[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:

       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.

  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

       U.S. Congress. Senate. Committee on the Budget. Social 
     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.

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