched in vague terms and used primarily as an educational vehicle rather than as a device to embarrass or threaten individual wage and price setters.

Improving the responsiveness to monetary and fiscal policy does not mean that demand restraint can be abandoned. Demand restraint is the signal to which wage and price setters should be responding. In the absence of a signal, there will be no response. And if the signal is inflationary, greater responsiveness would intensify the inflationary problem. However, there are alternative combinations of demand-restraining monetary and fl.seal policies than the one presently in force. Many economists feel that greater emphasis on fiscal restraint and a lesser reliance on monetary policy would be a better mix.

FOOTNOTES

: The figures cited are on a December-toDecember basis. Source: U.S. President, Eco-

nomic Report of the President, January 1.981. (.Washington: GPO, 1981), p. 293.

2 U.~. Council on Wage a.nd Price Stab111ty, lnftation Update, press release dated June 12, 1980, pp. 24-29. For a critique of the specific measures used bf COWPS in defining the underlying inflation rate1 see U.S. General Accounting omce. The Voluntary Pay and Price Standards 0 Have Had No Discernible Effect on Inftation (Washington: GPO), pp. 39-45.

3 An elaboration of this point can be found in Daniel J.B. Mitchell and Larry J. Kimbell, "Labor-Market Contracts and Inflation," paper presented at a Bookings Institution conference on Labor-Market Tightness and Inflation to appear in a forthcoming Brookings volume edited by Martin N. Bally.

'Some economists have argued that certain social programs have the effect of raising the unemployment rate by subsidizing job search. Examples a.re unemployment insurance and other forms of welfare benefits. To the extent that structural unemployment is increased, it might be further argued that public tolerance of additional unemployment induced by demand-restraint policy is decreased, thus reducing the effectiveness of such policy. Much depends on whether the alleged increment to structural unemployment is perceived differently by the public and policy makers from other forms of un·· employment. A summary of empirical studleB ca.n be found in Finis Welch, "What Have W•i Learned from Empirical Studies of Unemployment Insurance?" Industrial and Labor Relations Review, vol. 30 (July 1977), pp. 451-461.

5 Discussion of the TIP proposal can be found in Arthur M. Okun and George L. Perry, eds., Curing Chronic lnftation (Washington: Brookings Institution, 1978); and U.S. Senate, Committee on Banking, Housing, and Urban Affairs, Anti-Inflation Proposals, 95th Cong., 2nd Session (Washington: GPO, 1978). The outgoing Carter administration included a discussion of alternative TIP proposals in its final economic report. See U.S. President, Economic Report of the President, op. cit., pp. 60-68.

0 A jaundiced review of this proposal and its subsequent fate can be found in Daniel J. B. Mitchell, "The Rise and Fall of Real Wage Insurance," Industrial Relatfons, vol. 19 (Winter, 1980), pp. 64-73. See also U.S. House, Committee on Ways and Means, Real Wage Insurance, 96th Cong., 1st Session (Washington: GPO, 1979); and Robert J. Flanagan, "Real Wage Insurance as a Compliance Incentive," Eastern Economic Journal, vol. 5 (October 1979), pp. 367-377.

7 Arthur M. Okun, Prices and Quantities: A Macroeconomic Analysis (Washington: Brookings Institution, 1981).

8 Survey of Current Business, vol. 61 (June 1981). pp. 8-12.

9 David Schlein, "Contracts in Six Key Industries Scheduled to Expire in 1981." Monthly Labor Review, vol. 103 (December 1980), p. 22. This proportion tends to understate the escalated component of the wage increase since the estimate was made excluding wage increases under escalator clauses during 1981.

10 Less than two percent of the major private union contracts surveyed by the U.S. Bureau o! Labor Statistics had profit sharing. See U.S. Bureau of Labor Statistics, Characteristics of Major Collective Bargaining Agreements. January 1, 1980, bulletin 2095 (Washington: GPO, 1981) , p. 49.

11 Bureau of National Affairs, Inc., Wage and Salary Administration. Personnel Policies Forum Survey No. 131 (Was!lington: BNA, 1981), pp. 16-17.

12 For an account of such an early experiment, see Ben M. Selekman, Sharing Management with the Workers: A Study of the Dutchess Bleachery, Wappingers Falls. New York (New York: Russell Sage Foundation,

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24375 1924). The volume is one of a series on worker participation in management and profits.

13 To the extent that substantial wage variability was permitted, it might be possible to provide public or private insurance to alleviate the variation. For exaµiple, insurance against income variation due to layoffs is currently provided by state unemployment insurance plans and private supplemental unemployment benefit funds.

u It is true that short-duration union contracts show more wage sensitivity to demands than long ones. However, this tendency results partly from the use of short contrac•.s to o.ea.i with temporary disruptions in economic circumstances. Negotiators who were involuntarily forced to use short contracts would not necessarily exhibit the same s~n3it.ivlt.y as thos~ who volun.tarily use them On differences in wage sensiitlvity in union contracts, see Daniel J. B. Mitchell, Unions, Wages, and Inflation (Washington: Brookings Institution, 1980), chapter 4.

lj Tax incentives for Empioyee Btock Ownership Plans have been provided by Congress. While stock ownership plans do give the worker an element of compensation geared to the economic welfare of the firm, they do not lead to a variation in marginal labor costs. lt ls this VM'iation Which needs encouragement.

lO Wages at the local government level, for example, might be partially indexed to tax revenues. Wages in nonprofit institutions might be linked to receipts or revenues orin some cases such as hospitals-to productlon.e

THE ATTACK ON THE CORPORATIONS

• Mr. EAST. Mr. Fresident, for the last several years a growing apparatus of anti-capitallst ideologues has been mounting an attack on the free enterprise system, the American corporation, and the capitalist system. We are all generally aware of their activities, ideas, and goals, but in the attached paper, "The Attack on the Corporation," an institutional analysis published by the Her~tage Foundation in September 1981, Mr. William T. Poole, senior policy analyst at the Heritage Foundation, details the political and economic thought and strategy of these corporation haters.

Mr. Poole has written a number of similar analyses of the American Left and was one of the first to study in detail the structure and operations of the now notorious Institute for Policy Studies, the far left radical think tank in Washington, D.C. He brings to his analysis a deep familiarity with the radical mentality and the activities of extremist movements in the United States.

His analysis shows many interesting things seldom noted by the established m-~dia. For one thing, he shows that these apologists for socialism have little use for the American free enterprise system or for our free constitutional government. They are seeking not merely to reform the system or to correct its abuses. They are obsessed with the false idea that the occasional abuses of capitalism are inherent in it and that to correct them a totally different economic and political system must be developed.

The tactic these anti-capitalist theoreticians have developed is e3sentially one of infiltration and subversion from within. They recognize that the average

American is too satisfied with the asoounding success of the tree enterprise system to abandon it; there! ore, the corporation haters must work within the two-party system and seek to influence and dominate both major parties. They must also seek to use government power to promote their sociallst ideology, at the expense of the American taxpayer and of those who live on and profit from the capitalist system itself. Thus, the fact that the radicals are working within the system and not in the streets should not be allowed to disguise their revolutionary and subversive aims.

I commend Mr. Poole's paper and wish to have the executive summary, introduction and conclusion printed in the RECORD. The full text may be obtained from the Heritage Foundation, 513 C Street NE., Washington, D.C. 20002. (202) 546-4400.

The material follows: THE ATTACK ON THE CORPORATION

(EXECUTIVE SUMMARY)

The American corporation today faces an attack mounted by a movement which believes that, in the words of Ralph Nader, Mark Green, and Joel Seligman, "the powers of giant corporations in the United States ... erode the rule of law and ethical precepts" and that, as expressed by Richard J. Barnet, a founder of the Institute for Policy Studies, the nation's preeminent radical "think tank," the corporation's excessive power ... over the political and economic life of the country has all but destroyed the system of chec.KS and balances in our society."

Important components of this movement include organizations like the Interfaith Center on Corporate Responsibility and publication like The Corporate Examiner, both of which are maintained by the N9.t\onal Council of Churches; several, among them the North American Congress on Latln Americ·a and the Corporate Data Exchange, have been characterized by a pattern of interlocking relationships with certain programs maintained by JPS and IPS's international arm, t~e Transnational Institute.

An especially significant development has been the growth of the economic democracy movement, the best-known organizational expression of which ls probably the California-based Cia.mpaign for Economic Democracy, led by radical activist Thomas E. Hayden and financed to a large degree w!th the a.id of Hayden's wife, actress Jane Fonda.

CED's success has led one political analyst to observe that the economic d.emocracy movement may possess the ability to exploit economic issues in much the same way the so-called New Right has been able to capitalize on popular concern with social issues; Hayden has recently demonstrated a strong desire to work through the machinery of the Democratic Party in California, aud his CED managed, in April 1981, to gain political control of the city of Santa :Monica, largely through skillful organizing around the issue of rent control.

The economic democracy movement is fundamentally at odds with free-enterprise capitalism and with the corporation as an institution within the system; indeed, one of its prinoipal theoreticians has characterized economio democracy as, "in one respect, a euphemism for democratic socialism" that is "also a way of going beyond the usual idea of socialism to ... workers' control and consumers on corporate boards."

CED has trumpeted its 01'.)position to "this source of our ills" and "stink in our midst" that "is called Corporate Capitalism." To combat this allegedly all-pervasive corporate evil, economic democracy projects a program

of fundamental "structural change" as the basis for a political movement aimed at achieving power at the national, state, and local levels.

This program would involve such specific reforms as a government holding company, a separate publicly-owned energy corporation, and a "fourth" network of "public" radio and television stations that is "free of any control by owners of capital." Greater "pub-· lie" control of investment would be exerted 1

through pension funds and governmentowned banks and insurance companies; heavy emphasis would also be placed on the development of cooperative and "workerowned and worker/community-owned enterprises."

At the heart of the program, of course, is the need to control the corporation through such devices as increased "worker-controlled production" and the addition of worker, consumer, and other "public members" to corporate boards of directors, as well as through greatly increased government involvement in economic and corporate planning.

The goal is nothing less than "dismantling, or at least restricting, the power of these corporations" through a strategy that wlll "transfer capital from the corporations to the public, so that the people who work and consume can collectively and democratically decide what to do with it."

A crucial role in the development of this movement has been played by the Institute for Policy Studies and a major IPS offshoot, the Conference on Alternative State and Local Policies, formed in 1975 as the National Conference on Alternative State and Local Public Policies and dedicated to developing "a politics of how to change to a democratic, decentralized, socialism from a corporate, monopolistic state."

Outgrowths of !PS-sponsored activity in this area have included the HumphreyHawkins full-employment legislation; the exploratory Project for Economic Alternatives, which conducted a study of possible community ownership of steel mills in Youngstown, Ohio, in 1977 with a grant of $300,000 from the Department of Housing and Urban Development; national organizations of radical economists and urban planners; and widely-read publications like Working Papers for a New Society.

Many of these b:we enjoyed considerable practical political impact; in the words of one movement treatise, all of them "are explicitly anticorporate" undertakings which "also have a common positive side that we have chosen to call economic democracy."

INTRODUCTION

The American corpora. tlon today faces an attack mounted by an a.gg.lomera.tion of organizations having as their common view a conception of the corporation as a root ca.use (and often as the root cause) of much that i;; presumed wrong in American society, both politically and economically. To these people, the corporation manipulates our foreign policy in its own selfish interests; it squanders our resources; and it exploits our people in its uncaring pursuit of profit. As expressed by Ralph Nader, Mark Green, and Joel Seligman in Taming the Giant Corporation, published in 1976 by W. W. Norton & Company, Inc., "the powers of giant corporations in the United States ... erode the rule of law and ethical precepts." This is also the view held by Richard J. Barnet, a founder of the Institute for Policy Studies, as indicated in his 1975 IPS study The Crisis of the Corporation,• in which he wrote that "The modern giant corporation, operating now on a global scale, is transforming the world economy and, in the process is promoting a crisis of values." Barnet argues that the steady accretion of power by corporations "has weakened the power of the nation-state" a.s "The excessive power of large corporations over the political and economic life of the country has all but

24376 CONGRESSIONAL RECORD-SENATE October 19, 1981 destroyed the syatem of check• and balances in our society."

•This small volume is vital to an informed understanding of the movement's view of corporate power. Barnet 's basic view is that there are several "myths which legitimize the role of the corporation in society·· and which constitute a "source of corporat e power. They include the Myths of Free Enterprise, Efficiency, Equality, and Democracy." Th3 "Myth of Free Enterprise" is seen as the "most powerful of the corporate myths" and is, in turn, "based on the exchange transaction," the instrument for effecting which "is the market." Such free exchar..ge "is the essential legitimizing myth of free enterprise, which has put wealth acquired by commerce in a higher moral category than wealth acquired by conque3t." Barnet argues that "The most important development" challenging this myth has been "concentration of economic power,·• which has led "to the Age of Oligopoly," an era ill which the United States "operates a dual economy-free enterprise for small business, state welfare for big business." In "the Age of Oligopoly products are shaped not to Lne requL:euienis of public need but to the requirements of corporate growth." This is also related to the "Myth of Efficiency," e3pecially "in the consumption of resources. Under the system as it presently operates we reward extravagance and punish thrifts." Our dependence "on the corporate polluters" has risen while the "Throwaway Society-from dis~o3able bott-les to disros!l.ble car3-ha3 been successfully marketed a.s the highest stage of capitalism." Perhaps most importantly, however, "The concentration of economic power in the hands of a. few hundred corporaite managers and stockholders is inevitably translated into political power" in direct contravention of the "Myth of Democracy." To Barnet, "it would be naive to think that democracy in America is invulnerable. Its survival depends critically on the way our society confronts the issue of concentrated political and economic power." Or, put another way, "The redistribution of economic and political power is the price of maintaining democracy in America."

As Herman Nickel has observed in "The Corporation Haters, " published in the June 16, 1980, issue of Fortune. "Though the anti-corporate movement lacks centralized organization, it functions effectively as a loose coalition" in which "activists for one ca.use often help out campaigners for another." The National Council of Churches, for example, maintains the Interfaith Center on Corporate Responsibility and supports the operations of the Washington Office on Africa. and the Washington Ofll.c3 on Latin America; another group, Clergy and Laity Concerned, formerly known as Clergy and Laymen Concerned About Vietnam, has progressed from active participation in the major Communist-dominated "peace" coalitions of the 1960s and early 1970s to working with "those who are angry and hate the corporate power which the U.S. presently represents." One of the mo. e:nent's principal publications ls The Corporate Examiner, a newsletter published under NCC-_CCR auspices and self-described as "A publication examining actions and pollcie3 of major U.S. corporations in the areas of: consumerism, environment, foreign investment, government, labor and minorities, military production, corporate responsi bill ty."

There are numerous other such entities, many of them more obviously leftist in character. The North American Congress on Latin America, as an example, was originally an offshoot of Students for a Democratic Society and has continued to produce primary movement research on corporate involvement in Latin America. Among NACLA's principal activists over the years have been

such individuals as Micha.el Klare and Michael Locker, both of whom have also been prominently involved in certain programs of tha ..lnstitute for Policy Studies, the preeminent intellectual center for the New Left,'" and the Transnational Institute. descrioed by lPS as "its international program" which, "with centers in London and Amsterdam, addresses the fundamental disparity oetwt:~.a

the rich and poor peoples and nations of tne world, investigates its causes and developis alternatives for its remedy.'' In addition, Locker and other NACLA activists have played key roles J.n another primary movement group, the Corporaite Data Exchange.

CDE has characterized itself as "an independent tax-exempt research organization formed in 1975 to investigate econ..:;mic concentration and corporate control. ' ' Robert B.:>rosa.ge and Peter Weiss of IPS have written that CDE "has done contract work for the United Nations, the industrial Union Department of the AFL-C-0, and the Senate Committee on Governmental Affairs (Subcommittee on Reports, Accounting and Management)" and that it "13 an indepcnde.1t research group" which "has received modest funds from .tPS and TNI in the past for different projects; it may do so in the future, for its work is of the highest quality" and " .M.ichael Locker is a superb researcher." Given the prominence enjoyed by this "independent research group" within the anticorporate movement, it is noteworthy that an enumeration of "Activitie3, Fellow.>, Associates" published by TN : in November 1975 included a section devoted to a TNI "Multi.aa. i; .. ..ina.! .t-rOJeci;" ana that among the compo .• ents listed were Counter Information Services, whioh describe3 itself as "an affiliate of the Transnational Institute," and the Corporate Data Exchange, whose contribution was characterized as "Corpcrate concentration and its impact on democratic process; compiling a stock dirJctory-shareholders in 1,000 non-financial and financial corporations." A TNi activities summary also dated November 1975 included a 22-item "Political Economy" section which listed a "Project to compile a corporate stock directory of shareholders of 1,000 corporations; seminar on corporate power. (Michael Locker, Corporate Data Exchange)."

*The Institute for Policy Studies was characterized in the 1971 annual report of the Hou.;;e Committee on Internal Security as "the far-left radical 'think tank' in Washington, D.C.;" for general background information on the creation, leadership, financing, and certain major activities and programs of IPS, see Heritage Foundation Institution Analysis No. 2, "Institute for Policy Studies," May 1977. A detailed review of the IPS network and certain of the Institute's apparent biases may be found in "The Institute for Policy Studies: "Empire on the Left," written by Rael Jean Isaac and published in the June/July 1980 issue of Midstream; an extended response by Robert Borosage and Peter Weiss, Executive Director and Chairman of the Board of Trustees of IPS, respectively, ap;:ears in the February 1981 issue of Midstream, as does Mrs. Isaac's rejoinder. Much valuable information is to be found in the coverage provided over the years in the page3 of the biweekly Information Digest and in a succ3ssion of documented reports inserted into the Congressional Record by Representative Lawrence P. McDonald (D-Ga.); the nature of IPS and its relationship to the anti-intelligence complex have also been traced in Broken Seals, a. study published in 1980 by the Western Goals Foundation. For a treatment of the Institute's ideological pers;: ective that is at once both useful and conciEe, see Joshua Muravio's "The Think Tank of the Left" in the April 26, 1981, edition of The New York Times Magazine.

CONCLUSION

As Carnoy and Shearer recognize, the obvious question is, "Where do all these activitiea lead, and how do they fit together as parta of an integrated whole?" The answer they provide is, like the question, appropriate while, at the same time, it again makes clear the movement's view of the corporation as the very essence of what is wrong with freeenterprise capitalism in the United Sta.tea ( t.he wg.ca.l corollary ol' which is, of course, that undermining the corporation as a.n institution is likely to be the surest means of undermini.'lg the system as a whole): "All of these political activities" conducted by the groups discussed in their book, among them organizations like CED and the various components of the IPS network with which it works, "are explicitly anticorporate. They al.so have a common positive side that we have chosen to call economic democracy."

WILLIAM 1'. POOLE,

Senior Policy Analyst.e

TRIBUTE BY WILLIAM VANDEN HEUVEL TO ROGER BALDWIN

e Mr. KENNEDY. Mr. President, Roger Baldwin's death last August deprived the Natlon of one of the greatest champions of individual freedom and human rights in our history.

Last month, at a memorial service in the Communlty Church in New York City, Ambassador William Vanden Heuvel paid eloquent tribute to Roger Baldwin's extraordinary life. I believe that Ambassador Vanden Heuvel's remarks will be of interest to all of us who knew Roger Baldwin, who mourn his loss, and who celebrate his lifetime of remarkable achievement in the cause of human freedom. I ask that the tribute may be printed in the RECORD.

The tribute follows: IN MEMORIAM-ROGER NASH BALDWIN

January 21, 1884-August 26, 1981 (As remembered by William vanden Heuvel The Community Church, September 24, 1981)

When we were last together just more than a month ago, Roger Baldwin waved aside any thought of a sad farewell. He laughed about old age being an incurable illness. He had avoided its ravages. He was not about to accept them now. For him, Robert Louis Stevenson had written what had to be said. In his strong and vibrant voice he repeated faultlessly from memory:

"Under the wide and starry sky Dig the grave and let me lie. Glad did I live and gladly die, And I lay me down with a wlll. This be the verse you grave for me: Here he lies where he longed to be; Home is the sailor, home from the sea, And the hunter home from the hill."

The place "where he longed to be," that spot in the Ramapo hills where a hemlock and a sycamore are grown together, now belong to him. And there at last he will join in spirit his beloved Evie and Helen.

Roger Nash Baldwin's life on earth came quietly to an end in the early morning hours of August 26, 1981. He was in his 98th year. His life had spanned half of the presidential history of the United States. In reality though, it is with the Foundin"' Fathers that he should be identified. He .;as· one of them in the endless struggle for human liberty.

On January 16, 1981, more than threequarters of a century after he attended Harvard University with Franklin Delano Roosevelt, a grateful nation recognized its debt to Roger Baldwin and bestowed upon him its highest civilian honor, the Medal of

October 19, 1981 CONGRESSIONAL RECORD-SENATE 24377 Freedom. On that occasion, he stood at the

lectern without text or notes and did what he loved to do-encourage the faltering, cajole the go~ernment and dream of the future. It couJ.d have been Jefferson or Thomas Paine or Samuel Adams speaking to their countrymen: "If America. has a claim to glory among the nations, it is her sen ice to human liberty. we cannot bear that America fail in justice." He expected our children's children to grow old in pursuit of that Holy Grail of Peace, Justice and Freedom. Like Parsifal, the responsibility of each of us was to keep the faith.

His mind sparkled to the very end, forgetting nothing that he had seen, remembering everything that he had learned. The corners of his eyes continued to crinkle in smile and easy laughter. This contradictory fellow with a simple purpose, as he once described himself, loved life, every moment of it. Roger Baldwin accepted its end with tha same fearlessness that marked all of his years. The journey was over. He was very glad he had come.

What did we think? That he would be with us forever? Yes, I guess we did. And what is more, he will. Five generations have come together this evening to mourn. What better mark of his enduring spirit than that each generation should embrace Roger Baldwin as a contemporary. His simplicity and humor, the fundamental values which his life honored, and most of all that universal love that embraced each of us-and all of us, bound us to him.

He must have derived the discipline and balance that made his life so productive from his family and New England origins. The Boston where he grew up tolerated differences and encouraged his heretical bent. The Abolitionists and Thoreau and Emerson illuminated his path. "It is easy in the world to live after the world's opinions," said Emerson; "it is easy in solitude to live after our own; but the great man is he who in the midst of the crowd keeps with perfect sweetness the independence of solitude." Roger Baldwin was such a man. His opinions and judgments were his own-independent and carefully reached. He avoided absolutes except in his personal commitment against violence. Tolerance, common sense and a passion for justice were the qualities of his temperament.

"Go West," the great Brandeis had told him in 1905. He needed a break from family, establishment and Boston tradition. For ten years, he was teacher, Chief Probation officer and director of the progressive Civil League in St. Louis. He admired the democratic attitudes of the middle wes-c and waged his first successful battles there to protect free speech.

There were two experiences in Missouri that always stayed with Roger Baldwin. One was meeting Emma Goldman, whose intelligence and maternal warmth stood in sharp contrast to her notoriety as an anarchist revolutionary. He was inspired by her resistance to arbitrary authority, unjust laws, and insistence on the supremacy of individual conscience. She introduced him to a larger world of thought and experience. Her personal integrity in the struggle against oppression would o.lways be an important example for him.

The second experience was his introduction to those Missouri rivers. He would often say that his happiest days had been on rivers, his most contented, deeply spiritual moments of unity with the universe had been in a canoe, alone or with a silent companion. "Life and the river went by and I remained stlll, a point in time and space," he wrote. The canoe, the river and Bunk.le remain Inseparable as symbols of joy and strength.

The First World War was a major turning point. Its carnage, political insanity and human horror left no choice. lie returned to New York to lead the fight against the growing tide of milltarism. When the United States entered the war, it meant prison .tor Roger Baldwin as a conscientious objector. Out of the repressive environment of the war and its aftermath came the American Civil Liberties Union. He regarded his role in the creation of the ACLU as the major public accomplishment of his life. None of us will disagree.

A word a.Jout his imprisonment, however, is in order. It was another illustration of his belief that an individual can change the world whatever the time or place of his being. Anyone who hopes to reform criminal Justice prays to have a prisoner like Roger Baldwin. While in jail, he organized a Prison Welfiare League. He was a one-man Legal Aid So::iety, raising money from the wealthy prisonera (mostly gamblers) to hire lawyers to defend the poor awaiting trial. He established a prison library, learned to play the piano, lectured on the possib111ties of democracy, and managed the prison garden. His challenging of the System never stopped.

When the Director of a prison reform association wrote in 1971 that "the present wave (of prison riots) has been formented, pl!.l.nned and led by a com para.ti vely small group of avowed Black revolutionaries," Roger Baldwin expressed his shock at the unsupported assertion. "I am fairly famil1ar," he wrote, "with what you call Bl•ack revolutionaries, a misnomer for extremists who refuse to tolerate the injustices which poor Blacks are so constantly subject, in prison and out. I i:;ee nothing revolutionary in them. Violent resistance is not revolution. If they want to choa.nge society, it is only to achieve equality regardless of race." Strong words then. Unc;;poken words now. In the tradition of Thoreau, Gandhi and Martin Luther King, Roger Bald win gave voice to those who would otherwise not be heard.

Aften the prison experience, he joined the Cooks ·and Waiters Union. If he was going to fight for the working people, he wanted to know the reality of their lives. His union member~hip made him a Wobblie which meant a free pass on the freight cars of America's railroads. He was impressed with the qualities of unity, nonviolence, courage, self-sacrifice and uncom?romising purpose shown by the IWW workers. For almost a year, he lived off the wages of his manual labor in the steel mills and railroad yiards. I can hear him now repeating the insight of Clarence Darrow: "Baldwin, I'd rather be the friend of the workin'.?man than the workingman. It's a lot easier."

There was a compe111ng quality about his wit and humor. Quoting cynics was one of his pleasures. Like George Bernard Sha.w: "Do not, 'va.c;;te your time on social questions. What is the matter with the poor is poverty. What is the matter with t'he rich is uc:elessnec;;s." And his irresisti"lle laugh would follow.

By his own descriotlon, the most exhilarating period of his life was the last 30 years. He was Chairman or the International League for Human Rights. The United Nations became his second home. All his life he had fought against racism, for the end of imperialism and the colonial era, for the equality of women, for a true league of nations, for universal peace and just.ice. He sa.w the United Nations as a powerful opportunity to secure those objectives. No one knew the faults an'1 weaknesses of the United Nations better than he did. The bureaucratic quagmire of the or~anization, the stalemates engineered by the Superpowers, the destructive division into nat.ional blocs were oalnful for a v!c::i0narv to witness.

He had hoped for an International Court of Justice to protect human rights every-

where in the world. Explaining the obstacles to progress at the United Nations, he would write "that few things in history happen at the right time." He thought it a miracle that the world organization had travelled so far. His was the long view. War must be avoided. Peace must be secured. Disarmament must begin. '!'he United Nations had the possibility to achieve these purposes. There was no alternative. 'Ihe boring, repetitious rhetoric of UN monologues would have to be endured. Meanwhile, he worked fervently in his own country and abroad to advance the cause of a just world through the only organization that brought all of mankind together.

The events and meaning of Roger Baldwin's life will be chronicled for years to come. The democracy of death cancels all differences among us. Only the impact of our character, the goodness of our deeds, the pervasiveness of our love permit memory to survive. By those measures, Roger Baldwin's memory is planted in eternity.

Grief for the loss of our beloved friend must, by his instruction, remain behind us in this church. We must now set out to meet him in a thousand different places.

He wm be standing next to those who denounce a policy that says that in South Africa "it is not the task of the United States to choose between Black and White." Not our task, he would ask, to commit our political strength to help those in chains and servitude? Not our task to pull out apartheid and racism from the roots of human soil? Not our responsib111ty to help Namibia become independent? What scorn he would reserve for those who would lead us otherwise.

He will be applauding the President of Yale and Senator Goldwater and their successors as they fight for separation of Church and State, resisting those who threaten censorship, political retaliation and even violence in trying to impose their religious values on all the land. The defense of free thought, free speech, free religious choice was the banner of his life's struggle. Those who carry it from his stlll hands wm always be his children.

No one who comes to do the work of the United Nations will be able to avoid his presence. Those who seek peace will be extending his labors. Those who convince the world of the imperatives of disarmament wm echo his voice. Those who strive to bury the ancient divisions of Mankind, to build the institutions to bring the world together, to prevent the recurrence of Holocaust and war-they will have Roger Baldwin as their comrade.

Those who march against the exploitation of working peo;>le will have him in their ranks.

Those who struggle to preserve natural beauty, who resist the plundering of the earth's resources, the destruction of our wilderness, the dic;;integration of our parks, the defiling of our air and water-they will have Roger Baldwin as their lifetime colleague.

Those who languish in the prisons and gulaq;s will rave him as their cellmate.

Those who light a campfire, who hear the woodlark sing, or marvel at the bursting crocus on a forest walk, or slip a canoe silently into a river's water where space, time, fear, suffering no longer exist, where everything becomes simple, where the calm says there is something indestructible in us aq:ainst which notMnq: shall prevail-Roger Baldwin wm be at their side.

Tears blur our vision. We know autumn has come. The mi~hty tree upon which we leaned so heavily has cast its seed and shed its leaves. We walk to the river once more. The canoe is there. Always our guide, now our silent companion. Roq:er Baldwin waits for us to resume the journey.e

24378 CONGRESSIONAL RECORD-SENATE October 19, 1981 COMMITTEE'S INTERPRETATIVE

RULINGS ON SENATE CODE OF OFFICIAL CONDUCT

• Mr. WALLOP. Mr. President, on behalf of the Select Committee on Ethics, I submit a number of the committee's interpretative rulings on the Senate Code of Official Conduct made pursuant to section 206 of Senate Resolution 110, 95th Congress. These 14 rulings answer questions raised by Members, officers, and employees of the Senate and the public regarding Senate rules 34-42, the franked mail statute and regulations, and other matters. They are presented chronologically by ruling number (beginning with No. 336) with reference to subject and reflect committee action betrween September 5, 1980 and October 5, 1981. The first 103 rulings were published in the CONGRESSIONAL RECORD on October 7, 1978. Rulings 104-150 were published November 9, 1978. Rulings 151-242 were published September 5, 1979. Rulings 243-272 were published February 27, 1980. Rulings 273-335 we:re published September 11, 1980.

The committee also responded by letter to 277 inquiries not submitted here for publication. These inquiries were either too specialized to be of general assistance or responses to inquiries duplicated interpretations presented here or previously published.

Interpretative rulings by the committee may be relied upon by an individual involved in a specific transaction or activity which is indistinguishable in all its material aspects from the facts on which a ruling has been made. The committee encourages written requests for rulings on specific situations not clearly covered by the code of conduct.

The committee will continue to respond to written requests for _interpretations, treat such requests confidentially, and publish its rulings with appropriate deletions to proteot the privacy of individuals who seek committee guidance.

The rulings of the select committee are as follows: Interpretative

Ruling No. 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303

Tab 34, 35 34, 37, 41 Miscellaneous 40 Franking 35 40, Franking 34, 35 Franking 37 37, FGDA Franking 37 Franking 37, 41 38, Miscellaneous 40, Franking 41 34, 41 34, 35 FGDA 34 Franking 37 Franking 34, 35 35, 38, Miscellaneous 41, Miscellaneous 41 Franking

Interpretative Ruilng No.

304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349

Tab 37 34, 35, 37 Franking 38, Franking, Miscellaneous 37 Franking 40 34, Miscellaneous 37 40 35, 37, 41 34, Miscellaneous 35, Miscellaneous Franking 40 34, 37 Franking 37 Franking Franking 40 Franking 41 34 Fra'lking Franking 38, Miscellaneous Franking 38 Franking 35 Franking 34, 35, 37 Franking 37 35, 37 38, Miscellaneous 38 37 Miscellaneous 34, 37 34, 35 40 34, 35 Franking 37, 41

INTERPRETATIVE RULING No. 336 Dated issued: September 5, 1980. Applicable Rules: 34, 35, 37. Question Considered: What is the ap

plicability of the Code of Official Conduct to the spouse of a Member, officer, or employee of the Senate who has b een offered a position on the board of directors of an American corporation?

Ruling: In this particular factual situation, the spouse is an attorney who has established an independent professional reputation over a period of years which appears to qualify this individual for any number of possible offers to serve on a corporate board of directors.

While paragraph 6 of Rule 37 prohibits a Member, officer, or employee of the Senate, who is compensated at a rate in excess of $25,000 per year and is employed for more than ninety days in a calendar year, from serving as an officer or director of any publicly held or publically regulated corporation, financial institution or business entity, this prohibition is not applicable to the spouse of a Member, officer or employee. However, the Select Committee recognized that while the activities of a member of a board of directors are generally confined to establishing matters of corporate policy, rather than directing the course of day-today corporate business, should a spouse's duties as a director include "lobbying" other Members, officers, or employees of the Senate, a question could arise about such activities which might reflect upon the Senate as an institution.

Additionally, the Committee pointed out that Rule 34, "Public Financial Disclosure", requires a reporting individual to disclose the source of any director's fees or other

earned income in excess of $1,000 received by a spouse and that the prohibitions of Rule 35, "Gifts", are applicable not only to Members, officers, and employees but also to spouses and dependents as well.

INTERPRETATIVE RULING NO. 337 Date issued: september 15, 1980. Applicable Area: Franking. Question considered: A Senator proposes

to create a series of non-partisan, non-political "Citizen Advisory Committees" throughout his state. The Committees wlll have a limited number of members, who will represent a cross-section of their respective community, and their purpo3e will be to provide advice and suggestions to the Senator with respect to pending legislation and issues before the Congress. The senator asks whether his franked mail privileges might be used to mail the letters of invitation to individuals chosen to become members of the "Committees".

Ruling: The use of the senator's frank to mail the letters of invitation appears to be authorized by sections 3210(a) (1) and 3210(a) (3) of Title 2, U.S. Code: the franked mail statute. These sections provide authority to send mail as franked mail "in order to assist and expedite the conduct of the official business, activities and duties of the Congress . . . [which] shall include, but not be limited t o, the conveying of information to t he public and the requesting of the views of the public ... "

As to the creation of "Citizen Ad,vlsory Committees'', the Select Committee ruled that provided such "Committees" were nonpartisan and non-political, there appears to be nothing inherently wrong with the proposal. However, the Senator was reminded that it was his re.sponsibility to insure that a distinction was maintained in the public's eye between individuals who were members of the ''Citizen Advisory Committees" and individuals who were campaign workers. The distinction must be maintained in order to insure that the "Committees" limit their activities to providing advice and suggestions on matters before the Congress as opposed to advocating partisan, political positions on issues or candidat.es.

INTERPRETATIVE RULING No. 338 Date issued: september 23, 1980. Applicable Rule: 37. Question considered: Is a Senate employ

ee who works part-time in a Member's office In violation of the prohibition in paragraph 5 of Senate Rule 37 on affiliating with a "firm. partnership, association, or corpora

.tion for the purposes of providing professional services for compensation" because of his continuing, full-time employment as a writer for an organization which lobbies the Congress?

Ruling: In defining the scope of the prohibition, the paragraph states, "[f]or purposes of this parargraph, 'professional 11ervices' shall include, but not be limited to, those which involve a fiduciary relationship." In the normal course of business, the Committee does not believe that performing work as a writer constitutes the kind of "professional services" contemplated by the definition provided in Rule 37, and believes that the individual's work for the nonSenate organization ls not prohibited by paragraph 5. The Committee reminded the employing Senator that paragraph 3 o! Rule 37 requires the supervising Sena.tor of any Senate em;Jloyee who engages in non-Senate employment "to take such action as he considers necessary for the avoidance o! confiict of interest or interference with duties to the Senate." !'he Committee noted furthM that because of the employment relationship which wm continue to exist between the part-time employee and that employee's other employer, a business lobbylni organl-


zatlon, the supervising Senator wlll of course need to be especially vigilant and particularly sensitive to guard against a confllct of Interest arising.

INTERPRETATIVE RULING No. 339 Date issued: September 25, 1980. Applicable Rules: 35, 37. Question considered: May a Senate em

ployee accompany her husband who is a lobbyist on business trips, the expenses of which are paid for by the husband's employer, a corporation which ls a prohibited source within the meaning of paragraph 1 (b) of Rule 35 on Gifts?

Facts: Whl!e a part of the husband's corporate duties includes lobbying other senate committees, the senate committee which employs the wife has no jurisdiction over matters of interest to the corporate employer, and the Senate employee's duties are in no way related to the business interests of her husband's employer.

Additionally, the husband's corporate duties include travel for the purpose of attending certain corporate, business, and trade meetings on behalf of his employer. It is the corporation's practice both to encourage employee spouses to attend selected meetings and to pay the expenses of those spouses who attend.

Discussion: While paragraph 1 (a) of Rule 35 would prohibit Members, officers, employees, their spouses and dependents from accepting gifts (as defined by paragraph 2(a) of Rule 35) aggregating over $100 during a calendar year from a prohibited source (as defined ln paragraph 1 (b) of Rule 35), unless a waiver ls granted, the Committee finds that under the facts presented here, no gift was received by the Senate employee.

A search of the legislative history of Rule 35 contains no debate or conclusions on this particular situation. The Committee concludes, however, that the provisions of the Rule, and its legislative history, do suggest that, under certain circumstances, the payment by a spouse's employer of necessary travel expenses of wives or husbands incurred by them while accompanying ·their spouses on trips relating to the spouse's business duties ls not a gift within the meaning of Rule 35.

The Committee notes that Rule 35 contains an exception to the definition of a gift for the necessary expenses of official travel. During debate on the "necessary expenses" provision of the Rule, it was stated that the necessary expenses incurred by the spouse of a Senator in accompanying the Senator to an appearance before the sponsoring organization paid by the sponsoring organization was not to be considered a gift under the Gift Rule. Whlle the terms of the "necessary expenses" exception do not encompass travel for other than Senate related purposes, the thrust of the legislative policy articulated in that exception militates against a determination that the payment of necessary travel expenses in this case is a gift to the Senate employee-spouse.

Here the corooration defraying the expenses has a poUcy of encouraging the involvement of its employees' spouses in corporate sponsored or related activities_ Thus, the company would not consider the payment of the Senate employee-spouse's travel expenses a gift, but rather, an ordinary and necessary expense of conducting its business. The company woul<l have provided the same food, beverages, lodging's, entertainment and transportation to their employee's spouse whomever the spouse was-senate employee or not-and there ls no indication that she was treated anv differently than other spouses. Finally, it was stated that no effort was made in this case to influence the employee in the present or future performance of her duties.

The Committee therefore finds that on these facts, the payment of such expenses should not be characterized as a gift to an employee for Rule 35 purposes, hence the practice and conduct in question are not impermissible.

A second question presented ls whether the activities of the employee may raise a conflict of interest issue. Rule 37 (Contlict of Interest), paragraph 2 states:

"No Member, officer, or employee shall engage in any outside business or professional activity or employment for compensation which is inconsistent or in conflict with the conscientious performance of official duties."

The Committee has read the prohibition against outside business or professional actlvl ty or employment for compensation to include activities for which reimbursements for incurred expenses are received.

Pursuant to this Rule, Senate employees should be aware of the potential for the exertion of improper influence by those with whom they came in contact because of their spouse's employment. Additionally, in situations which raise the question of whether a particular activity might give rise to a conflict of interest, the Committee invokes paragraph 3 of Rule 37 which requires the employee to notify his or her supervisor of the proposed activity and which places on the employee's supervisor the initial responsibility to take appropriate steps to guard against the arising of a conflict of interest.

INTERPRETATIVE RULING No. 340 Date issued: November 26, 1980. Applicable Rule: 38, and The Federal Elec

tion Campaign Act and Area. Question considered: May a Member use

excess campaign funds from his or her principal campaign committee to defray the costs of photographs of the Member, or photographs that otherwise relate to his official duties, that are furnished to the press, furnished to constituents in response to their requests, or used in publications (such as newspaper columns) prepared and distributed by the Member's office for informational purpose?

Ruling: The use of excess campaign funds is governed by both the Federal Election Campaign Act and Senate Rules. 2 U.S.C. Section 439a permits such funds to be used for a ny lawful purpose, including the ordinary an:i necessary expenses incurred in connection with one's duties as a holder of public office. In addition, Senate Rule 38 allows Members to defray office expenses from "funds derived from a polltlcal committee"; however, paragraph 2 of Rule 38 provides that no campaign contributions may be converted to the personal use of any Member. "Personal use," as that term is used in Rule 38, does not include reimbursement of "expenses incurred by a. Member in connection with his o.:ftcial duties."

The Committee considers that, for the purposes of Rule 38, the costs of photographs of a Member, or photographs that otherwise relate to his official duties, that are furnished to the press, furnished to constituents upon request, or used in publications of the Member's office are the kinds of expenses which are incurred by a Member in conne-:tion with his or her official duties. Consequently, excess campaign funds from a Member's principal campaign committee may be used to pay these expenses, either directly or as reimbursements should the Member pay the expenses from personal funds.

INTERPRETATIVE RULING No. 341 Date issued: December 10, 1980. Applicable Rule: 38. Question considered: Does the Rule 38 re

quirement that "expenses incurred by a Member in connection with his omcial du-

ties" be defrayed only from cer.tain enumerated sources prohibit a committee staff from accepting without charge the services of an outside organization?

The staff of ·a senate committee, in conjunction with the Congressional Research Service, was holding a series of seminars. A non-profit organization which sponsors man- . agement seminars for fee-paying participants offered to assist the staff, without charge, in conducting the seminars. The staff was holding one set of seminars for which it might invite speakers suggested by the

· organization; and it contemplated holding a second set of seminars in which the organization would take a more active role in helping organize and conduct the seminars, including scheduling speakers and providing written materials for seminar participants.

Ruling: The Committee held that Senate Rule 38-which prohibits the acceptance of funds (other than personal and campaign funds), and in-kind contributions of goods and services, from outside sources to defray expenses incurred by a Senator in connection with official duties-applies only to the officiaL expenses of Sena.tors in ·their individual capacities, and the prohibitions of the Rule do not apply to expenses incurred by committees or their staffs.

The Committee concluded that it was consistent with the Senate Code of Official Conduct for the committee staff to accept free of charge from the outside organization (i) recommendations concerning speakers for the first set of seminars, and (11) the more active assistance in second set of seminars outlined above.

INTERPRETATIVE RULING No. 342 Date issued: December 10, 1980. Applicable Rule: 37. Question considered: May a Senator serve

on the board of directors of a statewide community action agency which administers prof7rams funded by subcommittees and committees on which the Sena.tor serves?

The community action agency, a non-profit corporation in the Senator's home state, receives fro:::n 60 to 70 percent of its funds from the federal government, either directly or indirectly through the state. The Senator's position would be uncompensated and the Senator would be expected to attend board meetings in the st::i.te several times a year.

Ruling: Paragraph 6 of Rule 37 on Conflict.s of Interest prohibits service by a Senator or senate employee as an officer or member of the board of a publicly held or regulated organization, excluding, however, organizations exempt from taxation under section 501(c) of the Tnternti.l Revenue Code of 1954 if the se1-vlce ls performed without oompensation. Since the community action agency ls a 50l(c) organization and the Senator would serve without compensation, the Sena.tor may serve on ~he board without violating paragraph 6. The Nelson Committee Report, which accomp:inied Senate Resolution 110 (Senate Code o! Official Conduct) , makes it clear, however, that such service is stlll "subject to the general admonitions of paragraphs 1 and 2 of the rule and all Members . . . should exercise great care in avoiding all conflicts of interest or the appearance of a conflict of interest." S. Rept. 49, 95th Cong., 1st Sess. 44 (1977).

Paragr.lph 2 of Rule 37 states that "no Member, officer, or employee shall engage in any out.side business or professional activity or emplo:ymen~ for compensation which ls tuconsistent or in conflict with the conscientious performance of official duties." This Committee has previously found conflicts of interest where Senate employees take uncompensated positions on boJ.rds, commissions, or advisor"/ cou!lcils of organizations that receive or seek federal funding from agencies with respect to which a committee on which

24380 CONGRESSIONAL RECORD-SENA TE October 19, 1981 the supervising senator sits has appropriation or oversight functions, or otherwise involves ms.tters with which the committee is concern~d." •

The Com;nittee stated that, based on the facts presented, it believed that the Senator's acceptance of the invitation to serve on the board of directors of the community action agency could lead to a conflict of interest because subcc.mmittees and committees on which the Senator serves have legislative and oversight !unctions relating to programs that are administered by the agency and substantially funded by the federal government. The Committee therefore recommended that the iavitation not be accepted.

INTERPRETATIVE RULING No. 343 Date issued: February 4, 1981. Applicable Area: Anti-Nepotism Statute. Question considered: Does the term "rela-

tive" as used in the Federal Anti-Nepotism Statute, 5 u.s.c. 3110(a) (3) include the niece or nephew of a spouse of a Member of the senate?

Ruling: This question has been addressed by the American Law Division of the Library of Congress in a memorandum dated April 28, 1978. Iµ that memorandum, the American Law Division pointed out that the term "relative" is specifically defined in the statute, that the definition does not include the nephew or niece of a public official's spouse and that nothing in the legislative history of the statute provides any indication that the Congress intended the term "nephew," as used in the statute, to have any other meaning than that found in common legal usage, 1.e., that the term encompasses only the son of one's brother or sister. In addition, the memorandum polnts out that this interpretation ls consistent with the position taken by the Office of Personnel Management which, ln the Federal Personnel Manual, at Chapter 310, subchapter l, section l-2(c), defines "nephew" as "the son of a public official's brother or sister".

The Select Committee agrees with this interpretation and has ruled that the son or daughter of a brother or sister of a Senator's spouse would not be a "nephew" for purposes of the anti-nepotism statute.

INTERPRETATIVE RULING No. 344 Date issued: February 16, 1981. Appl1ca.ble Rule.3: 34, 37. Question considered: A newly-elected Sen

a.tor who had withdrawn as a partner in a law firm prior to his swearing-in as a Member of the senate, but who, despite his best efforts, had been unable to wind up his practice before taking office, asked whether, under senate Rules, he could continue to serve as attorney !or two clients involved in litigation begun before his election, and whether, as a sole practitioner, he could continue to represent his brother and tha.t brother's wholly-owned corporation.

Ruling: Paragraphs 2 and 5 of Rule 37 of the Code provide respectively:

"No Member, officer, or employee shall engage in any outside business or professional activity or employment for compensation which ls inconsistent or in conflict with the conscientious performance of official duties."

"No Member, officer, or employee ... shall (a) affiliate with a firm, partnership, association, or corporation for the purpose of providing professional services for compensation; (b) permit that individual's name to be used by such a firm, partnership, association or corporation; . . . For the purpose of this paragraph, "professional services" shall include, but not be limited to, those which involve a. fiduciary relationship."

The Senator was advised tha.t while paragraphs 2 and 5 limit the performance of professional services by Members, the Rule's legislative history did not indicate that the

•see Interpretative Rulings Nos. 23, 227, 286, and sos.

Senate ha.d contemplated the p·roblems confronted by a newly-elected Member in winding up his business affairs. The Committee noted that an attorney has rather clearly defined obligations, as an officer of the court, to his clients and to his former firm, which limit the exercise of his discretion to withdraw from a pending court case. With these facts in mind, the Committee advised the Senator to conclude his responsib11ities expeditiously and in conformity with the spirit and purpose of paragraphs 2 and 5 of Rule 3r• '· Since one of the cases in litigation in-

volved an instrumentality of the federal government, and since the activities of that entity could be affected by the actions of a committee to which the Senator was assigned, the Senator was advised to consider whether this situation might lead to or give the appeerance of a contllct of interest. With a.n understanding that if a conflict of interest should appear the Senator would take appropriate action, the Committee round that his continued participation would not necessarily raise any other question as to conflict of interest under Rule 37.

With respect to the continuing representation of his brother, the Committee concluded that since this would involve new matters arising after the commencement of Senate duties, paragraphs 2 and 5 of Rule 37 are applicable but would not preclude the Senator's providing legal services as a sole practitioner, provided the matters of concern to his brother and his brother's business did not raise questions of conflicts of interest with the public trust of his omce or the conscientious performance of the Senator's official duties.

Finally, the Senator was reminded that Title I of the Ethics in Government Act of 1978 (Rule 34) requires Members to disclose the source and amount of all income received during the preceding calendar year aggregating $100 or more. Consequently, .the Committee concluded that income earned from his law practice in 1980 may be disclosed by identifying the Senator's former law firm as the source along with the amount of income earned. Additionally, 1981 income aggregating $100 or more, earned after joining the Senate, but derived from clients he had represented prior to his joining the senate and whom he continued to represent, may be disclosed by exact amount stating that the source of income ls "law practice." New cllents who provided $100 or more In income must be disclosed by exact amount and by name.

INTERPRETATIVE RULING NO. 345 Date issued: February 23, 1981. Applicable Rules: 34, 35. Question considered: May a Senator-elect

accept a wristwatch from a business group in his home State presented to him in th-e course of his appearance before the group in December, prior to swearing-in in January?

Ruling: Rule 35 of the Standing Rules of the Senate provides that Members, officers, and employees, and their spouses and dependents, may not accept any gift or gifts having an aggregate value exceeding $100 during a calendar year from any person, organization, or corporation having a direct interest in legislation before the Congress, or from any foreign national, as those sources are defined in the Rule.

Since the Senator-elect was not a Member at the time of the presentation, he was outside of the coverage of the Rule and its prohibition. In addition, section 102(g) of the Ethics in Government Act of 1978, as amended, provides that reporting individuals a.re not obligated to disclose the receipt of gifts which are received at a time prior to Senate service.

INTERPRETATIVE RULING No. 348 Dato issued: March 6, 1981. Applicable Rule: 40.

Question considered: May a Member use names and addresses from his malllng list maintained by the Senate Computer Center to inv.ite individuals to a charitable lfundra.ising event? The Member had received a number of letters in response to press accounts of a trip he had made to a ;foreign country, and the names of those who had wrHten concerning the trip were entered on the Member's mailing list maintained ·by the Senate Computer Center. Photographs taken during the trip were to be offered for sale at a home State art gallery, and all money received from photograph sa-les was to :be contributed to a. cha.r.itable organization. The names and addresses !rom the Member's ma111ng list were not to 'be .given to the art gallery or the charitable organization, all addre3sing work was to be done outside senate offices by volunteers, and neither government sta:tionery nor the malling !ra.nk were to be used.

Ruling: Para.graph 5 of Senate Rule 40 provides, " ( t) he Senate computer facilities shall not be used ... (c) to produce malling la.bels for mass maUings, or computer tB!pes and discs, ifor use other than in service faclUties maintained and operated by the senate or under contra.ct to the Senate." The author of this provl31on stared during debate on the Rule that it was his intention that the provisfon " ... just restates that in no case are Members of the Senate or Senate committees authorized to use Senate computer facilities .for political or personal purposes." 123 Cong. Rec. S4755 (1977) (emphasis added).

The Committee concluded tha.t the proposed use of a. Member's maillng list for the benefit of the charitable organization would be for "1persona.l purposes" and should therefore be avoided.

INTERPRETATIVE RULING No. 347 Date issued: March 6, 1981. Applicable Rules: 34 and 35. Question considered: An employee of the

Senate, while on vacation, apprehended an individual who was accused and later convicted of stealing jewelry and coins from a department store. As a token of its appreciation, the operator of the jewelry d·3partment presented a valuable watch to th3 employee. May the watch be accepted by the employee and under what circum.atances must receipt of the watch be disclosed?

Ruling: Rule 35 ("Gift•s") of the Standing Rules of the Senate generally prohibits the acceptance of certain "gifts" from inctlvfduals, organizations, or corporations having a direct interest in legislation before Congress. However, paragraph 2 (a) (3) c..f the rule specifically excludes from the definition of "gift" a "bona fide award presented in recognition of public service and available to the general public." The Select Committee ruled that acceptance of the watch, under the circumstances set forth above, would fall within the exception set forth tn paragraph 2(a) (3) of Rule 35.

Rule 34 ("Public Financial Disclosure") which incorporates the provision of Title I of the Ethics in Government Act of 1978 (P.L. 95-521) , amended, requires a reporting individual to disclose the identity of the source, a brief description, and the value of all gifts other than transportation, lodging, food, or entertainment aggregating $100 or more in value received from any source other than a relative during the preceding calendar year. The Select Committee pointed out that the definition of the term "gift .. , as used in the Act at section 107, does not exclude bona fide awards presented in recognition of public service. Therefore, the Select Committee ruled that if the individual were a reporting individual for purposes of Rule 34, he or she must disclose the acceptance of the watch 1f its value were 1n excess of $100.

October 19, 1981 CONGRESSIONAL RECORD-SENA TE 24381 INTERPRETATIVE RULING No. 348

Date issued: July 20, 1981. Applicable Area: Franking. Question considered: May a Senator send

a letter under the franked mall privilege to high school principals asking them to recommend students and faculty to participate in a program promoting voluntarism to be sponsored by the Senator and a charitable organization?

Ruling: section 3210(a) (3) (A) of Title 39, United States Code, authorizes the !ranking of mall matter "regarding programs, decisions and other related matters of public concern or public service, including any matter relating to actions of a past or current Congress." The Regulations Governing the Use of the Malllng Frank states with regard to this provision that "(t)hese matters must relate principally to the Federal Government. Matters of purely State or local concern are not !rankable."

The Committee concluded that a program for high school students and faculty to promote voluntarism as an important service !or home state communities was not a matter which "relate(s) principally to the Federal Government", and that material promoting the program was not frankable.

INTERPRETATIVE RULING No. 349 Date issued: October 5, 1981. Applicable Rules: 37, 41. Question considered: A Member has estab

lished his principal camµaign committee as a nonprofit corporation under the laws of his home State. May the Member's Acin'inistratlve Assistant, who has been designated to handle political funds under Senate Rule 41, serve as president of the corporation?

Ruling: The Committee has ruled• that other than the restrictions on political fundralslng activity in Senate Rule 41, no rule expressly prohibits political activity by staff during off-duty hours or during established and reasonable annual leave time. If an employee Intends to spend a substantial amount of time on campaign activities, however, the Committee has ruled that a Senator should use his or her best judgment in determining whether to remove the staff member from the Sena.te payroll or reduce his or her Senate salary commensurately. The Committee concluded that if the staff member's political activities conform to these guidelines, his political activity would not be prohibited.

Concerning the staff member's service as president of the incorporated entity, paragraph 6 of Senate Rule 37 provides:

"6. No Member, officer, or employee of the Senate compensated at a rate in excess of $25,000 per annum and employed for more than ninety days in a calendar year shall serve as an officer or member of the board of any publicly held or publicly regulated corporation, financial institution, or business entity. The preceding sentence shall not apply to service of a Member, officer or employee a&-

.. (a) an officer or member of the board of an organization which ls exempt from taxation under section fOl (c) of the Internal Revenue Code of 19E4, if such service is pertormed. without compensation."

As the committee is an incorporated political committee whose activities are regulated in some areas by the Federal Election Commission pursuant to the Federal Election Campaign Act of 1971, the question arises whether the stafl' person's services as president of the corporation ls prohibited by paragraph 6 of Rule 37. Whlle that paragraph provides, at sub (a), that a Senate employee may serve as an officer of an organization exempt from taxation under section 501 (c) of the Internal Revenue Code of 1954, a political committee ls exempt from tax under section 527 of the me. not 501 (c).

The Report of the Special Committee

•seem No. 302, dated February 21, 1980.

which recommended the Code of Official Conduct stated, with respect to the limitations provided by paragraph 6, that service on corporate boards or in corporate offices "may entail an unavoidable conflict of interest or the appaar&nce thereof." (S. Rept. 95-49 at 43). The Report cited a study by the Association of the Bar of the City of New York for the proposition that a director or officer "actually becomes a fiduciary for the corporation and f.::>r its stockholders charged with the duty to further their interest. He obviously will find it difficult to do this at times because he ls also charged with the duty of furthering the public interest, and the two interests may well be ln conftlct." (Id., at 43-44).

The Committee went on to observe that service on the board or as an officer of a tax-exempt organize.tion would not present the same kind of troubling issues, and that non-profit organiz9.tions have traditionally had less direct Interest in the legl.;latlve process and the possib111ties of confllct of interest are less marked.

In view of the absence of any indication that paragraph 6 was intended to apply to activity with a political committee, whether or not the committee is incorporated, and in view of the more speclftc limitations provided by Rule 41 (on political fund-raising) and by Committee Interpretative Rulings (concerning non-fundraislng political activity), we do not believe that paragraph 6 of the Confllct of Interest Rule was intended to prohibit activity by Senate employees with a Member's principal campaign committee. Members should be a.ware, however, that paragraphs 2 and 3 of the Confiict of Interest Rule provide a general prohibition on nonSenate activity which is inconsistent or tn confiict with the couscientlous performance of official duties.e

H.R. 4327 HELD AT THE DESK Mr. BAKER. I ask unanimous consent

that the House message on H.R. 4327, the Immigration and Nationality Act amendments, be held at the desk pending further disposition.


ORDERS FOR TOMORROW ORDER FOR RECESS UNTIL 10:30 A.M. TOMORROW

Mr. BAKER. Mr. President. I ask unanimous consent that when the Senate completes its business today it stand in recess until the hour of 10:30 a.m. on tomorrow.

The PRESIDING OFFICER. Without objection, it is so ordered. ORDER FOR RECOGNITION OF CERTAIN SENATORS

Mr. BAKER. Mr. President, I ask unanimous consent that after the recognition of the two leaders under the standing order, the following Senators be recognized for not more than 15 minutes each on special orders: the distinguished Senator from Connecticut <Mr. WEICKER) and the distinguished Senator from Wisconsin <Mr. PROXMIRE).


ORDER FOR ROUTINE MORNING BUSINESS

Mr. BAKER. Mr. President, I ask unanimous consent that after the expiration of the time allocated to Senators on special orders that there be a brief period for the transaction of routine morning business not to extend longer than 15 minutes in which Senators may speak for not more than 2 minutes each.


ORDER FOR THE CONSIDERATION OF S. 1'196

Mr. BAKER. I ask unanimous consent · that after the expira.M.on of the time for t'he transaction of routine morning business that the Senate turn to the consideration of Calendar Order No. 108, S. 1196, a bill to amend the Foreign Assistance Act of l.961.


PROGRAM Mr. BAKER. Mr. President, on to

morrow the Senate will convene at 10:30 a.m. After th-9 recognition of the two leaders under the standing order the special orders in favor of two Sen~tcrs for not more than 15 minutes each, and after the expiration of the time set aside on special orders for Senators, the Senate will have a brief period for the transaction of routine morning business.

At the conclusion of routine morning business, the Chair will lay before the Senate Calendar Order No. 108, S. 1196, the Foreign Assistance Act.

It is anticipated that rollcall votes will occur during the day on TuesdB.y. It is the hope cf the leadership that the Foreign Assistance Act can be completed on Tuesd,ay. If it is not completed then the Senate will resume consideration of the Foreign Assistance Act on Wednesday.

It is hoped, Mr. President, that on Thursday the Senate can tum to the consideration of the Treasury, Post Office appropriations bill. Other matters may come before the Senate on Wednesday and perhaps on Thursday depending on the progress made by the Senate in the interim.

RECESS UNTIL 10:30 A.M. TOMORROW

Mr. BAKER. Mr. President, I know of no further business to come before the Senate, and I move now, in accordance with the order previously entered, that the Senate stand in recess until the hour of 10:30 a.m. on tomorrow.

The motion was agreed to; and at 5 :25 p.m. the Senate recessed until Tuesday, October 20, 1981, at 10:30 a.m.

NOMINATIONS Executive nominations received by the

Senate October 19, 1981: THll JUDICIARY

Ronald P. Wertheim, of the District of COiumbia, to be o.n Associate Judge of the superior court of the District of Columbia for the term of 15 years, vice James B. Belson, elevated.

FEDERAL TRADE CoMMISSION

F. Keith Adkinson, of West Virginia, to be a Federal Trade Commissioner tor the unexT)ired term of 7 years from September 26, 1975, vice Robert Pltofsky, resigned. NATIONAL FOUNDATION ON THE ARTS AND THE

HUMANITIES

Francis S. M. Hodson, of Virginia, to be Chairman of the National Endowment for the Arts for a tenn of 4 years, vice Livingston L. Biddle, Jr., term explring.

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