Congressional Record, Volume 141 Issue 27 (Friday, February 10, 1995)

[Congressional Record Volume 141, Number 27 (Friday, February 10, 1995)]
[Senate]
[Pages S2457-S2483]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

BALANCED BUDGET AMENDMENT TO THE CONSTITUTION

Mr. STEVENS. Would the Chair report the pending business at this
time?
The PRESIDING OFFICER. The pending question is House Joint Resolution
1. The clerk will report.
The 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 continued with the consideration of the joint resolution.
Mr. REID addressed the Chair.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, I would like to take a few minutes this
afternoon, until other speakers come to speak on the matter before this
body, to kind of review what has taken place over the last few days in
regard to the balanced budget amendment, and, specifically, the
amendment that is now pending before this body, namely the Reid
amendment to exempt Social Security.
There have been, I think, a number of interesting statements made.
The one that has stuck in my mind since it was made is the one made by
the Senator from North Dakota [Mr. Dorgan] where he talked about a trip
that he took to Central America, and a helicopter in which he was
flying ran out of fuel and he landed. While on the ground waiting to be
rescued, he spoke to a number of Nicaraguans or Hondurans--I do not
remember which--who were native to the area. One of the questions that
he asked to a young
[[Page S2458]] woman there was, How many children do you have? She
said, Three. He noted in the tone of her voice that she was
disappointed. As the Senator from North Dakota went on to explain, in
many parts of the world a person's security and their golden years is
how many children they have been able to have because it is through the
network of the children that they hope they will be maintained in
dignity.
Mr. President, that is not the Social Security we have in this
country. The Social Security that we have in this country is by virtue
of an agreement made by the Congress of the United States in 1935 with
the people of this country--60 years ago--where a very noble experiment
was undertaken. That experiment said let us have an employee contribute
a certain amount of their wages along with an equal amount from the
employer, and we will put that into a trust fund. When that person,
that employee, gets older, and is of retirement age, they will be able
to draw in their retirement years money, an old age pension, if you
will.
So I think it says a lot. It speaks volumes; that in this country the
dignity of a person in their golden years is not determined by how many
children they have been able to have but rather the fact that in this
country we have a program that is no longer experimental but a program
that works which is called Social Security. This, of course, does not
take away from the fact that we should all be proud of the children we
have. But certainly, this takes a burden away from the children, a
burden that certainly becomes too much of a burden on occasion.
As we have proceeded with the debate, one of the things that I have
noted with interest is the participation in these proceedings by the
junior Senator from South Carolina [Mr. Hollings]. The Senator from
South Carolina has been in this body 28 years. He served as Governor of
the State of South Carolina. He has been chairman of the Budget
Committee. He is now the ranking member of the Budget Committee. He is
a person that we look to for fiscal guidance.
I was, therefore, pleased that he joined in support of the Reid
amendment, and as the debate has proceeded I think succinctly stated
and summarized in a letter his position that he wrote to each U.S.
Senator on the 9th of February where he said:
Left alone, this provision would repeal Section 13301 and
constitutionally endorse the violation. The Reid amendment
presently under consideration corrects this unintended repeal
by stating that the Social Security trust fund `` . . .
should not be counted as receipts or outlays for the purposes
of this article.''

Senator Hollings goes on in his letter:

John Mitchell, the former Attorney General, is known for
the axiom, Watch what we do, not what we say. It should be
made crystal clear that we mean what we say. If you want to
continue to use the trust fund in breach of the trust, vote
against the Reid amendment. If you want to maintain the
trust--the contract with America made back in 1935--then
please support the Reid amendment.

Mr. President, the fact is that in addition to the support of the
Senator from South Carolina, we have also received the support of the
senior Senator from Alabama [Mr. Heflin]. Senator Heflin is the
Senate's legal scholar and I would like to read a great statement that
he made. Senator Heflin, a member of the Judiciary Committee, put out
this bill with the report attached thereto. He recognized in the
report, on page 72--I should tell those watching on C-SPAN, those in
the offices who may not know, that a report is put out by the committee
of jurisdiction on a particular piece of legislation.
The balanced budget amendment went to the Judiciary Committee. The
Judiciary Committee reported out the bill with a report. Every piece of
legislation, with rare exception, that comes to this floor is
accompanied with a report. The purpose of the report, among other
things, is it gives the Senate the views of what the committee meant in
passing out the bill.
Senator Heflin filed a minority report and, among other things, in
this statement he said--as you will recall, Senator Feinstein, a member
of the Judiciary Committee, offered an amendment that was the same as
mine in the Judiciary Committee, which they turned down. Senator Heflin
says in the report:

I also support Senator Feinstein's amendment to exempt
Social Security from the balanced budget calculation. In the
Budget Enforcement Act of 1990, Congress clearly declared
that the Social Security trust fund is offbudget. In the
past, surplus which has accumulated in the trust fund has
been used to mask the true size of the Federal budget
deficit.

I part briefly from the report language of Senator Heflin and state
that it has been fairly well established on this floor on both sides of
the aisle that this started in 1969, during the Vietnam war, when there
were efforts made by the Congress and President Johnson to mask the
size of the deficit that had accumulated as a result of the Vietnam
war. So they started using, at that time, Social Security trust fund
moneys to offset the deficit. That is what Senator Heflin is talking
about here.
He goes on to say:

Social Security is a self-financing contributory
requirement program. Workers must contribute 6.2 percent of
their salaries to the program, and employers are required to
match that amount. These funds, by law, are held in trust,
and the American people have a right to expect that Congress
will maintain the integrity of that fund. The funds are now
in surplus, and this is expected to continue until 2012.

That is what he said in the report. But he has come to the floor on
more than one occasion during the past week and talked about this
proposal; namely, that the opponents of my amendment are saying that
they can use implementing legislation to exempt Social Security from
the balanced budget calculations. Well, it is clear that attempts to
protect Social Security through implementing legislation would simply
be futile. Once the Constitution is amended to require that ``Total
outlays for any fiscal year shall not exceed total receipts for that
fiscal year,'' Social Security is certainly in danger. And that is my
authority that is renowned in the legal circles--Senator Howell Heflin,
who previously was chief justice of the Alabama Supreme Court.
Senator Heflin said:

This means that there will be a constitutional requirement
that Social Security funds be considered onbudget. If the
balanced budget amendment is adopted as presently worded, it
would prohibit Congress from legislatively taking Social
Security funds offbudget and would nullify the provisions of
the 1990 Budget Enforcement Act, which requires Social
Security funds to be considered offbudget.

Senator Heflin is a supporter of the balanced budget amendment, as is
the Senator from Nevada, the minority leader, and the minority whip.
But we have some significant concerns, Mr. President, about Social
Security being used to offset the deficit, especially when we consider,
as Senator Heflin said in the report, that Social Security moneys are
accumulated in a trust fund.
It has been talked about here on the floor lots of times. The Senator
from North Dakota [Mr. Conrad] compared it to Jim Bakker, the infamous
clergyman who went to jail because of his misrepresentations. The
Senator from North Dakota said that he went to jail--Jim Bakker--as a
result of saying he was collecting money for one reason and using it
for another reason. Well, that is one way to describe our fiduciary
relationship to trust fund moneys accumulated in the Social Security
trust fund. We cannot spend those moneys for some other purpose.
Senator Heflin talked about implementing legislation, but just so the
Record is clear, it is not only Democratic Senator Howell Heflin, a
person whose integrity is unmatched, whose legal prowess is unmatched
in this body. Let us look to someone else to see if they would come up
with the same conclusion. Sure enough, we went to the Congressional
Research Service, an arm of the Congress, and one of the attorneys in
the law division, Kenneth Thomas, had this to say:

Under the proposed language----

He is talking about the constitutional amendment.

----it would appear that the receipts received by the
United States which go to the trust fund and the Federal
disability insurance trust fund would be included in the
calculations of total receipts, and that payments from those
funds would similarly be considered in the calculation of
total outlays. Thus, if the proposed amendment was ratified,
then Congress would appear to be without the authority to
exclude the Social Security . . .

[[Page S2459]] I will read that again:

Thus, if the proposed amendment was ratified, then Congress
would appear to be without the authority to exclude the
Social Security trust funds from the calculations of total
receipts and outlays under section 1 of the amendment.

That says it real clear--namely, that if House Joint Resolution 1
passes, it does not matter what Congress does with implementing
legislation--or any other kind of legislation--to exclude Social
Security; they cannot and we cannot. A future Congress cannot, because
to do so would violate the Constitution, which would be House Joint
Resolution 1. In effect, it says you must include the Social Security
trust fund in balancing the budget. So that thing we passed earlier
today is not worth the paper it is written on.
It is not worth the paper it is written on. It is only for show that
people can go home and say, ``I voted to protect Social Security.'' It
cannot happen.
Social Security has to be included. To not do so would be violating
the Constitution. I did not write the constitutional amendment that is
being sought to be adopted. It was written by someone else. And, sure
enough, that is what it says. ``Total outlays shall include all outlays
of U.S. Government except for the repayment of debt principle.'' That
is what it says.
There has also been statements made from time to time that, ``Well,
there are other ways we could legislate.'' Well, according to Senator
Heflin it simply will not work. In fact, what we have done is made it
even worse.
The House has passed a measure that is comparable to what we did here
today. We are going to vote on my amendment on Monday or Tuesday. If
the same action is taken in the Senate that was taken in the House,
that would mean both bodies of this legislature, our bicameral system
of government, both bodies turned down exclusion of Social Security. So
if any court later considered the constitutionality of implementing
legislation, I think they would have to look to the legislative history
and they would determine it was not Congress's intent to keep Social
Security off budget.
First, the House defeated a proposal to exempt Social Security. And
if my amendment does not pass, you would have a second time. So there
would be similar authority from this body as in the House. And a court
reviewing the legislative history would likely determine that Congress
had its opportunity to maintain the Social Security trust funds off
budget but refused to do so.
If my amendment does not pass, Social Security trust funds, I
believe, are gone. The great experiment that we have had for some 60-
odd years will then have failed, not because Social Security has added
one penny to the debt, because it has not, but because we in Congress
were unwilling to exclude Social Security from trying to balance the
budget.
It is really unfair that we would use Social Security receipts--
unless there were an effort made really to do that--that behind all
this there is a subtle effort made to get through this part of it and
then go use the Social Security moneys.
One day this week, I was on a television program at noon with a
little minidebate with former Senator Tsongas. And he was very candid.
He said, ``Yes, we will use Social Security moneys to balance the
budget.'' He did not mince any words. He was pretty clear.
The L.A. Times set out a little quote that I made here on the floor
this week, where I said that there is about as much chance for this
body to balance the budget without using Social Security trust funds as
Evel Knievel was going to jump the fountain at Caesar's Palace. He just
would have a real difficult time doing it. It could be done, but it
would be difficult.
So I think we should stop playing games and recognize that there are
some who want to use these moneys. I think we should exclude Social
Security and then ratchet down to do what we can to balance the budget,
which we would be obligated to do under the constitutional amendment.
Opponents of my amendment argue that statutes have never been
incorporated into the Constitution and this would be an unprecedented
constitutionalizing of a statute. But this is pure
poppycock, Mr. President. Because this is the first time, of course,
that we have tried to deal with an amendment to the Constitution
dealing with fiscal policy. So certainly with a program as large as
Social Security, we should understand in the confines of the balanced
budget how we are going handle that.
The only way to protect Social Security is to specifically exclude it
from the constitutional amendment because Congress would be without
authority to attempt to exclude Social Security from the balanced
budget calculations for any type of implementing legislation.
The Senator from California, Senator Feinstein, has said the only way
to save Social Security surpluses to pay for future retirements is to
balance the budget exclusive of Social Security.
Opponents have also argued, Mr. President, if Social Security is put
off budget, then Congress would have to raise taxes or cut spending,
$69 billion this year alone, just to keep the deficit at the current
level. This is what Chairman Hyde of the House Judiciary Committee
referred to when he said, ``The effect on the other Federal programs
will be draconian if Social Security is excluded from the balanced
budget amendment.''
That is exactly the point that I am making. We are against using
Social Security trust funds to balance the budget. We want to exempt
Social Security because that is where the money is and that is what we
must protect.
I have said a number of different times over this last couple of
weeks that famous bank robber Willie Sutton, when released from prison,
was asked why he robbed banks. He responded, ``Because that's where the
money is.''
Well, Mr. President, in the next few years the huge amounts of money
that will be accumulating in the Social Security trust fund will be
where the money is. That is where people will look to balance the
budget--this year, $70 billion; next year, $80 billion; the year 2002,
over $700 billion; and a few years later $1 trillion and then $2
trillion and it rises to the point where there is $3 trillion in the
Social Security trust fund if we do not take those moneys as we have in
the past and divert them to deficit reduction.
Fifty-eight percent of all workers pay more FICA taxes than they do
Federal income tax. Over half of the people in this country pay more in
FICA taxes, that is Social Security taxes, than they do in income
taxes.
And, as stated repeatedly, this Social Security is the most important
contract we have with America. These surplus funds should be saved and
not used to balance the budget.
Opponents also argue, Mr. President, that exempting Social Security
in the constitutional amendment would create a loophole. That argument
was made by my friend from Idaho this morning; that passing this
amendment creates a loophole through which you could add other
programs, try to define them in Social Security, and thus would be
exempted from the requirements of the balanced budget amendment. That
argument makes no sense, no sense, because the amendment offered by the
Senator from Nevada is very specific. The argument is an exaggeration
that it would create a loophole.
My amendment is intended to safeguard an easily identifiable and
narrowly defined program--the old-age pension and disability insurance.
Anything that changes the long-term actuarial plan of Social Security
is subject to a 60-vote point of order before this body. If someone
wanted to place education or foreign aid or aid to families with
dependent children with Social Security, it would not work. You would
need 60 votes to waive that.
Having Social Security exempted from the balanced budget amendment
does not--I repeat, does not--create a loophole.
Legislation which proposes either increased Social Security
expenditures or decreased taxes would be in violation of 302(F) and
311(A) of the Budget Act, and thus it would be subject to a budget
point of order and require, I repeat, 60 votes to waive the Budget Act.
Some have also argued, Mr. President, that an exemption for Social
Security would remove the incentive Congress would have in a balanced
budget amendment to provide for a long-term solvency of the trust fund.
One of the most interesting--and I cannot say
[[Page S2460]] most pleasant, but one of the most interesting--and
educational times I have spent in Government was being a member of the
Entitlement Commission which completed its work recently.
The Entitlement Commission, chaired by Senators Danforth and Kerrey,
was a bipartisan commission with an equal number of Democrats and
Republicans. The commission was made up of elected Members of Congress,
mayors, union leaders, and business leaders. A wide range of people
made up that bipartisan commission. During the year we worked on that,
it was very clear that the entitlements in existence in this country
needed some work done on them.
It is also very clear one of the obligations we have is to look at
tax policy in this country. It appears very clear to me that we must
also examine tax policy in this country.
So, to say that an exemption for Social Security would remove
incentive to strengthen Social Security is wrong. We all know that
there has to be some changes made to Social Security. But they should
be made separate and apart from the problems we are having with the
rest of the Government. The Social Security trust fund should rise or
fall on its own merits.
Therefore, Mr. President, I think this argument is fallacious. Social
Security has also been funded by FICA tax to which over 95 percent of
Americans contribute. These funds are used to pay recipients presently
receiving Social Security. In the past, when it appeared to Congress
that Social Security might be in jeopardy, we took care of that. We did
it in 1977 and 1983. The proposal I have that is appearing before this
body would not prevent Congress from making future adjustments in
either the benefits or the FICA tax to keep it solvent.
The Republican measure, though, what is called S. 290, would prevent
both the benefits and the FICA taxes from being changed. By freezing
the levels of the benefits and the taxes, S. 290 guarantees Social
Security's insolvency by the year 2029.
With Social Security, I think we can liken it to a ship which keeps
itself afloat. Opponents of the Reid amendment tend to want to have the
ship at least list if not sink. Social Security is a program that is
publicly administered, a compulsory contributing retirement program.
Financing to cover the cost of Social Security is provided by the flat
tax levied on wages. They are not the Federal Government's funds, but
are contributions that workers pay in and expect to get back.
Mr. President, I see my friend, the Senator from Iowa is present in
the Chamber. I yield the floor.
Mr. HARKIN addressed the Chair.
The PRESIDING OFFICER (Mr. Santorum). The Senator from Iowa.
Mr. HARKIN. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. HARKIN. 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. HARKIN. Mr. President, I first want to thank my friend and
colleague, Senator Reid, for his long and diligent efforts to ensure
that the Social Security system in America remains sound and separate,
to make sure that the people who are now receiving Social Security are
not threatened by its reduction, and those who are working hard and
paying into the system are assured it will be there for them when they
retire. There is no one who has worked harder and longer and fought
harder to protect Social Security than Senator Reid from Nevada. I am
proud to join him as a cosponsor on this amendment.
I am delighted to yield.
Mr. REID. I wanted the Senator to yield for a question or perhaps a
statement.
I want to spread across this record one reason this debate has been
so fruitful is that during the unfunded mandates debate, the Senator
from Iowa offered a sense-of-the-Senate resolution to exclude Social
Security from the balanced budget amendment. But for the Senator's
aggressiveness on that matter during the days we spent debating that,
we would not be in the posture we are today. This Senator from Nevada
and the other 14 cosponsors extend to the Senator our appreciation.
Mr. HARKIN. Mr. President, I thank the Senator for those fine words,
but I am literally following in his footsteps and proud to be a
cosponsor with him on this amendment.
Mr. President, I have long supported a balanced budget amendment. I
expect to do so again this year. However, there have been a number of
issues raised concerning the amendment. Should there be a supermajority
requirement for tax increases? Should there be truth in budgeting to
require that the cuts necessary to reach a balanced budget by 2002 be
specified? Should we make provision for times of recession when there
are more demands on the Federal Government and tax receipts are down?
Each of these questions is very important and should be given the
attention they deserve. Mr. President, the one issue that is of
greatest concern and one that I think is necessary to address
immediately, is whether Social Security should be allowed to be cut as
part of the balanced budget amendment. Should Social Security funds be
included along with all the receipts and deficits in calculating
whether we have a balanced budget?
I have received hundreds of calls and even more letters from older
Iowans who are scared to death that their Social Security will be cut
to balance the budget. Almost all of these people subsist on little or
nothing more than their monthly Social Security checks. They live on
fixed incomes and are already struggling to meet the basics to pay for
their food, utilities, and medical bills. A cut in their Social
Security would literally mean for many not enough to eat or not enough
to pay for their heating or phone or their medical bills.
When we talk about the average Social Security recipients, we are
talking about people of very modest means. The average monthly Social
Security payment to retirees is now $679 a month. That is $8,148 a
year, just above the poverty level for a household of one.
Remember, for many senior citizens, Social Security represents 90
percent or more of their entire income. This is particularly true for
older widows. For the majority of older widows, Social Security
represents the bulk of what they have to live on. So it is perfectly
understandable for them to be very fearful of potential Social Security
cuts.
Mr. President, I should also note I am not just hearing from senior
citizens. I am also hearing from middle-aged workers who are concerned
that the surplus in the Social Security trust funds that are necessary
to pay benefits when they retire will not be there. They are worried
because they know that it may be just too tempting for politicians to
dip into the growing Social Security trust fund surpluses to pay down
the deficit.
And our workers have every reason to be worried. Today the surplus
stands at about one-half trillion dollars. By the year 2010, the Social
Security surplus is projected to reach $2.1 trillion. And by 2020 it
will grow to an astounding $3 trillion surplus. That surplus is nearly
two times the entire Federal budget for this year. It will be very
tempting to be used to balance the budget. Some will say, a little bit
out will not hurt. But, in fact, Mr. President, we need to not only
protect against cuts in Social Security but in the coming years we will
have to add to that surplus.
The current projections are that even with a $3 trillion surplus in
the year 2020, the system will go bankrupt by around the year 2030, a
mere 10 years later. So in the next 25 to 30 years, we are going to
have to make some adjustments in the Social Security program to ensure
that it remains sound beyond the year 2030.
But that is nothing new, we have made those adjustments in the past,
and we will make those adjustments in the future. I will point out one
that could be considered. We have a cap on income for those paying into
the system. I think it is around $60,000 or $62,000 a year. So if you
are making a million dollars a year in income, you pay the same into
Social Security as someone making $60,000 a year, and
[[Page S2461]] that is not right. I think that level is going to have
to be raised. That adjustment alone would help us immensely with the
Social Security trust funds.
Mr. President, I hope the Senate does the right thing and adopts the
amendment offered by Senator Reid. A number of our colleagues,
including myself, have cosponsored this. The Reid amendment is simple
and straightforward. It is not convoluted. It simply puts in writing
what just about everyone in this body says they are committed to. It
explicitly exempts Social Security income and outlays from balanced
budget calculations in the constitutional amendment.
Now, there be will be some to say, Why do we need this? We just
adopted the Dole resolution a couple of hours ago. The Dole resolution
agrees with the Reid amendment that Social Security is important and
deserves to be protected. But, Mr. President, the Dole amendment is
only a fig leaf and, I might add, a very small and a very transparent
fig leaf. It offers little comfort to the millions of Americans who are
so concerned about and dependent upon Social Security. What it says to
them is clear: Protecting Social Security is not as important as
balancing the budget. It says we need a constitutional amendment to
balance the budget, but protecting Social Security, the financial
security of millions of Americans, is not deserving of that same kind
of protection and elevation in our system.
People who say that the Dole provision is enough are basically saying
that protecting Social Security is not important enough to actually
include in the Constitution.
The people who support the Dole resolution--I voted for it as a
prelude to voting for the Reid amendment--but those who say they voted
for the Dole resolution so now they do not need to vote for Reid are
basically saying Social Security is important enough only to be
protected through legislation to implement the balanced budget
amendment, legislation that can be adopted and changed virtually
overnight by a simple majority vote in the Congress.
What the Dole amendment says to senior citizens and future Social
Security recipients is: Trust us, we'll protect you.
We have heard that one before. We have taken a number of important
steps over the past few years to protect Social Security from abuse. In
1990, we took it off budget. This past year, we passed legislation to
make Social Security an independent agency, so as to insulate it from
politics and other programs. If we fail to specifically exempt Social
Security from the proposed balanced budget amendment, we will
effectively put Social Security back in the budget, and this would be a
great step backwards.
So, Mr. President, those who support the Dole amendment and say now
they do not have to support the Reid amendment are sort of like a used
car salesman that says to a person buying a used car: Well, you don't
need a warranty, just trust me. If anything happens to the car, just
trust me, but you don't need a warranty. Just as none of us would do
that and plunk down cold hard cash to buy something without some kind
of warranty, we should not buy just the Dole amendment. We have to pass
the Reid amendment to, once and for all, say to the people of this
country that Social Security is so important, so important a part of
our social and economic system that it deserves to be in the
Constitution of the United States.
So let us do the right thing. Let us put our commitment into writing.
Let us adopt the Reid amendment and really protect Social Security.
Mr. President, if the proponents of the balanced budget amendment are
really serious--if they are really serious, as I am--about passing and
getting it out into a form the States can support, then they ought to
support the Reid amendment.
I have heard some rumors around here--and I am sure it comes as no
surprise to anyone; I have not heard it said in any debate, but I am
going to say it--I have heard it said around here that some of our
friends on the other side of the aisle, some of the Republicans, are
kind of secretly hoping that this does not pass because if it does not
pass, then they can blame Democrats for not passing an amendment to
balance the budget and use it in upcoming campaigns.
I hope that is not true, but it has been said around here, and I have
heard it. I am sure everyone else has heard it, too. I hope that is not
the case.
So I say to my friends on the other side of the aisle, especially
those who rushed to support the Dole amendment, the fig leaf, if you
really want to pass a constitutional amendment to balance the budget,
you ought to support the Reid amendment. There are many in this body
who, if the Reid amendment is adopted to exempt Social Security from
the balanced budget amendment will then vote for the constitutional
amendment to balance the budget, and I think then there would clearly
be the votes to pass it.
I have heard, again, that there are some games being played. Then
again, if the Reid amendment can be defeated, the balanced budget
amendment will be defeated and it can be used as a campaign issue. Like
I say, I hope that is not true. It is being said around here. We all
know it.
So I say to those who like me are truly serious about having a
balanced budget amendment, you ought to support the Reid amendment and
do not in any way think that by supporting the Dole resolution that the
elderly of this country are going to be fooled. There is not a smarter,
more intuitively sage voter or citizen than our senior citizens. They
have been around the block. They have watched us over the years. They
know what happens in this place when Social Security gets a surplus and
becomes very tempting to use to balance the budget. They are not going
to be fooled by a fig-leaf vote for the Dole amendment.
I say to those who are really, truly serious about, A, protecting
Social Security and, B, getting a constitutional amendment to balance
the budget, I invite them to support the Reid amendment.
With that, I yield the floor.
Mr. CAMPBELL. Mr. President, I would like to take this opportunity to
respond to the amendment introduced by my friend, the Senator from
Nevada, Senator Reid, and my other distinguished colleagues on this
side.
Social Security, as well as Medicare, has been one of the most
successful Government-run programs in the history of this country.
Every hardworking, tax-paying American participates in these programs--
we all have a vested interest in the Social Security program whether we
are present or future beneficiaries.
As it stands now, Social Security is set to go bankrupt in 2029. Only
a few years ago, the Social Security program was projected to go broke
in 2036.
I acknowledge the fact that Social Security may be on the caboose of
this balanced budget train because of its current surplus versus other
more problematic programs like Medicare and Medicaid, but this program
is still connected to the budget as a whole.
This Senator believes Social Security is vital to a high quality of
life for all Americans. It is my belief that the Senators who are
offering this amendment are doing so because they, too, believe Social
Security is vital to our Nation.
There are indications that an exemption for Social Security is the
only way to get the balanced budget amendment through the Senate. As a
supporter of the balanced budget amendment, I hope that is not the
case. Even so, to keep one of the largest programs in our country out
of the balanced budget amendment discussion is fiscally irresponsible
and wrong.
It's wrong because it would provide constitutional protection to a
single statutory program--Social Security. The Constitution should not
be used for this purpose. There are sound reasons to consider ways to
keep Social Security solvent beyond 2029 in the coming years. Codifying
Social Security in the U.S. Constitution prevents Congress from
considering anything that may in fact be intended to preserve Social
Security for the future.
The Constitution is not the place to set budget priorities, nor to
enshrine statutes passed by Congress. Congress can exempt Social
Security through statute.
I would also ask why not, if Social Security, any other worthy
program? The argument that Americans have paid into Social Security and
should not be denied getting those benefits rings hollow when we all
know for a
[[Page S2462]] fact that a majority of current and past retirees are
receiving or will receive far more in benefits than what they paid into
Social Security plus interest. Americans also pay into a variety of
very good and worthy programs as well, in the form of taxes. Should
those worthy programs also be exempted using that kind of argument?
Keep in mind that the balanced budget
amendment does not specify where the cuts will take place. This
language only forces Congress to balance the budget by the year 2002.
Year after year, Congress will have the authority, should this measure
pass, to choose what cuts will come from what programs. Social Security
would not necessarily have to be cut. This hype we are getting about
how necessary it is to have a Social Security exemption in order to
preserve benefits is driven by powerful lobbying groups and is
unjustified. You and I know that Congress will not vote to cut Social
Security benefits to those who need those benefits. There may be
trimmings of benefits for the wealthiest of Americans, but we are not
about to vote to deny benefits to the millions of Americans who rely on
Social Security as their only source of retirement income. So a
constitutional exemption is not necessary.

To prioritize which program or programs are worthy of exemption in
the balanced budget amendment will only chip away, piece by piece, the
value of a balanced budget amendment and pit one program against
another.
Let me take just a few more minutes and read to you a couple letters
I have received this month from Coloradans regarding the treatment of
Social Security and Medicare, the two largest entitlement programs in
our Federal budget. Take for example,
Donald Kynion, from Walsenburg, CO, who says ``I feel you should do
what is best for the country. If changes in Social Security and
Medicare are necessary then make them. Cut spending and too much
government!''
Or listen to 72-year-old Edith Seppi from Leadville, CO, who says ``I
hope you will be fair to all Americans and pass legislation that will
cut the debt, even if we all must be a part of the cuts. I hope
interest groups will not control the decisions you make. I hope you do
what you believe is best for our country. So, count me in on the side
that says do the best that you can.''
Doing the best that we can, is not allowing certain privileged
programs to be exempt from this difficult task of balancing our budget.
If a family was forced to balance their budget for the month, could
they be successful by omitting their mortgage payments? Where should
this family then get the money to make this payment? Where then should
Congress find the funds to pay the baby boomers when they retire?
I beg my colleagues not to exempt any program, no matter how
successful or useful it is to us, from the balanced budget amendment.
If we are forced to balance the budget, all programs on this train,
whether they are Medicare, veterans pensions, unemployment
compensation, SSI, and Social Security, will have a chance for a better
tomorrow if we balance our budget today.
The balanced budget amendment gives this country hope for a better
quality of life further down the tracks. Let's not derail this effort.
Mr. SARBANES addressed the Chair.
The PRESIDING OFFICER. The Senator from Maryland.
Mr. SARBANES. Mr. President, I would like to address the underlying
amendment, the basic resolution seeking to amend the Constitution of
the United States to put into the Constitution a provision requiring a
balanced budget.
In my view, amending the Constitution would be economically unwise
and constitutionally irresponsible. The amendment would have the very
substantial risk of promoting economic instability, retarding economic
growth and shifting the basis of our democracy from majority to
minority rule.
Every time you talk about the problems connected with the
implementation of this amendment, things get very fuzzy around here,
but I think it is clear that we are inviting fiscal paralysis or court
intervention in the conduct of economic policy, or both.
I wish to address two concepts that I think are very important in
thinking about this amendment to the Constitution to require a balanced
budget. One is the argument that is made and drawing a supposed analogy
with the States that State and local governments have to balance their
budgets; businesses have to balance their budgets; individuals have to
balance their budgets; why does not the Federal Government operate
under the same constraint?
Now, not only is this argument wrong factually--most State and local
governments actually run deficits if they use the accounting principles
which are used to compute the Federal budget--but this argument also
fails to recognize the different responsibilities of the Federal as
opposed to the State and local governments with respect to the overall
functioning of the economy.
The State analogy is superficially attractive. Most States have some
form of balanced budget requirement, either statutory or
constitutional. But it needs to be clearly understood that many States
maintain capital budgets which are not subject to the balancing
requirement. Others have developed off-budget funding mechanisms to
circumvent the balance requirement, or they use accounting rules which
count some borrowing as a form of revenue for the balancing
requirement.
Official data on the debt incurred by State and local governments
gives a very different picture from this assertion that the States run
balanced budgets. This chart shows that State and local government debt
has been growing year by year. This chart begins in 1972 and runs out
here to 1992, the amount of borrowing has increased steadily since
1972..
Now, how can this be? Everyone says State and local governments have
to balance their budgets. Yet the amount of State and local debt has
been on the upswing. In fact, we had a hearing before the Joint
Economic Committee. Two Governors testified that having a balanced
budget requirement in their State which they had to adhere to assured
them a good credit rating.
Of course, the question then is why is a good credit rating relevant
to you if you are required to run a balanced budget? They need a good
credit rating because they do not run a balanced budget. They have a
capital budget which they fund by borrowing. So they acknowledge that
the balance requirement for the budget is only on their operating
budget and that they make active use of a capital budget for which
borrowing is allowed.
Now, this proposal before us makes no provision in the Federal
accounting regime for a capital budget. It, in effect, would require
the Federal Government every year to balance receipts with outlays, and
it makes no provision whatever for what in most places is treated as a
capital budget. Not only do State and local governments borrow for
investment; the same thing is true of businesses and individuals. I
could show you a similar chart geared to each of the major corporations
in this country which would show that their amount of outstanding debt
had increased over the years because they make prudent borrowing in
order to enhance the investment capacity of their business and in order
to be in a better position to compete.
Individuals do not balance their budgets every year. They run huge
deficits in the year they buy a home or a car because they borrow in
order to fund it. Yet everyone regards it as a prudent and reasonable
practice to borrow on a capital debt, the use of which you then have
over an extended period of time and to pay back over the lifetime of
that capital asset the amount that you have borrowed and the interest
charges upon it. Then you get the use of the capital asset now, in the
present, and you amortize its use over time.
That is how people buy houses. The only people in the country who
could afford to buy houses, if they were required to do it under the
kind of regime you want to impose on the Federal budget, would be the
very wealthy, who are in a position to pay for it out of their flow of
income. The overwhelming percentage of people in this country are in no
position to do that, and of course, what they do is they borrow. They
incur a large deficit in the year they make the purchase, but they set
it up with a schedule over time in order to make the repayment. As long
as the amount they are borrowing is reasonably related to what their
income is and their ability to repay it,
[[Page S2463]] everyone regards that as a wise and prudent policy to
follow.
So the first point I wish to make is that the very concept of a
balanced budget amendment is flawed in the sense that we do not have a
capital budget at the Federal level. This requirement would require the
Federal Government to fund capital expenditures in the operating
budget, which, as I pointed out, is not done by State and local
governments, it is not done by businesses, and it is not done by
individuals.
Now, let me turn from this flaw in terms of not providing for a
capital budget to address the fact that it does not allow for the
workings of what is called countercyclical fiscal policy.
Countercyclical fiscal policy is the effort to ameliorate the ups and
downs of the business cycle. The fact is, that in the current budget
framework we automatically try to offset the economic downturn. The
deficits automatically increase because revenues decrease and the
payout of unemployment insurance, food stamps, and other income
stabilizers increase. If, in fact, in an economic downturn you try to
balance the budget, you would only contribute to the downturn. You
would make it worse. You would have deeper cycles of boom and bust. And
that, of course, is what occurred throughout a good part of our
history.
This chart shows the percentage change in our gross national product,
beginning in 1890 and coming forward to today.
What this chart shows--and I think it is very important--is that
after World War II we put into place what we called automatic fiscal
stabilizers. We broke out of that pattern of thinking where we tried,
when we went into a recession or an economic downturn, to balance the
budget, thereby driving the economy even further into downturn.
That is what we used to do. And you can see when we tried to balance
the budget during recessions we had tremendous fluctuations that took
place in the economy. We had these huge swings up and down, and the
downturns would go very deep.
During the Great Depression negative growth was 15 percent. As those
who have read history know, it was an incredible time in this country.
People were selling apples on the street corner, grass was growing in
the streets, the wind was whistling through deserted homes in the rural
areas of our country. We had other downturns where we had 8-, 10-, 12-
percent negative growth in the course of the cycle.
Now, what has happened in large part as a consequence of these fiscal
stabilizers is we have to be able to ameliorate the huge swings of the
business cycle.
We still get the ups and downs, but they do not have the wild
gyrations with all extremely harmful consequences. In fact, since the
economic stabilizers have been in place we have rarely gone into a
negative growth experience. Most of the fluctuations take place above
the negative growth line. So while we get the ups and downs, we still
manage to keep it within the positive growth range.
A rigid balanced budget requirement would have its most perverse
effect during recessions. It would require the deepest spending cuts or
tax increases in recessions, when revenues automatically fall far short
of expenditures. We have learned over these last 50 years, as this
chart demonstrates, to be more flexible with fiscal and monetary policy
in responding to business cycle downturns. As a result, we have
experienced less violent downturns than before. This chart clearly
illustrates the moderation of downturns that have accompanied the more
flexible fiscal policy of roughly the last 50 years.
Just this week, the Chairperson of the Council of Economic Advisers,
Laura Tyson, wrote an op-ed piece entitled ``It's a Recipe for Economic
Chaos,'' speaking on the proposal to amend the Constitution to require
an annual balance budget. I want just briefly to quote some parts of
that article.
Mr. President, I ask unanimous consent the full article be printed in
the Record at the conclusion of my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. SARBANES. Ms. Tyson says:

Let me just comment on that. As she points out, an economic slowdown
automatically brings about an increase in the deficit because you lose
tax revenues and you make payments out of the Treasury in terms of
income support programs.
She goes on to note, then:

Such temporary increases in the deficit act as ``automatic
stabilizers,'' offsetting some of the reduction in the
purchasing power of the private sector and cushioning the
economy's slide. Moreover, they do so quickly and
automatically, without the need for lengthy debates about the
state of the economy and the appropriate policy response.

In other words, the economic downturn adjusts automatically. You do
not have to wait until you are deep into the trough and you recognize
that you are deep in the trough to take some action to do something
about it. This proposal has a waiver provision in it which requires an
extraordinary 60 votes, which of course raises the question: Would you
be able to get that vote even if you were in a difficult circumstance?
But even if we assume you can, by the time you are aware and perceive
that you are in a difficult circumstance, you are well into your
downturn. The downward momentum has begun.
The automatic stabilizers check that downward momentum the moment it
begins to happen. So they act as a counterbalance. Not completely,
because we get the ups and downs. But, as you can see over the
experience of the last 50 years, we have markedly improved this
performance and we no longer had the very deep dips into negative
growth that we used to experience.
These deep dips into the negative represent people out on the street,
unemployed. These represent the foreclosures on farms and on homes.
These represent the bankruptcy of businesses, small and large. That is
what these deep dips represent. They are not just lines on a chart.
They represent a lack of activity out in the economy. As I have
indicated, we have been able to check a good part of this over the last
50 years.
As Dr. Tyson goes on to say in her article:

A balanced budget amendment would throw the automatic
stabilizers into reverse. Congress would be required to raise
tax rates or cut spending programs in the face of recession
to counteract temporary increases in the deficit. Rather than
moderating the normal ups and downs of the business cycle,
fiscal policy would be required to aggravate them.

Let me just repeat that:

Rather than moderating the normal ups and downs of the
business cycle, fiscal policy would be required to aggravate
them.

So Mr. President I hope people will think long and hard before we put
ourselves back in a box that will return us to the approach that was
taken before World War II. This problem extends back into the 19th
century. This chart begins in the late 1800's, where we had these
tremendous boom and bust swings in the economy, and we paid a very
heavy price for that from time to time.
We have a situation now in which these automatic stabilizers work as
we go into an economic downturn in order to help ameliorate the
volatility of the economy and, as a consequence, we have experienced
far less violent downturns in the last 50 years.
Finally, I want to just make reference to the assertions that are
made that we can simply waive the balanced budget requirement. We are
going to waive the Constitution. That is an interesting concept. There
are no other provisions in the Constitution that are waivable. No one
talks about waiving the Bill of Rights. I do not quite know how you
have waivable principles in your Constitution which is, after all,
designed for a statement of fundamental principle, not for matter to be
waived away.
We do not put substantive policy into the Constitution. This is what
will be
[[Page S2464]] happening here. In order to counter that problem, they
say we are going to provide for a waiver through a three-fifths
override provision. The waiver provision says this requirement is not
an enduring principle, it is a matter of current judgment. As I say, no
other constitutional principle--free speech, individual rights, or
equal protection--can be waived by a three-fifths vote.
Finally, such a provision would permanently shift the balance of
power from majorities to minorities in our society, violating the
democratic principles upon which our Government is based. A three-
fifths supermajority effectively gives control over fiscal policy to a
minority in either House, not what the framers of the Constitution had
in mind when they established our democratic form of Government.
I just want to quote from James Madison--he is the father of our
Constitution--with respect to supermajorities.
This proposal before us has a three-fifths requirement, a 60-vote
requirement. It is not three-fifths of those present and voting, it is
a flat 60-vote requirement. It also has a requirement of 51 votes--
again, not a majority of those present and voting--but of 51. You
actually have to produce 51 affirmative votes to invoke other
provisions.
Madison, in Federalist Papers No. 58, in addressing questions about
supermajorities says, and I am now quoting in Federalist No.
58:

It has been said that more than a majority ought to have
been required for a quorum; and in particular cases, if not
in all, more than a majority of a quorum for a decision. That
some advantages might have resulted from such a precaution
cannot be denied. It might have been an additional shield to
some particular interests, and another obstacle generally to
hasty impartial measures. But these considerations are
outweighed by the inconveniences in the opposite scale. In
all cases where justice or the general good might require new
laws to be passed, or active measures to be pursued, the
fundamental principle of free government would be reversed.
It would be no longer the majority that would rule: the power
would be transferred to the minority. Were the defensive
privilege limited to particular cases, an interested minority
might take advantage of it to screen themselves from
equitable sacrifices to the general weal, or, in particular
emergencies, to extort unreasonable indulgences.

That was James Madison's view of requiring extra supermajorities. In
fact, the founders of the Constitution were very careful. They had this
debate. It was an extended part of the debates in Philadelphia at the
Constitutional Convention in the summer of 1787, and again it was the
subject of debate in the ratification process across the States. But in
those deliberations in Philadelphia, the founders were very careful.
They required supermajorities in certain very, very limited instances.
Of course, amending the Constitution itself was one of those very
limited instances. Impeachment was another. Ratification of treaty was
yet another. But I think it is very important to appreciate what
Madison's perception was, and it was this perception that was reflected
in the basic document.
I am not going to discuss today the danger that the courts would come
in and intervene to implement this requirement although I think it is a
very real danger, and I know Robert Bork and other scholars have
written expressing that very concern.
We have amended the Constitution only 27 times in the history of the
Republic. The first 10 amendments took place almost immediately. Those
were the Bill of Rights. So I think it is accurate to say that we have
amended it literally 17 times over the life of the Republic, over 205
years.
We have been very careful about amending this Constitution. It has
been done only in certain, very limited instances, and I think in
situations in which we had a very clear view of what the consequences
would be. We lowered the voting age. That was a very clear provision.
We provided for the direct election of Senators by the people rather
than by the States. We changed the term dates for the President and the
Congress. But the basic document has held steady throughout the more
than 2 centuries of our Republic's history.
But putting this balanced budget requirement in the Constitution will
undercut countercyclical economic policy, the very policy that has led
to this very substantial improvement in economic performance in the
post-World War II period. It would burden the Constitution and the
courts with issues which should probably be decided by the President
and by the Congress.
I think we need to be very careful. The courts have in some instances
assumed jurisdiction over what I think are essentially executive and
legislative policy matters. They have done that with respect to prison
systems, for instance, in some States in the country, and there is a
very real possibility that under this proposal they would be assuming
an extended authority with respect to budget and fiscal decisions,
decisions which should properly in my view be decided by the executive
and the legislative branches interacting as provided for in the
Constitution. In addition, it would shift the principles of our
democracy from majority to minority rule.
The Constitution is a relatively brief general statement defining the
political and civil liberties of our citizens and the defining of the
framework of our Government. It does not establish any specific
domestic policy or foreign policy or economic policy. We do not put the
substance of policy into the Constitution out of a belief that you make
substantive policy through the interaction of the Congress and the
President.
Because of its focus on universal principles, the Constitution has
endured for over two centuries despite the dramatic changes in American
society.
I think it is clear that we should proceed with great caution any
time we come up against amending our basic charter.
The desire to put a balanced budget amendment into the Constitution
is frequently justified in the name of political expediency. It is put
forward as a way of supposedly addressing the problem of the deficit. I
have voted here on occasions for both spending cuts and tax increases
in order to bring about a deficit reduction. And I have a concern about
placing on future generations the consumption of the current
generation. I have a different view when we talk about capital
investment, as I indicated at the outset, because I think a very
prudent case can be made as to why it is a sensible and wise economic
policy to borrow in order to purchase a capital asset which will then
be used over an extended period of time.
Enacting a constitutional amendment itself will not bring about that
deficit reduction. The deficit reduction will come about through the
actual enactment of measures involving expenditures and revenues, as we
did in August 1993 when we passed the deficit reduction program which
has worked quite well and has brought down the deficit in a very
significant and substantial way.
I just want to come back to this point of the fluctuation for a
moment. It is very important to understand that if the economy starts
downward, and we do not try to offset that as we have done by these
fiscal stabilizers, the economy will worsen. As it worsens, your
deficit grows. If you take more and more extreme measures to try to
bring the deficit under control during an economic downturn, you only
drive the economy further down which means your deficit only gets
larger. So the problem compounds itself. You in effect end up working
at counterpurposes. No one wants to go back to this situation that we
used to confront before economic stabilizers were in place. But I say
to my colleagues, we have to be exceedingly careful. We may be throwing
ourselves right back into the difficulties that we confronted earlier
in this century and which were particularly marked with the Great
Depression.
Mr. President, you address the deficit by dealing with real measures
to address spending and revenues. We ought not to lock into the
Constitution a provision which is faulty in its concept since it lacks
a capital budget, which all the State and local governments have, and
which is faulty in not providing for a way to address economic
downturns and, therefore, it carries the risk with it that the economy
would be precipitated into very deep downswings in the economic cycle,
and we would pay the price across the country of people out of work,
the mortgages on homes being foreclosed, small farmers losing their
farms, and small businesses going bankrupt.
[[Page S2465]] Mr. President, I yield the floor.
Exhibit 1

[From the Washington Post, February 7, 1995]

It's a Recipe For Economic Chaos

(By Laura D'Andrea Tyson)

Continued progress on reducing the deficit is sound
economic policy, but a constitutional amendment requiring
annual balance of the federal budget is not. The fallacy in
the logic behind the balanced budget amendment begins with
the premise that the size of the federal deficit is the
result of conscious policy decisions. This is only partly the
case. The pace of economic activity also plays an important
role in determining the deficit. An economic slowdown
automatically depresses tax revenues and increases government
spending on such programs as unemployment compensation, food
stamps and welfare.
Such temporary increases in the deficit act as ``automatic
stabilizers,'' offsetting some of the reduction in the
purchasing power of the private sector and cushioning the
economy's slide. Moreover, they do so quickly and
automatically, without the need for lengthy debates about the
state of the economy and the appropriate policy response.
By the same token, when the economy strengthens again, the
automatic stabilizers work in the other direction: tax
revenues rise, spending for unemployment benefits and other
social safety net programs falls, and the deficit narrows.
A balanced budget amendment would throw the automatic
stabilizers into reverse. Congress would be required to raise
tax rates or cut spending programs in the face of a recession
to counteract temporary increases in the deficit. Rather than
moderating the normal ups and downs of the business cycle,
fiscal policy would be required to aggravate them.
A simple example from recent economic history should serve
as a cautionary tale. In fiscal year 1991, the economy's
unanticipated slowdown caused actual government spending for
unemployment insurance and related items to exceed the
budgeted amount by $6 billion, and actual revenues to fall
short of the budgeted amount by some $67 billion. In a
balanced-budget world, Congress would have been required to
offset the resulting shift of more than $70 billion in the
deficit by a combination of tax hikes and spending cuts that
by themselves would have sharply worsened the economic
downturn--resulting in an additional loss of 1\1/4\ percent
of GDP and 750,000 jobs.
The version of the amendment passed by the House has no
special ``escape clause'' for recessions--only the general
provision that the budget could be in deficit if three-fifths
of both the House and Senate agree. This is a far cry from an
automatic stabilizer. It is easy to imagine a well-organized
minority in either House of Congress holding this provision
hostage to its particular political agenda.
In a balanced-budget world--with fiscal policy enjoined to
destabilize rather than stabilize the economy--all
responsibility for counteracting the economic effects of the
business cycle would be placed at the doorstep of the Federal
Reserve. The Fed could attempt to meet this increased
responsibility by pushing interest rates down more
aggressively when the economy softens and raising them more
vigorously when it strengthens. But there are several reasons
why the Fed would not be able to moderate the ups and downs
of the business cycle on its own as well as it can with the
help of the automatic fiscal stabilizers.
First, monetary policy affects the economy indirectly and
with notoriously long lags, making it difficult to time the
desired effects with precision. By contrast, the automatic
stabilizers of fiscal policy swing into action as soon as the
economy begins to slow, often well before the Federal Reserve
even recognizes the need for compensating action.
Second, the Fed could become handcuffed in the event of a
major recession--its scope for action limited by the fact
that it can push short-term interest rates no lower than
zero, and probably not even that low. By historical
standards, the spread between today's short rates of 6
percent and zero leaves uncomfortably little room for
maneuver. Between the middle of 1990 and the end of 1992, the
Fed reduced the short-term interest rate it controls by a
cumulative total of 5\1/4\ percentage points. Even so, the
economy sank into a recession from which it has only recently
fully recovered--a recession whose severity was moderated by
the very automatic stabilizers of fiscal policy the balanced
budget amendment would destroy.
Third, the more aggressive actions required of the Fed to
limit the increase in the variability of output and
employment could actually increase the volatility of
financial markets--an ironic possibility, given that many of
the amendment's proponents may well believe they are
promoting financial stability.
Finally, a balanced budget amendment would create an
automatic and undesirable link between interest rates and
fiscal policy. An unanticipated increase in interest rates
would boost federal interest expense and thus the deficit.
The balanced budget amendments under consideration would
require that such an unanticipated increase in the deficit be
offset within the fiscal year!
In other words, independent monetary policy decisions by
the Federal Reserve would require immediate and painful
budgetary adjustments. Where would they come from? Not from
interest payments and not, with such short notice, from
entitlement programs. Rather they would have to come from
either a tax increase or from cuts or possible shutdowns in
discretionary programs whose funds had not yet been
obligated. This is not a sensible way to establish budgetary
priorities or maintain the health interaction and
independence of monetary and fiscal policy.
One of the great discoveries of modern economics is the
role that fiscal policy can play in moderating the business
cycle. Few if any members of the Senate about to vote on a
balanced budget amendment experienced the tragic human costs
of the Great Depression, costs made more severe by President
Herbert Hoover's well-intentioned but misguided efforts to
balance the budget. Unfortunately, the huge deficits
inherited from the last decade of fiscal profligacy have
rendered discretionary changes in fiscal policy in response
to the business cycle all but impossible. Now many of those
responsible for the massive run-up in debt during the 1980s
are leading the charge to eliminate the automatic stabilizers
as well by voting for a balanced budget amendment.
Instead of undermining the government's ability to moderate
the economy's cyclical fluctuations by passing such an
amendment, why not simply make the hard choices and cast the
courageous votes required to reduce the deficit--the kind of
hard choices and courageous votes delivered by members of the
103rd Congress when they passed the administration's $505
billion deficit reduction package?

Mr. GORTON addressed the Chair.
The PRESIDING OFFICER. The Senator from Washington [Mr. Gorton] is
recognized.
Mr. GORTON. Mr. President, the debate over the relationship between
Social Security and the balanced budget amendment seems now to be
drawing to a close. The truly vital vote on the subject was cast just a
few hours ago, evidencing the attention this Congress will pay to the
security of our Social Security system.
Early next week, I believe the Reid amendment will be tabled. A
mention of Social Security will not be added to the Constitution of the
United States. I believe that both sides in this debate share a deep
and sober dedication to the viability of our Social Security system. I
am delighted that we had an opportunity earlier today to vote
overwhelmingly our dedication to seeing to it that none of the promises
made to our senior community are repudiated in any respect whatsoever.
Now it is only required of us that we deal decisively with this
proposed addition to the Constitution on the subject of Social Security
and go on to passing a balanced budget itself, the prospects for which,
it seems to me at least, have increased dramatically during the course
of this week.
Despite the dedication of those who have proposed this addition to
the Constitution, in fact, adding this reference to Social Security to
the Constitution of the United States would clearly undercut the very
security they say they seek. Once you take this large, vital portion of
the money which is collected by the Government in the United States and
distribute it to beneficiaries by the Government of the United States
and place it outside of the constitutional limitations on spending,
which we propose, you run the overwhelming risk that some new Congress,
faced with the unpleasant task of balancing the budget without ever
being able to count Social Security, would simply lower the Social
Security payroll tax and substitute for it a new general fund tax to
balance an incomplete budget, while at the same time greatly risking
the sanctity and the security of the Social Security trust fund.
Or perhaps an equally imaginative Congress, faced with the same
difficult choices but with this huge loophole, will simply define other
programs for the benefit of the elderly; for veterans; or for that
matter, for children; as Social Security, and have them paid for out of
the trust fund, therefore saving money on the balance of the budget and
making the tasks of those Members of Congress easier than they
otherwise would have been.
The common thread running through these and other similar examples,
Mr. President, is the fact that we do not treat the budget of the
United States as a unitary whole. We give future Members of Congress
the ability overwhelmingly to play games--games which have nothing to
do with the amount of money the United States is taking in in taxes and
fees, or alternatively with the amount of money that is going out,
being spent. A simple
[[Page S2466]] redefinition of the tax, a simple redefinition of a
spending program without any change in substance, could manipulate the
impacts of the balanced budget amendment. Almost certainly, any such
manipulation would be to the detriment of the Social Security trust
fund.
So, Mr. President, rather than buttressing our promises with respect
to Social Security, the Reid amendment, over a period of years, will
seriously undercut them. Those who drafted and those who most
enthusiastically supported the motion of the distinguished majority
leader, Mr. Dole, on this subject are, by and large, those in this body
like myself who, 2 years ago, repudiated the President's attempt to
limit or even eliminate certain Social Security cost-of-living
adjustments. They were those, like myself, who fought--unfortunately,
unsuccessfully--against a 70-percent tax increase on a number of Social
Security recipients' incomes just 2 years ago. They are, by and large,
the people who believe, as I do, that we should reduce or eliminate the
earnings test on the earned income of Social Security recipients and
encourage them to keep on contributing to our society.
Those of us who wish to protect Social Security by defeating the Reid
amendment, who have shown our dedication to Social Security by our
enthusiastic support of the Dole motion, and who have shown that in
past years by our actions with respect to Social Security are truly
those who will protect those whose lives depend on the security and
sanctity of that system.
So, as I have said, Mr. President, I believe we are close to the end
of this debate and that this debate will end, as it should, in
retaining the balanced budget amendment in its original and pristine
form, and at the same time providing the highest degree of protection
for the Social Security system itself. As a consequence, we will, once
again, be back debating the fundamental issue which has been before
this body: Are we for the status quo? Do we think the system which has
led to a $4 trillion debt, which promises us, through the President's
budget, $200 billion, more or less--generally more--in deficits
forever; that this is a system with which we should be content; that
generalized promises of doing better in the future are all that is
required? Or, Mr. President, will we be found with those who say the
system is broken down and that only outside discipline, only a
discipline which can be provided effectively by the Constitution of the
United States itself, will cause Presidents and all Members of
Congress, Republicans and Democrats, liberals and conservatives, to
operate under the same rules and will require them to exercise the
discipline necessary to balance the budget of the United States?
Those who are comfortable with, those who favor, the status quo,
those who think that the job that has been done is a fine job will
align themselves with the opponents to this constitutional amendment.
Those who feel that we need to act differently, that we need to operate
under different rules, that we need to be a part of a constructive
resolution to do the job this country demands of us will vote in favor
of House Joint Resolution 1 and submit this constitutional amendment to
the people of the States.
Mr. EXON addressed the Chair.
The PRESIDING OFFICER. The Senator from Nebraska.
Mr. EXON. Mr. President, I ask unanimous consent that I be allowed to
proceed as if in morning business for not to exceed 10 minutes for the
purpose of introducing a bill and making a brief explanation of it.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Nebraska is recognized.
Mr. EXON. I thank the Chair.
(The remarks of Mr. Exon and Mr. Dorgan pertaining to the
introduction of S. 387 are located in today's Record under ``Statements
on Introduced Bills and Joint Resolutions.'')
(Mr. COCHRAN assumed the Chair.)
Mr. DORGAN. Mr. President, I would like to turn now to the Reid
amendment and the constitutional amendment to balance the budget.
Senator Reid has done, I think, a great service for this institution
to raise this issue, and it is a critically important issue. This is
not a debate about whether we should balance the budget. Everyone here
in this Chamber understands our responsibilities. This is not a debate
about ``whether''; it is a debate about ``how'' we address this
crippling fiscal policy problem in this country.
Some have said that there is great uncertainty and it is hard to
estimate what a deficit might be. I heard the Senator from Nevada
earlier, I believe probably yesterday, in which he talked about one of
the reasons for the uncertainty is that we do not always know what will
happen to change the deficit or change the receipts or change
expenditures.
He mentioned the Federal Reserve Board. Actually, the Federal Reserve
Board has increased interest rates seven times in a year. Seven times
the Open Market Committee--paradoxically it is called the Open Market
Committee, though it meets in a closed room, behind closed doors. I
call it the ``closed market committee.'' They had a national mandate
for all Americans. What does it do to the Federal budget? It increases
the cost of the Federal budget.
I just received some information that I had asked be developed by a
number of sources, and I would like to share it with the Members of the
Senate, that respond to some of the points that the Senator from Nevada
made.
First, let me talk about the national costs. The Federal Reserve
Board-imposed interest rate hikes in the last year or so have been the
following:
Home mortgages will be increased by $35 billion over the next 5
years. That is what people will pay additional on their home mortgages.
In other words, the Fed has said to people out there who own homes, we
will send you a bill for $35 billion more dollars. No democracy there.
There is no debate about that. That is what the Fed said: We will send
this bill.
Small businesses will pay about $96 billion more in the next 5 years
as a result of the seven interest-rate increases.
Home equity and credit card loans will increase $86 billion over the
next 5 years.
And especially, the point the Senator from Nevada was making, the
Federal Reserve Board by its action has increased the cost to the
Federal Government during this coming 5-year budget period, has
increased Federal spending by $171 billion. How did it do that? The
Federal Government will pay now $171 billion more to finance its debt
than it was estimated to have to pay under the old interest rates.
So, when we talk about balancing the budget in revenues and
expenditures, here is something the Fed did that says we will ask the
Federal Government to assume $171 billion in higher deficits over the
next 5 years because we are imposing higher interest rates.
I suppose one could say this ought not be criticized if one thought
that the Fed was doing it in a justifiable way. The fact is, there is
no credible evidence of inflation on the horizon. They are fighting a
phantom, nearly invisible, opponent and, in my judgment, they simply
believe they are a set of human brake pedals whose sole design is to
bring the economy to a standstill. They apparently believe their
mission in life is making sure unemployment never goes below 5 percent
and making sure economic growth never goes above 3 percent.
I have no idea how they came up with those economic theories. I have
no idea which schools teach that. Obviously, they collected it from
somewhere and they are able to impose it because the Federal Reserve
Board is unaccountable to virtually anyone at this point.
The point the Senator from Nevada made is that some things are very
hard to predict. And $171 billion added to the deficit in 5 years is
hard to predict, especially if no one is able to determine what the
Federal Reserve Board is going to do.
I feel very strongly, as I think do many Republicans and Democrats in
this Chamber, that if you were to rank the challenges we face in this
country, near the top of that list--maybe at the top of the list--is
the challenge of bringing this crippling fiscal policy problem under
control. These budget deficits threaten this country's future. It is
very simple. Everybody says it. Nobody ever does much about it.
All of us--I say us--want to appear to be the ones to have the answer
and the
[[Page S2467]] others do not. The conservatives especially say,
``We're, the conservatives, and its the other people's fault.'' We say,
``Gee, it's--.'' It is everybody's fault. Republicans and Democrats,
Presidents and Congresses, have been unable to come to grips with a
budget which links entitlement programs to inflation so they continue
to increase automatically, and links taxes to inflation the other way
so it holds them down and you have a disconnection; therefore, you have
very significant budget deficits. And it does threaten this country's
future.
So the question we come to the floor with today is, how do we
respond? Not whether--how? The Senator from Utah asked the question
whether some want to respond to this by raiding Social Security trust
funds, a program which, incidentally, does not cause one cent of the
Federal budget deficit. This year the Social Security System will take
in nearly $70 billion more than it spends, so it is not causing one
penny of the Federal budget deficit. That is by design. We want to save
by design right now to be able to pay for the baby boomers when they
retire.
So the question the Senator from Nevada asks is a simple question: Do
those who want to balance the Federal budget want to break the promise
and go into the Social Security trust funds, yes or no? It is like the
old binary system, you have two choices, yes or no. It is not
difficult. It is not rocket science. One can answer that yes or no.
I want to tell a brief story about something that happened in North
Dakota in the year 1867. In the year 1867, the Philadelphia Inquirer, a
newspaper in Philadelphia, published a story in their newspaper about
how the military garrison at Fort Buford, ND, had been wiped out. This
Philadelphia Inquirer story said the military garrison under the
command of Colonel William Rankin up at Fort Buford, northwestern North
Dakota, had fallen. Thousands of Indians, they said in their story,
swept down and took over that Fort Buford and wiped it out. It said
Rankin actually shot his wife rather than let her be captured during
that siege. Then it said Colonel Rankin himself, who led that military
outpost, was burned at the stake.
President Andrew Johnson, President at the time, came under attack by
political foes, and congressional investigations were called, wondering
how could this happen in our country. General Sherman said that he was
embarrassed that he had no firsthand information about it.
And then later the truth.
The story was an April fool's story. It never happened. It just did
not happen. The worst episode at that Fort had been a single cannon
shot which had scattered a small band of Indians. So this story about
massacre that spread across the Nation, had the President responding,
generals embarrassed, and Congress calling for investigations during a
time, of course, of slower communications, radically slower
communications in 1867, never happened. It was a hoax. The massacre
hoax at Fort Buford, ND.
Well, we have seen a lot of hoaxes. The American people have seen a
lot of hoaxes. The question, I suppose, one might ask now is: What is
the hoax here? Is it a hoax for people to believe that maybe we can
deal with these budget deficits and try and respond to our children's
future in a positive way, or is it a hoax? Is it just one more empty
promise, one more promise to make and then break? That is the question.
I have spoken several times on this, and I have not been one who said
if this amendment does not pass, I am going to vote this way or that
way on the underlying constitutional amendment. I have avoided saying
that for a very specific reason. Because I view this as a very solemn
responsibility.
The U.S. Constitution, which I brought to the floor before, is quite
a sacred document. It says, ``We the people.'' That is the way it
starts, ``We the people.'' Senator Byrd says this is ``my contract with
America,'' the American Constitution. It is a pretty good contract to
start with and to end with. ``We the people.''
What can ``we the people'' in this country expect from our leaders?
The senior Senator from Utah, Senator Hatch, for whom I have great
affection, says, ``Let's pass an amendment to change the U.S.
Constitution.'' The senior Senator from Maryland, Senator Sarbanes,
someone for whom I have great respect, says, ``No, that would be the
wrong thing to do.'' There is real division in this Chamber about what
to do. Not whether it is a good idea to bring into balance the budget
deficits, to strive to stop spending money we do not have, often on
things we do not need and mortgaging our children's future. It is not a
question of whether or a difference on whether, it is a question of
how.
I take a look at what we face in the coming years, and I see enormous
deficits in the out years, under virtually everyone's proposals.
I have said, and I do not mean this in a pejorative way, the
conservatives say, ``Gee, we have this Contract With America and here
is what our plan is: We want to increase defense spending, we want to
cut taxes and we want to balance the budget.''
And we said, ``Gee, we know you are people of good faith, but could
you share with us how that is all possible? Haven't we heard this
before? How could you possibly do that? How do you cut your revenue,
increase one of the largest areas of spending and balance the budget?''
So we offer a right-to-know amendment, and they say, ``No, we do not
want to get into details and make people's legs buckle.'' A Congressman
in the other body said, ``If we provide the details, it would make
people's legs buckle.'' What would make them buckle? We would like to
understand how you get from here to there, because we want to get there
as well. We share the desire to get to the same destination.
The question that Senator Reid is asking with his amendment is not
whether we should pass this constitutional amendment to balance the
budget. I have voted for one in the past and may vote for one again.
The question he asks is how, in doing so, will the Social Security
funds be treated? Will we decide on the one part of the Contract With
America to increase defense spending, at a time, incidentally, when the
U.S.S.R. is gone, there is no Soviet Union, the Berlin Wall is down,
the cold war is largely over? Will we increase defense spending and
resurrect Star Wars, one of the goofiest gold-plated weapons systems,
so out of step with reality and so unnecessary for this country? Will
we do that? And if we do that, how will we pay for it?
Will some decide, ``Well, there is one way to pay for it. There is
$70 billion in the Social Security trust funds just this year we raised
but did not spend. That is sitting there. We can pay for it that way.''
Except, that is a contract. We said to the American people we are going
to collect more from your paychecks in order to save it, and those who
say let us balance the budget and increase defense spending and cut
taxes, who might look at that Social Security trust funds as one giant
golden goose, they, I think, will be breaking a promise with the
American people.
So we are saying in this amendment we would like to see if everyone
here will pledge to keep the promise.
I would not suggest that there should not ever be changes in the
Social Security system. Any changes in that system ought to be made for
one reason, and that is to make the system whole. The Social Security
system ought to be made viable, and it ought to be made solvent for the
long term. But changes in Social Security must be made for its own
sake, for the sake of preserving that system, not because someone
wanted to do something else to cut taxes or increase defense spending.
We face staggering challenges in this country, and I could list some
of them. I do not have to do that at great length. But all of us
understand how difficult these challenges are. The challenges include
environmental challenges, clean air, clean water. Does anyone here not
want clean air to breathe or clean water to drink? Of course, we do.
The epidemic of teenage pregnancies among unwed mothers; a welfare
system that seems out of whack, has the wrong incentives; a staggering
number of people who are left behind in our country.
Two days ago I saw again a press story that said more American
children live in poverty today than ever before. More American children
are poor than ever before in this country.
[[Page S2468]] These are staggering challenges to which we have a
responsibility to respond. The question is, how do we do that? We do
that in part with a Federal budget. And there are plenty of needs for
which we must make investments. But we must, at the same time we do
that, pay for them.
I am not someone who comes here to talk about a balanced budget
amendment or the Reid amendment and says, as far as I am concerned, let
us fold up the tent and just shut down shop here at the Government.
There are a lot of things we do I am proud of, I care about, and I am
going to fight for. A commitment to this country's children is first
and foremost. If we are not willing in these discussions, all of these
discussions, even as we strive to balance this budget--and I will help
do that--if we are not willing to stand up for this country's children,
all of us, and say, those of you who are disadvantaged, we are going to
give a head start; those of you who need help, we are going to give you
an upward bound program; those of you who are hungry, we are going to
give you food, we are going to help you find something to eat; those of
you who need shelter, we are going to help; those of you suffering
abuse--physical abuse, sexual abuse--we are going to help.
Right now there is a place in this country with a stack of files on
the floor. As I speak, a stack of files alleging child abuse against
young children is lying unexamined because there are not enough people
to investigate these charges. Physical violence and sexual abuse files
are sitting on the floor. People have alleged that young children are
victims, and there is not enough money for those folks out there to
investigate them. It just breaks your heart, brings tears to your eyes
to hear stories of these kids. And to think somewhere tonight there is
a 3-year-old or 4-year-old out there who is going to suffer abuse and
someone knew it, because it was complained about before and it did not
even get investigated.
My point is this. We must make a commitment to the children in this
country. Someone once said 100 years from now it really will not matter
how much your income was, it will not matter how big a house you lived
in, if the world is a better place because you were important in the
life of one child. We can be important in the lives of every child in
this country. It is a question of deciding what is important for us. It
is important to balance the budget because those children inherit the
debt. If we are unwilling to pay for the things we now consume as a
country, the children inherit that debt. So it is important to do that.
It is also important with respect to what we spend money on to
understand that children come first in this country. This country's
future is the future of its children. We are going to have, I think,
very substantial debates, fights later this year about what to spend
money on.
Let me go back to this issue because it is not an unimportant issue.
It is such a clear issue to me. We have people who, at a time when more
children are living in poverty than ever before in the history of this
country, when we have children who are hungry and homeless, say, well,
now is the time for us to rebuild star wars; it is time now; we need a
new gold-plated weapons program in defense; we need to build star wars.
I do not even understand what kind of thinking produces that sort of
nonsense, but people believe it. Some people do. If they propose it,
they will fight for it. And do you know, it is a lot easier to get
money for a weapons program, a lot easier to get money to build a
weapons program, than it is to get money to try to investigate charges
of child abuse. I tried last year to get $1 million to help those
people to investigate those charges.
We have to do better than that. We have to change. We have to change
with respect to the priorities we decide are important in this
country's future, what we invest in, what makes us a good country with
a good future. But we also have to change.
The Senator from Utah and others are absolutely right; we have to
change, change this stream of deficits that hurt this country. And we
can do it. There is nobody better qualified to do it than the American
people now today, to start today. And it may be the constitutional
amendment is the way to do that. If it ratchets up even with a small
percent the chance of doing it, then I think we will have served some
good purpose. But not if while serving that good purpose we break
another solemn promise of saying we are going to raid the Social
Security trust fund to do it.
Some people in here, it seems to me, are afraid to ask for
responsible choices from the American people. I think it is reasonable
to ask the people to make choices.
Let me give you an example. In this country, we spend nearly $400
billion on gambling. We gamble more in this country than we spend on
defense, which is one of the largest items in the Federal budget. So
someone says well, gee, if you propose a 1-cent gas tax, people get all
upset. Sure, I understand that. But the fact is we must force people to
make choices. Some choices are very hard to make. Nobody would ever
want to pay an increased tax and no one wants spending cuts in areas
where spending benefited them. And yet the solution, it seems to me, is
probably going to have to in the long run be both, in one measure or
another.
We cannot continue to ignore the problem, and I say to those who
bring this to the floor I think they do justice to this country's
agenda because it is something we ought to be debating and we ought to
force the Congress to deal with it.
I do hope, however, that as we do this we will do it the right way.
And the right way, it seems to me, would be, when we vote on Monday on
the Reid amendment, to decide to vote yes, to tell the American people
we have a number of contracts going on around this country. One is a
political contract called the Contract With America. Another is the
fundamental contract called the U.S. Constitution, which supersedes it
all and has made it all possible.
Under the Constitution we have made a promise, probably one of the
most successful promises ever made and a promise that I expect to be
kept for decades to come, and that is the promise of Social Security.
The Senator from Nevada I guess mentioned this morning again the
story I told yesterday about landing in a helicopter that was out of
gas in Nicaragua. I was up in the mountains actually by Honduras,
between the border of Nicaragua and Honduras, and discovering up there
for the first time what Social Security meant. I was talking to the
people, campesinos, and discovered that they do not have Social
Security. They have as many children as they can have during the
childbearing years and hope that maybe, if the children are lucky
enough to grow old, the children will provide for the parents who
raised them. If you are lucky enough to have children grow up with you,
that is your Social Security. I had not even thought about it before,
until that day out in the jungle of Honduras talking to some of the
campesinos.
This is an enormously fortunate Nation, to have had some people to
make tough choices but to develop approaches that have been very, very
good for this country, one of which is Social Security.
I know we had people who, when it was constructed, said, Gee, this is
socialism. What on Earth are we doing?
It is not socialism. Not at all. It has been the most successful
program, I think one of the most successful programs, in this country's
history. It has been there for every generation and will be there for
every generation.
Now, some will say, well, why are you doing this? Why do you raise
the question of Social Security, Senator Reid? The answer is that just
today in The Washington Post and the New York Times, once again there
are two more references by public officials who say we are simply going
to have to adjust Social Security to deal with the budget deficit.
I say to people, if you adjust Social Security, do it to make the
Social Security system solvent if it is necessary, but do not ever do
it to deal with the operating budget deficit that this country is
running because we cannot reconcile our revenue with things we are
spending it on other than Social Security.
That really, it seems to me, would be breaking a promise.

So just today, again, with two references, one in the New York Times
[[Page S2469]] and one in the Washington Post, again on this subject,
it underscores, I think, the need that Senator Reid says is foremost
here to pass an amendment that simply says when we amend the
Constitution that we will continue the promise. The promise is the
Social Security system is a trust fund paid for with dedicated taxes,
not running at a loss and not contributing one cent to the Federal
deficit, and we promise we will not balance the budget by raiding the
Social Security trust funds.
I said before I do not ask for three reasons one would not vote for
this, just one good reason, one reason someone would decide not to vote
for this amendment. The only conceivable reason I can divine is that
some way, somehow, someday down the road, someone wants to use this
money in order to make it easier to balance the budget. But of course
in my judgment that would be breaking a promise.
So, having said all of that, let me again congratulate the Senator
from Nevada, Senator Reid, and the Senator from Utah. Again, this is a
debate we should be having. It is when we should have it. There are a
few left who say this does not matter. This matters more than almost
anything else because we are spending tomorrow's money today.
I have a 5-year-old young daughter who is going to grow up and
inherit a $10 or $12 or $14 trillion debt. Somehow I am going to try to
prevent that from happening with every ounce of my energy because it is
unfair, unfair to have her do that. So that is what these debates are
about.
I appreciate very much the leadership of the Senator from Nevada and
I look forward to the vote Monday.
Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Nevada.
Mr. REID. Mr. President, prior to the Senator from North Dakota
leaving the floor, I want to say to him, and to the senior Senator from
Utah, and to the American people, I think what has gone on during the
last week or so--I should say more than that--what has gone on since we
have started this congressional session has been very constructive. We
have had some very difficult debates on coverage, unfunded mandates,
and now this balanced budget amendment. But I think these debates have
been very good. We have debated issues. We have not gotten involved in
personalities. We have, on this issue and a number of other issues, a
real difference of opinion and we will debate this--as to whether or
not there should be an exemption for Social Security--the rest of this
day, Monday, and perhaps Tuesday. But this is drawing to a close.
I say to my friend, the manager of the bill, I think this has been,
for lack of a better description, a high-class debate. We are, really,
talking about issues that are important to the American public. I hope
the debate that will transpire the next few hours on this particular
amendment will remain constructive and in so doing I think it brings
honor to this institution and to the American public.
The PRESIDING OFFICER. The Senator from Montana.
Mr. BAUCUS. Mr. President, I rise in support of the balanced budget
amendment.
I have always supported a balanced budget. Montanans want a balanced
budget. We must listen to the people and give them a balanced budget.
The Federal Government must learn to live within its means--just like
the middle-class families we all represent. And I now believe a
constitutional amendment is the best way to make that happen.
I questioned this amendment in the past simply because I have a
reverence for the Constitution. I do not like the thought of amending
it to address any subjects beyond the fundamental questions of our
rights and responsibilities as citizens.
There are serious, thoughtful arguments against this amendment,
arguments on constitutional principle, and arguments based on its
practical effects. But I have seen us evade our responsibility too many
times.
Rising interest payments and rising spending are denying our children
their shot at the American Dream. They are eating away every essential
function of the Federal Government. And when presented last year with a
chance to solve part of the problem by containing Government health
spending, Congress would not do it.
It is time to send the balanced budget amendment on to the States. It
is time to let our Governors, State legislatures, and citizens debate
the issue and vote on it. It is time to move beyond the amendment, cut
waste in Washington and work with the States to set priorities and
control spending. If we work together as a country we can do the job.
And if we set our priorities carefully we will find the consequences
are not so dire as the opponents of this amendment predict.
Let us begin with a look at the problem we face.
Every year, for the past 14 years, we borrowed $150 or $200 billion.
In that time, our national debt grew to its present extravagant size of
$4.6 trillion. And not only is debt growing, it is growing faster than
our economy.
It rises about 5 percent a year, faster than we can expect GDP to
grow in the foreseeable future. That means every year, we give up more
of our income to pay interest on the debt.
Each year, more tax dollars go not to useful purposes like defense,
fighting crime and drugs, education or promoting public health but to
commercial and foreign banks. Our fiscal situation is bad already, and
our children will take the worst of it.
Last year, for the first time, Federal net interest payments topped
$200 billion. Next year it will be $260 billion, $1,000 for every
American man, woman, and child. And without emergency action on the
deficit, interest payments will be higher every year from here to
eternity.
The question, however, is not whether consistent over-borrowing is
wrong. Obviously, there are times--in wars, in depressions--when
borrowing is not wrong. But to do it year after year, without any
emergency, is scandalous.
Last year the economy grew faster than it has in a decade. Any
economist would say that years like 1994 are years in which we should
run a surplus and retire some of the debt. Instead we borrowed more.
So we now face two questions.
First is the practical question of how to make enough cuts and raise
enough revenue to balance the budget. And the second--the more profound
question--is how to establish an ethic that says constant,
irresponsible overborrowing is simply wrong.
On the practical side, we have made a start with the normal budget
process. In 1993 we made a massive cut in the deficit--$486 billion
over 5 years.
That has succeeded. You can see the effects already. In the last year
of the Bush administration, the deficit was $222 billion. In fiscal
year 1994 it was $203 billion. And this year it will be down to $176
billion. As a percentage of GDP, it has not been this low since 1979.
That is a start, but we must do more. And since the 1993 budget
passed, I have kept at it. Last year I looked into overspending on
Federal courthouses. And I cut $120 million out of the courthouse
construction budgets. Further investigation found judges spending
taxpayers' money on private kitchens and rosewood paneled offices.
I worked with Senator DeConcini, then the Intelligence Committee
chairman, to cut $50 million from the CIA's National Reconnaissance
Office, when we caught them wasting money on a building with a fountain
and a sauna.
That is all to the good. But there is more waste to cut.
The Army Corps of Engineers insists on building more and more levees
at great expenses to the taxpayer--an expensive, backward policy, which
turns damaging floods into disasters like the Missouri flood of 1993.
We cut out the supercollider but we still fund giant boondoggles like
the $70 billion space station.
We still pay $12 million a year for an absurdity like TV Marti--the
weather balloon unsuccessfully beaming dubbed reruns of ``Laverne and
Shirley'' to Cuba between 3 and 6 in the morning. I have tried to cut
both and I will try again.
And on a broader scale, many in Congress like talking about spending
cuts in the abstract more then cutting spending in the concrete. Back
in 1984, I joined Senators Kassebaum, Grassley, and Biden in sponsoring
an amendment to freeze all Federal spending across the board for a
year. It was
[[Page S2470]] simple--some said simplistic--but effective. We got just
33 votes.
Last year, I was one of just 31 Senators to support Senator Bob
Kerry's amendment to cut over $94 billion in Federal spending. Its cuts
in Public Law 480 Food Aid and the honey program meant pain at home in
Montana. Means testing for Medicare part B would have made wealthy
senior citizens pay a bit more.
But it was fair. It spread the pain equally around the country, and
we cannot afford to reject deep, fair cuts like that one again.
I have seen this happen one time too often. And I do not believe it
will stop unless we make a clean break with the past and establish a
new ethic of responsibility. And I conclude that the only way to
establish such an ethic is through a step as dramatic as a balanced
budget amendment.
So, while I respect and at many points agree with the arguments made
by the amendment's opponents, I will support this amendment to our
Constitution. But I will also try to improve it, because in three
critical areas it falls short.

right to know

First, the amendment is only a statement that the budget must be
balanced. It contains no plan of how to do it.
That is also a question of values. In Montana, you look people in the
eye and tell them the truth. You do not promise to fill them in later.
Our state government is the country's most open and accessible.
Our State constitution guarantees the people access to virtually every
official document or meeting.

It should be the same in Washington. A ``right to know'' provision,
requiring us to spell out a program that balances the budget within
seven years, is an essential part of a balanced budget amendment. And
without a detailed, specific plan to cut spending, reduce interest
rates and raise revenue, experience tells us that this amendment will
fail to do the job.
Why do I say that? Because I remember the Gramm-Rudman-Hollings Act I
voted for back in 1986. That act required us to meet a set of
progressively lower deficit targets every year, ultimately balancing
the budget by 1992.
Well, we all know what happened. Because it lacked a plan to meet the
targets, Gramm-Rudman became an annual exercise in gimmicks. Payment
dates delayed or moved up, savings double-counted, revenue forecasts
artificially pumped up and more. It was a well-intentioned failure, and
we must not repeat it.
So because of practical necessity as well as old-fashioned Montana
honesty, we need full disclosure in this amendment. We have a right to
know--the people have a right to know--the consequences before we act.
I deeply regret an earlier attempt to add this right to know concept
was defeated.

capital investment and consumption not the same

Second, when the Federal Government thinks about how to balance the
budget, it can take a good lesson from Montana and from some of the
other States.
Our State of Montana Constitution requires a balanced budget. But
despite that provision, and without violating it in any way, Montana
has a State debt of over $400 million.
How did it happen? Simple. Montana balances its operating budget. But
Montana can borrow money to support its capital budget, that is the
money it uses to build and improve public highways, buildings and water
systems. That is straightforward, sensible policy. It is not a shell
game. And, of course, it is also how businesses and families manage
their budgets.
Middle-class families watch their money. They stay on a budget and do
not spend more than they earn on luxuries like restaurants and CD
players. But when they make major, essential purchases, like cars and
homes, they carefully, within their means, borrow. Virtually nobody
pays cash for a house.
Likewise, most successful businesses strictly avoid borrowing to pay
for operating expenses. But they do borrow at times to expand their
working space. A farmer on the Hi-Line borrows to buy a new tractor. A
small enviro-technical company in Butte borrows to buy a computer
system. Businesses borrow to buy essential capital goods that raise
their productivity and mean more profits in the long run, and they are
right to do so.
The right policy for Montana, small business and families is also
right for the country. On critically important capital projects,
borrowing is sometimes right.

capital budgeting and highways

For example, Dwight Eisenhower asked our generation to accept a
significant debt burden to fund the Interstate Highway System. In 1956,
when he signed the bill creating the Interstate, we had a balanced
budget. But beginning in 1958 and throughout the 1960's, we ran
deficits.
And since 1956, we have spent $130 billion on the Interstate. If we
had spent nothing, the debt would be lower by $130 billion plus
interest. But Ike made the right decision.
Through I-15, I-90, and I-94, the Interstate System makes Montana a
viable part of the modern economy. Across the country, it eased the
flow of commerce, created millions of jobs, and brought us untold
additional wealth. Compared to these benefits, some additional debt is
unimportant.
We are now beginning its successor, the National Highway System. The
NHS will do for our children what the Interstate did for us. It will
mean jobs, growth, and higher productivity, and if we need to accept
some debt to build it, that is appropriate.
Passing this amendment, without ensuring that we can keep a separate
capital budget, risks destroying the National Highway System. Towns
like Lewistown, Glasgow, and Kalispell will remain isolated. Our
farmers will be at a competitive disadvantage. Our businesses will see
transportation costs higher than they should be, and that would be sad
and foolish.
A separate capital budget will make sure that wise capital
investments like the National Highway System are protected. Thus, I
intend to support an amendment to give us a capital budget as well as
an operating budget, and allow us to make the wise choice Dwight
Eisenhower made 40 years ago.

exempt social security

Finally, we come to an item of great sensitivity. That is, how will a
balanced budget amendment affect Social Security?
Social Security is not really a government program at all. It is
essentially a pension fund. People who work contribute to it throughout
their career. The Federal Government manages the money and returns it
to them with interest on retirement.
So it is not Federal money. It belongs to the people who pay into the
system. It is wrong to count payments from the Social Security trust
fund as spending, or to count Social Security contributions as revenue.
To do either is really a breach of contract.
Robert Olandt, from Rollins in the Flathead, expresses it perfectly
in a letter he wrote me 2 weeks ago:

Sir, you and I and countless others are or have been paying
Social Security premiums with the expectation that this
program will, in fact, not be diminished . . . that quality
of life may be preserved as we enter later maturity. Just
getting old is bad enough. There has to be some dignity as
well.

When this amendment passes, we can pass budget resolutions which do
not cut Social Security. I will work very hard to make sure we do that.
But the temptation to include Social Security will be great. And the
better course is to say now, in this amendment, that Social Security is
off the table.
montanans must face this together

Mr. President, we must balance the budget. We must learn to live
within our means.
On no issue are Montanans more united. When I walk the highways of
our State people stop and tell me we have to balance the budget. I
listen to them at workdays, when I spend a day at Ribi Immunochem in
Hamilton, on Geoff Foote's ranch on the Blackfoot or the Big Spring
Water Plant in Lewistown. And I feel the same as any other Montanan.
But feeling is not doing. And doing will hurt. According to the
National Association of State Budget Officers, about 28 percent of
Montana's State budget comes from the Federal Government. On top of
that the Federal Government spends about $330 million to support
Montana crop and livestock producers, $30 million at Glacier and
Yellowstone National Parks, and $100 million at Malmstrom Air Force
Base.
[[Page S2471]] To balance the budget by 2002--without new Federal
taxes, without a separate capital budget, and with each State taking a
proportionately equal cut--the Treasury Department predicts that the
Federal Government will need to cut spending by $277 million in
Montana.
That includes $52 million in highway funding--and when we give up $52
million in highway funding, we lose 2,000 high-paying construction jobs
and hundreds of miles of road repair. We give up $123 million in
Medicaid. And we lose over $100 million in education funding, welfare
payments, environmental protection, housing, help for veterans, and
more.
So debate in the Senate is only the beginning. Difficult and painful
decisions lie ahead for our State.
We must set our priorities. We must decide which programs we are
willing to pay for and which we are willing to live without. And all
Montanans and Americans ought to shape these priorities together--so
that we share the stress fairly, and so that we cut as much waste and
as few essential services as possible.

But we must make these decisions. We can no longer postpone them.
Because at bottom, they are questions that relate more closely to
values than to accounting.
I found the essay Prof. James Wilson published in the Wall Street
Journal a few weeks ago very perceptive. He said that in years past:

something akin to a Victorian ethos and restrained our
spending. Now that ethos is gone.

That goes for everyone. The Federal Government has evaded the
problems at the root of the deficit for a decade. State governments
blame Washington for unfunded mandates without admitting how much
Washington pumps into their budgets every year. Citizens write letters
demanding tax cuts, money for local projects, and a balanced budget.
That is a failure of values. At every level, it is a failure to admit
the truth and take responsibility. It shows how far we have come from
the ethos Wilson describes.
Whether or not it passes, we must get back to the values we have
lost. Like living within our means. Like thinking more about our
children than ourselves. So in the coming months I hope to hear from
our State's legislators and elected officials, and most of all from
ordinary, middle-class Montanans as to how we start. And I will seek
their views on where they see waste in Montana, where Federal spending
can be eliminated and where Federal support is essential.
This is a heated, spirited, principled debate. But underneath it is a
consensus. We need to live within our means. We need to set priorities.
And we need to work together to do it.
That is true of the political parties. It is true of the State and
Federal levels of government. Most of all, it is true of us all, as
ordinary American citizens. And there is no time better than now to
begin.
(Mr. KYL assumed the Chair.)
Mr. HATCH. Mr. President, as far as I know, that may be the last set
of remarks. There may be one other Senator coming over to speak. We
would like to shut the Senate down because I think everybody has really
had a good chance. I first pay tribute to my colleague from Montana and
tell him how much we appreciate his willingness to support this
balanced budget amendment. I know it has been a very difficult decision
for all of us because there are arguments on both sides of this issue.
I also have a great deal of affection not only for him but for my
colleague from Nevada, who, it seems to me, has conducted this debate
on his amendment with about as much dignity and class as anybody I have
ever seen in the history of the Senate. I personally appreciate it. So
I thank the Senator from Montana and the Senator from Nevada, as well.
Both of you are dear friends. Let us keep fighting, because I
personally believe we can pass this joint resolution. I think we have
to. Even though nothing is perfect, it is a Democratic and Republican,
bipartisan opportunity for us to try and do something.
Mr. President, some of my colleagues have argued that the balanced
budget amendment is a figleaf. To the contrary, it is the first step
toward our country's fiscal atonement. That is a pretty high-flung term
to talk about ``atonement,'' but $5 trillion in debt, going to $6.3
trillion within 3 years, spending our children's and grandchildren's
future away, I think this is fiscal atonement. That is what we should
do.
We have been unwilling to deal with our exploding debt. The few times
we have tried, the short-term benefits of partisan politics consumed
our institutional duty to attend to our Nation's long-term interests.
If we have learned anything from recent history, we have learned that
we lack the fiscal backbone to make the tough decisions, or restrain
ourselves from engaging in shortsighted political assaults when some in
Congress demonstrate the willingness to do so. I suggest, perhaps that
both sides of the aisle are responsible. When Republicans tried to curb
the growth in entitlements by changing Social Security back in 1985,
Democrats seized on that opportunity and took back the Senate. When
Democrats tried to address the deficit by raising taxes last Congress,
Republicans jumped into action and, of course, we took back the Senate.
If we have learned anything from the past decade, it is that we
should not raise taxes or play with Social Security. But we have also
learned that without the balanced budget amendment to give us the
fiscal backbone we need, neither party is willing to restrain itself
from partisan politics when it comes to budget cutting. Instead of
viewing the balanced budget amendment as a reward for congressional
cowardice, my hope is that we will begin to see it as a first step
toward our own fiscal penance, and I call it fiscal atonement.
The truth is we must act. If we fail to act here, can any of us
honestly admit that, without the balanced budget amendment to give us
backbone, we will continue business as usual and we believe the
Congress will develop the institutional courage to act responsibly any
time in the next several years if we pass this amendment?
Teddy Roosevelt said:

The danger of American democracy lies not in the
concentration of administrative power in responsible hands,
it lies in having the power insufficiently concentrated so
that no one can be held responsible.

Without the balanced budget amendment, we will be content to hold the
other party, or the President, or the past Congresses, responsible in
lieu of ourselves.
Why act now? Why should we act? Because such an act is important. So
much is riding on our vote. If we do not act, just think of the fate we
are leaving for our future generations. As Senator Daschle said last
Congress when he voted in favor of the balanced budget amendment, ``We
are leaving a legacy of debt for our children and grandchildren. A lot
of people have paraphrased that during this debate.
Every child born in America today comes into this world over $18,500
in debt. And that debt is growing. We are concerned about our children
and our grandchildren.
In President Clinton's fiscal year 1959 budget, it was estimated that
for children born in 1993--these kids right here --the lifetime net tax
rate will be 82 percent. The net tax rate is the estimate of taxes paid
to the Government less transfers received, if the Government's total
spending is not reduced from its projected path and if we do not pay
more than projected. The 82 percent figure for our children stands in
stark contrast to the 29 percent net tax rate for the generations of
Americans born in the 1920's, and the 34.4-percent net tax rate for the
generation born in the 1960's.
Now, that is right from the Clinton administration's 1995 budget,
genera- tional forecasting.
Each year that we endure another $200 billion deficit will cost the
average child--these children right here and all of our children
throughout this country and our grandchildren--over $5,000--$5,000--in
taxes over his or her working lifetime. And we have, under this budget,
12 straight years of $200 billion deficits. So just add it up--5,000
bucks per child each year that we endure another $200 billion deficit.
It is going to cost the average child over $5,000 in taxes over his or
her working lifetime just to pay--now get this--just to pay the
interest costs on the debt. President Clinton's conservative deficit
estimate alone for the next 5 years
[[Page S2472]] will mean a total of $25,000 in taxes for these
children, just to pay interest on the debt.
A lot is riding on our vote. When this child is 11 years of age in
fiscal year 2005, the CBO's conservative projection shows that the
deficit will top $400 billion--more than twice today's level. In that
year alone, this child right here will be charged and all of our
children will be socked with a $10,000 tax bill, just to pay the
interest on the deficit. The debt will reach nearly $6.8 trillion, or
58 percent of our GDP.
That is from the ``CBO Economic and Budget Outlook, Fiscal Years
1996-2000.''
CBO notes that the growing deficits stem from entitlement spending,
particularly by major health care programs. Entitlements will grow from
roughly one-half to two-thirds of all Federal spending. Spending for
both Medicare and Medicaid is still projected to rise by 10 percent per
year through the year 2005. These two programs alone will overtake
Social Security in the year 2000 and catch up to total discretionary
spending by the year 2005. That is just Medicaid and Medicare alone. In
the year 2005, the first baby boomers from our generation will be
several years away from eligibility for Social Security. The child in
this picture will be over 55 years away from eligibility.
Our debt is ballooning. It took our Nation 205 years--from 1776 to
1981--to reach the first $1 trillion national debt. It took only 11
years to quadruple that figure. Today, the national debt stands at over
$4.8 trillion and it is only going to take another 3 years to get it up
to $6.3 trillion. Today, the national debt stands at almost $5
trillion. Citizens of other nations, like Argentina, Canada, and Italy
have faced stagnant or lower living standards when their Governments
ran up huge debts. Future generations face higher interest rates, less
affordable housing, fewer jobs, lower wages, and a loss of economic
sovereignty.
Let me just say this. We have been talking about Social Security. I
want to take care of our senior citizens and I intend to do so, and I
think everybody else around here does, too, in spite of this debate.
But I have to tell you something that people have to stop and think
about. If we keep running this debt up into the air as we have been
doing, if we keep accumulating the deficits that we have and paying so
much interest against the national debt, I have to tell you we are
robbing our children and our grandchildren and our future generations.
And it is not right.
When Social Security came into being, there were 46 workers for every
person on Social Security. Today, it is a little bit better than three
for every person getting Social Security, and by the year 2020 it is
going to be two. It is going to be these kids who are going to share
the burden. And we have been robbing our kids. Now, it is time for us
to talk about the kids and about our grandchildren, at the same time we
are trying to take care of our seniors. But we cannot forget them. And
if we do, we deserve the condemnation that should come our way.
Let me tell you something. Sooner or later, if we want Social
Security to be strong, we have to have a strong economy. If we want a
strong economy, we have to get spending under control. We have not been
able to do that for 26 years and certainly not for over the last 14
years.
And I have to tell you, it is getting worse and worse. If we want to
get our economy under control, we have to pass this balanced budget
constitutional amendment. It is one way we can. It is our only hope
right now. It is not a Republican amendment. It is not a Democrat
amendment. It is both of us. We have worked together. Seventy-two or
seventy-three courageous Democrats voted for this in the House, and we
will have a number of them here. All we need are 15.
So I hope the folks out there will get with their Democrat Senators
and let them know they expect them to vote for this balanced budget
amendment, regardless of what happens. And if we pass this, we will be
on the way to some fiscal restraint and some fiscal sanity that may
save the lives and the futures of these children that are born today.
Mr. GRAIG. Mr. President, I rise to oppose the Reid amendment. Now
that the Dole motion has passed, the Senate has expressed its will to
protect Social Security.
The best protection we could provide for the Social Security system,
and for the welfare of our senior citizens, in general, is to pass the
balanced budget amendment and send it to the States for ratification as
soon as possible.
Any amendment, such as the Reid amendment, that claims to do both,
require a balanced budget and protect Social Security with an
exemption, will do neither.
From every proposal like this that we have seen so far, it seems
obvious that there is no practical way to do both those things in one
constitutional amendment.
On the other hand, the Dole motion, with the amendments proposed by
the majority leader, is the real vote on protecting Social Security.

the real vote was on the dole motion

The Dole motion, combined with the Kempthorne amendment to S. 1
recently, fully commits this Senate to protect the integrity of the
Social Security system and the benefits of seniors who are counting on
that system.
The Dole motion deals with how we get to a balanced budget by fiscal
year 2002. Even if the Reid amendment worked as its author has
indicated, it would not be effective until fiscal year 2002 at the
earliest.
To get to a balanced budget by 2002, Congress will need to restrain
the growth in spending to 3 percent a year. With Social Security off
the table, we will have to hold non-Social Security spending to 2.25
percent growth a year.
That is a reasonable glide path, just slowing the growth in spending
between now and 2002. After the budget is balanced in fiscal year 2002,
spending can resume growing at the same rate as revenues at that time,
now projected at more than 5.2 percent a year.
So, obviously, budget discipline will have to be tighter before
fiscal year 2002 than after 2002. The Dole motion sets Social Security
aside as a priority immediately, while we are on that deficit-reduction
glide path, and after 2002, as well.
The Dole motion protects Social Security when it needs protection. A
yes vote on the Dole motion is the real vote to protect Social
Security, now and later.
the reid amendment will not work

The Reid amendment does not even purport to protect Social Security
until 7 or 8 fiscal years from now. In reality, careful examination
shows that the Reid amendment will never protect Social Security.
These five facts best summarize what is at stake as we debate the
Reid amendment:
First, the debt is the threat to Social Security, our seniors, and
the economy.
Second, nothing in the language of the Reid amendment provides any
protection for Social Security or seniors.
Third, the Reid amendment would create perverse incentives to raid
the Social Security trust funds on both the spending and revenue sides.
Fourth, nothing in the underlying House Joint Resolution 1 would
overturn present statutes protecting Social Security or prevent future
efforts to strengthen its priority status.
Fifth, a Constitution should include timeless principles, not
temporary priorities.
Mr. President, let's be realistic: Social Security has 100 friends in
this Senate.
I do not doubt that the supporters of the Reid amendment earnestly
seek to protect Social Security. I do think some of them want to vote
against the balanced budget amendment, and I hope they will not hide
behind Social Security as an excuse.
I share the goal of protecting Social Security benefits from being
cut, or Social Security taxes from being raised, to balance the budget
and pay for other spending.
But the Reid amendment would take us in the opposite direction from
that goal. At the same time, it would undermine the basic purpose of
the balanced budget amendment itself.
Let us examine these five principal issues one at a time.
First, the debt is the threat to Social Security, our seniors, and
the economy.
Some of our colleagues have taken to the floor to remind us that
Social Security has not been contributing to the
[[Page S2473]] deficit and to the buildup of the national debt.
I agree. It is exactly the other way around--the debt is the threat
to Social Security.
Gross interest on the debt is already approaching one-fifth of total
Federal spending. It is the second largest item of Federal spending now
and, by the end of the decade it will pass up Social Security as the
largest item.
As the debt grows, as the cost of servicing the debt grows, it
threatens to crowd out all other budget priorities--including Social
Security.
The more debt the Government runs up, the more we have to pay out in
interest, the less we will have to pay for anything we want.
We know what happens when any debtor racks up too much debt and heads
into bankruptcy--every lender who is owed something by that debtor now
stands to lose out.
Current Social Security surpluses represent an obligation, a
commitment, to pay those dollars back out in benefits tomorrow. But if
the debt keeps growing, in the not-too-distant future, there will be so
much debt that the Government will not be able to honor all its
obligations.
In the year 2013, the Social Security trustees project that OASDI
outlays will exceed FICA tax revenues. The trust funds will start to
run an operating deficit. In 2019 total OASDI outlays will exceed total
income and Social Security will begin to run annual deficits. In 2029,
the trustees estimate, the trust funds will be exhausted.
According to the Kerry-Danforth Entitlement Commission, under current
trends, at about that same time, by the year 2030, total Federal
spending will top 37 percent of GDP, net interest will exceed 10
percent of GDP, and the deficit will be about 19 percent of GDP.
Contrast that with today: For fiscal year 1995, Federal spending is
expected to be 21.8 percent of GDP, net interest 3.3 percent of GDP,
and the deficit 2.5 percent of GDP.
How much more pressure will those future deficits, that interest
burden, place on future Social Security beneficiaries? An intolerable
amount.
Those future trends will be unsustainable for the economy and
devastating to seniors depending on Social Security.
The best way to protect Social Security is to protect our future
ability to meet all our obligations. And the best way to do that is to
pass the balanced budget amendment and send it to the States for
ratification.
Second, nothing in the language of the Reid amendment provides any
protection for Social Security or seniors.
Let us look at the plain meaning of the language in the Reid
amendment.
All the Reid amendment does is provide a simple exemption. It simply
exempts receipts and outlays for the Old Age, Survivors, and Disability
Insurance [OASDI] from the calculations of total Federal receipts and
outlays--from the calculation of balanced budgets.
Nothing in the Reid amendment says, Congress shall not cut Social
Security benefits.
Nothing in the Reid amendment says, Congress shall not raise Social
Security taxes on working class people.
Nothing in the Reid amendment says, you cannot change the actuarial
balances in the Social Security trust funds.
Nothing in the Reid amendment requires Congress to do any of the
things to protect Social Security that the supporters of the Reid
amendment say they want to do to protect Social Security.
At the very best, the Reid exemption is a fig leaf that does not add
one layer of protection for Social Security.
At the very worst, this exemption could be disastrous for Social
Security and our seniors, as I will explain next.
Third, the Reid amendment would create perverse incentives to raid
the Social Security trust funds on both the spending and revenue sides.
The Reid language is a simple exemption. And it is all loophole.
It exempts anything you put into, and anything you take out of, the
OASDI trust funds from the discipline of the balanced budget.
In other words, it allows unlimited deficits, as long as the
accountants say you are deficit spending only out of the OASDI trust
funds.
Supporters of the Reid exemption acknowledge this. They say they have
taken care of that possibility by limiting OASDI outlays to ``provide
old age, survivors, and disabilities benefits.''
But most of the problem remains.
In its own terms, the Reid exemption says that OASDI trust funds can
be used to pay for any ``old age, survivors, and disabilities
benefits,'' in addition to what we currently call ``social security''
benefits.
Let us add up what is possible to include in this loophole, if the
Reid amendment to the balanced budget amendment were in the
Constitution today, for fiscal year 1995.
Under current statutory definitions, $334 billion will be spent for
Social Security in fiscal year 1995.
In addition to what we currently consider Social Security, here are
some of the programs that obviously would qualify to be paid for out of
Social Security trust funds under the Reid amendment, that are paid for
from other sources today:

Billions
Medicare...........................................................$176
Supplemental security income.........................................24
Federal civilian retirement and disability...........................42
Military retirement and disability...................................28
Veterans' benefits and services......................................38
Other retirement and disability.......................................5
________

Subtotal......................................................313

Those, obviously, are programs that provide old age, survivors, and
disability benefits, and adding these spending programs to the OASDI
trust funds would almost double what we currently spend on Social
Security.
Then, a reasonable question arises, what else might be considered
disability or survivors benefits? When Aid to Families with Dependent
Children [AFDC] was first created, it was portrayed primarily as
providing for widows and surviving children. And most social programs
aimed at disadvantaged populations could be said to prevent or mitigate
a disability.
So, Congress could also go into the Social Security trust funds to
pay for programs like these:

Billions
Medicaid............................................................$90
Housing assistance...................................................27
Food stamps..........................................................26
Family support.......................................................18
Public Health Service................................................13
Child nutrition.......................................................8
Education for the disadvantaged.......................................7
Head Start............................................................4
Dislocated workers and Job Corps......................................2
Other social services.................................................6
________

Subtotal......................................................201
========

Total, newly exempt spending..................................514
Grand total, potentially exempt spending......................848

In other words, the Reid exemption would open at least a half-
trillion-dollar loophole for deficit spending for programs that are not
currently funded out of the Social Security trust funds.
Other programs may qualify, as well. The list I have given is what
seemed obvious after only a cursory examination of the President's new
budget and CBO's January Economic and Budget Outlook.
Senator Thompson, during the Judiciary Committee markup of Senate
Joint Resolution 1, envisioned that christening a new aircraft carrier
the ``U.S.S. Social Security'' would allow it to sail through this kind
of loophole.
Add that $533 billion in loophole deficit spending to the $334
billion in Social Security spending that the exemption supporters say
they want to protect, and you can move half the budget offbudget--$867
billion in fiscal year 1995.
But it gets worse.
The Reid amendment merely says that OASDI receipts are exempt from
the balanced budget amendment--it does not guarantee that today's FICA
taxes will continue to be deposited in the OASDI trust funds tomorrow.
Under the Reid amendment, Congress could simply deposit FICA tax
revenues into the General Treasury, to help balance the budget, instead
of putting them into the OASDI trust funds. This year, that will amount
to $357 billion.
Far from protecting Social Security, the Reid amendment creates a
perverse incentive to raid Social Security revenues, to use them for
other purposes, and to shift every spending program possible offbudget,
and into deficit spending, by paying for them out of the Social
Security trust funds.
At best, if Congress did not exploit the loopholes, the perverse
incentives,
[[Page S2474]] offered by the Reid amendment, that exemption would
provide absolutely no additional protection for Social Security.
But we would not be here debating the Balanced Budget Amendment in
the first place if deficit spending were not so tempting as to become a
permanent, systemic problem. Therefore:
The Reid amendment would be worse for Social Security, and worse for
the national debt, than the status quo.
A balanced budget amendment with the Reid amendment would be more
likely than the ``clean'' balanced budget amendment, without the Reid
amendment, to result in raiding the Social Security trust funds for
other purposes.
To repeat the conclusion I stated before: Any amendment, such as the
Reid amendment, that claims to do both, require a balanced budget and
protect Social Security with an exemption, will do neither.
This is exactly the problem created when you try to reference a
statutory creation in the Constitution.
The revenues that go into, and spending that comes out of, the Social
Security trust funds, have been set by statute. New spending can be
added or subtracted by statute. Revenues can be redirected by statute.
If you create a loophole in the Constitution that can be exploited by
statute, it will be. That is why you do not find problems like Social
Security referenced anywhere else in the Constitution.
Fourth, nothing in the underlying House Joint Resolution 1 would
overturn present statutes protecting Social Security or prevent future
efforts to improve its priority status.
The balanced budget amendment is all about setting priorities.
No supporter of any one program really has anything to worry about
unless they fear that most of the American people and most of the
Congress will consider their program a low priority.
Realistically, we know that is not going to be the case with Social
Security.
Bob Myers, former Deputy Commissioner of the Social Security
Administration, said it well at our press conference earlier last week:

It's my opinion, very strongly held opinion, that if it
(the balanced budget amendment) were to go into effect and
into operation, Social Security benefits would be cut. . . .
Congress would see that this would not be logical, or would
not be fair.

Social Security has numerous protections under current law that would
not, in any way, be overridden or changed by the balanced budget
amendment.
These current protections include the following:
The Social Security Amendments of 1983 removed the OASDI trust funds
from the totals of the official budget as of fiscal year 1993 and made
them ``exempt from any general budget limitation imposed by statute on
expenditures * * *.''
Gramm-Rudman-Hollings in 1985 accelerated Social Security's off
budget status to fiscal year 1986 and exempted it from the automatic
spending-cut sequester.
Gramm-Rudman-Hollings made it out of order--subject to a 60-vote
waiver in the Senate--to include Social Security changes in a deficit-
reduction reconciliation bill or conference report.
The 1990 Budget Enforcement Act removed Social Security from any
parts of the budget process designed to reduce and control budget
deficits.
The 1990 act excluded Social Security from all spending caps and any
pay-as-you-go limitations.
The 1990 act also created a point of order against making changes in
the actuarial balance in the trust funds--subject to a 60-vote waiver
in the Senate.
Under House Joint Resolution 1, these statutory protections would
continue to set aside Social Security aside as a special case, as a
priority, within a balanced budget. They would keep Social Security off
the table when it comes to budget discipline and deficit reduction.
Nothing would prevent Congress from acting to wall off Social Security
further.
Fifth, a constitution should include timeless principles, not
temporary priorities.
A constitution is a document that enumerates and limits the powers of
the Government to protect the basic rights of the people.
Within that framework, it sets forth just enough procedures to
safeguard its essential operations. It deals with the most fundamental
responsibilities of the government and the broadest principles of
governance.
Our balanced budget amendment fits squarely within that
constitutional tradition. It is dedicated to the same kind of
fundamental, timeless principles enshrined elsewhere in the
Constitution.
The guiding principle of the balanced budget amendment could be
summed up as follows: The ability of the Federal Government to borrow
money from future generations involves decisions of such magnitude that
they should not be left to the judgments of transient majorities.
That principle will never change. If the Framers of the original
Constitution had realized how insufficiently they had provided for that
principle, the balanced budget amendment would have been included in
1787 or 1789.
Social Security, however important, is a statutory program. It
involves obligations that we all agree we must honor. But we already
know that it will go through changes in the future, as the population
goes through changes.
For the sake of future retirees, we know that Congress may have to
address these trends at some time in the future, as the trends
themselves become clearer. We also know that Congress will only make
changes that our senior citizens and the rest of the American people
support.
But we cannot predict what the American people will want in this
program 30, 40, and 50 years from now. We do know that we do not want
them to have to amend the Constitution to perfect the operation of that
statutory program.
Mr. President, I also ask unanimous consent that I may enter
additional materials into the Record at this point, including: A letter
from the 60/Plus Association, endorsing the balanced budget amendment
and opposing the Social Security exemption; materials from the Seniors
Coalition; and additional fact sheets and information.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Tax Fairness for Seniors,

Arlington, VA, February 9, 1995.
Hon. Larry E. Craig,
U.S. Senate, Washington, DC.
Dear Senator Craig: I am writing to you to express the
strong support of the 60/Plus Association for the Balanced
Budget Amendment to the Constitution, which is now being
considered by the U.S. Senate.
The 60/Plus Association is a two-year-old, nonpartisan,
seniors advocacy group with more than 225,000 members. For
the 103d Congress, we presented the Guardian of Seniors'
Rights award to 226 House and Senate Members.
The Balanced Budget Amendment is the best friend the Social
Security system and our nation's seniors could have. The
Senate should pass H.J. Res. 1, as passed by the House of
Representatives in a strong bipartisan vote, and submit it
immediately to the States for ratification.
Continued, growing deficit spending is the greatest threat
to the integrity of the Social Security system and to the
present and future benefits paid from Social Security trust
funds. Past deficits have created a national debt of $4.8
trillin--an alarming 70 percent of our Gross Domestic
Product. Gross interest payments now consume nearly one-fifth
of total federal spending and will surpass Social Security as
the largest item of spending by the end of the decade.
This national debt already has depressed the economy and
lowered seniors' standard of living. As the costs of
servicing that debt continue to climb and to squeeze all
other budget priorities, they threaten the very existence of
Social Security. Today's Social Security surpluses represent
a commitment to seniors tomorrow. But a debtor bankrupted by
an excessive debt load is not able to meet any of its
commitments. Bitter experience has shown that only the
Balanced Budget Amendment can save our nation from that fate.
While well-intentioned, these attempts to exempt Social
Security from the discipline of the Balanced Budget Amendment
are completely misguided. Instead of protecting seniors,
exemptions like that in the Reid Amendment would allow the
Social Security trust funds to run unlimited deficits. This
would create an irresistible temptation to pay for all sorts
of unrelated programs out of the trust funds, completely
destroying the unique purpose for which they were created and
rendering them insolvent.
The debt is the threat to Social Security and America's
seniors. A ``clean'' balanced budget amendment, such as H.J.
Res. 1, is their best protector. The 60/Plus Association
[[Page S2475]] urges you and your colleagues to pass this
urgently needed legislation and resist the scare tactics of
those who create any loopholes that would compromise either
balancing the budget or protecting Social Security.
Former Senator Paul Tsongas summed it up best when he said
he was ``embarrassed as a Democrat to watch a Democratic
President raise the scare tactics of Social Security.''
In other words, it's ``scare us old folks time again'' as
opponents drag a 30-year-old red herring across the trail.
Many seniors--including this one--vividly remember the
scare tactics then--the LBJ TV ad--a giant pair of scissors
cutting through a Social Security card--with the clear
implication that a vote for Barry Goldwater and Republicans
would mean the end of Social Security.
Seniors didn't buy that canard then, nor do they now, 30
years later, judging by the response we get from the vast
majority of seniors.
Sincerely,
James L. Martin,
Chairman, 60+.
____

The Seniors Coalition,

Fairfax, VA, January 24, 1995.
Memorandum re balanced budget amendment.

To: Senator Craig.
Fr: Jake Hansen, Vice President for Government Relations.

The Seniors Coalition has supported a balanced budget
amendment for several years. On behalf of our one million
members nationwide, I am requesting your support of S.J. Res.
1 in the next few weeks.
It is vital that Congress pass a measure that would require
the federal budget to be balanced. Our members feel that if
the government were forced to evaluate its spending the way
every family in America evaluates their own, this country
would not be ``heading down the wrong path.'' While there are
a great many factors that contribute to this public
perception, the bottom line for many Americans is that the
government takes too much from them and spends too much on
programs that do not work. The time to end the cycle of
taxing and spending has come.
I also want to touch briefly on the role of Social Security
in the balanced budget amendment. We feel that there is no
reason to exempt Social Security from a balanced budget. In
fact, such an exemption would create a serious policy and
political crisis for Congress, and would lead to the
destruction of the Social Security system.
If Social Security is exempted, the total force of
balancing the budget will find its way to Social Security.
There will be an overwhelming temptation to either redefine
government programs as Social Security programs, or pull
money out of the Trust Fund to balance the budget by cutting
Social Security taxes to offset tax increases elsewhere. In
fact, there would be nothing to stop Congress from
``borrowing'' as much money as it wanted from the Trust Funds
to finance any other government program.
We feel confident that the political climate surrounding
Social Security is enough to protect it, thus engaging in
destructive policy in the name of protection will only lead
us down the path of truly committing damage to the Social
Security system.
What is most important is that America be given a serious
balanced budget amendment as soon as possible.
____

The Seniors Coalition,

Fairfax, VA, January 26, 1995.

Balanced Budget Amendment--Alert

This morning the opponents of a BBA launched a full scale
attack on the Balanced Budget Amendment with Social Security
bombs. Seniors across the country are watching C-SPAN with
renewed and unjustified fear. It is vital that their scare
campaign be stopped!

exempting social security from the balanced budget amendment will
destroy the social security system--not protect it

Balancing the budget will create tremendous pressure and
that pressure will blow through any available escape hatch.
WHATEVER is exempted from the balanced budget requirement
becomes that escape hatch!
As the total force of balancing the budget falls on Social
Security, there will be overwhelming pressure to redefine
many government programs as Social Security programs. This
endangers its original purpose. There would be nothing to
stop Congress from ``borrowing'' as much money as it wanted
from the trust fund to finance any government program if
Social Security is exempted from the Balanced Budget
Amendment.
Exempting Social Security from the Balanced Budget
Amendment would open a loophole in the requirement that would
completely gut its effectiveness by allowing all social
welfare and other programs (such as Medicare and Medicaid) to
be financed off-budget, in deficit, as the ``New Covenant
Social Security.''

failure to pass a balanced budget amendment will destroy social
security

Eventually, $400 billion plus will have to be returned to
the Social Security trust fund to pay benefits to retired
baby-boomers. Without starting a balanced budget process NOW,
the battle over Social Security will be like nothing Congress
has ever seen thirty years from now.
Without balancing the budget, Social Security benefits will
always be subject to cuts, new taxes and means-testing. This
permanently erodes any confidence in discussions of systemic
reforms for future generations.
____

The Seniors Coalition,

Fairfax, VA, January 23, 1995.

Testimony of Jake Hansen, Director of Government Affairs, The Seniors
Coalition, for The Joint Economic Committee, U.S. Congress

balanced budget amendment: imperative to social security

Mr. Chairman, this is not a new issue to The Seniors
Coalition. Since our inception we have fought for a Balanced
Budget Amendment. We have had experts on Social Security and
expert economist look at the issue, as well as hearing from
thousands of our members. Their conclusion: give us a
Balanced Budget Amendment.
During the elections and in recent debate, we have heard
from many politicians that a Balanced Budget Amendment will
destroy Social Security. However, the question is not ``Will
a Balanced Budget Amendment destroy Social Security'', but
rather ``Can Social Security survive without a Balanced
Budget Amendment?''
As you know, up until 1983, the Social Security system ran
on a pay-as-you-go basis. That is, the amount of money going
into the Trust Funds from payroll deductions was basically
equal to the amount of money being paid to beneficiaries of
the day.
In the late seventies, the economy was a disaster.
Inflation was up, leading to higher cost of living payments
than had been anticipated. Unemployment was up, meaning that
less money was being paid into the system than had been
anticipated. The result: Social Security was headed for
bankruptcy at break-neck speed.
In 1983, a bi-partisan effort saved Social Security by
changing the benefit structure and raising Social Security
payroll taxes. This effort created a new--and potentially
worse--problem: a rising fund balance in the Social Security
Trust Funds. For the past ten years, more money has been
pouring into the Trust Funds than is needed to meet today's
obligations.
This balance has been ``borrowed'' by the federal
government. Today, the federal government owes the Trust
Funds about $430 billion. By the year 2018, according to the
Social Security Board of Trustees, that figure will be a
shade over three trillion dollars. At that time, the entire
federal debt will be--who knows, eight, ten, twelve trillion
dollars?
The point is, how will the government ever pay back the
Trust Funds? They could: Turn on the printing presses and
monetize the debt, so that a Social Security check would buy
a loaf of bread; borrow the money--hurting both the economy
and the Federal Budget; make massive cuts in benefits; raise
taxes, and thus, destroy the economy for everyone; or simply
renege on the debt.
Mr. Chairman, The Seniors Coalition doesn't find any of
these alternatives acceptable.
The Chairman of our advisory board, Robert J. Myers (often
referred to as the father of Social Security) wrote of his
support of a Balanced Budget Amendment last year and said:
``In my opinion, the most serious threat to Social Security
is the federal government's fiscal irresponsibility. If we
continue to run federal defects year after year, and if
interest payments continue to rise at an alarming rate, we
will face two dangerous possibilities. Either we will raid
the trust funds to pay for our current prolificacy, or we
will print money, dishonestly inflating our way out of
indebtedness. Both cases would devastate the real value of
the Social Security Trust Funds.''
The bottom line, is that if we want to protect the
integrity of Social Security the only way is through a
Balanced Budget Amendment.
With that said, the question becomes will just any old
Balanced Budget Amendment do? The answer is, some are better
than others, and some are absolutely not acceptable.
First, some people are suggesting that Social Security
should be exempted. That should be something that an
organization like ours would leap at. The fact is, we are
concerned that such an Amendment would end up destroying
Social Security as more and more government programs would be
moved to Social Security to circumvent the Balanced Budget
Amendment. We believe this would destroy Social Security, and
will not support such an Amendment.
Our first choice would be a Balanced Budget Amendment that
controls taxes as well as spending--such as the Amendment
that has been presented by Congressman Barton. We support tax
limitation and would like to see this Amendment voted on. We
would urge every Member of Congress to vote for this
Amendment.
If, this Amendment does not pass, then we willingly support
a Balanced Budget Amendment such as the one offered by
Senators Hatch and Craig. While I am concerned about taxes, I
believe that last year's elections showed us that we, the
people, do have the ultimate power. And, I believe that had
we been forced to pay for all the government we
[[Page S2476]] were being given, we would have made massive
changes much sooner.
Mr. Chairman, we believe that what is most important is
that America be given a serious Balanced Budget Amendment as
soon as possible. We will work with you and your colleagues
in every way possible to make that happen. Thank you.
____

Congressional Leaders United for a Balanced Budget [CLUBB] Fact Sheet,
January 18, 1995

A Balanced Budget Amendment Exemption Would Increase The
Threat To Social Security.
A BBA exemption would threaten the revenues for the Social
Security Trust Fund. Placing the OASDI/Social Security trust
funds outside the Amendment's deficit restrictions would
provide a perverse incentive for a future Congress to shift
FICA (and related income) taxes out of the trust funds.
Portions of those taxes could be transferred to general
Treasury accounts to balance the ``operating'' budget covered
by the BBA, but at the cost of gutting the OASDI trust funds.
The current stable revenue stream for Social Security could
be critically diverted in small steps which would add up to
disaster for the system. A precedent for this already exists:
The income taxes on Social Security benefits in the 1983
``bailout'' go directly into the trust funds, but higher
income taxes imposed on Social Security retirees in 1993 are
diverted to general Treasury revenues.
Social Security could easily be overwhelmed by non-Social
Security programs moved to Social Security's ledger in an
attempt to hide them behind the cloak of its exempt status.
It's easy to predict well-meaning efforts to protect a whole
range of social programs by arguing they fall under the
general intent of Social Security to provide a safety net.
Contrary to the claims of those who want an exemption,
funding for current Social Security would not be set aside
for protection, but would be pilfered by reclassifying more
and more programs as Social Security. This is an even greater
threat than simply providing a loophole for deficit spending.
As other programs intrude on Social Security, its stability
will steadily erode.
A Social Security exemption defeats the intent of the BBA
by providing the greatest deficit loophole in history. As if
the direct threat to Social Security isn't enough, exempting
it would create an enclave for additional federal debt while
at the same time, government could proudly proclaim a
``balanced budget.'' Projects which risk being assigned a low
priority under the BBA could avoid facing scrutiny and be
paid for by draining the Trust Funds. The Social Security
deficit tomorrow could be bigger than the total deficit
today.
The debt is the threat! The greatest threat to Social
Security is the federal debt itself. Gross interest payments
on the debt already are nipping at the heels of Social
Security as the second largest single item in the federal
budget. Social Security is in no way immune to the increasing
pressure interest payments placed on every single federal
spending item as the growing debt forces ever larger debt
service costs.
Every current statutory protection for Social Security can
continue under BBA. Social Security is the best statutorily
protected program in the federal budget. Those laws are
perfectly compatible with a BBA and can remain in force,
continuing to protect the system. The BBA takes away the
major threats to Social Security so existing statutes can do
their jobs. But if the federal budget does not have the
spending restraint imposed on it by a Constitutional
Amendment, we cannot guarantee that the statutes which
protect Social Security now can be maintained.
____

Congressional Leaders United for a Balanced Budget [CLUBB] Fact Sheet

How the balanced budget amendment protects social security

The BBA would put an end to the rapid growth in interest
payments that threaten to crowd out Social Security spending.
Interest payments on the federal debt have nearly
quadrupled since 1980. Net interest payments in 1993 were
$200 billion and are expected to exceed $300 billion annually
by the end of the decade. Until we balance the budget,
spiralling interest payments will continue to crowd out other
spending, including Social Security.
Balancing the budget would avert the threat of runaway
inflation.
No industrialized nation has reached the level of debt we
will face next century without monetizing the debt by
printing more dollars. Monetizing the debt would lead to
explosive inflation. Huge debt burdens contributed to
ruinious inflation in Germany in the 1920's and several Third
World nations in the 1980's. Runaway inflation would have a
particularly severe impact on senior citizens living on a
fixed income. It would not do any good to get a $1,000
retirement check if bread costs $100 a loaf.
The BBA would force Congress to deal with deficits in time
to prevent a budget crisis forcing draconian cuts each year
just to ``muddle through.''
The General Accounting Office has warned that if the amount
of deficit reduction required just to limit the deficit to
three percent of GDP would increase exponentially by the year
2005. By the year 2020, Congress would be required to enact a
half a trillion dollars of additional deficit reduction each
year just to restrain the deficit to three percent of GDP. No
program--including Social Security--would be able to escape
deep spending cuts under this scenario.
Balancing the budget would promote the economic growth
necessary to sustain the Social Security trust funds.
GAO, CBO and most economists warn that continued growth in
deficit spending would
result in lower productivity and deteriorating living
standards. As real wages for taxpaying workers decline,
there will be increasing resistance to the taxes necessary
to meet the growing commitments of the Social Security
program. GAO found that balancing the budget by the year
2001 would lead to the higher productivity and growth in
real wages that would be necessary to support our
commitments to the growing elderly population.
The amendment would help ensure that Congress takes action
before the Social Security trust funds begin running yearly
deficits.
Although the Social Security trust funds currently run a
surplus, within a generation, they will face cash shortfalls.
A balanced budget amendment would provide Congress and the
President with the necessary incentive to take corrective
action to deal with this threat and provide for the long-term
solvency of the trust funds.
The amendment preserve statutory provisions protecting
Social Security.
The current statutory protections for Social Security would
not be eliminated by the BBA. For example, under current law,
any legislation that would change the actuarial balance of
the social security trust funds are subject to a point of
order which requires a 3/5 vote to waive in the Senate. Under
the 1985 Gramm-Rudman-Hollings Act and the 1990 Budget
Enforcement Act, Social Security was completely protected
from all sequesters. Social Security is not subject to the
spending caps in the 1990 budget agreement. Given political
realities, Congress would be likely to set budget priorities
in such a way that protections for Social Security are
maintained or even enhanced.
Exempting Social Security would open up a loophole in the
BBA and tempt Congress to defund the trust funds, threatening
retirement benefits and the trust fund surplusses.
Exempting the Social Security trust funds from the
amendment would create a perverse incentive for Congress to
use them as a source to fund new or totally unrelated
programs, threatening the ability of the trust funds to
fulfill their current obligations to retirees. For example,
Congress could pay for current and new non-Social Security
spending by simply depositing FICA taxes into general
Treasury revenues, instead of into the trust funds. Congress
also could pass legislation to shift spending for Medicare,
other retirement programs, or any number of programs to the
Social Security trust funds to avoid a 3/5 vote to unbalance
the budget. Thus, non-Social Security outlays and receipts
could be ``balanced'' simply changing program definitions and
draining the Social Security trust funds.
The Constitution is not the place to set budget priorities.
A constitutional amendment should be timeless and reflect a
broad consensus, not make narrow policy decisions. As noted
above, the financial status of Social Security will change
drastically, and perhaps quite unpredictably, in the next
century. We should not place technical language or overly
complicated mechanisms in the Constitution and undercut the
simplicity and universality of the amendment.
____

Seniors' Security in the Balance

(by Larry E. Craig)

Submitted September 29, 1994, to United Seniors of America for their
newsletter

Early next year, the new Congress will again begin
considering the Balanced Budget Amendment to the Constitution
(BBA), as well as specific proposals to reduce federal
deficit spending. Seniors will be told these efforts are an
assault on their rights, economic security, and general well-
being.
Don't you believe it.
The BBA and the right package of spending reforms are
absolutely critical to preserving not only the well-being of
seniors today and tomorrow, but also the American Dream of
economic opportunity for our children and grandchildren.
The federal government has spent more than it has taken in
for 56 of the last 64 years. The result is a federal debt
that now totals $4.6 trillion--more than $18,000 for every
man, woman, and child in America--and will reach $9 trillion
by the year 2004.
Seniors are paying already, in higher taxes and lower
living standards, for the drag this debt puts on our economy.
The Federal Reserve Bank of New York estimated that the $3
trillion added to the debt prior to 1990 reduced Americans'
standard of living by 5 percent. A General Accounting Office
study projected that current trends will reduce our standard
of living another 7-to-36 percent by the year 2020.
Gross interest payments on the federal debt now run $300
billion a year, an amount equal to half of all personal
income taxes. Every dollar borrowed incurs interest costs
that squeeze priority programs--like Medicare--and create
pressure for higher taxes--like those raised last year on
Social Security benefits. In contrast, if the current federal
debt had not been allowed to accumulate,
[[Page S2477]] the savings in interest costs would have
produced a balanced budget in 1994 and a $64 billion surplus
in 1995.
About 10 percent of the federal debt is owed to the Social
Security trust funds and is supposed to be paid out
eventually in benefits. The more debt the government piles
up, the harder it will be to find the cash to honor its
obligations.
If the stakes are so high, why has it been so hard to
balance the budget? Our system of government has changed
fundamentally. While most Americans want a balanced budget,
this general public interest is outgunned by the specific
demands of mobilized, organized interest groups. The
unlimited ability to borrow leads naturally to unlimited
demands to spend. If they don't have to say ``no,'' many
elected officials see only political peril in doing so.
There's no way to make it a fair fight until we put a
balanced budget rule in place that Congress can't ignore,
postpone, or repeal at will--and that will be true only if
the rule is in the Constitution.
The United Seniors Association endorses the BBA.
Unfortunately, however, some groups with an agenda of ever-
expanding social programs have resorted to misleading, mass-
mail scare tactics claiming the BBA would force severe
cutbacks on Social Security.
Nothing could be farther from the truth. The BBA would not
change the current statutory protections and priority
budgetary status enjoyed by Social Security. It would not
prevent Congress from enacting further protections in the
future.
Most important, the BBA would do more to protect Social
Security than would any other reform, by reversing and
reducing the threat now posed by an ever-growing federal
debt. Contrary to the alarmist groups' arguments, exempting
Social Security from the BBA would not change the
government's overall financing needs--it would just shift
IOU's from one pocket to the other.
The BBA would be phased in over several years to ease the
adjustment. Total federal spending is growing an average of
more than 5 percent a year. If we simply held annual spending
growth to 2.8 percent a year, we would balance the budget by
the year 2001.
In addition to passing the BBA and sending it to the states
for ratification, the next Congress should move toward a
balanced budget by doing the following:
Give the President a modified line item veto (``expedited
rescission'') authority, so that billions of dollars in
narrow-interest ``pork'' cannot be hidden away in massive,
must-pass pieces of legislation;
Require honesty in budgeting, so technical rules are no
longer manipulated to claim that a program's spending has
been cut when it actually has been increased;
Cap the overall growth in federal spending, including both
the so-called ``discretionary'' and ``entitlement''
categories.
Balancing the budget is a key to saving our way of life. No
one can be exempt from some belt-tightening once we summon up
the discipline to move in that direction. But the Idahoans--
and other Americans--I've talked to, from school children to
seniors, understand the problem and are willing to bear their
share, as long as deficit-reduction is spread out fairly and
no one group is singled out. Debt multiplies, but so do
savings. The sooner we start, the easier it will be.
____

U.S. Senate,

Committee on the Judiciary,

Washington, DC, February 14, 1994.
Dear Colleague: Recently, certain interest groups have
raised fears that the Balanced Budget Amendment to the
Constitution somehow threatens Social Security and other
important social programs.
Nothing could be further from the truth. The Balanced
Budget Amendment will protect the very programs that I have
spent my career fighting for: Social Security, health care,
education, job training, and other important programs that
help people achieve economic security before and after
retirement.
The most serious danger to Social Security is our enormous
debt burden. If we continue to spend beyond our means, the
temptation to pay for our debts by printing more and more
money will become irresistible. That remedy, however, would
result in the kind of inflation that would devastate the
Social Security Trust Fund. After all, what good is a $1,000
social security check if a loaf of bread costs $100?
Dorcas Hardy, the former commissioner of Social Security,
emphasized this point in her book ``Social Insecurity.'' Her
number one recommendation for protecting the Social Security
Trust Fund: balance the federal budget. That is the objective
of the Balanced Budget Amendment.
Unfortunately, we still have a long way to go to meet that
goal. The budget deficit is projected to remain over $170
billion in 1995. Interest payments on the debt now exceed
$290 billion, only a few billion dollars behind social
security payments themselves. How can we possibly hope to
adequately invest in vital social programs like health care
for the elderly if we keep throwing dollars away on interest?
Unless we end this trend, federal support for the sick, the
poor, and the elderly, as well as programs like education,
will indeed be threatened.
The fact that I have spent my legislative career fighting
for seniors, for health care, and for other needed social
programs would, I hope, at least cause some to pause enough
in their passionate rhetoric to listen, and examine. I would
not be sponsoring the Constitutional Amendment if it would
hurt the investments we need to build a stronger, better
nation.
Only with this Amendment can we be confident that all of us
will have a secure economic future.
My best wishes.
Cordially,
Paul Simon,
U.S. Senator.
____

U.S. Senate,

Committee on the Judiciary,

Washington, DC, February 16, 1994.
Dear Colleague: I recently sent you a ``Dear Colleague''
letter explaining how the Balanced Budget Amendment will
protect Social Security and other important social programs
that help people achieve economic security before and after
retirement. Unfortunately, the most serious threat to Social
Security is our runaway debt.
Subsequent to that ``Dear Colleague,'' I received a letter
from Robert J. Myers, a retired public servant who helped
write the legislation that created the Social Security system
in the 1930's. He worked in the Social Security
Administration for a total of 37 years, including 23 years as
Chief Actuary and two years as Deputy Commissioner. He was a
member of the National Commission on Social Security from
1978-1981 and served as Executive Director of the National
Commission on Social Security Reform from 1982-1983. In the
past, Mr. Myers worked as a consultant to the American
Association of Retired Persons (AARP) on Social Security
Issues.
Robert J. Myers is a renowned expert on Social Security
matters and is an informed supporter of a sound Social
Security program. He has been referred to in this body as a
``person of legendary integrity and authority'' in this area.
His letter succinctly summarizes the real threat to Social
Security. Although it speaks for itself, his conclusion bears
repeating: ``Regaining control of our fiscal affairs is the
most important step that we can take to protect the Social
Security trust funds.'' He supports the Balanced Budget
Amendment as the appropriate means to exercise that control.
I have enclosed a copy of Mr. Myers letter. I strongly urge
you to read it in its entirety.
My best wishes.
Cordially,
Paul Simon,
U.S. Senator.
Enclosure.

Robert J. Myers,

Silver Spring, MD, February 15, 1994.
Hon. Paul Simon,
U.S. Senate,
Washington, DC.
Dear Senator Simon: I am pleased to have this opportunity
to express my support for the Balanced Budget Amendment.
For 37 years I worked for the Social Security
Administration, serving as Chief Actuary in 1947-70, and as
Deputy Commissioner in 1981-82. In 1982-83, I served as
Executive Director of the National Commission on Social
Security Reform. And I continue to do all that I can to
assure that Social Security continues to fulfill its
promises.
The Social Security trust funds are one of the great social
successes of this century. The program is fully self-
sustaining, and is currently running significant excesses of
income over outgo. The trust funds will continue to help the
elderly for generations to come--so long as the rest of the
federal government acts with fiscal prudence. Unfortunately,
that is a big ``if.''
In my opinion, the most serious threat to Social Security
is the federal government's fiscal irresponsibility. If we
continue to run federal deficits year after year, and if
interest payments continue to rise at an alarming rate, we
will face two dangerous possibilities. Either we will raid
the trust funds to pay for our current profligacy, or we will
print money, dishonestly inflating our way out of
indebtedness. Both cases would honestly inflating our way out
of indebtedness. Both cases would devastate the real value of
the Social Security trust funds.
Regaining control of our fiscal affairs is the most
important step that we can take to protect the soundness of
the Social Security trust funds. I urge the Congress to make
that goal a reality--and to pass the Balanced Budget
Amendment without delay.
Sincerely,
Robert J. Myers.
____

CRS Report for Congress--Social Security: Its Removal From the Budget
and Procedures for Considering Changes to the Program

(By David Koitz)

summary

Social security and other Federal programs that operate
through trust funds first were counted officially in the
Federal budget in FY 1969. At the time Congress did not have
a budget-making process, and the trust fund programs were
added to the budget by administrative action of President
Johnson. In 1974, Congress began setting budget goals
annually through passage of budget resolutions. Like the
budgets the President prepared, these resolutions reflected a
``unified budget'' approach that included trust fund programs
such as social security in the budget totals.
Beginning in the late 1970s, financial problems plaguing
social security and concern
[[Page S2478]] over the program's growing costs and the
duplicative role it performed with other programs gave
impetus to measure to curtail benefits. Social security
cutbacks were included in the Omnibus Budget Reconciliation
Acts of 1980 and 1981 and the Social Security Amendments of
1983. However, despite passage of these cost-saving measures,
resolution of the program's financial problems, and the
eventual buildup of surpluses in the trust fund accounts,
interest in other ways to curb social security expenditures
continued because of the large Federal budget deficits that
arose in the 1980s.
This routine consideration of social security constraints
led to concerns that the public's confidence in the program
was being eroded and gave impetus to proposals to remove
social security from the budget. The result was that although
social security continued to be counted in the budget
throughout the decade, measures were enacted in 1983, 1985,
and 1987 making the program a more distinct component of the
budget and imposing potential procedural hurdles for
budgetary bills containing social security changes.
Then, in 1990, reacting to criticism that surplus social
security taxes were hiding the size of the budget deficits,
Congress removed the program from the budget calculations.
This was one of the changes in the budget process included in
the $500 billion deficit-reduction legislation enacted at the
end of the 101st Congress. The legislation also excluded
social security from budget procedures designed to discourage
tax reductions or spending increases that would increase the
size of the deficits. At the same time, however, because of
concern that lifting these constraints would encourage
proposals that could weaken the financial condition of social
security, Congress adopted new procedural hurdles for bills
that would erode the balances of the trust fund accounts.
In the House, these procedures permit points of order to be
raised against bills that (1) propose more than $250 million
in social security spending increases or revenue reductions
over a 5-year period or (2) would increase the average cost
or reduce the average income of the program over the long run
(considered to be 75 years) by at least 0.02 percent of
taxable payroll. In the Senate, budget resolutions set
specific amounts for social security income and outgo for a
5-year period, and points of order can be raised against
measures that would cause income to be lower or outgo to be
higher than these amounts. Approval by three-fifths of the
Senate is required to waive the objection. These procedures
were made effective beginning with FY 1991.
INTRODUCTION

Social security and other Federal programs that operate
through trust funds first were counted officially in the
Federal budget in FY 1969. This initiative was taken by
President Johnson. At the time Congress did not have a
budget-making process. Spending and revenue measures were
adopted incrementally through appropriations laws and
periodic entitlement legislation. In 1974, with passage of
the Congressional Budget and Impoundment Control Act (P.L.
93-344), Congress adopted a process for developing budget
goals through passage of annual budget resolutions. Like the
annual budgets prepared by the President, these resolutions
were to reflect a ``unified'' approach that included trust
fund programs such as social security in the budget totals.
Beginning in the late 1970s, financial problems plaguing
the social security trust funds and concern over the
program's growing costs and the duplicative role it performed
with other programs gave impetus to a variety of measures to
curtail certain benefits. A number of cutbacks were included
in the Omnibus Budget Reconciliation Acts of 1980 and 1981
and the Social Security Amendments of 1983. However, despite
passage of these cost-saving measures, resolution of the
program's financial problems, and the eventual buildup of
surpluses in the trust fund accounts, interest in other
possible ways to curb social security expenditures continued
because of the large Federal budget deficits that arose in
the 1980s.
This routine consideration of social security constraints
led to concerns that the public's confidence in the program
was being eroded and gave impetus to proposals to remove
social security from the budget. The result was that although
social security continued to be counted in the budget totals
throughout the decade, a series of measures were enacted in
1983, 1985, and 1987 making the program a more distinct part
of the budget and permitting floor objections to be raised
against budgetary bills containing social security changes.
Then, in 1990, reacting to criticism that surplus social
security taxes were masking the size of the budget deficits,
Congress removed the program from the budget calculations.
This step was one of the budget process changes included in
the $500 billion deficit-reduction legislation passed at the
end of the 101st Congress (P.L. 101-508, the Omnibus Budget
Reconciliation Act of 1990). The new law also excluded social
security from the new procedural aspects of the budget
process designed to discourage tax reductions or spending
increases that would increase the size of the deficits. At
the same time, however, because of concern that lifting these
constraints would encourage proposals that could weaken
social security's financial condition, Congress included
measures in that same act to permit additional forms of floor
objections to be raised against bills that would erode the
balances of the social security trust fund accounts.
SOCIAL SECURITY'S BUDGET TREATMENT UNDER THE SOCIAL SECURITY AMENDMENTS
OF 1983

The Social Security Amendments of 1983 (P.L. 98-21)
required that beginning with the Federal budget for FY 1993,
income and expenditures for social security--Old Age,
Survivors, and Disability Insurance (OASDI)--and the Hospital
Insurance (HI) portion of the medicare program would be
excluded from the totals of the budget formulated by the
President and Congress and would be ``exempt from any general
budget limitation imposed by statute on expenditures. * *
*''\1\ The Supplementary Medical Insurance (SMI) portion of
medicare, although remaining a component of the official
budget figures, was to be more prominently displayed in the
budget as a separate functional category.
Footnotes at end of article.
---------------------------------------------------------------------------
The amendments also required that for FY 1985-1992 the
social security and medicare programs be displayed more
prominently in both the President's and congressional budgets
as separate major functional categories of the budget.
Previously social security was displayed in the category
labeled income security, which included civil service
retirement and disability, railroad retirement, unemployment
insurance, food stamps, and other public assistance programs.
Medicare was displayed in the category for health activities,
which included such programs as medicaid, health block grants
to the States, biomedical research, and medical education and
health training grants.

SOCIAL SECURITY'S BUDGET TREATMENT UNDER THE 1985 GRAMM-RUDMAN-HOLLINGS
PROCEDURES

The Balanced Budget and Emergency Deficit Control Act of
1985 (Title II of P.L. 99-177) included several measures
further altering social security's budget treatment. This was
the original enabling legislation for the Gramm-Rudman-
Hollings (GRH) deficit-reduction provisions, the purpose of
which was to bring the Federal budget into balance by FY
1991. Among the changes it made to the budget process, the
act accelerated the ``off-budget'' treatment of social
security to FY 1986 (from FY 1993, as prescribed by the
Social Security Amendments of 1983).\2\ However, for the
purpose of setting a schedule for eliminating the deficits,
it stipulated that the receipts and expenditures of the
social security trust funds be counted in calculating the
budget deficits and enforcing the deficit goals established
under the act and subsequent budget resolutions. In effect,
the 1985 law appeared to make contradictory statements about
how social security was to be viewed in the Federal budget.
After passage, the only notable manifestation of the off-
budget status of the program was that the President's budget
and other tabulations of the budget began to show what the
figures would be with and without social security.
Congress altered the GRH procedures and extended the time
period over which the budget deficits would be eliminated to
FY 1993 (instead of FY 1991) in passing Title I of P.L. 100-
119, cited as the Balanced Budget and Emergency Deficit
Control Reaffirmation Act of 1987. Except for the 2-year
extension in arriving at a balanced budget, the treatment of
social security under the budget process was not altered.\3\

Sequestration and reconciliation to enforce the budget targets

A key element of the GRH procedures was a requirement that
the President reduce (or sequester) expenditures if projected
budget deficits exceeded the targets set in the law. The idea
was that if economic or legislative developments did not lead
to meeting the targets, across-the-board spending cuts would
be triggered. Social security's income and outgo were counted
in determining the deficits; however, social security
benefits were exempt from any spending cuts that the
President was required to make.\4\ Social security's
administrative expenses were not exempt.
Congress could take action on its own to bring overall
spending and receipts in line with the targets (and avoid
sequestration) by enacting so-called budget reconciliation
legislation. As part of budget resolutions, specific outlays
and/or revenue targets were given to each committee, and if a
committee could not meet the targets under present law
provisions of the programs under its jurisdiction, it was
expected to recommend changes. Recommended changes from the
various committees would then be joined together by the
budget committees in each House and passed as a single budget
reconciliation act.\5\ Social security benefits were again
protected from potential cutbacks through rules that made it
out of order for either the House or Senate to take up social
security changes in a reconciliation bill, resolution, or
conference report thereon. If an objection were raised (a so-
called section 310(g) objection) against a bill that did so,
a separate vote, suspending the rules under which the
respective bodies operate, was required. In the Senate, this
required approval by three-fifths of its Members.\6\

Procedures to maintain budget discipline

Also enacted with the GRH procedures were restrictions on
bringing up legislative
[[Page S2479]] changes that would violate budget resolution
totals (including, with respect to the Senate, the GRH
deficit target) or the separate spending and revenue
allocations made to each committee. Social security was
affected by these restrictions in the same way as other
programs; points of order (so-called sections 302 and 311
objections) could be raised against social security
legislation that violated the resolution totals or committee
allocations. These, too, could be overridden only by a vote
of three-fifths of the Senate.\7\

social security's budget treatment under the 1990 budget enforcement
act

The Omnibus Budget Reconciliation Act of 1990 (P.L. 101-
508) again made substantial changes in the budget process
(under Title XIII, entitled the Budget Enforcement Act of
1990). Among them was the removal of the income and outgo of
the social security trust funds from all calculations of the
Federal budget, including the budget deficit or surplus. This
measure applied to the budgets prepared by the President, to
the Federal budgets formulated by the Congress (e.g., budget
resolutions), and to the budget process provisions designed
to reduce and control the budget deficits.\8\ In the Senate,
budget resolutions were to contain income and outgo targets
for social security, but they were to be set separately and
not be included in the budget totals themselves.\9\
Exclusion of Social Security benefits from spending limits and deficit-
reduction targets

A key element of the current budget process put in place by
the Budget Enforcement Act is a set of specific limits on
discretionary spending (encompassing most programs requiring
annual appropriations) and a ``pay-as-you-go'' requirement
for direct spending (mostly entitlement programs) and
revenues. For FY 1991-93, these limits and the pay-as-you-go
requirement, for the most part, took the place of the overall
deficit-reduction targets established under the former GRH
procedures.\10\ For FY 1994-95, overall deficit targets again
may become critical limits in the process (although it should
be noted that a balanced budget is not set forth as the
ultimate target, i.e., for FY 1995). Under the old
procedures, the income and outgo of social security were
included in estimating the budget deficit to determine if the
deficit was expected to fall within the targets set under the
law. In contrast, under the current procedures social
security's income and outgo are excluded from calculations of
the limits (including the pay-as-you-go rule) and overall
targets, with the exception of administrative expenditures,
which are incorporated in a limit on discretionary spending.
As under the old law, if any of the spending limits or the
``pay-as-you-go'' rule are violated (i.e., breached or
exceeded), the President may be required to issue
sequestration orders to bring spending down to the prescribed
limits. Social security would be exempt as it was under the
old law (again, with the exception of administrative
expenses).
The 1990 law also continued the old law provision (section
310 (g)) that permits points of order to be raised against
reconciliation bills or resolutions that contain social
security measures.

Inclusion of Social Security's administrative expenses under the
spending limits and deficit-reduction targets

Under the pre-1990 law social security's administrative
expenses were subject to sequestration of the GRH deficit
targets were exceeded. While the 1990 law stated that social
security was not be counted as ``budget authority or outlays
for purposes of the Balanced Budget and Emergency Deficit
Control Act of 1985,'' there was some ambiguity about how the
program's administrative costs were to be treated. The
accompanying explanatory statement of the conferees
reiterated that social security benefits were exempt from
sequestration, but made no mention of administrative
expenses. However, social security was listed among the
programs subject to the limit on discretionary domestic
spending with a footnote stating that portions of the social
security accounts are ``non-appropriated mandatory.'' One
interpretation is that the only reason social security was
listed in the discretionary domestic category was to subject
its administrative expenses to the limit, since benefit
payments, interest, and payments to the trust funds all were
explicitly excluded. An alternative interpretation is that
the new provision stating that social security is not to be
counted for budget act purposes was sufficient language to
exempt all aspects of the program from the discretionary
limit. The lack of specificity gave the Office of Management
and Budget (OMB) latitude to make either interpretation, and
early in 1990 OMB chose to include it in the discretionary
category of the budget as domestic spending. Hence, social
security's administrative expenses are subject to the 1990
budget rules and the process.\11\
Procedures to protect the Social Security trust funds

The 1990 law also made changes in House and Senate
procedures intended to protect the social security trust
funds from benefit liberalizations or revenue reductions that
would erode their balances. Under the old law, social
security's inclusion in the budget had the potential effect
of thwarting attempts to increase social security spending or
cut its revenue base. Points of order could be raised against
such actions for violating the budget resolution totals or
spending and revenue allocations if the action would be
effective in the year of the budget resolution. Moreover,
these violations would have potentially threatened other
programs with sequestration, and posed difficulty for
Congress and the President in reaching subsequent budget
targets. In effect, the former process imposed a fiscal
discipline on social security.
Since social security benefits are now not part of the
budget, the fiscal constraints of the budget process
technically no longer apply. In their place, the 1990 law
established separate rules for the House and Senate that
attempt to make it difficult to bring measures for a vote in
the respective chambers that would weaken the financial
condition of the program by reducing revenue or increasing
spending without offsetting changes.
In the House, a point of order can be raised against a bill
that proposes more than $250 million in social security
spending increases or revenue reductions over the 5-year
period consisting of the fiscal year in which the legislation
becomes effective and the following 4 years, unless the bill
also contains other offsetting spending reductions or tax
increases that bring the net impact of the measures within
the $250 million limit. In calculating the impact, any costs
from prior legislation (i.e., enacted in the current or
previous 4 years) that fall within the 5-year period would be
counted in calculating whether the pending legislation falls
within the limit. A point of order also can be raised against
a measure that would increase long-range (75 years) average
costs or reduce long-range revenues by at least 0.02 percent
of taxable payroll. Hence, a bill whose financial impact fell
within the 5-year $250 million limit could still be subject
to a point of order if its long-range costs were equal to or
greater than 0.02 percent of taxable payroll.
In the Senate, budget resolutions must include separate
amounts for social security income and outgo for the first
year and 5-year period (cumulatively) covered by the
resolution. (They are separate in the sense that they are not
counted in the budget resolution totals themselves.) These
amounts cannot reflect a narrowing in the surplus of income
(or larger deficit) from what is projected under current law.
Recommended resolutions or amendments that do so could draw
an objection that can be overridden only by approval of
three-fifths of the Senate.\12\ Simply stated, Senate rules
preclude consideration of budget resolutions that would erode
the ``near-term'' balances of the social security trust
funds. In addition, once a conference agreement on the budget
resolution is reached, allocations of the social security
amounts included in the resolution must be made to the
Finance Committee, and budget act points of order (under
sections 302 and 311) can then be brought up against
subsequent social security measures that would cause outlays
to be increased or revenues to be reduced (without offsetting
changes) from those reflected in the allocations to the
Committee. To override these objections requires approval by
three-fifths of the Senate.
Report to Congress on the actuarial balance of the trust fund by the
trustees

The 1990 law also added a provision requiring the social
security board of trustees to include in its annual report a
statement as to whether the OASI and DI trust funds are in
``close actuarial balance.'' Traditionally, close actuarial
balance is said to exist if average income over the trustees'
estimating period as a whole (which extends 75 years into the
future) falls within 95 percent and 105 percent of the
average cost of the program. Over the years, it has been
considered a primary indicator of the long-range soundness of
the program. Although trustees' reports routinely have made a
statement about the program's actuarial balance, the practice
of doing so was not required by law. In their 1989 report,
the trustees declined to make such a statement (the
projections themselves showed that the program was slightly
outside the lower limit of actuarial balance with average
income projected to be 94.9 percent of average costs). Its
absence drew an objection from the chief actuary of the
Social Security Administration in his legislatively required
certification of the report. The 1990 law required a
statement by the trustees about close actuarial balance to be
included in each trustees' report.
All reports issued since enactment of this provision have
included a substantive analysis of the close actuarial
balance of the system and a statement about it by the
trustees.

Display of retirement trust fund balances

The 1990 law further required that budget resolutions
display the balances of Federal retirement trust fund
programs, presumably including social security. This display
must show the amount of the securities expected to be
recorded to the trust funds.
footnotes

\1\This provision became section 710 of the Social Security
Act.
\2\The measure did not accelerate the ``off-budget''
treatment of HI (i.e., under the 1983 Social Security
Amendments, HI was not to be taken ``off-budget'' until FY
1993).
\3\The law also contained a provision that stated that no
legislation enacted after December 12, 1985, could authorize
payments from the General Fund of the Treasury to the OASDI
and HI trust funds and vice versa (with the exception of
appropriation measures for which authority existed on or
before that date). This item did not create any practical
changes in the process. Basically, it was a statement
[[Page S2480]] of principle that no new provisions should be
enacted that would authorize new forms of interfund
``payments'' between the Government's General Fund and the
OASDI and HI trust funds.
\4\Interest earned on the holdings of the social security
trust funds and appropriated ``payments to the social
security trust funds'' for military wage credits and benefits
paid to certain uninsured recipients also were exempted.
\5\Special procedures also existed in the Senate under which
a reconciliation bill could be initiated to alter a
sequestration order issued by the President.
\6\The period in which the three-fifths rule would apply was
extended through FY 1993 with enactment of P.L. 100-119
(under prior law, the three-fifths rule applied through FY
1991). An additional technical change was included in P.L.
100-119 altering Senate rules that previously had the effect
of permitting waivers of the three-fifths requirement as it
pertained to the social security and other potential ``points
of order'' authorized in the 1974 and 1985 budget acts.
\7\A section 311 objection existed under the original budget
act for violations of the budget resolution totals, although
it was modified somewhat by the 1985 act.
\8\It should be noted that removing social security
officially from the budget totals does not change how social
security funds are actually handled. Social security taxes
continue to be deposited in the U.S. treasury (with the
appropriate crediting of securities to the trust funds) and
social security expenses continue to be paid from the
treasury. Hence, those who are interested in the aggregate
financial flows of the Government and the impact those flows
have on the economy are likely to continue to view the
financial affairs of the Government on a unified budget basis
(which means they would count social security in computing
revenue and spending totals).
\9\These changes did not affect medicare. Although HI is
scheduled to be removed from the budget totals in FY 1993 as
a result of the 1983 social security amendments, it will be
counted in the budget through FY 1995 for purposes of the
Budget Enforcement Act rules.
\10\For FY 1991-93, the 1990 law set limits on three
categories of discretionary spending: defense, international,
and domestic. There is no dollar limit on the ``direct
spending'' category, but it is subject to a ``pay-as-you-go''
rule requiring that any new spending increases or revenue
reductions be offset with spending reductions or revenue
increases enacted by the end of the session. Overall deficit
targets, such as existed under the former GRH procedures,
also were prescribed for these fiscal years, but adherence to
the discretionary spending rules and the ``pay-as-you-go''
requirement, and required economic and technical adjustments
to the budget totals made by the Office of Management and
Budget (OMB), have basically made them irrelevant.
\11\Note that in FY 1994-1995, the domestic spending portion
of the budget is merged with the defense and international
spending portions, making a single discretionary category of
the budget. Under OMB's 1991 interpretation, social security
administrative expenses would be counted in this category.
\12\In its original form, this provision only precluded the
Senate Budget Committee from recommending a budget resolution
that would reduce the current law balances of the trust
funds. It was not out of order to subsequently consider floor
amendments to modify the resolution to reflect measures that
would reduce the trust fund balances. Such amendments could
be passed by a simple majority. In enacting the FY 1992
Budget Resolution, the Senate adopted a rule making it out of
order to consider measures (including amendments to budget
resolutions) that would erode the balances of the trust funds
for the period covered by that resolution (and requiring
approval of three-fifths of the Senate to suspend the rules
to do so). In enacting the FY 1993 Budget Resolution, the
Senate made this a permanent rule.
chronology

1990--P.L. 101-508 enacted, including among its titles, the
Budget Enforcement Act of 1990. This law establishes new
budget procedures to enforce a 5-year $500 billion deficit-
reduction package. It includes provisions officially taking
social security out of all calculations of the budget totals
and creates new floor procedures (for considering social
security legislation) intended to protect the balances of the
OASDI trust funds.
1987--P.L. 100-119 enacted, including among its titles, the
Balanced Budget and Emergency Deficit Control Reaffirmation
Act of 1987. This law makes changes to the Gramm-Rudman-
Hollings (GRH) procedures, including extending the point at
which a balanced budget would be reached to FY 1993. The
financial operations of the social security trust funds
remain part of the budget calculations for GRH purposes.
1985--P.L. 99-177 enacted, including among its titles, the
Balanced Budget and Emergency Deficit Control Act of 1985,
better known as the Gramm-Rudman-Hollings (GRH) deficit
reduction law. Although technically removing social security
from the budget totals effective for FY 1986, this law
includes social security in the budget totals through FY 1991
for GRH purposes.
1983--P.L. 98-21 enacted, the Social Security Amendments of
1983, including a provision calling for removal of the social
security and the medicare Hospital Insurance (HI) trust funds
from the budget totals beginning in FY 1993.
1974--P.L. 93-344 enacted, the Congressional Budget and
Impoundment Control Act of 1974, establishing new procedures
to formulate and control the budget that encompass a
``unified'' approach to the budget that includes social
security and other trust fund programs in the budget totals.
1968--President Johnson issued a ``unified'' Federal budget
for FY 1969.
additional references

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security, medicare, and the unified budget. Senate Print No.
99-83, 99th Cong., 1st Sess. Washington, U.S. Govt. Print.
Off., 1985.
U.S. Congress. Omnibus budget reconciliation act of 1990.
Conference report to accompany H.R. 5835. House Print No.
101-964, 101st Cong., 2d Sess. Washington, U.S. Govt. Print.
Off., 1990.
U.S. Congress. Library of Congress. Congressional Research
Service. Social security tax debate. CRS Issue Brief No.
IB90033, by David Koitz and Geoffrey Kollmann. Washington,
1993 (continually updated).
Social security and 1990 legislation to increase the
Federal debt ceiling. CRS Issue Brief No. IB90125, by David
Koitz. Washington, 1990 (archived).
The social security surplus: a discussion of some of the
issues. CRS Report for Congress No. 88-709 EPW, by David
Koitz. Washington, 1988.
Budget enforcement act of 1990: brief summary. CRS Report
for Congress No. 90-520 GOV, by Edward Davis and Robert
Keith. Washington, 1990.
Social security issues in the 99th Congress. CRS Report for
Congress No. 86-1055 EPW, by David Koitz. Washington, 1986.
Budget enforcement act in 1992. CRS Issue Brief No.
IB92009, by Robert A. Keith. Washington, 1993 (continually
updated).
my vote on the dole amendment

Mr. HOLLINGS. Mr. President, I rise today to make a brief comment on
the Dole amendment which the Senate agreed to today by a vote of 87-10.
I voted against this amendment and was tempted to call it a fig leaf.
But upon reflection, I think the Dole amendment is more accurately an
octopus amendment: It squirts out dark ink and obscures what's really
going on.
The plain language of House Joint Resolution 1 constitutionally
requires that the revenues in the Social Security trust fund be
included in the sum of total receipts. Neither a report from the Senate
Budget Committee nor any other legislative fix can override this
constitutional mandate. The Reid amendment would correct this problem
by changing the language of the constitutional amendment and removing
Social Security from deficit calculations.
Mr. President, if Members wish to see how a balanced budget can be
achieved without raiding Social Security, they should not wait on a
report from the Senate Budget Committee, but instead should examine the
table that I have included in the Congressional Record on January 24
and February 7 of this year. We know that we can balance the budget
without looting the Social Security trust fund, but no amount of
wishing will allow us to override the Constitution if the Reid
amendment is rejected.
the prospect of stability, 1993-95

in opposition to h.j. res. 1: the balanced budget amendment

Mr. MOYNIHAN. Mr. President, this will be the third and last of the
papers I have presented to the Senate in opposition to House Joint
Resolution 1, Proposing an amendment to the Constitution of the United
States to require a balanced budget.
In the first paper I described the development of fiscal policy in
postwar America, following the huge swings of the Great Depression and
the Second World War. I described an economic profession growing in
understanding and reach. I made the point that I saw this happen. In
1961, I joined the Kennedy administration. I became Assistant Secretary
of Labor for policy planning and research. Unemployment that year
reached 6.7 percent, the second highest it had been since annual rates
were first recorded in 1948. There was a sense of emergency. But also a
confidence that we knew what to do. The Federal Government was running
a surplus. The result was fiscal drag. We would contrive to spend more
and tax less, so as to stimulate the economy toward full employment.
We did and it worked. By 1966, unemployment dropped to 3.8 percent
and by 1969, it reached 3.5 percent. A level, incidentally, never
reached since.
Those were heady days. In 1965, in an article in ``The Public
Interest'' entitled, ``The Professionalization of Reform,'' I noted
that the Council of Economic Advisers forecast for GNP for 1964 was off
by only $400 million in a total of $623 billion, while the unemployment
forecast was on the nose. Recalling events that followed World War II,
I noted that in 1964 the unemployment rate in West Germany was 0.4
percent, and not much higher in the rest of Western Europe. Indeed,
unprecedented low levels for peacetime.
There had been some social learning. In the first year of the Nixon
administration, contractionary fiscal policies were put in place
designed to cool off an overheated economy following the buildup for
the Vietnam war. Then in 1972 expansionary policies put in place by
then-Director of OMB George P. Shultz stimulated the economy following
the 1970-71 recession--the first
[[Page S2481]] since that which Kennedy inherited from Eisenhower.
In truth, the record is extraordinary. The great issue of the 19th
century--the economic swings accompanied by vast unemployment--the
issue which gave rise to the radical totalitarian movements that were
to prove the agony of the 20th century--that issue has been resolved. A
chart prepared by the Joint Economic Committee illustrates this with
great clarity. Between 1890 and 1945, real growth in the economy
dropped by 5 percent on three occasions, dropped by 10 percent on two
occasions, and on two other occasions dropped almost 15 percent. Since
1945, there have been four tiny declines, and only one serious one,
that of the recession of 1982, say 2 to 3 percent. Hardly worth noting
in the pre-war economy.
We had ``fine tuned,'' as the phrase went. The contractionary
policies of 1969 were, in retrospect, a little too large; while the
expansionary policy of 1972 came a little too late. But the theories
seemed sound and the timing likely to improve.
Both theory and practice centered on the problem of underconsumption
and the avoidance of what was seen as the problem of persistent
cyclical surpluses in the Federal budget.
Then came the Reagan Revolution. Earlier doctrines were succeeded by
supply side economics. To say again, I saw this happen. Huge deficits
appeared which were not cyclical, and which were of no possible use. To
the
contrary, just yesterday at the Finance Committee, Matthew P. Pink,
president of the Investment Company Institute testified:

Government statistics show that personal saving as a
percent of disposable personal income has tumbled over the
last decade--from a high of 8.0 percent in 1984, to a low of
4.0 percent in 1993. If government deficits are factored in,
the situation appears even more bleak: since the 1960s, ``net
national saving'' has dropped from more than 8 percent to
less than 2 percent today.

In 1984, the Council of Economic Advisers, then headed by Martin
Feldstein, the eminent Harvard economist, now head of the National
Bureau of Economic Research, reported the grim news that a structural
as against cyclical deficit had appeared and was not going away:

Reducing the Budget Deficit

Despite the dramatic reduction in the share of national
income taken by government domestic spending and the
fundamental improvement in the character of our tax system,
the Nation still faces the serious potential problem of a
long string of huge budget deficits. Vigorous economic growth
can eliminate the cyclical component of the deficit. But
without legislative action, the structural component is
likely to grow just as fast as the cyclical one shrinks. The
Administration's economic projections imply that the budget
deficit will remain roughly $200 billion a year--or about 5
percent of GNP--for the rest of the decade unless there is
legislative action to reduce spending or raise revenue.
Deficits of that size would represent a serious potential
threat to the health of the American economy in the second
half of this decade and in the more distant future.

deficit projection

The cyclical component of the budget deficit is the party
of the deficit that occurs because the unemployment rate
exceeds the inflation threshold level of unemployment, i.e.,
the minimum level of unemployment that can be sustained
without raising the rate of inflation. This excess
unemployment raises the deficit by depressing tax revenues
and by increasing outlays on unemployment benefits and other
cyclically sensitive programs.
The remaining part of the budget deficit, known as the
structural component, is the amount of the deficit that would
remain even if the unemployment rate were at the inflation
threshold level. The Administration estimates that the
inflation threshold level of unemployment is now 6.5 percent
and will decline in the coming years as the relative number
of inexperienced workers declines and as the Administration's
employment policies are enacted and take effect.
Table I-2 presents the cyclical and structural components
of the budget deficit for 1980 through 1989. The 1983 deficit
of $195 billion was divided about evenly between the cyclical
and structural components. Because of the lower level of
unemployment projected for 1984, a much larger share of the
current year's deficit is structural. The projected deficit
of $187 billion includes a cyclical component of $49 billion
and a structural component of $138 billion. By 1989, the
entire projected budget deficit is structural.

TABLE I-2--CYCLICAL AND STRUCTURAL COMPONENTS OF THE DEFICIT, FISCAL
YEARS 1980-1989
[In billions of dollars]
------------------------------------------------------------------------
Fiscal year Total Cyclical Structural
------------------------------------------------------------------------
Actual:
1980......................... 60 4 55
1981......................... 58 19 39
1982......................... 111 62 48
1983......................... 195 95 101
Estimates (current services):
1984......................... 187 49 138
1985......................... 208 44 163
1986......................... 216 45 171
1987......................... 220 34 187
1988......................... 203 16 187
1989......................... 193 -4 197
------------------------------------------------------------------------

And so the idea of making it go away by amending the Constitution
gained greater strength.
This idea was already part of the public discourse. The new economics
was hard to understand. It seemed to contradict common sense. To cite
the work of Thomas Kuhn, many or most Americans lived within an
economic paradigm in which countercyclical spending made no sense
whatever. Would
it not be agreed that Herbert Hoover had the most practical and
governmental experience in national and international economics of any
American President? And yet, he did not grasp the new economics. Mind,
the new economics had not yet evolved, but the point is that much of
President Hoover's instinctive response to the Depression of the 1930's
only worsened that Depression. President Roosevelt had more of an
excuse, in that he knew nothing of economics, or as near as makes no
matter. But his instincts were almost exactly those of his predecessor,
even denouncing in 1932 the few countercyclical measures that Hoover
has instituted.

In the 1970's a grassroots movement got underway to call a
constitutional convention to adopt a balanced budget amendment. In the
event, some 30 State legislatures joined in this call, only four fewer
than the required two-thirds. Note that the final four were not
forthcoming: The prospect of hanging concentrates the minds of
legislators along with other folk. But I, for one, grew alarmed. At a
meeting of the Budget Committee, I asked the newest Chairman of the
Council, the estimable Charles L. Schultze, if he would run the 1975
recession on their computer. He agreed and reported back a while later.
They had carried out the simulation. The computer ``blew up.'' I, in
turn, reported this in an article in the Wall Street Journal of March,
1981. In specific terms, Dr. Schultze reported that Federal spending
dropped something like $100 billion, and GNP dropped 12 percent. Back,
that is to the wild swings of the last century. Save. that there might
be no upswing.
In the Wall Street Journal, I asked if we really wanted to write
algebra into the Constitution.
Obviously, a majority, but not yet two-thirds of the Members of the
U.S. Senate are disposed to do just that, And so I have now asked Dr.
David Podoff, sometime Chief Economist of the Senate Committee on
Finance and now Chief Minority Economist, if he would construct an
example of what might occur if we attempted to balance the budget in
the middle of a recession.
Dr. Podoff was well trained at M.I.T. by a distinguished faculty,
including three Novel laureates, Professors Paul Samuelson, Robert
Solow, and Fransisco Modigliani. Not surprisingly, Podoff's analysis
brings Schultze's up-to-date, and quite conforms the professional
judgment of, well, the profession. It is as follows:
Assume that for 1995 our $7 trillion economy is roughly at full
employment--which it is--and that under the requirements of the
Constitution the budget is balanced. The economy is then buffeted by
external or what economists call exogenous shocks. These shocks, which
could be due to financial dislocation in international currency markets
which disrupt trade--a second run on the Mexican peso--oil price
shocks, or world-wide natural disasters are assumed to result in an
increase in the unemployment rate from 5.5 to 8.5 percent. At the
height of the 1981-82 recession the unemployment rate reached 9.7
percent, so this is not an implausible level for unemployment.
Most economic models suggest that a 3 percentage point increase in
the unemployment rate in associated with a 7.5 percent reduction in
GDP. In turn, sensitivity analysis published by CBO in its Economic and
Budget Outlook indicate that a reduction in GDP of about $500 billion
leads to an increase
[[Page S2482]] in the deficit of $150 billion, as tax collections fall
and outlays for unemployment compensation and other income maintenance
programs increase.
But now the budget must be balanced. Outlays are reduced and/or taxes
are increased by a total of $150 billion. This reduction in the deficit
leads to further decreases in output which again increase the deficit
which cause another round of budget cuts and on and on.
When this so-called multiplier process is finally completed, the
downward spiral in economic activity will leave the economy in a new
low level equilibrium, with output 18 percent below its potential and
an unemployment rate of 12 percent.
Note the symmetry between Schultze's simulation of 1975 and Podoff's
of 1995. Schultze projected 12-percent drop of GDP in an economy
operating at less than full potential, off about 5 percentage points.
In 1995, we are close to full employment, which is a sufficient
shorthand for producing at potential GDP. Podoff suggests a drop of 18
percentage points. We may be onto an important economic insight here,
but let us hope this remains in the realm of theoretical economics!
Another distinguished economist, Laura D'Andrea Tyson, current Chair
of the Council of Economic Advisers, in the Washington Post, February
7, reinforced the perverse nature of balancing the budget in a
recession. As she put it:

A balanced budget amendment would throw the automatic
stabilizers into reverse. Congress would be required to raise
tax rates or cut spending programs in the face of a recession
to counteract temporary increases in the deficit. Rather than
moderating the normal ups and downs of the business cycle,
fiscal policy would be required to aggravate them.

Monetary policy could moderate the swing in economic activity
described in the simulations above. But as Dr. Tyson further notes in
her op-ed piece:

In a balanced-budget world--with fiscal policy enjoined to
destabilize rather than stabilize the economy--all
responsibility for counteracting the economic effects of the
business cycle would be placed at the doorstep of the Federal
Reserve.

Compared to fiscal actions, the Federal Reserve monetary actions
could be constrained. Concerns about inflation, interest rates and
exchange rates may prevent the Fed from acting quickly and forceful.
For example, over the last year the Fed has increased short-term
interest rates in seven small measured steps; and many analysts believe
that the full impact of these contractionary actions have not yet been
felt.
However, under the constitutional amendment, required fiscal actions
to balance the budget would come quickly, unless waived by a three-
fifths vote. The amendment (section 6) states:

The Congress shall enforce and implement this article by
appropriate legislation, which may rely on estimates of
outlays and receipts.

In the absence of a waiver, what legislator would dare not vote
quickly to balance the budget using the most up-to-date estimates of
outlays and receipts? Indeed, respect for the Constitution,
irrespective of the economic consequences, would require quick action.
On February 3, our revered sometime President pro tempore, Senator
Robert C. Byrd, invited Senator Paul S. Sarbanes, formerly chairman of
the Joint Economic Committee, and this Senator to join him in the
Mansfield room to hear a number of economists, led by Jeff Faux of the
Economic Policy Institute, present their views on the inadvisability
and peril of a balanced budget amendment. Dr. Faux, incidentally,
correctly predicted the devaluation of the Mexican peso in the course
of the debate over the North American Free Trade Agreement. Among those
who spoke, for himself and his fellow Nobel laureate at M.I.T., was
Robert M. Solow, who stated in part:

Many economists have pointed out how perverse the Amendment
can be when the economy falls into recession. Then the
appearance of a cyclical deficit is a desirable, functional
event, not an undesirable one. At such a moment, the higher
taxes or reduced transfers or lower expenditures that would
be needed to restore balance will worsen the recession and do
relatively little to reduce the budget deficit. Of course
some escape mechanisms will be built into the amendment. But
they will inevitably be slow, uncertain in their scope, and
subject to manipulation by a minority. (This would be an
obvious occasion for dissidents to challenge the accounting
conventions in use.)

As I have remarked earlier, in the early 1980's, deficits were not
viewed as a tool to stabilize the economy. Rather, they were used as a
way to reduce the size of government. A debt in excess of $4 trillion
is the legacy of the misuse of fiscal policy. We should not use the
legacy of the 1980's as an excuse to abdicate control of fiscal policy
by passing a constitutional amendment to balance the budget. Abdication
would, in the words of a statement issued February 3 by several hundred
economists of every political persuasion, who joined Senator Byrd, lead
to the following results:

When the private economy is in recession, a constitutional
requirement that would force cuts in public spending or tax
increases could worsen the economic downturn, causing greater
loss of jobs, production, and income.

And, as noted in the examples of Dr. Schultze and Dr. Podoff, that is
surely what will happen in a recession if we have a balanced budget
amendment.
Not only were the budget policies of the early 1980's an aberration,
which should not be used as a justification for adopting a
constitutional amendment to balance the budget, but in the last two
years we have been making progress toward achieving a balanced budget.
In the ``Economic and Budget Outlook: Fiscal Years 1994-1998'' report
of January 1993, CBO projected that, by the year 2000, the deficit
would reach $455 billion and exceed 5 percent of GDP.
In the ``Economic and Budget Outlook: Fiscal Years 1996-2000,''
issued last month, CBO now projects a deficit of $284 billion or about
3 percent of GDP. The proposals recently submitted by the President in
his fiscal year 1996 budget message would reduce the deficit below 3
percent of GDP.
What accounts for this remarkable turnaround in the budget?
Two inter-related factors explain the reduction in the deficit.
First, the Administration proposed, and Congress adopted a sizable
deficit reduction package. Second, the economy performed better than
expected, in part, because Congress adopted a creditable deficit
reduction plan. In part, also, because, as Secretary of the Treasury
Rubin remarked to the Finance Committee this Wednesday, the deficit
reduction program squeezed the deficit premium, as he put it, out of
real long-term interest rates. If financial markets do not believe the
deficit is under control, they will levy a deficit premium on capital
lending. In 1993 and 1994, we clearly persuaded the markets that we
were finally serious.
I do not wish to be partisan in these remarks, and I hope I have not
been. But will not forebear to note that the 1993 deficit reduction
program was enacted with Democratic votes and only Democratic votes. I
understand that Republican Senators are committed to House Joint
Resolution 1, all but one that is, and I do not expect that to change.
But I would hope Democratic Senators will recognize what I believe to
be the error of the views of the other side of the aisle.
CBO estimated that the deficit reduction package enacted by Congress
in August 1993 would reduce the deficit by more than $400 billion over
five years. The budget resolution adopted by Congress in 1993--which
required enactment of the deficit reduction package--anticipated a
decrease in the fiscal year 1994 deficit of $33 billion, from an
estimated baseline deficit of $287 billion to $254 billion. The actual
deficit turned out to be $203, in part because of higher economic
growth than projected. CBO estimates that a stronger economy reduced
the fiscal year 1994 deficit by $21 billion.
The vigorous expansion was not unrelated to the adoption of a
creditable deficit reduction program, which led to a reduction in real
interest rates. Again, as Secretary Rubin stated, ``the deficit
premium--on interest rates * * * is in my judgement largely gone.''
As a result of the deficit reduction policies we have had three
straight years of deficit reduction--the first such string of declines
since the administration of President Harry S. Truman. Here are the
numbers:
Fiscal year: Deficit in billions
1992...........................................................$290.4
1993............................................................255.1
1994............................................................203.2
OMB 1995 est....................................................192.5
CBO 1995 est......................................................176

[[Page S2483]]

But the legacy of debt for the 12 year period 1980-92 will not go
away quickly and can be seen in three aspects of fiscal and budget
policy.
First, net interest on the increase in the publicly held debt--
accumulated during the 12 year period 1980-1992--is about $180 billion
or roughly the size of the annual deficit.
Second, even without a balanced budget amendment fiscal policy
remains paralyzed--as long as we are running deficits of $200 billion,
for whatever reason, it is difficult to deliberately increase the
deficit as an anti-inflationary measure. The public will just not
accept that.
Third, the legacy of annual deficits of almost $300 billion must be
reduced gradually, so as not to depress the economy. Consequently, we
will
continue to add to the debt. By the end of the century the gross
Federal debt will approach $7 trillion.

But it can be done. Note once more. Spending on Government programs
is less than taxes for the first time since the 1960s. If we keep at
it, do more, the deficit could start declining in 5 years surely. The
decline accelerates as smaller debt leads to lesser borrowing for
interest which leads to smaller debt. But can we not do this on our
own, of our own free will? I say to Senators that it won't happen
otherwise. The Courts, to which all disputes under that misbegotten
amendment will be referred, are not capable of making even remotely
sensible decisions on fiscal policy.
Some 40 years ago, Guthrie Birkhead, professor, later dean of the
Maxwell School of Citizenship and Government at Syracuse University,
remarked that Americans are gadget-minded about government. The
proposed balanced budget amendment is nothing if not a gadget. Allow me
to offer a cautionary tale from New York history. On March 3, 1858, the
New York Times reported from Albany that 86 State senators had
presented a petition so brief and so explicit that it was given in its
entirety:

The undersigned, citizens of the State, would respectfully
represent: That owing to the great falling off of the Canal
revenue, as well as the increasing drafts upon the State
Treasury, and the large expenses of carrying on the several
departments of the State Government, thereby swelling up the
taxes; therefore, with the view of relieving the people from
the large amount now unnecessarily expended to sustain the
Executive and Legislative Departments, and to secure the
honest and better administration thereof: your petitioners
respectfully ask that your Honorable body pass an act for
calling a Convention to so alter the Constitution as to
abolish both the Executive and Legislative Departments, as
they now exist, and to vest the powers and duties thereof on
the President, Vice President, and Directors of the New York
Central railroad Company.

The Times special correspondent, an early advocacy journalist,
explained that the proposal, while intended as a joke, nonetheless
conveyed a bitter satire, a satire which is deserved and just, such
were the depredations of the ruling Democrats. The time would come, he
concluded, when ``after long suffering'' the people would rise and
``retaliate.''
They almost did and not long thereafter. Joke or not, the proposal
passed the legislature, went on the ballot the next fall, and failed by
only 6,360 votes.
The amendment failed, but retaliation came even so. The New York
Democrats scarcely held office for the rest of the century. But
retaliation has pursued us into the twentieth century, even to this
time. The New York Democrats have controlled the New York State
legislature for a total of 4 years in the whole of the twentieth
century so far. Let Republicans beware. This amendment could pass.
Mr. HATCH. Mr. President, I see the distinguished Senator from
Oklahoma is here. I am hoping that after he speaks, we will be able to
close out the Senate for the day.
Mr. NICKLES. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. NICKLES. 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. NICKLES. I ask unanimous consent to proceed as if in morning
business.
The PRESIDING OFFICER. Without objection, it is so ordered.

____________________