[Congressional Record Volume 141, Number 19 (Tuesday, January 31, 1995)]
[Senate]
[Pages S1842-S1845]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             BALANCED BUDGET AMENDMENT TO THE CONSTITUTION

  The Senate continued with the consideration of the joint resolution.
  Mr. BENNETT. Mr. President, we are in the midst of a debate on the 
balanced budget amendment. At some point in this debate, I will have a 
[[Page S1843]] lengthier and perhaps more comprehensive statement to 
make but, taking advantage of what the sportscasters call a break in 
the action, I thought I would make a few observations now about this 
particular matter.
  I am a reluctant convert to the balanced budget amendment. As I have 
said from time to time around here, my educational background is as a 
political scientist. My whole career has been spent in business. But 
when I was in college, I studied the works of Jefferson, Madison, 
Hamilton, and Jay, and, yes, Karl Marx, Friedrich Hegel, and some of 
the other political philosophers. That has always been my avocation, 
even in the years that I was in business. I guess it was inevitable, 
given that particular bent on my part, that I would end up, when I 
could afford it, back in politics.
  From a pure political science point of view, I can make a brilliant 
case against the balanced budget amendment. I can give you all of the 
reasons why a balanced budget amendment is not sound politics. 
Unfortunately, the real world sometimes intrudes upon the world of the 
political scientist and causes us to do things that are perhaps not as 
philosophically pure as we might like.
  Let me give you an example. As I understand the Constitution and the 
theory and philosophy behind the Constitution, election of Senators by 
State legislatures is the ideal way this body should function. The 
Senate was created to represent States. What better way to make sure 
that the Senate represents States than to give the States full and 
complete control over the choice of their Senators. And the States did 
that in time-honored fashion through their own State legislatures.
  That is the political science pure way that the Senate should 
operate. There is one problem with it. In the practical world, State 
legislatures that were divided by party--that is one party controlling 
one House and the other the other--would go for an entire Congress 
without being able to elect a Senator.
  The Framers of the Constitution did not foresee the rise of the two-
party system and there is nothing in the Constitution to accommodate 
it. There is nothing in the Constitution to deal with the challenges 
that come from it.
  Also, people who were unscrupulous, who just decided they wanted to 
become Senators, many times could buy an entire State legislature, a 
bargain, if you will. And the corruption that surrounded the election 
of some Senators in the days when State legislatures chose Senators 
became so rampant that finally we had to go to another solution to the 
choice of Senators, which, while not pure to the philosophical doctrine 
of the Constitution, made eminent good sense. And so we passed the 17th 
amendment that called for direct election of the Senators.
  I am not sure the caliber of the Senate got any better when we moved 
from the time when State legislatures chose Senators to the time when 
the voters did, but the various problems that I have described went 
away. And we have lived with the result of this very well since the 
time the 17th amendment was passed.
  I think there is a parallel argument here with the balanced budget. I 
can give you, as I said at the outset, all kinds of reasons why the 
balanced budget amendment is not a good constitutional doctrine; all 
kinds of reasons why the Founders were wise to leave it out of the 
Constitution.
  Unfortunately, we have practical pressures that have now overwhelmed 
us that say to us it is time for us to recognize that we need to adopt 
a balanced budget amendment. What are those practical pressures?
  If I can go back to my political science background, I share with you 
the one thing that philosophers say is wrong with democracy as a form 
of government. Simply put, it is this: Once the people discover that 
they can vote themselves largess, the democracy will become financially 
unstable and it will fall. That was an article of faith among political 
scientists for centuries.
  What is the oldest democracy in the history of humankind that has 
defied this principle? It is this one. We have lasted longer as a 
democracy than any other in the history of the planets.
  And what is threatening our financial survival? It is the discovery 
of the people that they can, through their elected representatives, 
vote themselves largess--that is, get the Government to give them back 
more money than they give it--that is threatening our survival.
  Now, we did not do that for over a century, maybe a century and a 
half, and then we began to discover that. And, having discovered that 
principle and gotten comfortable with it, we have started down the 
dangerous path that has historically undermined democratic governments 
all along.
  So, in recognition of the fact that we have finally discovered that 
ancient truth and are acting on it, I say the time has come for us to 
adopt a balanced budget amendment.
  I see the Senator from Arizona has arrived. As I say, I have a longer 
and more comprehensive statement on this issue that I will offer at 
some point. But I felt at this time that I should lay the groundwork 
with this little philosophical note before I get into the meat and 
potatoes of this real debate. I hope those who spend their time looking 
at history and philosophy will grant me a point or two on this one and 
recognize that I am addressing it in something other than the practical 
political hustings of the last campaign.
  With that, Mr. President, I yield the floor.
  Mr. KYL addressed the Chair.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. KYL. Thank you, Mr. President.
  First, I want to compliment the Senator from Utah. His reference to 
the famous historian Alexander Tytler, I think, is an apt way to 
characterize the dilemma that faces our Nation today, because it is 
true that certain segments of our society have determined that they can 
vote themselves largess from the public treasury. And it was at that 
point that this famous British historian and many others have concluded 
a democracy would not thereafter long last.
  So the point that the Senator from Utah makes, I think, is critical 
to understanding the reasons for our support for a balanced budget 
amendment. I compliment him for that reference.
  Mr. President, by the end of this fiscal year, Congress will have 
added another $309 billion to the national debt. It will amount to a 
total of over $4.9 trillion, nearly $19,000 for every man, woman, and 
child in this country.
  Mr. President, $19,000 is more than the average Arizonan makes in a 
year. The $296.8 billion spent to service the debt last year amounted 
to over $1,100 per capita. That $1,100 is enough to pay the tuition of 
a young man or woman at Arizona State University for a year; enough for 
a healthy young person in a group plan to buy health insurance for an 
entire year.
  Mr. President, Congress and the President are debt addicts. The 
addiction is destroying the Nation. Almost 50 cents of every $1 paid in 
individual income taxes is required just to pay the interest on the 
national debt. That is 50 cents of lost opportunity for every income 
tax dollar paid by hard-working Americans. The overspending makes us 
feel good today, but Congress is ruining the economic future of 
generations to come.
  Congress has denied its addiction for too long. Many in this Chamber 
will continue to deny it, claiming that we can balance the budget 
without the discipline of a balanced budget amendment to the 
Constitution. That is just not going to happen. Just as it is difficult 
for drug and alcohol abusers to overcome their habit, it will not be 
easy for Congress to overcome its addiction. But we can either wait 
until the addiction destroys the country or we can take action now, 
suffer some pain, and get on the road to long-term recovery.
  The first step to recovery is to admit the problem and seek treatment 
for it, treatment in the form of a balanced budget amendment to the 
Constitution. House Joint Resolution 1 will establish the framework and 
impose the discipline that is so urgently needed to force Congress to 
put its fiscal house in order. It is the best and the only chance to 
send a balanced budget amendment to the States for ratification in the 
immediate future.
  Still, it is not the amendment I would have written, not the 
comprehensive treatment for the problem that I would have prescribed. 
House Joint Resolution 1 will force Congress 
[[Page S1844]] to be more responsible in its budgeting practices. But 
there is more to responsible budgeting that just balancing the Nation's 
books. It also matters at what level Congress balances the books 
relative to the size of the Nation's economy.
  For example, gross national product now exceeds $6 trillion. But no 
one would be happy if Federal outlays were $6 trillion, and Federal tax 
revenues were $6 trillion, even though the budget would be balanced at 
$6 trillion. It matters how much the Government spends in taxes as much 
as it matters whether we balance the budget. In that regard, House 
Joint Resolution 1 represents the intensive care treatment, the step 
needed to stop the hemorrhaging, to ensure recovery over the long term. 
However, it is a Federal spending limit that is needed.
  The balanced budget spending limitation amendment, Senate Joint 
Resolution 3, which I introduced January 4, including a spending limit, 
requires a balanced budget and limits spending to 19 percent of the 
gross national product, which is roughly the level of revenue the 
Federal Government has collected over the last 40 years.
  Mr. President, I will refer to this chart to my right a couple of 
times during my presentation. But the first thing that you can see by 
examining the chart is that revenues which are characterized in blue on 
the chart at this level here, almost uniformly from 1955, denoted on 
this chart to 1995 here, are at the 19 percent level of gross national 
product or relative to gross domestic product, 19.5 percent. We can see 
if we drew a line at 19.5 percent, that blue line is a very close 
approximation.
  That is how much Americans are historically willing to pay into the 
Treasury. Through bad times and good economically, through Democrat 
Presidents and Republican Presidents, through times of tax increases 
and times of tax cuts, it does not matter. It stabilizes very quickly 
at about 19 percent of the gross national product. That is how much 
Americans are willing to pay in revenues.
  When we say ``willing to pay,'' what do we mean? Just quickly, by way 
of example, when the Federal Government increases tax rates, what do 
people do? Do they say, OK, we will simply pay more in taxes, or do 
they begin to adjust their behavior? Of course, we know the answer. 
They seek tax shelters. They do other things with their incomes so they 
do not have to pay as much in Federal income taxes. That is why, even 
though we increase income tax rates, revenue stabilizes at about that 
level of 19 percent.
  What happens when we cut tax rates? Do revenues go down? No. We know 
that that stimulates the economy. It produces more gross national 
product. It produces more income, and even at a lower rate of income 
tax, more revenue is generated by virtue of that growing economy. It is 
a lot like the grocery store putting things on sale. They do not do it 
to lose money. They know the volume will make up for the reduction of 
prices; in fact, more than make up for it. That is why you see so many 
sales.
  The bottom line is Americans are willing to pay 19 percent of the 
gross national product in income taxes. The way to balance the Federal 
budget is to limit spending to that level of revenues.
  As we see the other line, the line that is represented in red, 
represents the spending as a percent of the gross domestic product on 
this chart. We can see that 20 or 30 years ago, it was roughly the 
equivalent of the revenues in the country, whereas in more recent 
years, the lines, two lines have begun to separate. Today, we have 
spending in the neighborhood of 22 percent or 23 percent of the gross 
domestic product, with revenues at 19 percent. That is the gap that 
needs to be closed with a balanced budget amendment.
  Limit spending and there is no need to consider tax increases, 
obviously. Congress would not be allowed to spend the additional 
revenue it raised, and knowing politicians as I do, they will not raise 
taxes just for the heck of it. Link Federal spending to economic growth 
as measured by the gross national product and an incentive is created 
for Congress to promote progrowth economic policies. The more the 
economy grows, the more Congress is allowed to spend, but always 
proportionate to the size of the economy.
  A spending limitation has a further advantage. It reflects the fact 
that the economy has already imposed an effective limit on revenues 
relative to GNP. As I said before, despite tax increases and tax cuts, 
recessions and expansions, and fiscal policies pursued by Presidents of 
both political parties, revenues as a share of GNP have fluctuated only 
around a relatively narrow band, between 18 and 20 percent for the last 
generation. As I said, the primary reason for that is because the Tax 
Code changes people's behavior. That is why the debate about raising 
taxes is less important than the debate about limiting spending.
  Lower tax rates stimulate the economy, resulting in more taxable 
income and transactions and more revenue to the Treasury. Higher tax 
rates discourage work production, savings, and investment, so there is 
ultimately less economic activity to tax.
  Revenues amounted to about 19 percent of GNP when the top marginal 
income tax rate was in the 90 percent range in the 1950's. They 
amounted to just under 19 percent of GNP when the top marginal rate was 
in the 28 percent range in the 1980's. Revenues amounted to about 19 
percent of GNP in the 1970's, during one of the longest postwar 
contractions and during the peacetime expansion of the 1980's. Since 
revenues remained relatively constant, 19 percent of GNP, the 
significance of our Nation's tax policy is how Congress taxes, not how 
much it can tax. The key is whether tax policy fosters economic growth 
and opportunity, measured in terms of GNP, or results in a smaller and 
weaker economy. In other words, 19 percent of a larger GNP represents 
more revenue to the Treasury than 19 percent of a smaller GNP.
  The benefit of writing a spending limitation into the balanced budget 
amendment is that it would preclude futile attempts by Congress to 
balance the budget by raising taxes. Raising taxes will merely impede 
economic growth and harm the Nation's standard of living. A spending 
limitation provides Congress with the guidance at the outset that there 
is really only one way to balance the budget, and that is by cutting 
Government spending. While my preference is that a spending limit be 
included in the constitutional balanced budget amendment, I believe the 
issue can only be addressed, if need be, in subsequent implementing or 
enforcement legislation.
  The quest for the perfect in this case should not be an excuse to 
defeat the very good. The stakes are too high in terms of the mountain 
of additional debt Congress is passing on to future generations to miss 
yet another opportunity to send a balanced budget amendment to the 
States for ratification. Of course, what the Senate has concluded to do 
is to take up the resolution which was adopted by the House of 
Representatives by 300 votes, rather than to bring forth our own 
version of a balanced budget amendment.
 The reason: To ensure that we can secure passage by both Houses of the 
same provision and, thus, pass it on to the States at the earliest 
possible stage.

  So if there is insufficient support for inclusion of a spending limit 
in the amendment itself, I believe Congress should approve House 
Journal Resolution 1, which we took from the House of Representatives 
last week and then turn to consideration of the Federal spending limit 
as a means of implementing the balanced budget requirement.
  Mr. President, the Senate has an historic opportunity to ensure that 
we begin to invest in the future of the country, not just continue to 
borrow from it. That will take courage, the courage to say no to 
special interests who benefit from the status quo. We should pass the 
balanced budget amendment. We should pass it in the form that it passed 
the House of Representatives. We should then send it on to the States 
for their ratification, and then we should make a couple of very 
important points to the States.
  Point No. 1, we will not pass on the costs of a high-spending 
Congress to the States as our way of balancing the budget. We have a 
plan for achieving a balanced budget, and that plan, I hope, will be 
adherence to a legislatively adopted implementation guideline of 
spending limits. Those spending limits could be tied to the gross 
national product, as I proposed.
   [[Page S1845]] We can agree to come down half a percent per year and 
that will get us to the 19 percent we need to be at within the 6 or 7 
years that it will take to adopt a balanced budget amendment. That is a 
rational, disciplined, proper way to achieve the balanced budget 
amendment.
  Those who say that we should propose our plan before we adopt the 
discipline of a constitutional balanced budget amendment overlook the 
fact that we can impose an implementation plan without all of the 
specifics of every single budget. There is not a one of us here who 
knows how we are going to balance our own household budget 3 years from 
now, but we sure enough know we are committing ourselves to the fiscal 
discipline of doing it.
  We also understand the way we have to do it is to conform our 
spending to our income, and that is what the Congress would be doing by 
immediately adopting an implementation plan to achieve a balanced 
budget through spending limitation.
  So when our colleague from Utah, the chairman of the Judiciary 
Committee, Senator Hatch, proudly proclaims that the balanced budget 
amendment has passed the U.S. Senate, I think the very next thing we 
should do is to say, ``And here is how we are going to do it so that 
you States who are considering whether to adopt it or not, to ratify 
it, will know we mean business back here in Congress, we don't mean to 
pass the costs on to you.'' That is the second part of the two-part 
commitment we made to the States. The first part we already adopted as 
legislation prohibiting unfunded mandates.
  So with those kinds of commitments from the U.S. Congress, we can be 
assured that the States will adopt or ratify a balanced budget 
amendment to the Constitution and finally put this country on the road 
to fiscal discipline.
  Mr. President, I thank you and certainly thank the chairman of the 
Judiciary Committee for the many years of hard work he has put into 
this very important endeavor.
  Mr. HATCH addressed the Chair.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, I want to compliment the distinguished 
Senator from Arizona. I cannot tell you what it means to me to have him 
on the Judiciary Committee and with his broad background in the House 
of Representatives as well as here on this amendment.
  His suggestions are very valid, and the point that he has made, I 
think, overwhelms some of the arguments that have been made for tax 
increases in this body. No matter what we do, that line stays 
relatively the same, which means tax increases do not always produce 
more revenues. Sometimes they produce less revenues. We found, as in 
the case with capital gains, since 1960, every time capital gains rates 
went up, revenues to the Government went down; every time capital gains 
rates went down, revenues to the Government went up. There are $8 
trillion in capital assets locked up out there because people do not 
want to pay 28-percent capital gains.
  But his chart is a very important chart. The distinguished Senator 
makes a very interesting and good case. I wish that we were able to 
take some of his ideas and incorporate them in an amendment that could 
get the broad support that this amendment does have. But to his credit, 
even though he knows that if we used the 19 percent as a line in order 
to balance the budget, we would probably be better off if we did that. 
But he also knows that this amendment is the only one that we have that 
we can get a widespread consensus on. It is bipartisan. It is an 
amendment that involves Democrats and Republicans and one that he is 
willing to help support.
  So I personally just want to express to him how much I appreciate 
him, how much I appreciate his knowledge and his explanations to us of 
how his approach would work if we could put it through.
  I have to say that I could easily support his approach. I think it is 
a very, very good one, and I want to thank the Senator for being such a 
stalwart on this issue.
  Mr. KYL. Mr. President, may I say, I thank the Senator from Utah for 
his very kind remarks and look forward to continuing cooperating with 
him in passing this very important amendment.
  Mr. HATCH. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant 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.
  

                          ____________________