[Congressional Record Volume 140, Number 107 (Friday, August 5, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: August 5, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
         FIRST ANNIVERSARY OF THE 1993 ECONOMIC PLAN'S PASSAGE

  Mr. LEAHY. Mr. President, I rise today to mark the first anniversary 
of the Omnibus Budget Reconciliation Act of 1993. A year ago, the 
Senate and House of Representatives passed President Clinton's economic 
plan by the slimmest of margins and without a single Republican vote. I 
am proud to say that I voted for last year's budget bill.
  After a year, I think it is appropriate to see where our economy is 
today under this plan.
  Today, economic growth is up. The economy is growing at a steady pace 
of 3.7 percent. Since President Clinton took office, the private sector 
has created 3.8 million jobs--1.5 million more jobs than were created 
in all 4 years of the previous administration. As a result, 
unemployment is at 6 percent--a 3\1/2\ year low. And today's growth 
rate equals 77,000 new jobs per day.
  Today, the deficit is down. The budget deficit for 1994 is now 
projected to be $220 billion, $85 billion less than projected before 
passage of the 1993 economic plan. The Congressional Budget Office 
estimates that the 1995 deficit will decline to $167 billion, $135 
billion less than projected before the President's plan was adopted. As 
a percentage of the Gross Domestic Product, the deficit will be cut in 
half--from 4.9 percent in 1992 to 2.4 percent in 1995. By 1998, the 
strict spending measures in 1993 budget law are estimated to trim the 
deficit by $691 billion.
  And today business is booming. Last year, more new businesses were 
incorporated than any other year since World War II. Besides new 
business, old business are also doing well--business failures have 
declined to their lowest level since 1988. And investment in new plant 
and equipment has soared to 13 percent in the last year, the highest 
percentage in a decade.
  What do all these numbers mean? They mean the 1993 economic plan is 
working and working well. I applaud the President's vision in proposing 
it, and Congress' courage in adopting it.
  Mr. President, I ask for unanimous consent that the attached article 
from yesterday's Wall Street Journal by Albert R. Hunt entitled ``Last 
Year's Budget Deal Was a Success'' be printed in the Record after my 
remarks.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

              [From the Wall Street Journal, Aug. 4, 1994]

                 Last Year's Budget Deal Was a Success

                          (By Albert R. Hunt)

       ``Clearly, this is a job-killer in the shortrun. The impact 
     on job creation is going to be devastating.''
       --Rep. Dick Armey (R., Texas), August. 2, 1993
       ``The tax increase will lead to a recession and will 
     actually increase the deficit.''
       --Rep. Newt Gingrich (R., Ga.), Aug. 5, 1993
       ``I will make you this bet. I am willing to risk the 
     mortgage on it * * * the deficit will be up; unemployment 
     will be up; in my judgment, inflation will be up.''
       --Sen. Robert Packwood (R., Ore.), Aug. 6, 1993
       It was exactly a year ago this week that the 1993 deficit 
     reduction measure, with tax increases on wealthier Americans, 
     cleared both houses of Congress by the narrowest of margins.
       Fortunately, Bob Packwood has a reasonably small mortgage 
     on his Washington condominium. All those dire Republican 
     predictions have not materialized; unemployment is down, not 
     up, the deficit is lower and inflation hasn't risen.
       ``I was wrong,'' Sen. Packwood acknowledges with rare 
     candor. ``It reminds me of a fraternity brother who used to 
     write down all of our New Year's resolutions and then a year 
     later had the audacity to read them.''
       Even the take-no-prisoners conservative Dick Armey displays 
     a tinge of self-effacement when asked about his Chicken 
     Little predictions of a year ago. ``Clinton has got to be the 
     luckiest president ever,'' says the Texas Republican, who 
     then adds: ``The one thing we didn't appreciate was the 
     extent to which the economy would live off the relaxed 
     policies of the Federal Reserve.''
       OK, let's take that latest Republican rationalization. This 
     past Jan. 31, Fed Chairman Alan Greenspan said: ``The actions 
     taken last year to reduce the federal budget deficit have 
     been instrumental in creating the basis for declining 
     inflation expectations and easing pressures on longterm 
     interest rates.'' In short, Mr. Armey, those ``relaxed 
     policies'' were facilitated by the 1993 deficit reduction act 
     that you said would be so disastrous.
       Since the 1993 budget act was passed, the economy has grown 
     at almost a 4% annual rate, not spectacular but not bad. This 
     growth has been centered on the private sector. In June the 
     economy added an impressive 379,000 jobs, causing some 
     economists to modify their forecast of a second-half 
     slowdown.
       A year ago today, Sen. Phil Gramm (R., Texas), a self-
     proclaimed economic expert, confidently predicted not only 
     that the deficit measure would be a near-term calamity, but 
     that ``the deficit four years from today will be higher than 
     it is today, not lower.'' Here are the inconvenient facts, 
     Sen. Gramm: The Congressional Budget Office now estimates the 
     fiscal 1997 deficit at $192 billion, or more than $100 
     billion less than the so-called baseline projection of a year 
     earlier.
       If the Republicans were simply wrong on their economic 
     predictions, they were disingenuous on taxes. The claim that 
     this was a huge tax increase on most Americans is a fraud. 
     Income taxes were boosted for only the most affluent 
     taxpayers, about 1.4 million or little more than 1% of the 
     tax-paying population. The top Federal rate was raised to 
     39.6%, still well below the 50% rate that existed in 1986, 
     six years into the Reagan administration and below the top 
     rate in almost every other major industrial nation.
       The legislation also icluded a 4.3 cent a gallon hike in 
     the gasoline tax. The CBO calculates that, even including 
     indirect costs, that amounts to higher taxes of a grand 
     annual total of $36 per driver. Gasoline prices remain about 
     half of what they are in most other countries.
       Moreover, the critics often conveniently forget that taxes 
     were reduced for more than 15 million working poor families, 
     who benefited from the expanding of the earned income tax 
     credit. This was the most important antipoverty measure 
     enacted in years, one supported by many Republicans as well 
     as Democrats.
       Overall, the gains in the economy and the brighter deficit 
     outlook are due in part to a few extraordinary factors. The 
     savings-and-loan mess has gone from net drain to net gain. 
     And there are some unrealistic savings in the Clinton 
     administration defense budget, according to the General 
     Accounting Office.
       Responsible economic experts on the right, like the 
     Heritage Foundation's Dan Mitchell, argue that, while the 
     Clinton performance outstrips his predecessor, the gains 
     would have been far better with a more conservative pro-
     growth policy. Mr. Mitchell notes the current recovery lags 
     behind most other recent recoveries.
       Nevertheless, the CBO estimates that more than two-thirds 
     of the deficit savings in the next several years can be 
     directly attributed to the 1993 deficit measure. Whatever 
     small drag there is from higher taxes on a few Americans has 
     been more than offset by the gains in a lower deficit and 
     consumer confidence, which is up 54% since last August, 
     according to the Conference Board.

            BEFORE AND AFTER THE 1993 DEFICIT REDUCTION BILL            
Unemployment (June rate) (percent)................        7.6        6.0
Consumer prices (12 mo. avg. ending in June)                            
 (percent)........................................        3.0        2.5
Stock market (Aug. 1 DJ industrials)..............   3,539.47   3,798.17
Projected 1995 deficit (billions of dollars)......       $284      $180 
------------------------------------------------------------------------
Source: Congressional Budget Office; government figures.                

       The Republicans, undercut by all the data, have a final 
     refrain: just wait until the November elections. There's 
     little doubt that the GOP will score major victories this 
     November, probably exceeding the average gains of the 
     opposition party in off-year elections. But polls, focus 
     groups and conversations with politicians of both parties 
     demonstrate that the Democratic weakness has nothing to do 
     with the deficit and tax legislation of 1993. Last month's 
     Wall Street Journal/NBC News poll showed that only 15% of the 
     public thinks that legislation was bad for the country, 
     although 62% think it didn't make any real difference.
       In the not-too-distant future--probably after the next 
     presidential election--the deficit issue will have to be 
     joined again. The deficit starts ballooning again by the 
     early part of the next century. Not unexpectedly, the two 
     major elements of any plan will have to be entitlements and 
     taxes.
       The politics will look bad. It's never easy to raise 
     anyone's taxes. And while there's a lot of clamor now for 
     curbing entitlements, the reality will be a lot more 
     difficult than the rhetoric. Americans strongly favor 
     reducing entitlements but oppose cutting specific programs.
       But when the politicians then are grappling with those 
     difficult decisions, they would do well to remember the 1993 
     prophets of doom and how wrong they were.

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