[Congressional Record Volume 141, Number 27 (Friday, February 10, 1995)]
[Senate]
[Pages S2441-S2453]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             BALANCED BUDGET AMENDMENT TO THE CONSTITUTION

  The PRESIDING OFFICER. Under the previous order, the Senate will now 
resume consideration of House Joint Resolution 1, which the clerk will 
report.
  The assistant legislative clerk read as follows:

       A joint resolution (H.J. Res. 1) proposing a balanced 
     budget amendment to the Constitution of the United States.

  The Senate resumed consideration of the joint resolution.

       Pending:
       Reid amendment No. 236, to protect the Social Security 
     system by excluding the receipts and outlays of Social 
     Security from balanced budget calculations.
       Dole motion to refer H.J. Res. 1, Balanced Budget 
     Constitutional Amendment, to the Committee on the Budget, 
     with instructions.
       Dole amendment No. 237, as a substitute to the instructions 
     (to instructions on the motion to refer H.J. Res. 1 to the 
     Committee on the Budget).
       Dole amendment No. 238 (to amendment No. 237), of a 
     perfecting nature.

  The PRESIDING OFFICER. Under the previous order, the Senator from 
Oregon [Mr. Packwood] is recognized to speak for up to 60 minutes.
  Mr. PACKWOOD. Mr. President, I had prepared over several days a 
speech for this morning. But because of a news article this morning on 
the death of Senator Fulbright the day before yesterday, I decided to 
change my approach and have thrown away all of the comments I was going 
to make. I will try to put this debate in a different light.
  The Washington Post article on Senator Fulbright is well worth 
reading, because he was a figure of great consequence here. As we are 
debating this, another matter of great consequence, I look back at some 
of the other events that have taken place in my career on this Senate 
floor. I will not use Yogi Berra's famous expression, ``It's deja vu 
all over again,'' because I think a more apt expression might be 
Justice Holmes' comment about the law, but it really relates to all of 
us. He said, ``The life of the law has not been logic. It has been 
experience.''
  I think, as we look at this balanced budget amendment, we are better 
off to look at it in the light of experience rather than the light of 
logic.
  I mentioned Senator Fulbright because I recall in this Chamber the 
most extraordinary event--certainly the most extraordinary debate, but 
extraordinary event--that I have ever witnessed in my life.
  It was an unusual situation. It was a closed session of the Senate on 
the debate--this was in 1969--on the antiballistic missile system. 
There were two extraordinary Senators who were
[[Page S2442]] going to carry the battle for and against that: Senator 
Symington of Missouri, high up on the Armed Services Committee, was 
unalterably opposed; Senator Jackson of Washington, high up on the 
Armed Services Committee, was unalterably in support. These two 
Senators had access to identical witnesses, identical information, and 
came down on absolute opposite sides. The antiballistic missile was a 
touchstone between the so-called hawks and doves.
  We were then enmeshed heavily in Vietnam. This, I suppose, would have 
been the equivalent of the star wars of its day. Could we invent a 
missile that would go up in the air and shoot down other missiles? We 
finally agreed, under a unanimous consent, as I recall, to either 6 or 
8 hours of debate. And because it was going to be highly sensitive, 
classified information, the Senate was cleared of all press. The 
galleries were closed. The staff left. We had all 100 Senators on the 
floor and the Vice President presiding.
  We started the debate. Senator Symington, in opposition, spoke first. 
He spoke for an hour without notes. The only references he had were 
some charts behind him, showing the Russian missile system and its 
progress. When he finished speaking, I thought to myself, that is the 
end of the ABM, the antiballistic missile. No one can rebut that 
argument.
  Then, Senator Jackson arose and spoke for an hour, without notes. I 
remember him turning to Stewart Symington and saying: ``Let me take you 
just a few charts further than where my distinguished colleague from 
Missouri left off.'' And Senator Jackson went on with his seven or 
eight charts, taking us up to what was probably the SS-18 or SS-19 at 
the time--a brilliant argument. And I thought when he finished, that is 
it. We are going to have an antiballistic missile system. No one can 
rebut that argument.
  Then these two giants began to ask questions of each other. Like 
great fencers, they parried and thrusted. They each knew the answers to 
the questions they were asking. They hoped that somehow they could 
pinion the other. And the reason the questions and answers were so 
critical is everyone knew this was a close vote, just like this coming 
vote on the balanced budget amendment. Everyone knew it was one or two 
votes, one way or the other.
  President Nixon desperately wanted the ABM because he needed it as a 
bargaining chip with the Soviets to attempt to begin arms reduction. 
Without it, he knew he could not begin. So when the two had finished 
their speeches and had finished questioning each other, then the rest 
of us had an opportunity to ask questions.
  Again, you have to picture a full Chamber, 100 Senators, in closed 
session. There was no one here but us: no press, no gallery, no staff. 
And the third or fourth question was from Senator Fulbright to Senator 
Jackson.
  Senator Fulbright said, ``Would my good friend from Washington yield 
to a question?''
  ``Yes,'' Senator Jackson said.
  Senator Fulbright said, ``Has my good friend had a chance, yet, to 
digest the remarks of the Russian Foreign Minister, Andrei Gromyko, in 
Warsaw last week, in which the Soviet Foreign Minister said that the 
Soviet Union wanted to reach a new era of detente--of cordiality with 
the United States? And doesn't my friend from Washington think that 
before we rush pellmell into this unproven missile system, we should 
give just some little credence to the words of the Russian Foreign 
Minister?''
  Senator Jackson shot back, as if it had been a prompted question. He 
pointed his finger at Senator Fulbright. I remember the gesture so 
well. They sat no more than two or three desks apart.
  He said, ``Let me call to memory for my friend from Arkansas'' and 
then Scoop Jackson moved his hand like this and said to the--others, 
who were not here at that time--``that morning, when President Kennedy, 
in October 1962, asked Russian Foreign Minister Gromyko, who had been 
at the United Nations the day before, to come to Washington to chat 
with him. Andrei Gromyko flew down from New York and went to the White 
House.''
  Scoop Jackson related this scene: ``That day, the President asked 
Gromyko, if there were any Russian missiles in Cuba.''
  ``No, came the answer.''
  ``Were there any Warsaw Pact country missiles in Cuba?''
  ``No.''
  ``Had any missiles been transported on Russian ships to Cuba?''
  ``No.''
  ``Were there any Russian troops in Cuba assembling missiles?''
  ``No.''
  Then Scoop Jackson made this gesture. He reached down and said--
``Then the President opened the drawer of his desk, took out the 
pictures from the U-2, threw them in front of Mr. Gromyko--showing the 
missiles, showing the ships, pictures so good that you could see the 
chevrons on the sleeves of the Russian troops in Cuba assembling the 
missiles.''
  Scoop Jackson said, ``Andrei Gromyko left that room an acknowledged 
liar. If my friend from Arkansas wants to rest the security of this 
country on the truthfulness and credibility of Andrei Gromyko, that's 
his business. I would not ask a single American to sleep safely tonight 
based upon the credibility of Andrei Gromyko.''
  The vote that afternoon was 51 to 50, with the Vice President 
breaking the tie.
 And the answer to that question was the difference of one or two 
votes.

  So do we on occasion have the opportunity to participate in great 
events where we can make a difference? We do. With that vote, President 
Nixon was able to start negotiations with the Soviet Union, and it was 
the first of our major negotiations leading to arms reductions over the 
years.
  I cite that moment because I think we are approaching a similar 
moment again. This time on the balanced budget amendment and just one 
or two of us may make an extraordinary difference for the future. I 
have said, quoting Holmes, it is experience, not logic.
  Let us take a look at some of our experiences from that time on. In 
1972--this was an open debate, it is in the Record--we did not have 
budget bills in those days. We thought we had a terrible budget 
problem. The deficit was $15 billion. The budget was $245 billion. This 
is in my lifetime in the Senate; 1972, barely 20 years ago, a budget 
that was smaller than some of our deficits have been in the last few 
years. But we thought this was so terrible that we were going to vote 
on a bill to delegate to President Nixon the power to cut the budget 
anyplace he wanted--once it exceeded $250 billion. You talk about a 
line-item veto. This was not just a line-item veto. It was carte 
blanche power to cut it wherever he wanted it. It had passed the House 
with Wilbur Mills leading the fight for it. It came to this body. We 
had an extraordinary debate. There is not even a baker's dozen of us 
left now from that time. I am not going to read into the Record all of 
the debate. Most of the people who were involved are now gone. But 
interestingly there are still a few left that opposed that effort. I 
was one that opposed it. I made what I thought was an extraordinary 
speech on the history and the power of the purse, going into the 
parliamentary debates and the fights with the kings' efforts over the 
centuries to gain power over the purse. Did we want to give to the 
President a power which the Parliament and the Congress had fought for 
the better part of 500 years to gain for itself? I said no. And all of 
us who talked and opted against that legislation said we the Congress 
can do it. We have the courage in Congress to narrow a $15 billion 
deficit. We do not need to give away the power to balance the budget.
  It is particularly interesting to read the statements of one or two 
of the Democratic Senators who were in opposition to the balanced 
budget amendment, speaking in opposition to this particular bill in 
1972, as to how we in Congress could do it. That is almost now 25 years 
ago. The deficit was $15 billion.
  In 1978--there have been several people who have made reference to 
it--we had the Byrd amendment. This is not Robert Byrd of West 
Virginia. This is Harry Byrd of Virginia. We passed it in 1978. It is 
very simple. All it says is beginning with fiscal year 1981 the total 
budget outlays of the Federal Government shall not exceed its receipts. 
It is pretty easy to understand. It is a balanced budget statute. 
Somehow we did 
[[Page S2443]] not make it. We did not even come close.
  Do you know what the problem with a statute is? Every time you pass 
another statute later that is in conflict, the later one governs. So we 
passed a later nonbinding law that says in 3 years we have to balance 
the budget, and, then, this Byrd law is just irrelevant. We just 
ignored it. I thought it was ridiculous. It was embarrassing to have it 
on the books and ignore it year after year. So in essence, we repealed 
it. Then we knew that we had to face the deficit ourselves. We had the 
courage to do it. We in Congress could do it. Even then we were 
starting to talk about constitutional amendments. But we had not quite 
gotten to there yet.
  Now I want to go to 1981, again this experience. It is amazing how 
myths are perpetrated. ``The Reagan tax cuts are what led to the 
deficits.'' How many times have we heard that? Again, I was here. I was 
on the Finance Committee. But sometimes when you hear it long enough 
your memory plays tricks on you, and you wonder if you remember as it 
actually happened.
  So I had Dr. Reischauer, the head of the CBO, check it for me. And 
indeed my memory was right. From roughly January 1980 until July 1981, 
a period of about 18 months, every budget projection we had from the 
Congressional Budget Office, from the Office of Management and Budget, 
from the Joint Committee on Taxation and private economists said we 
were going to have by 1985 between a $150 billion and a $200 billion 
surplus--not a deficit; a surplus.
  So President Reagan proposed tax cuts in 1981. I want to emphasize 
something. His Treasury Department came and made staging estimates. 
They assumed that the tax cuts would parallel these projected $150 to 
$200 billion in deficits. President Reagan correctly understood that if 
we did not give this money back to the taxpayers, we would spend it; no 
question about that. Do not worry. We have plenty of experience on 
that. But they were to parallel the projected surpluses.
  Well then, did we ever become generous. The House Ways and Means 
Committee took the President's bill and added to it more tax cuts. Then 
it came to the Senate Finance Committee. We added tax cuts to the House 
version. We even gave real estate 15 years for depreciation. It is no 
wonder that we had a building boom--built on taxes, not on economics--
from 1981 on--when you could depreciate real property over 15 years. 
You could not lose. You did not even have to rent the building. In 
fact, many of them were not rented. That is what happened. But that is 
not the point. They were not being built to be rented. They were built 
for tax losses. We piled everything on we could. We went to conference, 
and we took the most expensive provisions of both bills and sent it 
down to the President. He signed it.
  What the economists did not foresee in those 18 months were three 
things: First, the rapid decline in inflation. This was before we had, 
indexed, the Tax Code. We had run 4 years of inflation of 13, 14, or 15 
percent. We could presume that before we indexed the Tax Code we would 
get about 1.7 percent increase in revenues for each 1 percent of 
inflation.
  So if you could presume 10 or 11 or 12 percent inflation compounded 
from 1981 to 1985, it is no wonder we were projecting surpluses. But we 
did not foresee that inflation would absolutely nosedive, nor did we 
foresee that recession. It wasn't anybody's fault. It was not President 
Reagan's fault. It was a rosy scenario. This was everybody's 
projection. When the recession comes down, revenues go down, expenses 
go up.
  So we had an immense shortfall by 1982. Just to corroborate this, so 
that those that believe in the myth do not think that I do not know of 
what I speak, I want to insert two letters from Dr. Reischauer in the 
Record, one of November 8, 1994, and one of December 15, 1994, and then 
just a portion of his testimony, just 2 weeks ago on January 26, 1995, 
before the Finance Committee. I will quote just one sentence when he is 
referring to this period.

       It is reasonable then to ascribe nearly all of the 
     underestimate of deficits during that period to errors in 
     economic forecasts.

  Mr. President, I ask unanimous consent that those three documents be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                 Washington, DC, November 8, 1994.
     Hon. Bob Packwood,
     U.S. Senate,
     Washington, DC.
       Dear Senator: This is in response to your request of 
     November 3, asking CBO to provide additional information 
     about budget projections done almost 15 years ago, before 
     enactment of the Economic Recovery Tax Act [ERTA] of 1981. As 
     you recognize, many changes in budget policy and presentation 
     hamper our ability to answer questions about projections that 
     are so widely separated in time. Nevertheless, we will answer 
     the questions posed in your letter as best we can.
       Briefly, before the enactment of ERTA, CBO's budget reports 
     routinely warned that a continuation of current tax and 
     spending laws would lead to a surplus that would act as a 
     drag on the economy. The late 1970s and early 1980s were a 
     period of high inflation. Key features of the individual 
     income-tax--brackets, personal exemptions, and standard 
     deductions--were not indexed for inflation, even though 
     inflation tended to push taxpayers into progressively higher 
     tax brackets. In response, policymakers typically enacted ad 
     hoc tax reductions every few years to keep the revenue-to-GDP 
     ratio from spiraling. Examples are the tax cuts enacted in 
     1964, 1969, 1971, 1975, 1976, 1977, and 1978. On the spending 
     side of the budget, many entitlement programs (such as Social 
     Security) were automatically indexed to inflation, but 
     discretionary programs had no such automatic feature and 
     relied on the annual appropriation process for funding (if 
     any) to compensate them for inflation.
       In doing its pre-ERTA projections, then, CBO faced a 
     dilemma: literal projections of current-law revenues and 
     spending implied a fiscal drag that was viewed as 
     incompatible with long-term growth. Therefore, CBO's economic 
     projections assumed changes in fiscal policy sufficient to 
     offset this effect and were not predicated on unchanged laws. 
     The tax cuts enacted in 1981 and subsequent economic 
     developments, of course, erased projected surpluses from 
     CBO's reports.
                     CBO February 1980 Projections

       Illustrating this dilemma, in its February 1980 report 
     Five-Year Budget Projections: Fiscal Years 1981-85, CBO 
     projected that the revenues collected under current tax law 
     would climb from about 21 percent of GNP in 1981 to 24 
     percent by 1985. Simple arithmetic pointed to enormous 
     surpluses in the outyears. For example, current-law revenues 
     exceeded outlays by a projected $98 billion for 1984 and $178 
     billion for 1985.
       CBO purposely did not, however, publish these surpluses, 
     which it called the ``budget margin.'' The reasons was one of 
     internal consistency. CBO's assumptions of economic 
     performance beyond the two-year forecasting horizon were 
     based on an analysis of historical trends and the economy's 
     long-run growth potential. Thus, the February 1980 report 
     assumed that the economy would grow at a real rate of 3.8 
     percent a year in 1982 through 1985. Such growth was 
     incompatible with a rising revenue-to-GDP ratio; in fact, the 
     report stated that ``fiscal policy changes that would use up 
     most of the burden margin would be required if the economic 
     growth path were to be achieved.'' The economic assumptions 
     assumed approximately budget balance in 1983 through 1985 but 
     did not assume specific tax cuts or changes in spending.


                         early 1981 projections

       The tax environment changed in 1981. By mid-1981, the 
     Congress and the Administration had agreed on a large multi-
     year tax cut. The budget resolution prescribing the 
     appropriate size of the cuts was adopted in May, and ERTA 
     itself was enacted in August. Indexing for inflation was not 
     a feature of the Administration's tax proposal submitted in 
     March 1981, but was a part of ERTA. It did not take effect 
     until 1985, after an intervening series of three cuts in 
     individual income taxes effective at the start of calender 
     years 1982, 1983, and 1984.
       Economic assumptions. CBO presented its baseline 
     projections in 1981 using two different sets of economic 
     assumptions--those contained in the budget resolution 
     (resembling the Reagan Administration's assumptions), and an 
     alternative set developed independently by CBO. For the 
     reasons described above, economic forecasts require an 
     assumption about fiscal policy; the CBO assumptions 
     explicitly assumed adoption of a package of tax cuts and 
     spending cuts like those advocated by the Administration.
       Budget projections. Without the tax cuts, long-run 
     surpluses still appeared likely from the vantage point of 
     early 1981. For example, using the economic assumptions 
     dictated by the budget resolution, OMB envisioned a surplus 
     of $76 billion in 1984 and $209 billion in 1986 if no changes 
     in tax law or spending policy were adopted (Baseline Budget 
     Projections: Fiscal Years 1982-1986, July 1981). Those 
     economic assumptions were rosier than the set developed 
     independently by CBO. Budget projections based on CBO's 
     economic assumptions, which were more fully documented in a 
     March 1981 report (An Analysis of President Reagan's Budget 
     Revisions), foresaw smaller surpluses amounting to $23 
     billion in 1984 and $148 billion in 1986.
       The budget resolution was expected to generate a bare $1 
     billion surplus in 1984, under 
     [[Page S2444]] the economic assumptions contained therein. 
     That would presumably imply a deficit of roughly $50 billion 
     under CBO's less rosy assumptions.
       In sum, given the best information available at the time, 
     the Congress and the Administration reasonably thought that 
     surpluses loomed under current law. Analysts differed, 
     however, on whether following the policies of the first 
     budget resolution would put the government on a balanced-
     budget footing or would lead to deficits.


                        Post-1981 Deterioration

       Economic developments led to far bigger deficits than even 
     relatively pessimistic participants in the 1981 debate 
     envisioned. As you requested, we have prepared a comparison 
     of the economic assumptions contained in the fiscal year 1982 
     budget resolution with the actual outcomes (see attached 
     Table 1). For completeness, we also include a comparison with 
     the CBO alternative forecast published in March 1981. 
     Revisions by the Department of Commerce to economic data 
     (such as the shift in the base year for measuring real 
     growth) prevent the actuals from being perfectly comparable 
     to the projections, but do not distort the overall story.
       Compared with the budget resolution, the most dramatic 
     deviations in economic performance were sharply lower real 
     growth and sharply lower inflation. The economy plunged into 
     recession, registered negative growth in 1982, and then 
     recovered. Even so, real growth over the 1981-1986 period 
     (including recession and recovery years) averaged 2.6 
     percent, versus the budget resolution's assumption of 4 
     percent. Inflation was sharply lower than in the budget 
     resolution, averaging 4.9 percent over the 1981-1986 period 
     (when measured by the CPI) versus the 6.6 percent assumed in 
     the resolution. These two factors--lower real growth and 
     lower inflation--caused nominal GNP to be about $700 billion 
     smaller by 1986 than assumed in the resolution, with a 
     corresponding drop in the tax base. Interest rates, however, 
     did not
      behave very differently than assumed in the resolution--
     implying that real interest rates (nominal rates adjusted 
     for inflation) were much higher than foreseen.
       In one crucial respect, the economy performed closer to 
     CBO's early-1981 alternative forecast. Although CBO did not 
     foresee the recession, it did envision average real growth of 
     2.8 percent over the 1981-1986 period, compared with an 
     actual rate of 2.6 percent. CBO overestimated inflation, and 
     underestimated real interest rates (as proxied by nominal 
     Treasury bill rates minus inflation).
       The post-1981 deterioration in the budget picture cannot be 
     allocated to individual economic variables--real growth, 
     inflation, and interest rates--as you requested. But it is 
     clear that economic factors were mostly responsible, with so-
     called technical factors running a distant second. In 1986, 
     the deficit was more than $400 billion greater than in the 
     CBO July 1981 baseline projections (see attached Table 2). 
     Policy changes contributed slightly over $100 billion; this 
     figure includes not just the impact of ERTA and other changes 
     adopted in 1981 but also the effects of later changes, such 
     as the Tax Equity and Fiscal Responsibility Act and the 1983 
     Social Security Amendments, enacted to curb the burgeoning 
     deficit. Economic and technical changes contributed the 
     remaining $300 billion. The deterioration was overwhelmingly 
     in the areas of revenues and net interest and it is 
     reasonable to ascribe nearly all of it to errors in the 
     economic forecast.
       Of course, the indexation of the tax system contributed 
     very little to the deterioration in this five-year period, 
     because indexing did not take effect unit 1985. By then, CBO 
     estimated that repealing it would generate a mere $5 billion 
     in fiscal year 1985 and less than $15 billion in 1986. Since 
     1985, indexation--the annual adjustment to tax brackets and 
     other features of the individual income tax code--has 
     operated, other things being equal, to keep such taxes 
     roughly constant as a share of GDP.
       I hope that this information is helpful to you. If you have 
     additional questions, please do not hesitate to contact me. 
     The principal CBO staff contact is Kathy Ruffing (X62880); 
     more detailed questions about revenues can be answered by 
     Rosemary Marcuss (X62680) and inquiries about CBO's economic 
     forecast by Robert Dennis (X627750).
           Sincerely,
                                             Robert D. Reischauer,
     Director.
                                                                    ____


     TABLE 1.--ECONOMIC ASSUMPTIONS IN THE FIRST BUDGET RESOLUTION FOR FISCAL YEAR 1982 AND ACTUAL OUTCOMES     
                                               [By calendar year]                                               
----------------------------------------------------------------------------------------------------------------
     Nov. 8, 1994          1980         1981         1982         1983         1984         1985         1986   
----------------------------------------------------------------------------------------------------------------
                                                                                                                
(6) First Budget                                                                                                
 Resolution for                                                                                                 
 1982\1\                                                                                                        
                                                                                                                
Nominal GNP (dollars)        2,626        2,941        3,323        3,734        4,135        4,641        4,983
Real GNP growth                                                                                                 
 (percentage change).         -0.2          2.0          4.1          5.0          4.5          4.2          4.2
Consumer price index                                                                                            
 (percentage change).         13.5         11.0          8.3          6.2          5.5          4.7          4.2
Unemployment rate....          7.1          7.5          7.2          6.6          6.4          5.9          5.6
3-month Treasury bill                                                                                           
 rate................         11.4         13.5         10.5          9.4          8.2          7.0          6.0
                                                                                                                
                                                                                                                
(6) CBO Alternative                                                                                             
 Assumptions of March                                                                                           
 1981\2\                                                                                                        
                                                                                                                
                                                                                                                
Nominal GNP                                                                                                     
 (dollars)\3\........        2,626        2,936        3,285        3,663        4,081        4,558        5,055
Real GNP growth                                                                                                 
 (percentage change).         -0.2          1.3          2.5          2.7          3.0          3.8          3.7
Consumer price index                                                                                            
 (percentage change).         13.6         11.3          9.6          8.9          8.2          7.7          7.1
Unemployment rate....          7.1          7.8          7.9          7.8          7.7          7.5          7.2
3-month Treasury bill                                                                                           
 rate................         11.4         12.6         13.7         11.5         10.2          9.7          9.3
                                                                                                                
                                                                                                                
(6) Actual\4\                                                                                                   
                                                                                                                
Nominal GDP (dollars)        2,708        3,031        3,150        3,405        3,777        4,039        4,269
Real GDP growth                                                                                                 
 (percentage change).         -0.6          1.8         -2.2          3.9          6.2          3.2          2.9
Consumer price index                                                                                            
 (percentage change).         13.6         10.3          6.2          3.2          4.3          3.6          1.9
Unemployment rate....          7.1          7.6          9.7          9.6          7.5          7.2          7.0
3-month Treasury bill                                                                                           
 rate................         11.4         14.0         10.6          8.6          9.5          7.5          6.0
----------------------------------------------------------------------------------------------------------------
\1\The budget resolution contained assumptions through 1984; assumptions for 1985 and 1986 are a CBO            
  extrapolation. They were published in Baseline Budget Projections: Fiscal Years 1982-1986 (July 1981).        
\2\CBO's alternative assumptions assumed fiscal policy changes comparable to those contained in President       
  Reagan's March 1981 budget revisions. These alternative projections were published in An Analysis of President
  Reagan's Budget Revisions for Fiscal Year 1982 (March 1981) and in Baseline Budget Projections: Fiscal Years  
  1982-1986 (July 1981).                                                                                        
\3\Nominal GNP was not published; these levels are estimated using the published growth rates.                  
\4\The actuals are not strictly comparable to the 1981 projections. They reflect the shift in emphasis from GNP 
  to GDP and the redefinition of the base year used in measuring real economic growth (from 1972 at the time of 
  the 1981 projections to 1987 for the most recent actuals). These changes, however, do not seriously distort   
  the comparison.                                                                                               


    TABLE 7.--CHANGES IN BUDGET OUTLOOK, 1982-86, FROM CBO JULY 1981    
                                BASELINE                                
------------------------------------------------------------------------
        Nov. 8, 1994           1982     1983     1984     1985     1986 
------------------------------------------------------------------------
                                                                        
(4) CBO July 1981                                                       
 Baseline\1\                                                            
                                                                        
Revenue....................      709      810      920     1033     1159
                            ============================================
Outlays:                                                                
    Net Interest...........       72       70       67       62       59
    Other\2\...............      687      742      796      853      911
                            --------------------------------------------
      Total................      759      812      863      915      970
Deficit or surplus (-).....       50        2      -56     -118     -189
                            ============================================
                                                                        
(4) Changes                                                             
                                                                        
Policy changes:                                                         
    Revenues...............      -43      -75     -100     -117     -133
    Outlays:                                                            
        Net interest.......        0        1        6       16       29
        Other\3\...........      -40      -39      -36      -15      -51
                            --------------------------------------------
          Total............      -40      -38      -30        1      -23
Deficit....................        3       37       70      118      110
                            ============================================
Economic and technical                                                  
 changes:                                                               
    Revenues...............      -48     -135     -153     -182     -257
                            ============================================
    Outlays:                                                            
        Net interest.......       13       19       38       51       48
        Other\2\...........       14       16      -20      -21       -5
                            --------------------------------------------
          Total............       26       35       19       30       43
Deficit....................       75      169      171      212      300
                            ============================================
Total changes:                                                          
    Revenues...............      -91     -210     -253     -299     -390
                            ============================================
    Outlays:                                                            
        Net interest.......       13       20       44       67       77
        Other\1\...........      -26      -24      -56      -36      -57
                            --------------------------------------------
          Total............      -13       -4      -11       32       20
Deficit....................       78      206      242      331      410
                            ============================================
                                                                        
(4) Actual Outcomes                                                     
                                                                        
Revenues...................      618      601      666      734      769
                            --------------------------------------------
Outlays:                                                                
    Net interest...........       85       90      111      130      136
    Other\1\...............      661      719      741      817      854
                            --------------------------------------------
      Total................      746      808      852      946      990
Deficit....................      128      208      185      212     221 
------------------------------------------------------------------------
\1\The July 1981 baseline was based on the economic assumptions of the  
  first concurrent resolution, not those of CBO.                        
\2\Adjusted by approximately $20 billion a year in formerly off-budget  
  outlays (chiefly lending by the Federal Financing Bank).              
\3\Includes a one-time cost of about $12 billion for the purchase of    
  maturing subsidized housing notes in fiscal year 1985.                
                                                                        
Source: CBO memorandum, ``Changes in Budgetary Policies since January   
  1981'' (May 30, 1986), updated for fiscal year 1985 actuals.          

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                Washington, DC, December 15, 1994.
     Hon. Bob Packwood,
     U.S. Senate,
     Washington, DC.
       Dear Senator: This responds to your request for additional 
     information about budget projections done before the 1981 tax 
     cuts were enacted. The conclusions that follow were discussed 
     more extensively in my letter to you of November 8, 1994.
       Before enactment of the 1981 tax cuts, CBO's budget reports 
     routinely projected that a continuation of current tax and 
     spending laws would lead to large budget surpluses. CBO also 
     warned that such levels of taxes and spending would act as a 
     drag on the economy.
       [[Page S2445]] The primary reason for this outlook was that 
     high inflation was expected to drive up revenues 
     dramatically. Because key features of the federal individual 
     income tax were not automatically adjusted for inflation, 
     periods of high inflation--like the late 1970s and early 
     1980s--pushed individuals into higher tax rate brackets and 
     caused revenues to increase rapidly. In response, 
     policymakers cut taxes every few years on an ad hoc basis--
     five times in the 1970s alone.
       Illustrating this dilemma, in its February 1980 report 
     Five-Year Budget Projections: Fiscal Years 1981-1985, CBO 
     projected that revenues collected under current tax law would 
     climb from about 21 percent of GNP in 1981 to 24 percent by 
     1985. Simple arithmetic pointed to enormous surpluses in the 
     outyears. For example, current-law revenues exceeded outlays 
     by a projected $98 billion for 1984 and $178 billion for 
     1985. Similarly, in its July 1981 report Baseline Budget 
     Projections: Fiscal Years 1982-1986, CBO projected budget 
     surpluses of between $148 billion and $209 billion for 1986, 
     depending on the economic assumptions used.
       In the same report, CBO estimated that the 1981 tax cuts 
     and other policies that were called for in the May 1981 
     budget resolution would generate a balanced budget or a small 
     deficit (roughly $50 billion) by 1984--again, depending on 
     the economic assumptions employed.
       This was the budget background leading to the 1981 tax 
     cuts. Given the best information available at that time, the 
     Congress and the Administration reasonably thought that 
     significant budget surpluses loomed under current law. 
     Analysts differed, however, on whether the 1981 tax cuts 
     would put the government on a balanced-budget footing or 
     would lead to small budget deficits.
       As it turned out, the federal government ran budget 
     deficits of about $200 billion a year from 1983 through 1986. 
     Economic performance was poorer than envisioned in 
     projections of either CBO or the Administration at the time 
     of the 1981 tax bill. The economy plunged into recession, 
     registered negative growth in 1982, and then recovered. The 
     rate of inflation dropped sharply. By 1986 nominal GNP was 
     about $700 billion smaller than assumed in 1981, which caused 
     a corresponding drop in tax revenues. And interest rates 
     remained high despite the plunge in inflation. It is 
     reasonable to ascribe nearly all of the underestimate of 
     deficits during this period to errors in economic forecasts.
           Sincerely,
                                             Robert D. Reischauer,
     Director.
                                                                    ____

   Statement of Robert D. Reischauer, Director, Congressional Budget 
  Office, on the Economic and Budget Outlook: Fiscal Years 1996-2000, 
before the Committee on Finance, United States Senate, January 26, 1995


      the budget outlook differs from the outlook in 1980 and 1981

       At the request of Chairman Packwood, CBO has also examined 
     how the current outlook compares with the economic forecast 
     and budget projects CBO made before the Economic Recovery Tax 
     Act of 1981 was enacted. The many changes in budget policy 
     and presentation made since 1981 limit our ability to provide 
     a detailed analysis of the differences between projections 
     that are so widely separated in time. Nevertheless, we can 
     explain the primary reasons for the fundamental differences 
     between the outlook now and the outlook then.
       Unlike the current Economic and Budget Outlook, CBO's 
     budget reports issued before enactment of 1981 tax cuts 
     routinely projected that a continuation of current tax and 
     spending laws would lead to large budget surpluses. CBO also 
     warned that such levels of taxes and spending would act as a 
     drug on the economy.
       The primary reason for those projections was that high 
     inflation was expected to drive up revenues dramatically. 
     Because key features of the Federal individual income tax 
     were not automatically adjusted for inflation, periods of 
     higher inflation--such as the late 1970's and early 1980's--
     pushed individuals into higher tax rate brackets and caused 
     revenues to increase rapidly. In response, policymakers cut 
     taxes every few years on an ad hoc basis--five times in the 
     1970s, for instance.
       Illustrating this dilemma, in its February 1980 report 
     Five-Year Budget Projections: Fiscal Years 1981-1985, CBO 
     projected that revenues collected under current tax law would 
     climb from about 21 percent of GNP in 1981 to 24 percent by 
     1985. Simple arithmetic pointed to enormous surpluses in the 
     out-years. For example, current-law revenues exceeded outlays 
     by a projected $98 billion for 1984 and $178 billion for 
     1985. Similarly, in its July 1981 report Baseline Budget 
     Projections: Fiscal Years 1982-1986, CBO projected budget 
     surpluses of between $148 billion and $209 billion for 1986, 
     depending on the economic assumptions used.
       In the same report, CBO estimated that the 1981 tax cuts 
     and other policies that were called for in the May 1981 
     budget resolution would generate a balanced budget or a small 
     deficit of roughly $50 billion by 1984--again, depending on 
     the economic assumptions employed.
       That budget background led to the 1981 tax cuts. Given the 
     best information available at that time, the Congress and the 
     Administration reasonably thought that significant budget 
     surpluses loomed under current law. Analysts differed, 
     however, on whether the 1981 tax cuts would put the 
     government on a balanced-budget footing or would lead to 
     small budget deficits.
       As it turned out, the federal government ran budget 
     deficits of about $200 billion a year from 1983 through 1986. 
     Economic performance was poorer than envisioned in 
     projections of either CBO or the Administration at the time 
     of the 1981 tax bill. The economy plunged into recession, 
     registered negative growth in 1982, and then recovered. The 
     rate of inflation dropped sharply. By 1986, nominal gross 
     national product was about $700 billion smaller than assumed 
     in 1981, which caused a corresponding drop in tax revenues. 
     Furthermore, interest rates remained high despite the plunge 
     in inflation. It is reasonable, then, to ascribe nearly all 
     of the underestimate of deficits during that period to errors 
     in economic forecasts.


                 illustrative path to a balanced budget

       A constitutional amendment requiring a balanced federal 
     budget will be considered during the early days of the 104th 
     Congress. If the Congress adopts such an amendment this year 
     and three-quarters of the state legislatures ratify it over 
     the next few years, the requirement could apply to the budget 
     for fiscal year 2002. If the budget is to be balanced by 
     2002, it is important that the Congress and the President 
     begin immediately to put into effect policies that will 
     achieve that goal. According to CBO's latest projections of a 
     baseline that adjusts discretionary spending for inflation 
     after 1998, some combination of spending cuts and tax 
     increases totaling $322 billion in 2002 would be needed to 
     eliminate the deficit in that year. The amounts of deficit 
     reduction called for in years preceding 2002 depend on both 
     the exact policies adopted and when the process is begun.

  Mr. PACKWOOD. It was not President Reagan's fault, not really our 
fault. We were just wrong. The only reason I say that is because now we 
are not facing the same situation we were facing on projections in 
1981. Now we are projecting $200 billion to $400 billion deficits as 
far as the eye can see. Could we be wrong? I suppose so. We were wrong 
in 1981. Should we base the budgeting of this Congress on the 
assumption that we are wrong, we are not going to have these deficits? 
I do not think so. I do not think so.
  Let us go on to 1982. We have the recession. So a number of people 
say to President Reagan, we are going to have to increase the taxes to 
cut this deficit. He was not wild about that. To the best of my 
knowledge, President Reagan is perhaps the only person that ever lived 
who actually paid 91 percent in income taxes. He hit it in Hollywood 
when the rates were 91 percent, and I do not think he had to count. I 
think he remembered 91 percent. He was reluctant to go back to a tax 
increase. We promised him--we the Congress--if he will give us $1 in 
real tax increases, we will give him $3 in real spending cuts. Mr. 
President, it is not logic. It is experience. He did not get a dime of 
those spending cuts. We did not pass them. All he got was a tax 
increase.
  None of us should start down that road again of promises in this 
Congress. I am not here attacking anybody as being immoral, malevolent, 
or anything else. We should not accept promises that we do not need a 
balanced budget amendment and we will pass spending cuts. We have not 
done it, and we will not do it. Anybody that was here in 1982 and 
bought that charade maybe can excuse themselves the first time. 
Remember the old adage, ``Fool me once, shame on you; fool me twice, 
shame on me.'' That was 1982. That is when we first had the balanced 
budget amendment vote in this Senate. Up until 1981--or maybe 1982, I 
cannot remember --I had been opposed to a balanced budget amendment. I 
believed we could do it. But I realized after 1981 and 1982--and 
especially 1982--there was never any hope that we would have the 
courage, and unless we were compelled to do what every city, county, 
and State has to do, we would never, ever, ever balance the budget. So 
I voted for the balanced budget amendment in 1982.
  Now, let us go forward a bit again, to 1985. I feel privileged to 
have been a part of the 1985 budget bill. Bob Dole, in one of the most 
extraordinary acts of leadership I have ever seen, from a Republican or 
a Democrat, managed to cobble together the Republicans--because we only 
got one Democratic vote--on a budget bill that had a 1-year freeze on 
Social Security COLA's. We were not eliminating them. We were not 
cutting them back to the Consumer Price Index. A 1-year freeze. It 
passed by one vote. It passed because we wheeled Pete Wilson into this 
[[Page S2446]] Chamber--now the Governor of California, then a 
Senator--who had an appendectomy just 24 hours before and could not 
walk. We wheeled him in and he voted from a gurney right over there. 
The controversial part of it was this 1-year freeze on the COLA's on 
Social Security.
  Unfortunately, here I have to be critical of President Reagan. Before 
it got to the House, he said he would not accept it. That finished it; 
it was over. The Republicans had to pay for it in 1986. We had already 
paid for it once, politically, in 1982. Budget Director Stockman, at 
that time, suggested a modest change in the amount of money you could 
get in your Social Security benefits if you retired at 62. For that 
suggestion, we never even got to the place of seriously considering it. 
For that suggestion, he got unshirted hell. The Democrats used it in 
1982 to further their campaign, and they clobbered us.
  I remember a cartoon afterward--Tip O'Neill was Speaker at that 
time--that showed Tip O'Neill and he has his mother there, and it says 
``Social Security'' on her. He is dropping her off at the nursing home, 
saying, ``Good to see you, Ma. I will call you in 2 years when we need 
you once more.'' From that day on, the Republicans have been frightened 
of ever talking about Social Security.
  The fright is on both sides. You will recall the 1984 Democratic 
convention in San Francisco, where Fritz Mondale said, ``The President 
has a secret plan to raise taxes. He will not tell you, but I am 
courageous enough.'' And President Reagan says, ``There he goes 
again.'' For the rest of that campaign, Fritz Mondale was on the 
defensive about tax increases. So we are all skittish.
  It is understandable why we are politically skittish. None of us, 
Republicans or Democrats, or the President, want to take the step 
forward that we all know needs to be done. The most freshman Member of 
this Congress, who has never been in politics before, knows what the 
problem is. This argument about term limits and that you have to have 
8, or 9, or 10 terms to understand the problems--no, no, no. You do not 
have to be here 10 minutes to understand the problem. Maybe you have to 
be here 8, 9, or 10 terms to have the courage, when you finally feel 
safe enough to face the problem and say, let us solve it. We know what 
the problem is.
  Well, where are we now? The President has given up. He, in essence, 
has thrown in the towel. Last year, when he proposed his health bill, 
he had $475 billion in Medicare and Medicaid restraints. Someone called 
them ``cuts'' because they were not lower than we were, but over the 
period of 5 years, $475 billion in Medicare and Medicaid restraints. He 
has no health care in the budget this year and has no restraints of any 
consequence in Medicare or Medicaid--as if to sort of say it is 
Congress' problem, or maybe the Republicans' problem, to come up with a 
budget.
  You know, it is funny. It is all right to have those $475 billion in 
reductions if we were going to spend them, but it is not all right to 
have them if we are going to save them and apply them to the deficit. 
At least that is what the President is saying.
  Then the critics say, well, we cannot vote for this until we know the 
direction we are going to go in. I have heard the Senator from Ohio, 
the Senator from Michigan, the Senator from South Dakota say that, 
until we know specifically what the roadmap is, we cannot vote for 
this. I would defy any Governor in this country right now --and nearly 
all of them operate under a balanced budget requirement--to tell me how 
they are going to balance their budget in 2002. I bet you they could 
not. They will have to raise the sales tax, or cut welfare, cut the 
highway fund and say we can use the State highway funds for the State. 
They know they have to do it and will do it, and they will do it 
because they have to do it. And we will do it if we have to do it. But 
if we use the excuse that because we do not have a roadmap now as to 
how it is going to be done, we will not vote for this amendment. That 
is a patsy's way out. That means we do not want to face the problem. 
This is an excuse to avoid it.
  But if they want suggestions, I will give them some. My favorite one 
that everybody comes up with is that we will tax the rich--however you 
define who is rich. If we just tax the rich, that will take care of our 
problem. Well, I had the Joint Tax Committee do a chart for me, an 
estimate and a letter of how much money we could get. I asked how much 
money could we confiscate from those earning over $200,000? We will 
have a 100 percent rate of taxation. We will take it all.
  They said they could not quite answer that question. They had never 
run that on their computers, but they could tell me how much untaxed 
income there was with people above $200,000. So, they sent me the 
letter. And this year, if we were to tax all of the rest of the income 
that is not now taxed above $200,000, 100 percent of it, we would get 
about $182 billion,--billion, with a ``b''--not enough to narrow our 
deficit.
  My hunch is we would never get it again, because I do not think 
anybody would ever, ever again make over $200,000 if they had to give 
it all to the Government.
  And the Joint Committee had a wonderful paragraph in this letter. I 
will just read the paragraph and then put the whole letter in. This is 
the effect of a 100 percent rate of taxation. These effects would be 
extraordinary.

       If the 100 percent tax rates were to be in effect for a 
     substantial period of time. . . then in our judgment there 
     would be a substantial reduction in income-producing activity 
     in the economy and, thus, a significant reduction in tax 
     receipts to the Federal Government.

  I do not know why that should surprise anybody. But so much for the 
goose and the golden egg. We can get it once, then that deficit problem 
is right back with us again.
  Mr. President, I ask unanimous consent that the text of the letter 
from the Joint Committee on Taxation be printed in the Record.
  There being no objection, the text of the letter was ordered to be 
printed in the Record, as follows:

                                    Congress of the United States,


                                  Joint Committee on Taxation,

                                 Washington, DC, October 12, 1994.
     Hon. Bob Packwood,
     U.S. Senate,
     Washington, DC.
       Dear Senator Packwood: This is in response to your letter 
     of September 30, 1994, for revenue estimates of imposing a 
     100-percent tax on all income over $100,000, and 
     alternatively, income over $200,000. We are unable to provide 
     a revenue estimate for these options for the reasons given 
     below. However, the following table, which gives the amount 
     of taxable income above those levels reduced by the current 
     Federal income tax attributable to such income shows the 
     amount of tax that could be raised by such change assuming no 
     behavioral or macroeconomic responses.

------------------------------------------------------------------------
         Item            1995    1996    1997    1998    1999    1999-95
------------------------------------------------------------------------
After tax income in                                                     
 excess of:                                                             
    100,000...........   289.1   314.4   342.8   370.1   399.6   1,716.1
    200,000...........   182.3   195.5   212.6   227.0   243.5   1,061.9
------------------------------------------------------------------------

       As mentioned above, we are unable to provide a complete 
     analysis of the proposal outlined. Our estimating models and 
     methodology incorporate behavioral effects based on available 
     empirical evidence to produce reliable estimates of the 
     effects of tax changes in general. Even when tax rate changes 
     are relatively small, our analyses include significant 
     changes in behavior to account for portfolio shifts and the 
     timing of income realizations. At a proposed tax rate of 100 
     percent, however, we lack historical experience on which to 
     base an estimate of the significant behavioral effects. One 
     may speculate that these effects would be extraordinary. If 
     the 100-percent tax rate were to be in effect for a 
     substantial period of time, so that taxpayers would have no 
     rational hope of avoiding or evading the 100-percent tax in 
     the outyears by deferring income to lower rate years or using 
     other tax avoidance or deferral plans, then in our judgment 
     there would be a substantial reduction in income-producing 
     activity in the economy and, thus, a significant reduction in 
     tax receipts to the Federal government.
       I hope this information is helpful to you. If we can be of 
     further assistance, please let me know.
           Sincerely,
                                                  John L. Buckley.

  Mr. PACKWOOD. So, let us go on down some other suggestions.
  Restrain spending. We all get this from home. If we just spent no 
more next year than we spend now, in 3 years we will balance the 
budget. If we spend no more than we spend now, we will balance the 
budget.
  I will give you some problems. You can decide what you want to do 
with them.
  [[Page S2447]] Let us just take Social Security. Let us assume Social 
Security now spends $1,000. You have 10 recipients and they each get 
$100 apiece; $1,000, that is all we spend on Social Security.
  And let us say there is 10 percent inflation. Under the present law, 
all of those recipients would get a 10-percent increase. They would all 
get $110, and we would spend $1,100 on Social Security. But we said we 
are not going to spend any more than we spend now. Therefore, do they 
all get just $100 and their purchasing power declines a bit?
  Or I will give you another scenario. We are only going to spend 
$1,000. There are 10 recipients on Social Security. But the population 
is aging. Let us say next year one more person becomes eligible. Now we 
have 11, not 10. But we are only going to spend $1,000. Do they all get 
about $90 instead of the 10 that got $100? When you pose this to 
people, they say, ``Well, we did not think about that. Maybe we can 
give Social Security recipients their cost-of-living increase and still 
hold all others.''
  But now they do not expect to hold all other things this year. You 
are going to have to spend less this year. Do you know what you get? 
``Well, we have to spend more for defense. Don't spend any more than we 
spent last year. Increase defense, increase education, increase health, 
but don't spend any more than you spent last year and take it out of 
somebody else. Don't take it out of me.''
  I was intrigued with a statement in the paper, if quoted accurately, 
by the American Medical Association the day before yesterday. I like 
the American Medical Association, but here is the statement.

       AMA leaders said at a news conference here that Medicare 
     needs a major restructuring to save it from bankruptcy, but 
     insisted that should not be achieved by slashing doctors' or 
     other health care providers' fees. The American Hospital 
     Association and others that provide health services have 
     taken a similar position and a coalition is forming to fight 
     such cuts.

  Mr. President, there are only two expenses to Medicare. One is we 
reimburse the patient on occasion and the other is we pay the doctors 
and hospitals and labs and what not. That is all there is. Those who 
provide the services say, ``Not us,'' and the beneficiaries say, ``Not 
us, but cut spending.''
  Well, if you do not cut those who provide the medical services and if 
you do not cut those who get the medical services, where do you cut the 
spending? You do not. These are the things we want to gloss over.
  The same problem exists if, instead of cutting spending, you say, 
``Well, let's do it at the Consumer Price Index minus 1 percent or 
minus 2 percent.'' You have these same variations all the way through. 
I am not saying it cannot be done, but you have to realize that while 
Social Security only goes up with the cost of living each year, plus 
any new members that come on--it is not just the cost of living; you 
have more people, more expenses--but Medicaid and Medicare go up 
anywhere from 7 or 8 percent, at a minimum, to 15 to 16 percent a 
year--a year.
  Do you know what would happen if we take a 15-percent increase and 
compound it over 5 years? You have more than doubled your spending.
  So we say, ``Well, still spend the same we spent last year. Spend 
what we spent last year plus inflation. It is doable and, if we are 
forced to do it, we will do it and we should do it.''
  And everybody says the problems are the entitlements. That is a term 
we use here in Washington. It is not a term any ordinary American uses.
  Entitlement means nothing more than a Government program that is 
passed and put into law and we never have to appropriate the money for 
it. Again, you get it automatically, unless we change the law. Social 
Security is the one that is best known. Medicare is one. Unless we 
change the law--positively vote to change it, the President has to sign 
it, or if he vetoes it we have to override the veto--this law goes on 
forever and it spends money forever.
  They say, ``Take it out of the entitlements.'' We have about 410 
entitlement programs in this country--410--that automatically spend 
money, so surely we can find some money in entitlements.
  So I took a look at some of the entitlements. I have some where we 
can save some money.
  The Canal Zone Biological Area gets $150,000 a year. This is an 
island in the Panama Canal Zone. The money comes out of the Department 
of the Interior, administered by the Smithsonian, but it is an 
entitlement. Well, there is one we could save. There is 150,000 bucks.
  The John C. Stennis Center for Public Service Development trust fund. 
Now this is a big one--$680,000. This program trains State and local 
public servants to become more efficient. This program ought to be 
applied to the Federal Government, not the State and local governments. 
It also ``increases awareness about the importance of public service.'' 
We all revere John Stennis and we would hate to do anything to demean 
his memory, but this is $680,000 in spending.
  Now, another: The Pershing Hall revolving fund. General Pershing, of 
course, was the commander of our troops in Europe in World War I. 
Pershing Hall is a Department of Veterans Affairs building in Paris, 
France. It does not get many tourists. It is currently being subleased 
to a hotel firm which is gutting the building and will turn it into a 
hotel. A hotel firm is going to gut the building, and turn it into a 
hotel. But it is an entitlement of $114,000 in fiscal year 1996.
  Let us take the last one. Payment of Government losses in shipment 
fund. This is a permanent, indefinite appropriation in the Treasury 
Department. The fund would cover losses incurred by the Postal Service 
or any Federal agency in shipping coins, currency, and savings bonds--
$500,000.
  I have added up these four, and I think they come to a couple million 
total for these four entitlements. I said we have 410 entitlements. 
These are four inexpensive ones. But the bottom 400 of them 
altogether--there are about 410--the bottom 400, in terms of expense, 
cost about plus or minus $50 billion. Fifty-billion dollars is big 
money, but it is for 400 of the entitlements--$50 billion.
  The top four entitlements, plus interest--and the top three are 
Medicare, Medicaid, and Social Security, and then fourth is other 
Government retirements, military, civilian retirements--just those 
four, plus interest, are $900 billion a year. You know interest is the 
ultimate entitlement. We have to pay it or we can be sued. The entire 
cost of the bottom 400, the $50 billion, is less than the amount that 
these four, plus interest, goes up a year.
  You want to get rid of the 400? Go ahead. Save the $50 billion and 
the deficit, then, instead of being $200 billion will be $150 billion.
  The problem is, we are all afraid to approach these big entitlements.
  Now what is the old expression? If you want to go duck hunting, you 
go where the ducks are. The ducks are these big programs.
  You think they are growing? Boy, are they growing. You take those 
four that I mentioned, plus interest, in 1964 those four, plus 
interest, were 23 percent of all of the money that the Federal 
Government spends--23 percent. Ten years later, in 1974, they were 39 
percent. In 1984, they were 48 percent. In 1994, they were 56 percent. 
In the year 2004, they will be 67 percent.
  One day all the money the Federal Government spends will go for these 
four programs, plus interest. And we are afraid to touch them.
  One of two things happens, or maybe three things, if we do not do 
something soon. First, as we begin to spend more and more and more on 
these programs, if we do not increase taxes, all the other programs of 
Government get squeezed. We spend less on the Coast Guard and less on 
education and less on environmental protection and less on defense. 
Less on everything. So we can fund these four.
  Or we raise taxes--and I am not suggesting that, and I do not want 
that--we raise taxes to try to fund the other programs. Do not worry 
about narrowing the deficit. We will not use the taxes to narrow the 
deficit. We will spend it if we have it, so we still have a deficit. 
That is the other alternative.
  Or maybe we do nothing and we finally get to the place where there is 
a cataclysmic catastrophe coming. It is coming first in Medicare. There 
are two parts to Medicare. One is part A, that is hospital payments; 
the other is part B, and that is doctor payments.
  [[Page S2448]] In the year 2000 to 2001, the part A trust fund is 
exhausted. The part B portion which is the doctor payment--on which we 
now spend $47 billion out of the general fund--this is general 
taxpayers' money. This is not from the beneficiaries' premium that is 
deducted from a Social Security check.
  But this scenario does not hold a candle to where we will be in 
Social Security in the lifetime of most of the Members of this Senate. 
At the moment, Social Security is taking in more money than it pays 
out. We will take in $70 to $80 billion more this year than we take 
out. That will continue on until about the year 2013.
  The reason we are doing that is because we know the baby boomers born 
from 1945 to 1965 start to retire in about the year 2010. Give or take 
a few years or so from 2010--2013--the Social Security starts to pay 
out more than it takes in.
  But at the moment it is taking in more money and investing it in 
Government bonds. That is all we allow it to do, Government bonds. If 
we had cut them lose and let them invest what they wanted in 1978, they 
might have invested in Texas real estate and they would be broke now.
  Here comes the $70 billion more than we pay out. In it comes. Social 
Security administration, in essence, gives the $70 billion to the 
Treasury Department. The Treasury Department gives the Social Security 
administration a bond for $70 billion, a Government bond. We, 
thereupon, spend that money now, the $70 billion. We spend it on the 
Coast Guard, on education. We spend it on defense, we spend it on 
environmental protection, we spend it on everything Government spends 
money on. The $70 billion is gone.
  This continues, in the next year, the year after that, the year after 
that until about the year 2013 when I estimate Social Security will 
probably hold almost 3 trillion dollars' worth of Government bonds. 
Now, at this stage they start to pay out more than they take in. The 
Social Security Administrator takes their bond to the Treasurer of the 
United States and says, ``Here, give me some money to pay these 
benefits.'' The Treasurer looks at the Administrator and says, ``Are 
you crazy? We spent that money 20 years ago. What do you mean, give you 
money? I don't have any money.''
  At that stage we have to start redeeming the bonds. For example, if 
we keep faith with the recipients we have to raise the taxes to pay 
those bonds. That is not bad enough. About the year 2013 we start to 
pay out more money than we take in. By about the year 2029, only 34 
years from now--look backward 34 years and that is but a memory. That 
is not history. Much of it is as clear today as it was 34 years ago. We 
think that is not a very long time. Yet think ahead and we think it is 
an eternity.
  About the year 2029, not only is Social Security paying out a lot 
more than it takes in, all of the bonds are gone. They have now 
redeemed all of the bonds, and by that year Social Security is paying 
out about $3 trillion a year. Unfortunately, it is only taking in about 
$2.2 trillion, roughly, $700 to $800 billion shortfall and no bonds to 
turn in.
  At that stage, if we are going to keep faith, and we are going to do 
it with a payroll tax we will have a whopping increase in the payroll 
taxes. I cannot even estimate how high it will have to be to pay that 
kind of a deficit.
  What I fear is going to happen is this: Your children or your 
grandchildren at that stage will say, ``I am not going to pay that 
money. I will not pay that much. And I will not vote for anybody that 
will tax me that much,'' and this is where the cataclysmic coalition 
comes between generations.
  We can cure that if we would face the problem now. But we are not 
going to, I fear. We are not going to unless we pass the balanced 
budget amendment. Then what does that require of Members? It does not 
require a cut. We spend, this year, 1995, rounded off to the nearest 
$100 billion, we will spend this year about $1.5 trillion, $1.5 
trillion if we spend in what I referred to earlier as baseline.
  If we do not change the laws at all, we do not add new spending, we 
do not add prescription drugs to Medicare, we do not add long-term care 
to Medicare, we spend as we are doing under the present law, in 7 
years, in the year 2002, instead of spending $1.5 trillion, we will 
spend $2.2 trillion--$700 billion more.
  When people talk about cutting, that is not a cut. We are not talking 
about cutting. In order to balance the budget in the year 2002, instead 
of spending $2.2 trillion we might have to spend $2 trillion. Now we 
are spending $1.5. Now to balance the budget we would have to spend 
about $2 trillion instead of $2.2. Is that impossible? Can we not do 
that?
  The answer is, based upon experience, no. Better phrase it 
differently. We will not do that. Because in order to do it, we would 
have to undertake steps that we do not politically want to undertake 
and we are afraid.
  I talked about some of the significant debates of 20-25 years ago and 
some of the steps we took and the one-vote margins that made a 
difference. And yet in my quarter of a century in this Senate there 
probably will be no more important vote that I have cast, or if I 
stayed here another quarter of a century, that I ever would cast than 
the one that says to my kids and my grandkids I was able to help save 
this country.
  Sometimes what you do is a holding action. In the military it is 
referred to as a holding action. Major Devereux at Wake Island, shortly 
after the Japanese bombed Pearl Harbor, 200, 225 marines on this atoll, 
and the Japanese invaded it and we can see the footage of it, men 
swarming to shore like ants. There is Major Devereux, and his men, 
holding on, knowing they were defeated, waiting for the time.
  Or maybe it was General Wainwright at Corregidor, when we moved in 
and it was clearly a loss. Or Jack Kennedy, a young PT boat commander 
being part of that rescue. Or Colonel Travis at the Alamo, 
extraordinary courage, when Sam Houston says to him, ``We need a 
holding action until we can get our army organized.'' And when the 
siege starts February 23, and the battle is on March 6, for 2 weeks 
they held out, wiped out the men but gave Sam Houston time to put the 
army together and win at the battle of San Jacinto.
 These actions made a major difference in American history.

  Well, we are at that point now, but I think it is not a holding 
action. Every now and then, there is a difference between a holding 
action and an action you are going to take that is priceless. It is not 
Corregidor Island or Wake Island or San Jacinto.
  Shakespeare said it best in Henry V. You recall the history. The 
French and the English in the Hundred Years War had been battling. 
France had clearly the superior position in geography, and they were a 
unified nation and the biggest nation in Europe. The British had beat 
them at Poitiers and then at Crecy in the early part of the Hundred 
Years War. But the final battle was coming at Agincourt, and the 
English were utterly at a disadvantage--foreign soil, 9,000 troops, the 
French had 30,000.
  Picture Shakespeare's opening scene: Westmoreland is the king's 
cousin, and Westmoreland comes in. They know the battle is going to 
take place the next day.
  He said:

       O', that we now had here
       But one ten thousand of those men in England
       That do no work today!

  And the king responds:

       What's he that wishes so?
       My cousin Westmoreland? No, my fair cousin.
       If we are marked to die, we are enow
       To do our country proud, and if we live,
       The fewer the men, the greater share of honor.

  Going on he says:

       This day is called the feast of Crispian.
       He that outlives this day and comes safe home
       Will stand a-tiptoe when this day is named
       He that shall see this day and live old age
       Will yearly on the vigil feast his neighbors
       And say ``Tomorrow is Saint Crispian.''
       Then will he strip his sleeve and show his scars,
       [And say ``These wounds I had on Crispin's day.'']
       And gentlemen in England now abed
       Shall think themselves accurs'd they were not here,
       And hold their manhoods cheap whiles any speaks
       That fought with us on Saint Crispin's day.

  Today is an interesting day. Fortunately, there is a feast day for 
almost everyday. Today is Saint Scholastica Day, named after Saint 
Scholastica. It means ``learned.''
  [[Page S2449]] And we are going to vote on this day on a significant 
amendment that I think will determine whether or not we pass the 
balanced budget amendment. Some will flee, some will stand.
  I quote one other part from the soliloquy that I left out at the time 
when Henry turns to his troops and says:

       Let he which hath no stomach for this fight depart.
       His passport shall be made
       And crowns for convoy put into his purse.
       I would not die in that man's company
       That fears his fellowship to die with us.

  On this Feast Day of Saint Scholastica, the ``learned,'' we are going 
to vote. The vote we make will probably have a greater effect on our 
children and grandchildren than anything else we will ever do, and I 
would hate to be that man or woman that serves in this Senate whose 
child or grandchild comes to you 10 or 20 or 50 years from now and 
says: ``Where were you on Saint Scholastica Day?''
  And you say: ``I fled the battlefield.''
  I thank the Chair. 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. REID. 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. REID. Mr. President, I have spoken with the manager of the bill 
on the other side, and we ask that we go to the constitutional 
amendment to balance the budget, which will be the order at 11 o'clock, 
and that we divide the approximately 12 minutes equally between the two 
sides.
  The PRESIDING OFFICER (Mr. Kyl). Without objection, it is so ordered.
  Mr. REID. If the Chair will advise me when I have used 6 minutes, I 
would appreciate it.
  The PRESIDING OFFICER. The Chair will advise you.
  Mr. REID. Mr. President, I refer at this time to a statement that is 
on this chart behind me from the majority leader of the other body in 
the House of Representatives, the Honorable Richard Armey.
  He said:

       We have the serious business of passing a balanced budget 
     amendment, and I am profoundly convinced that putting the 
     details out would make that virtually impossible.

  There has been an attempt to keep from the American people what would 
happen to Social Security if it is not exempted from a balanced budget 
amendment. Why? The answer is in another statement made by the same 
majority leader, Congressman Armey, when he was asked the question why 
they had not produced a detailed plan for balancing the budget, wherein 
he responded, and I quote:

       Because the fact of the matter is that once Members of 
     Congress know exactly chapter and verse, the pain that the 
     Government must live with in order to get a balanced budget, 
     their knees will buckle.

  Mr. President, there are a lot of people whose knees are buckling as 
a result of the fact that they are going to have to vote whether or not 
to exempt Social Security from the balanced budget amendment. However, 
the amendment before this body that we will vote on at 11:30 is a 
mockery. It is an effort to allow people to walk from this Chamber and 
say, ``I voted to protect Social Security,'' when, in fact, they did 
just the opposite.
  This fig-leaf amendment that is now before this body will be adopted 
today, just like it did in the other body. But passage means nothing, 
just as it meant nothing in the House of Representatives.
  What it does provide is a fig leaf, a cover, a sham, a farce, a 
mockery to cloak, to conceal, to hide and mask the fact that Social 
Security will never be the same if the Reid amendment is not adopted, 
and this amendment will do nothing to conceal that, even though there 
is an attempt to conceal it.
  Mr. President, virtually everybody will vote for this weak, infirmed, 
ineffectual amendment that we will be called upon to cast our ballot at 
11:30. We will do it because it is just barely--just barely--better 
than nothing.
  This amendment allows some to go home and say, ``I protected Social 
Security,'' but all should smile when a Member of Congress uses this 
amendment to say they protected Social Security because that Member of 
Congress will have trouble keeping a straight face when those words are 
spoken: ``I protected Social Security.''
  I repeat, the only way to prevent the raping of Social Security is to 
vote for the Reid amendment next week. Today's vote is posturing and 
posturing only.
  My amendment excludes Social Security from the general revenues of 
this country. This forces Social Security into the pot of red ink; that 
is, the general revenues of the United States. This vote is a fig leaf, 
but sadly, Mr. President, it does not cover even the bare essentials.
  If the balanced budget amendment is ratified, then Congress is 
without authority to exclude Social Security trust funds from the 
calculations of total receipts and outlays under section 1 of the 
amendment, as stated by the Senate's leading legal scholar, Senator 
Howell Heflin, of Alabama, and the Congressional Reference Service, a 
man by the name of Kenneth Thomas.
  So this amendment does nothing to change the direct words of the 
underlying constitutional amendment. Not only do we have the words of 
the amendment which jeopardize Social Security, but we have the report 
from the committee of jurisdiction, the Judiciary Committee, which 
reported the bill. This report is an effort by the committee--it is 
done on every piece of legislation--to clarify the intent of the 
legislation. But let us listen to what the report says. On page 19, it 
states that social insurance should be included in receipts.
  The report on the same page excluded, or exempted, the Tennessee 
Valley Authority but not Social Security. This should give everyone an 
idea of the priorities of this body: Power over senior citizens. This 
amendment will do nothing for the tens of millions of Americans who pay 
their hard-earned money into Social Security and then expect to receive 
this retirement in their golden years.
  No one watching this debate should be mistaken about what is 
happening in this Chamber this day. It is not the politics of meaning, 
but the politics of meaninglessness. If it is adopted, which I believe 
it will be, it will provide meaningless protection to the Social 
Security trust funds.
  On the other hand, it provides meaningful protection to politics. It 
does not take great courage to vote for this amendment. However, it is 
a lot like the old beer commercial: Tastes great, less filling. It will 
do nothing to prevent the future raiding of the escalating surpluses 
that will be used to pay back the baby boomers. It does nothing to 
allay the fears of today's senior citizens that they will not receive 
what is rightfully theirs.
  The PRESIDING OFFICER. The Senator has used 6 minutes.
  Mr. REID. Could I have 1 more minute?
  Mr. DASCHLE. I yield the Senator another minute.
  Mr. REID. But it should create a state of despair for all 
generations, not only my generation, but my children's generation and 
their grandchildren. I have three grandchildren, all girls: Two age 4, 
one age 2. I want to protect them, because the real contract with 
America, the real contract with my grandchildren is not a contract of 
passing fancy but the Social Security contract. This contract, Social 
Security, deserves our defense. The vote today is a clever effort to 
let down our defense, to allow the destruction of the greatest social 
program the world has ever known, Social Security.
  Mr. DASCHLE addressed the Chair.
  The PRESIDING OFFICER. The Senator from South Dakota.
  Mr. DASCHLE. Mr. President, let me thank the distinguished Senator 
from Nevada for his statement this morning and for the great leadership 
he has shown on this issue. This has been an issue that the Senator 
from Nevada has been associated with now for a long period of time. He 
has led our caucus, he has led the Senate, and I commend him for the 
tremendous effort that he has put forth, especially now over the last 
couple of days.
  As our colleagues know, we are about to vote on a motion by the 
majority leader to request a Budget Committee report on how to protect 
current Social Security from the effects of a balanced budget 
amendment. I support that request, but unfortunately, we all know 
[[Page S2450]] that approach, while well-intentioned, just is not going 
to get the job done.
  First, the request is just that, it is a request. It does not bind 
the Congress. It does not bind any future Congresses.
  Second, the job is more significant than that. It is more significant 
than simply requesting that somehow at some point in the future we hope 
that Congresses can protect this important trust fund. The real job is 
to protect it, and the only way to protect the dedicated funds into 
which every working American pays to help secure his or her future or 
the futures of their parents or their children, the only way to do that 
is to do as the Senator from Nevada has now proposed.
  Even if the majority leader's request was binding, which we all know 
it is not, it would do nothing to protect those funds in the future. 
There is no way that we can guarantee future Congresses are going to do 
what we ask them to do this year. And so they remain vulnerable to the 
inevitable attempts to use these funds in future Congresses as we have 
used them in past Congresses: To hide the true size of the deficit.
  So as we contemplate amending the Constitution, it is essential--it 
is essential--that we completely be up front with the American people 
about how we are going to do it.
 If we want to build a trust, a faith, a confidence in this 
institution, we have to level with the public and acknowledge that the 
nonbinding request upon which we are about to vote is fine, but it 
simply does nothing, nothing to protect Social Security in the future. 
When we talk about amending the Constitution, it is the future that we 
are obligated to consider.

  The Senate has been debating this issue for some time now, and as it 
has, many of us have attempted to put teeth and honesty into this 
particular amendment. We have done so because it is evident from the 
so-called Contract With America that the only reliable cutting promised 
by the new congressional majority is going to be made in revenues. The 
Contract With America promises no spending cuts at all.
  Let me repeat that. The Contract With America does not delineate any 
cuts whatsoever in spending. To the contrary, it would commit the 
Government to substantial new spending. At the same time, it offers a 
balanced constitutional amendment--a promise with no hint on how it 
will be fulfilled. And that responsibility is ultimately passed on to 
future Congresses in a future year. It avoids the responsibility, it 
avoids outlining the spending cuts that will be required, and we all 
know we are going to have to vote for if we are here over the next 7 
years.
  In November of last year, the majority told us they would show us a 
budget cutting plan that would establish a glidepath to a balanced 
budget. Well, we are still waiting.
  Then we began to hear that we would reach a budgetary balance 
painlessly by curtailing program inflation. But we have now looked at 
the numbers and this easy, pain-free method will not work. It will not 
work because the numbers do not add up.
  Then the idea was to wait for the President's 1996 budget and 
complain that he did not do what the majority said they themselves 
would do in November--set out a plan to cut spending and balance the 
budget by the year 2002.
  So since November, we have heard pledges that Social Security will 
not be touched, promises that a plan will be written, and declarations 
that it is not fair to ask when.
  Current Medicare enrollees were told earlier that Medicare would not 
be on the chopping block. Now we are hearing complaints that the 
President did not put it there.
  I weigh the promises against the hard facts of budget numbers, and I 
think a lot of colleagues would share my view that the promises do not 
add up, but the numbers do. And what the numbers add up to is that 
these promises are, frankly, unrealistic. The promise to lay out a 
spending plan has not been kept and apparently will not be.
  Intentionally or not, the new majority sent that signal 2 days ago 
when every single Senator on the other side voted against telling the 
American people how the budget would be balanced in 7 years' time. And 
now they want us to accept on faith the promise to protect Social 
Security.
  While I have no doubt that many of my colleagues truly want to keep 
that promise, the fact is we all know that the pending motion does not 
bind even this Congress, much less future Congresses. There is no 
binding way with which we can take this resolution and tell anybody in 
the future that anything is changed that would give them confidence in 
knowing their benefits will be there.
  So, Mr. President, that is why the Reid-Feinstein amendment is 
necessary, to ensure that our good intentions will be realized. The 
amendment solidifies the Social Security promise. It writes into the 
Constitution, it says to Social Security enrollees, who include 
virtually all working people in this country, as well as their retired 
parents, that these trust funds will be protected from ever being used 
in the future to balance the Federal budget.
 It is the only thing--the only thing we know of that will absolutely 
guarantee in writing, in black and white, that Social Security is a 
trust fund that will always be there. I supported it last year. I will 
vote for it again this year. It is just as necessary today as it was 
back then.

  Why does it deserve special treatment? Because it is a contract 
between generations, that is why. Because it protects older Americans 
against poverty, that is why. Because it protects working families in 
case of premature death, that is why. Because it protects workers if 
they are disabled by illness or accident; that is why, too.
  It says to every working person: You pay into these trust funds and 
when it is your turn, when it is time for you to use them--when you are 
too old, when you are too sick, too disabled to work--your Nation will 
make sure you do not lose everything, everything that you have worked 
for.
  Today, 60 years after President Franklin Roosevelt sealed the real 
contract with Americans, Social Security is still a promise that is 
honored by Government. It is something people can count on to be there 
when they need it. It is a contract which recognizes that we are all 
human, that we all grow old, we are all vulnerable to illness and to 
ill health and to accident. It says that we, as Americans, will not let 
hard-working people sink into poverty through no fault of their own 
regardless of the circumstances. And that is a contract.
  That is a commitment that has not withstood 1 year, or one election, 
but generations--lifetimes. From its very creation in 1935 until 1969, 
everyone here knows that the program was off budget. And then everyone 
also knows what happened in 1969. In an attempt to mask the costs of 
the Vietnam war and the growing deficit, guess what happened? Social 
Security was put back on the budget.
  Then, in 1990, Congress again voted to take it off budget. We may 
have forgotten what that vote was, Mr. President. It was 98 to 2--98 to 
2, almost unanimous. The people in this body said Social Security ought 
to be off budget and not used for other things, not used to mask the 
debt, not used to pay for other things that may come along, whether 
foreign or domestic. We said then that Social Security revenues held in 
trust for retirement should not be used to balance the Federal budget. 
And we did the right thing.
  The flaw in the proposal now before us is that it includes in the 
budget Social Security surpluses that should be set aside to pay future 
retirement benefits. That is the flaw. Everybody knows it is there. 
Everybody knows we do not want it to be there. The question is, How 
serious are we about taking it out of there?
  Social Security is not responsible for one dime of the national debt, 
and it should not be raided to pay off that debt now. Those who oppose 
the Reid amendment argue that while Social Security did not cause the 
deficit, they are very concerned about what happens if we take it off 
the table to pay down that deficit. They do not want to acknowledge the 
Reid amendment can be used to ensure we protect it in the future. As 
long as the trust funds are part of the unified budget, we all know 
that they help hide the real dimensions of the budgetary imbalance. The 
program is currently generating a surplus. We all know that, too.
  There is a critical reason for accumulating those surpluses. It was 
laid out 
[[Page S2451]] very explicitly by the senior Senator from New York just 
yesterday. Following World War II, the level of Social Security taxes 
was raised so that adequate funds would be available to pay the 
retirement benefits that will come due as those of us who are baby 
boomers retire. Those surpluses are meant to be there as a confidence-
building effort to ensure the trust fund meets the predictable benefit 
payments in the future. If they are not there, from where will they 
come?
  The Federal Government will owe the Social Security system nearly $3 
trillion by the year 2017--$3 trillion. That is why we need to preserve 
the surpluses and protect them, because that $3 trillion is going to 
come due one day. Whether we have masked the deficit, whether we have 
used those funds to pay for other things or not, that money will be 
needed.
  So the Social Security system today is taking in far more revenues 
than it is paying out in benefits for that reason alone. This year it 
will take in $69 billion more than it pays out. Between now and 2002, 
when the balanced budget amendment would take effect, Social Security 
will have amassed $705 billion in additional revenue.
  Here is the point. If there is one point to the vote we are about to 
take, it is this. Without the Reid amendment, every dollar of those 
revenues will be placed on budget--every dollar --to give the false 
impression that there is $705 billion in available cash. Future 
Congresses would be able to avoid reducing the deficit by that amount, 
by $705 billion, in the next 7 years alone. That is why this issue is 
so important. The threat of the use of trust funds is a very real one. 
It is happening right now. It has been tried before. It will be tried 
again.
  Our late colleague, the highly respected Senator from Pennsylvania, 
John Heinz, used the right word, ``embezzlement,'' when he helped to 
lead the fight to take Social Security off the budget.
  The Senator from New York, the one to whom I have just recently 
referred, Senator Moynihan, has described it as ``thievery.''
  I have supported a balanced budget amendment because I believe it is 
completely unfair to leave the current legacy of debt to our children 
and grandchildren. But what happens if we deplete the Social Security 
trust fund that they are now counting on for their retirements? We will 
have failed. It is that simple. We will have failed to live up to our 
commitment to them.
  The Reid amendment would restore budgetary honesty by requiring an 
accurate accounting of the true size of the Nation's deficit problem. 
That is what it does. Taking Social Security out of the calculation 
would protect the fiscal integrity of the Social Security trust funds. 
It would require us to enact the tough policies needed to eliminate the 
deficit.
  Many of our colleagues argue it is unnecessary, that they will help 
protect Social Security in the future. But I urge those Senators, if 
they are truly sincere, to solidify that commitment in the Constitution 
itself to put an end to public concerns that the budget will be 
balanced at the expense of trust funds.
  So again, I remind everyone that less than 5 years ago, 98 Senators, 
across party lines, voted to take Social Security off the unified 
budget. Solemn commitments were made then--no less solemn than today's 
promises--that the special status of Social Security is acknowledged 
and, more important, will be respected by this Congress and by future 
Congresses. But the future is now, and it is again necessary to defend 
Social Security's unique mission.
  So I hope my colleagues will do the only thing that will ensure that 
Social Security is able to continue that mission into the future. We 
need to support the Reid amendment.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Utah.
  Mr. HATCH. Mr. President, may I ask how much time the majority side 
has?
  The PRESIDING OFFICER. The majority side has 17 minutes.
  Mr. HATCH. Mr. President, let us just all understand here, the Social 
Security trust fund is now filled with a bunch of IOU papers because 
the Federal Government has been borrowing from that trust fund and has 
been using that money to pay off Federal obligations. By agreeing to 
the Reid amendment, that does not solve that problem at all. The trust 
fund is a bunch of IOU's. Frankly, unless we get spending under 
control, unless we get this Government's fiscal house in order, all 
that is going to be left is that pile of papers, those IOU's, because 
all of that money will have been spent.
  So this is not that issue. Just look at this debt tracker that we 
have here. We are now in our 12th day. I might as well put that one up 
here: 12th day of debate. During these 12 days, we have gone above $4.8 
trillion. We are now almost $10 billion in additional deficit in just 
the 12 days we have been debating this.
  This is serious stuff. And, frankly, if we do not keep the balanced 
budget amendment intact to cover everything in the Federal Government, 
we will not get this under control.
  I would like to congratulate Senator Dole and all of my colleagues 
who support offering this motion to refer this measure. This motion 
requires that the Budget Committee report how, in implementing the 
balanced budget amendment, Congress will move toward balancing the 
budget without reducing Social Security benefits or increasing Social 
Security taxes. Let me repeat that. Congress will neither cut Social 
Security benefits nor increase Social Security taxes to balance the 
budget. I have maintained that this is an achievable goal, and now we 
have the first vehicle to demonstrate it.
  The next step, of course, is to pass the balanced budget amendment 
and start the Nation down the road to fiscal responsibility. This is a 
very good approach to ensuring that we will not harm either our current 
or our future retirees as we get this Nation's fiscal house in order. 
And the only thing that is going to do that is the balanced budget 
amendment as it is written now. It is bipartisan. It is consensus. It 
is Democrat-Republican. It is the only one that we can get through, and 
we should not try to change it with issues that can be solved like 
this, which does solve them.
  For all of our generations this is important. We want to protect 
Social Security. There is not a person in this body or in the other 
body who is not going to do that. I do not know of anyone in the House 
or the Senate who is not going to protect Social Security under the 
balanced budget amendment. And this measure that Senator Dole, Senator 
Domenici, and others have helped with will prove it.
  But everybody knows that, if we amend the balanced budget amendment 
to exclude Social Security from its features, the balanced budget 
amendment will not be worth the paper it is written on. Everybody knows 
that because that would be the loophole through which they would drive 
every program there is. We have already seen that with SSI. SSI is paid 
out of general revenues, but it is part of Social Security. That would 
be the first thing they would turn over to Social Security revenues. I 
will say that you can add almost any other social spending program just 
by calling it Social Security.
  So everybody knows what I am talking about, including those who are 
arguing this issue. Anyone who says otherwise is simply using a scare 
tactic, trying to scare our seniors into believing that they are going 
to be hurt by a balanced budget amendment while the exact opposite is 
true. They are going to be killed if we do not get spending under 
control, and if we do not get this Government's fiscal house in order. 
We have to do it. And it is in the interest of our seniors to do it, 
and I think most seniors understand that, and I think they know these 
scare tactics for what they are. There is no question that we will 
protect Social Security as we implement the balanced budget amendment. 
We provide in the amendment for implementing legislation in which 
Congress will do that, as Senator Dole's motion shows today.
  We all want to protect Social Security. It holds a special place in 
our Nation's programs. We will protect Social Security and in an 
appropriate and reasonable way. The report required by this motion will 
show that we can do that. It is wholly appropriate. It is the 
reasonable way to do it. It is wholly reasonable, and it points the way 
to real protection for those who are relying upon the Social Security 
trust 
[[Page S2452]] funds as well as future generations who will depend on 
our disciplining ourselves and our deficit spending habits.
  This provision goes to the heart of the concern of some that Social 
Security benefit cuts or tax hikes could result from attempts to 
balance the budget. It shows that, as we move to balancing the budget, 
we will not cut benefits or raise taxes in the Social Security trust 
funds in order to balance the budget.
  I wholly agree with the intention of this motion, and I urge my 
colleagues, all those who, like me, support a real balanced budget, and 
all of those who, like me--meaning everybody--support protecting Social 
Security, I ask all of them, to vote for this measure. Let us adopt 
this reasonable and appropriate approach showing that we will protect 
Social Security as we move toward balancing our Federal budget.
  This motion requires simply that the Budget Committee of the Senate 
report to the Congress how we can balance the budget without touching 
Social Security. It will show that we can do what we have said we 
could, and it is the right way to do it without writing a statute into 
this amendment.
  We are talking about the Constitution that we are amending. We do not 
need a statute, and we need to do something about this ever-increasing 
debt. This is only a modest illustration. But, in 12 days our debt has 
gone up $9,953,280,000, in the 12 days that we have been debating this 
matter and delaying and putting it off. Now we are getting down to 
brass tacks. It is time to vote for this.
  I hope that our colleagues will support the leader, Senator Dole, and 
the leadership in doing this.
  I yield 5 minutes to the distinguished Senator from Idaho.
  The PRESIDING OFFICER. The Senator from Idaho is recognized.
  Mr. CRAIG. Mr. President, it is fair and I believe proper that the 
Senate of the United States speak to the citizens of this country as to 
our intent about how we plan to handle Social Security as we move 
toward a balanced budget. Therefore, I strongly support the Dole motion 
and encourage all Senators to vote for it because it is the appropriate 
way to express our will and to direct the Budget Committee in its 
proceedings once we have sent a balanced budget amendment to the States 
for their consideration and, hopefully, their ratification.
  What is important is that it is separate and apart from the amendment 
itself because it expresses the will of Congress, and it does not 
clutter up the Constitution the way the Senator from Utah has so 
clearly spoken. It does not create the massive loophole that the 
Senator from Nevada is attempting to carve inside the Constitution that 
would allow future Congresses to drive ever-increasing social programs 
through the Social Security loophole and, in fact, potentially destroy 
the Social Security Program.
  The strength of the Social Security Program has never been the law 
itself. The strength of the Social Security Program is right here on 
the floor of the U.S. Senate. It is the obligation of every Senator to 
honor what we believe to be a commitment to the citizens of this 
country who pay into a supplemental income program as to our obligation 
to ensure that program remain sound and stable throughout all time. 
There is no statute in the Constitution today singling out any special 
program of Government guaranteeing to the citizens how that program 
will be operated for all time. The Constitution has been, and must 
remain, a code, a sense of principle and an organic act that says here 
is how the collective government of our country operates. It is then 
Government's responsibility and this Senate's responsibility, once we 
have passed legislation and created law as we did with the Social 
Security System, to honor the commitment of that law so spoken to the 
American people.
  Mr. President, the threat to Social Security is not the Senate of the 
United States. The threat to Social Security is the debt. It is the 
debt that is the threat. And if we fail to balance the Federal budget, 
Social Security will go down in 25 or 30 years. The obligations this 
Government will have will be so large that the tax increases that will 
be demanded to stabilize the system will be so large and overpowering 
that the average taxpayer will not be able to pay them, and by the 
Office of Management and Budget's own confession, 84 to 85 percent of 
the gross pay of the average worker out there in the future will have 
to go to the Government in taxes. You know what is going to happen, Mr. 
President, if that ever were to occur. They would look at me because, 
by then I would be on Social Security, and they would say, ``I am 
sorry, Larry, we cannot afford you because we cannot afford to pay our 
bills and put our kids through school and buy a home because you are 
asking too much of us for your own benefit.''
  That is why this motion is important, to say that it is the sense of 
the Congress in directing the Budget Committee, as we move to balance 
the budget, to do so without increasing revenues or depleting the trust 
funds of Social Security. That is a clear intent, a clear expression of 
what this Senate will do. It is not unlike what the House did before 
they voted on the balanced budget amendment by a vote of over 418 to 
say to themselves and to the American people watching that they will 
not balance the Federal budget on the backs of the Social Security 
recipients.
  But what they did not do and what we must not do is to clutter up the 
Constitution of this country by creating political loopholes. The 
American people are already suspicious of us. They know that we craft 
laws and we create special exemptions and special and unique 
opportunities with inside the law. We must never do that within our 
Constitution. That is why the Dole motion is so important and why I 
urge all of my colleagues to vote in support of that motion.
  The PRESIDING OFFICER. The Senator from Utah controls 5 minutes.
  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. DOLE. 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. HATFIELD. Mr. President, removing Social Security from the 
provisions of the balanced budget constitutional amendment misleads the 
American public and the current and future beneficiaries of the Social 
Security system. While removing Social Security from the balanced 
budget amendment is purported to protect its beneficiaries, in effect 
that action would threaten the long-term viability of the system. As 
noted in the report to the President from the Commission on Entitlement 
and Tax Reform, benefit payments under the Social Security system will 
exceed dedicated revenues for the program by the year 2013. This cash-
flow shortfall will result in the Social Security trust fund becoming 
insolvent by the year 2029. Given these projections, removing Social 
Security from the table as we debate our Nation's fiscal problems would 
be irresponsible. The Congress owes it to the current and future 
beneficiaries of Social Security to address this long-term problem. 
Removing Social Security from the balanced budget amendment addresses a 
short-term politically sensitive issue; however, it does not address 
the long-term facts that reform is needed for this program to remain 
solvent.
  Mr. DOLE. Mr. President, this motion presents us with another 
opportunity to demonstrate to America's seniors that there is broad 
bipartisan support for protecting Social Security as we move toward a 
balanced budget. On January 26, the Senate voted 83 to 16 to adopt a 
sense-of-the-Senate amendment stating that we intend to protect Social 
Security. The House of Representatives endorsed a similar concurrent 
resolution to protect Social Security by a vote of 412 to 18.
  Mr. President, we need to put a halt to the scare tactics and 
reassure America's seniors.
  Later this year, Republicans will put forward a detailed 5-year plan 
to put the budget on a path to balance by 2002. Our plan will not raise 
taxes. Our plan will not touch Social Security. Everything else, every 
Federal program from Amtrak to Zebra Mussel research will be on the 
table.
  Mr. President, I urge my colleagues on both sides of the aisle to go 
on record to reassure America's seniors and vote for this motion.

[[Page S2453]]

  Mr. President, I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There is a sufficient second.
  The yeas and nays were ordered.
  The PRESIDING OFFICER. The question is on agreeing to the amendment.
  The yeas and nays have been ordered.
  The clerk will call the roll.
  Mr. LOTT. I announce that the Senator from Wyoming [Mr. Simpson] is 
absent due to a death in the family.
  I further announce that, if present and voting, the Senator from 
Wyoming [Mr. Simpson] would vote ``yea.''
  Mr. FORD. I announce that the Senator from Louisiana [Mr. Johnston] 
and the Senator from Minnesota [Mr. Wellstone] are necessarily absent.
  I further announce that, if present and voting, the Senator from 
Minnesota [Mr. Wellstone] would vote ``yea.''
  The PRESIDING OFFICER. Are there any other Senators in the Chamber 
desiring to vote?
  The result was announced--yeas 87, nays 10, as follows:
                      [Rollcall Vote No. 63 Leg.]

                                YEAS--87

     Abraham
     Akaka
     Ashcroft
     Baucus
     Bennett
     Bond
     Boxer
     Breaux
     Brown
     Bryan
     Bumpers
     Burns
     Campbell
     Chafee
     Coats
     Cochran
     Cohen
     Conrad
     Coverdell
     Craig
     D'Amato
     Daschle
     DeWine
     Dodd
     Dole
     Domenici
     Dorgan
     Faircloth
     Feingold
     Feinstein
     Ford
     Frist
     Glenn
     Gorton
     Graham
     Gramm
     Grams
     Grassley
     Gregg
     Harkin
     Hatch
     Heflin
     Helms
     Hutchison
     Inhofe
     Inouye
     Jeffords
     Kassebaum
     Kempthorne
     Kennedy
     Kerrey
     Kerry
     Kohl
     Kyl
     Lautenberg
     Leahy
     Levin
     Lieberman
     Lott
     Lugar
     Mack
     McCain
     McConnell
     Mikulski
     Moseley-Braun
     Moynihan
     Murkowski
     Murray
     Nickles
     Pell
     Pressler
     Pryor
     Reid
     Robb
     Rockefeller
     Roth
     Santorum
     Shelby
     Simon
     Smith
     Snowe
     Specter
     Stevens
     Thomas
     Thompson
     Thurmond
     Warner

                                NAYS--10

     Biden
     Bingaman
     Bradley
     Byrd
     Exon
     Hatfield
     Hollings
     Nunn
     Packwood
     Sarbanes

                             NOT VOTING--3

     Johnston
     Simpson
     Wellstone
  So the amendment (No. 238) was agreed to.
  Mr. CRAIG. Mr. President, I ask unanimous consent that it be in order 
to vitiate the yeas and nays on the amendment numbered 237.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The question is on agreeing to the amendment, as amended.
  So the amendment (No. 237), as amended, was agreed to.
  The PRESIDING OFFICER. The question is on agreeing to the motion to 
refer, as amended.
  So the motion, as amended, was agreed to.
  Mr. DOLE. 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. FEINGOLD. Mr. President, I ask unanimous consent the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. FEINGOLD. Mr. President, I ask unanimous consent to speak as in 
morning business.
  The PRESIDING OFFICER (Mr. Frist). Without objection, it is so 
ordered.

                          ____________________