Congressional Record, Volume 141 Issue 39 (Thursday, March 2, 1995)

[Congressional Record Volume 141, Number 39 (Thursday, March 2, 1995)]
[Senate]
[Pages S3325-S3366]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

THE BALANCED BUDGET AMENDMENT

protection from big spenders? the people lost by one vote

Mr. HELMS. Mr. President, there are two disappointing things to
mention today. The first is my regular daily report on the latest
available disclosure of the total Federal debt, this time as of the
close of business yesterday, Wednesday, March 1, stood at
$4,848,389,816.26.
If this debt were to be paid off today, with every man, woman, and
child in the country paying his or her proportionate share, each of us
would have to fork over $18,404.57. Of course, since millions of
Americans pay no taxes at all, the average share of the Federal debt
would be far greater than the per capita amount referred to above.
The other sad thing? It is, of course, the Senate's failure today to
approve a constitutional amendment requiring Congress to balance the
Federal budget. If just one more Senator had voted today in favor of
the amendment, it would have been approved by 67 Senators, exactly
enough to pass the amendment and send it to the 50 States for
ratification.
Don't look for a balanced Federal budget anytime soon. But one day it
will come. The American people will demand it.
REDUCE THE DEFICIT WITHOUT AMENDING THE CONSTITUTION

Mr. WELLSTONE. Mr. President, over the course of the last 3 weeks, we
have heard many arguments for and against the proposed balanced budget
amendment to the Constitution. Those arguments were made in good faith,
and I know they reflect a broad commitment by those on both sides of
this question to bringing the deficit down to reasonable levels. But
the balanced budget amendment is an empty promise, not a policy. It has
little immediate political cost and very high poll ratings--hence its
popularity. But enacting it would be a serious mistake. We should
reject it in favor of a real, long-term deficit reduction program.
Since 1936, when Minnesota's own Harold Knutson revived the idea of a
balanced budget constitutional amendment that has been originally
rejected by the Constitution's Framers, Congress has debated various
versions. The real question before us today, as it was 50 years ago, is
whether we should weld onto the Founding document of our democracy, the
U.S. Constitution, a budget gimmick that would do more harm than good
to the economic well-being of our Nation, and our citizens.
As I have consistently argued, in my judgment we do not need to amend
the U.S. Constitution to balance the Federal budget. Instead, we must
continue to make tough choices on actual legislative proposals, as I
have done, to cut wasteful and unnecessary post-cold-war defense
spending, to continue to reduce low priority domestic spending, to
completely restructure the way we finance and deliver health care in
this country--in both the public and private sector--and to scale back
special tax breaks for very wealthy interests in our society who have
for a long time not been required to pay their fair share. That
approach is the only responsible, fair way to bring our annual Federal
deficits, and the much larger Federal debt, under control.
For the last 15 years or so, that is what the Congress has been
unwilling to do, and that is the source of a lot of frustration in the
country. Congress has been unable to muster and sustain a majority to
make difficult budget choices. We have seen illustrated here in the
Senate over and over again a central problem: The political gap between
the promise to cut spending, and actual followthrough on that promise.
I make this point because I want to underscore that many of those who
have been beating their chests the hardest about a balanced budget
amendment have often been among those who have consistently voted
against these actual deficit reduction proposals. We cannot give over
our budget-balancing responsibilities to a machine, a mechanism. That
responsibility is ours.
Of course, I support balancing the Federal budget in a responsible,
fair way. Despite all of the rhetoric today, we all at least agree on
that basic goal. That's why some of us have voted consistently to
reduce actual Federal spending when we've had the chance over the last
few years on this floor. Not gimmicks, not smoke and mirrors, not
deficit reduction formulas that never identify precise cuts, but actual
reductions in Federal spending contained in actual amendments to
appropriations bills. Votes on those proposed cuts have been important
indicators of our willingness to make tough choices. This is where the
budget rubber has met the road.

The President's $500 billion deficit reduction package in the 103d
Congress, which I supported and which was approved without a single
Republican vote, was a major downpayment toward balancing the budget.
But Democrats had to do it alone. When we cut, the Republicans ran.
While we acted, they talked. Still, much more must be done.
But now, instead of real budget choices we are presented with a
gimmick that I do not believe will work to balance the budget, and that
if it does work as it's designed, could do serious harm to the U.S.
economy. It will also serve to reduce pressure in the next few years to
actually reduce the deficit further, allowing Members of Congress to
declare a temporary victory without cutting significantly from the
Federal deficit. And then the reckoning will come, when we are up
against the wall at the end of this century and have to balance the
budget in just a few short years with massive spending cuts in all
Federal spending, including Social Security and Medicare.
[[Page S3326]] If that's true, then why is the amendment so popular,
at least in the abstract? In recent years, the borrow-and-spend
policies of the 1980's and early 1990's have come home to roost,
rekindling public support for drastic measures. But just so that we
don't lose our historical perspective in this debate, I think it's
important to recognize that the problem of huge Federal budget deficits
is a relatively recent one, going back only to the early 1980's. It's
just not true, as some amendment proponents imply, that the Federal
Government has been spending way beyond its means for decades.
The Reagan and Bush administrations gave America by far its 10
largest budget deficits in our history. The huge tax cuts and large
defense increases of that era are still costing us. Whatever your party
affiliation or perspective on enacting this amendment, that is
indisputable. If it were not for the interest costs on the debt
accumulated during the 1981-92 period, the Federal budget would be in
balance in 1996 and headed toward surplus thereafter.
I am not trying to explain away large deficits over the last decade
or so, but simply to point out that they are, more than anything else,
a direct result of the misguided and now thoroughly discredited fiscal
policy called supply side economics. Despite the urgings of some of our
colleagues in the new House leadership, and some of the provisions of
the Republican Contract for America, we must not turn down that supply-
side road again.
Opposing the amendment has not been easy, or politically popular. But
since I have spoken several times on various amendments that have been
proposed over the course of the last few weeks, let me try to
summarize one last time my major reasons for voting against this
amendment.

americans have a right to know how the amendment will affect them

Throughout this debate, I've argued that the people of Minnesota--and
all Americans--have an enormous stake in the outcome of this debate,
and that they have a right to know how the spending cuts required by
the amendment could affect them and their families. I offered an
amendment to one of the first bills before the Senate this year urging
proponents of the constitutional amendment to detail the over a
trillion dollars in cuts they would make to balance the budget by 2002,
before it is sent to the States for ratification. This is simple
``truth-in-budgeting;'' it's the least we could have expected from
proponents.
Indeed, the Minnesota State Legislature and Governor Carlson agree.
And they sent a Minnesota mandate to Washington to prove the point. The
legislature recently passed overwhelmingly a resolution, signed by the
Governor, urging those of us here in Congress to continue our efforts
to reduce the Federal budget deficit, and requesting financial
information on the impact the balanced budget amendment would have on
our State. By rejecting the amendment, which I introduced to provide
the information to all the States that the Minnesota Legislature was
seeking, the Senate sent States a chilling message.
Another major right-to-know amendment, offered by Senator Daschle,
was also defeated. Despite the straightforward logic of this approach,
these amendments were rejected on virtual party-line votes.
And so if we pass this constitutional amendment today, we would be
sending it to the State legislatures for ratification without giving
them, or the millions of American families whom they represent in each
State, any idea of how we intend to cut over a trillion dollars from
the Federal budget between now and the year 2002, or how it will affect
their lives and the lives of their children and grandchildren. Families
will not be told how deep the Medicare, Medicaid, school lunch, higher
education, or Social Security cuts will be; at least not before we vote
on the amendment.
That is, I think, a gross abdication of our sworn responsibility to
serve those we represent, and a slap in the face to those who count on
us for truth-in-budgeting. Recent polls show that over 80 percent of
Americans believe we should be straight with them about how we intend
to balance the budget under this amendment before we act on it. Even
so, balanced budget proponents have rejected the right-to-know and
instead offered Americans a ruse, an exercise in budget deception. In
so doing, they have seriously breached the standard of public
accountability that Americans should be able to expect from their
leaders. In addition, there are a number of sound fiscal policy
arguments against the amendment; I will raise just two examples.
amendment would deepen economic recessions and worsen disasters
Consider the potential risk that the spending cuts required by the
amendment could push soft economy into a recession, or in a worse case,
deepen an existing recession and push us into a depression. Now when
the economy slips into recession, Federal spending helps to cushion the
fall by increasing unemployment insurance and other assistance programs
for low- and moderate-income people. At the same time, income tax
collections drop because people and businesses are making less money in
a recession.
But under the amendment, Congress would be forced, perversely, to do
the opposite: raise taxes, cut spending, and push the economy into an
economic freefall. The so-called automatic economic stabilizers like
unemployment insurance that have proven so useful in recent decades
would be gone, and we would instead effectively enshrine in the
constitution the economic policies of Herbert Hoover. With fiscal
policy enjoined by the amendment, sole responsibility for stabilizing
the economy would rest with the Federal Reserve. And with their almost
exclusive focus on fighting inflation these days, more often than not
they end up protecting Wall Street investors--not average working
families.
As I have suggested, the amendment is an attempt to enshrine an
economic dogma which would cripple our ability to offer pragmatic
responses to changing economic conditions. Because our efforts to
change the balanced budget amendment to take this problem into account
also failed, this serious flaw remains.
Coupled with the absence of any exception for emergency disaster
spending, that was included in a proposed amendment defeated last week,
the lack of economic foresight this reflects is almost breathtaking to
me. In just a few days, we will consider an emergency spending bill to
help pay the Federal share of the California earthquake last year. The
cost of this disaster is now up to $15 billion.
In the last two decades, the Federal Government has spent $134
billion in Federal disaster relief, including $33 billion in the last 5
years alone. Under a balanced budget requirement, what would we do in
the face of a huge flood, earthquake, or other disaster that cost
scores of billions of dollars in relief aid? How long would it take to
garner the three-fifths votes necessary in both Houses to pay for it?
And what special legislative prizes would opponents require for their
votes? Those are all open to questions.

amendment could put federal deposit insurance at risk

Another open question is the impact of the amendment on bank
deposits. I am sure balanced budget amendment supporters don't intend
to put the life savings of American families at risk, or to threaten
the stability of the banking system. And yet that is precisely what
this amendment would do. Since the Depression, the FDIC has insured
depositors against bank failures. That limit is now up to $100,000 per
account. And right now those guarantees cover private savings of about
$2.7 trillion--that's a whole lot of money that's guaranteed by
the U.S. Government. Some have observed that the balanced budget
amendment could put the full faith and credit of the United States
embodied in such guarantees at risk.

amendment does not separate day-to-day expenses from investments

Most Americans believe that a balanced budget, like a balanced
checkbook, is a good idea. They argue that America, like a family,
should always balance its budget. But this overlooks a key fact: The
household budgets of most middle class Americans have substantial debt,
either for a car, a home, or a college education for their kids.
This reflects a central problem with the amendment. It ignores the
difference between two different types of spending: investments for the
future,
[[Page S3327]] and ``operating,'' or day-to-day, spending. Taking out a
mortgage on a home is investing in your family's future; taking one out
to pay for next year's vacation is not. This is acknowledged by most
State governments, many of whom are required to balance their operating
budgets--but not their investment budgets.
American business agrees; incurring debt to invest and expand a
business has long been a hallmark of business strategies for sustained
growth. With governments, as with families or businesses, borrowing
isn't inherently bad; it depends what you're borrowing for. With
families, businesses or State governments, the central question is:
Will the debt we incur improve our long-term economic prospects? If
this principle applies to household or business budgets, why shouldn't
it apply to the Federal budget? Nonetheless, an amendment to address
this problem was rejected.

No protections for the social security trust funds

This balanced budget amendment fails to protect the Social Security
trust funds from being raided to balance the Federal budget. We tried
to make sure that for the purpose of calculating the deficit under the
balanced budget amendment, the huge surpluses in the Social Security
trust fund would not be counted. In that effort, too, we failed; our
proposed Social Security amendment was defeated. Make no mistake what
this means: Despite the promises of the proponents that they will not
balance the budget on the backs of Social Security recipients, they
have refused to explicitly protect this program in the language of the
constitutional amendment itself. In fact, they fought hard to defeat
our Social Security amendment. That is as good an indication of their
future intentions regarding Social Security as anything we have seen.

A shell game that will require states to raise taxes

There is another problem with this constitutional amendment. For many
in Minnesota, it will likely mean an increase in personal income,
sales, and property taxes needed to offset the loss in Federal aid from
crime control to higher education, roads and bridges to farm programs,
rural economic development to Medicare. This shell game, in
which costs are simply shifted from the Federal Government onto the
States, would force Minnesota to fund these efforts on its own. A
recent Treasury Department study concluded that an increase of between
9 and 13 percent in Minnesota taxes would be required to make up the
difference. In reality, a vote for the balanced budget amendment is
really a vote for a trickle-down tax increase.

a standard of fairness
I think it's a simple question of fairness. If this constitutional
amendment passes, in the next 7 years we are going to have to make
$1.48 trillion in spending cuts and other policy changes--assuming that
we enact Republican-proposed tax cuts for the wealthy and defense
increases. If we don't, we'll still have to make about $1.2 trillion in
cuts. If we make these cuts to meet the balanced budget amendment
requirement and timetable, then we should make sure that wealthy
interests in our society, those who have political clout, those who
hire lobbyists to make their case every day here in Washington, will be
asked to pay their fair share. At least they should bear as much of the
burden as regular middle class folks that we represent, who receive
Social Security or Medicare or Veterans benefits, or who receive
student loans to send their kids to college and offer them a better
future.
That's just common sense, and I had hoped that during this debate we
would signal that we would apply such a standard of fairness. For
example, too often in discussions about low-priority Federal spending
which ought to be cut, one set of expenditures has been notoriously
absent. That is tax breaks for wealthy and well-positioned special
interests. But that, too, was rejected by the constitutional
amendment's proponents when I offered an amendment urging simply that
we make sure such special tax breaks are on the table as we move
forward in our deficit reduction efforts. Tax subsidies are heavily
skewed to corporations and the relatively few people with very high
incomes, while Government benefits and services go in far larger
proportions to the middle class and the poor.
In the last few weeks, this issue of fairness has emerged more and
more clearly to me, more by its absence than by its presence. It looks
to me as though the current standard, at least as it has been applied
so far in the published plans of balanced budget proponents, will not
require much, if any, sacrifice from special interests in our society
who have enjoyed certain tax breaks, benefits, preferences, deductions
and credits that most regular middle-class taxpayers don't enjoy.

efforts to scrutinize tax breaks for wealthy blocked

But while the constitutional amendment's proponents don't seem to
mind that it could require States to raise State taxes by large
margins, they are adamantly opposed to making sure that wealthy
corporations and others pay their fair share of the deficit reduction
burden.
It is a fact, often overlooked, that we can spend money just as
easily through the Tax Code, through what are called ``tax
expenditures,'' as we can through the normal appropriations process.
Spending is spending, whether it comes in the form of a government
check or in the form of a tax break for some special purpose, like a
subsidy, a credit, a deduction, or accelerated depreciation for this
type of investment or that. These tax expenditures--in some cases they
are tax loopholes--allow some taxpayers to escape paying their fair
share, and thus make everyone else pay at higher rates. These arcane
tax breaks are simply special exceptions to the normal rules, rules
that oblige all of us to share the burdens of citizenship by paying our
taxes.
The General Accounting Office issued a report last year titled, ``Tax
Policy: Tax Expenditures Deserve More Scrutiny.'' It makes a compelling
case for subjecting these tax expenditures to greater congressional and
administration scrutiny, just as direct spending is scrutinized. The
GAO noted that most of these tax expenditures currently in the Tax Code
are not subject to any annual reauthorization or other kind of
systematic periodic review. They observed that many of these special
tax breaks were enacted in response to economic conditions that no
longer exist. In fact, they found that of the 124 tax expenditures
identified by the committee in 1993, about half were enacted before
1950. Now that does not automatically call them into question. It just
illustrates the problem of their not being very carefully looked at in
any systematic way over very long periods of time. Many of these
industry-specific breaks get embedded in the Tax Code, and are not
looked at again for years. And yet we refused by roll call vote to even
commit to consider them as we move forward in our efforts to balance
the Federal books.
When we begin to weigh, for example, scaling back the special
treatment for percentage depletion allowances for the oil and gas
industry against cutting food and nutrition programs for hungry
children, we may come out with quite different answers than we have in
the past about whether we can still afford to subsidize this industry.
The nonpartisan Congressional Budget Office estimates that eliminating
this particular tax break would save $4.9 billion in Federal revenues
over 5 years.
And this is not an isolated example. The Congressional Joint Tax
Committee has estimated that tax expenditures cost the U.S. Treasury
over $420 billion every single year. And they estimate that if we don't
hold them in check, that amount will grow by $60 billion to over $485
billion by 1999. Now some tax expenditures serve important public
purposes, like supporting charitable organizations, and should be
retained. But many of these must be on the table along with other
spending as we look for places to cut the deficit.
I could not find any hint of interest in cutting corporate tax breaks
in the Republican contract, I think because many of the benefits of
these tax breaks go to very high-income people with wealth and power
and clout in our society, and to corporations with high-powered
lobbyists. They're the ones for whom the contract provides an
estimated $169 billion windfall that would resurrect the tax-shelter
industry and effectively slash corporate rates.

At a time when we are talking about potentially huge spending cuts in
meat inspections designed to insure against
[[Page S3328]] outbreaks of disease; or in higher education aid for
middle class families; or in protection for our air, our lakes, and our
land; or in highways; or in community development programs for States
and localities; or in sewer and water projects for our big cities; or
in safety net programs for vulnerable children, we should be willing to
weigh these cuts against special tax loopholes on which we spend
billions each year. And yet we could not even agree to put these on the
table along with everything else as we move forward in our efforts to
reduce the deficit.

ENSHRINES MINORITY RULE

Constitutional and congressional scholars have observed that the
balanced budget amendment gives a veto power to a small minority of
either the House or the Senate in key budget decisions, a profoundly
antidemocratic shift away from our proud, 200-year-old tradition of
majority rule. The need to win approval from three-fifths of both
Houses to waive the balanced budget requirement in a recession would
give added power to members whose votes might be needed to avoid
plunging the country into a deeper downturn.
Thus, the price of an agreement to let the Government run even a
modest deficit during a recession, and to provide recession-related
unemployment benefits, might be a capital gains cut or other tax break
touted by its backers as a ``growth incentive.'' As we saw in the
1980's, these tax breaks usually prove to lose revenues and increase
the deficit over the long term, which in turn could lead to additional
program cuts in subsequent years to bring the budget back into balance.

WEAKENS OUR ABILITY TO INVEST

As I have observed, the balanced budget amendment would largely deny
to the Federal government a basic practice that most businesses,
families, and States and local governments use--borrowing to finance
investments with a long-term payoff. Borrowing to finance new
investments is standard business practice. A business that failed to
modernize because it could not borrow would soon be left behind.
We must continue to invest in our people. Our economy is creating new
jobs at a near-record pace--over 5 million in the last 2 years alone--
yet it doesn't give much help to those ordinary working families who
are at the bottom, or in the struggling middle class. As one Iron
Ranger in Minnesota recently told me, ``All these jobs being created
doesn't do me much good if I have to hold three of them to keep my
family together.'' His comment reflects the anger and economic
insecurity many Americans feel because their personal economic
experience doesn't jibe with what Government statistics tell them--that
unemployment is down, inflation is in check, and economic growth
and productivity are booming. Despite these statistics, standards of
living and real wages of workers remain flat, or in slight decline;
many are just one downsizing away from layoff, and feel less secure. We
must invest in the skills and futures of our people if we are going to
turn this situation around.

The amendment would force a scaling back of Government investment in
areas where economists stress more investment is needed:
infrastructure, education and training, early intervention programs for
children, research and development. There is growing evidence we invest
too little in these areas and that such under-investment has
contributed to our Nation's weak economic performance in recent years.
It is true that for too long the Federal Government has been
undisciplined in its borrowing, and that is what threatens our fiscal
future. We have a responsibility to future generations to get our
fiscal house in order, and to do it the Federal Government has to
reprioritize spending in relation to this central question of
investment, by re-examining programs across the board and eliminating
or scaling back those that are wasteful and unnecessary. We must
redesign cumbersome Federal structures to meet the challenges of the
information age, of rapidly changing demographics, of our decaying
inner cities. We should do this in a way that's fair, open and
accountable, without the budget smoke and mirrors that have too often
fogged the real choices facing voters.
Let me say a word about the impact that systematic disinvestment
would have on working families, children and the elderly in my State,
because ultimately that is what this whole debate is about.

the impact of the amendment on minnesota families

Throughout this debate, I have tried to ask myself basic questions
about the impact of this balanced budget amendment on the families in
Minnesota whom I represent. I think it would inflict on Minnesotans
serious harm, and that is why I cannot in good conscience support it.
That is ultimately the deciding factor for me.
I've already talked about the shell game that this amendment would
require by shifting the costs of government from the Federal to the
State level, and forcing States to raise income, property and sales
taxes--in Minnesota's case by about 13 percent, according to the
Treasury Department. But what about the actual spending cuts? How would
they be distributed? Who would have to sacrifice, and who would
benefit?
Over 7 years, under the balanced budget amendment and accompanying
Republican proposals, Minnesota would lose nearly $5.9 billion in
Federal Medicare funds, Medicaid cuts would total nearly $3.7 billion,
elementary and secondary education would lose $1.5 billion, and Federal
law enforcement would lose $143.7 million. Minnesota farmers also would
likely lose billions in farm payments, causing a serious decrease in
family farm income. And it's not just rural areas
that would be hit. The two largest urban counties in my State,
Hennepin and Ramsey Counties, would alone lose about $10.3 billion in
total Federal aid over 7 years.

In addition, despite Republican promises to temporarily protect this
program, large cuts in Social Security benefits to Minnesotans--an
estimated $2,000 annually per beneficiary--should also be expected if
this program is slated for across-the-board cuts.
These are very large cuts, and they will have a major impact on the
people of my State. I have heard from elderly couples in Minnesota on
fixed incomes, terrified about the impact of the amendment on their
Medicare funding. And they have reason to be fearful. I have sat with
homeless men and women, Medicaid recipients, who are threatened with
going without even the most basic health care under the amendment.
Instead of this approach, we owe it to these people to do real
comprehensive health care reform.
Despite the claims of some that opponents of the amendment are
exaggerating the threat posed by these huge spending cuts, this is for
real. I am not making this up. In fact, just the other day, Finance
Committee Chairman Packwood said that he thought we would have to make
up to $550 billion in cuts in Medicare alone to meet its requirements--
not to mention the huge cuts in Medicaid he acknowledged would be
necessary. And it could go much higher than that, depending on budget
decisions made in other areas.
Finally, let me say a word about the process by which this amendment
has been considered. In recent weeks, balanced budget amendment
proponents have rejected virtually every single good faith effort to
improve the constitutional amendment. Amendments to prevent a raid of
the Social Security trust funds, to exempt earned veteran's benefits,
to strike the majority requirements, to prevent harm to hungry and
homeless children, to separate investment from day-to-day operating
budgets, to provide for exceptions for major disasters and economic
recessions--and many others--were defeated.
I believe that if the Senate passes this amendment today, as we look
back on this debate from the midst of a serious recession, major
disaster, or even undeclared national security emergency, this
unwillingness by proponents to accept even modest, reasonable changes
in the amendment will prove seriously misguided.
While at first look this amendment appears to make sense and is
widely popular, amending our Constitution in this way would be a
mistake with potentially serious fiscal, economic, and social
consequences and would seriously alter our democratic process. We can
and should balance the budget without gimmicks and without changing the
Constitution. I intend to continue to vote to do that. I urge my
colleagues to join me in that effort, and to
[[Page S3329]] vote no on the balanced budget amendment. I yield the
floor.
Mr. LEVIN. Mr. President, I want deficit reduction and I am willing
to work for it. That is why I supported the President's deficit
reduction package in the last Congress. But while I have stood up for
real deficit reduction, what I am not prepared to do is to write into
the Constitution language that is more likely to lead to
disillusionment and constitutional crisis than to a balanced budget.
I see five flaws in the proposed amendment. First, the proposed
amendment would not balance the budget, it would just say that a future
Congress has to pass a law to enforce a balanced budget. Why wait?
Unless and until we make the tough choices needed to cut spending or
raise revenues, we will not have a balanced budget, whether or not we
pass the proposed constitutional amendment and whether or not the
States ratify it. We will instead have passed what could turn out to be
a cynicism-deepening illusion.
The proposed constitutional amendment says that starting no earlier
than 2002, Congress has to have a law enacted which enforces a balanced
budget. Why wait? Why wait to do the hard work of passing implementing
laws and doing the actual budgeting? That's a dodge which allows some
to say we are cured before we have taken the medicine. It puts a giant
loophole in the Constitution to cover over congressional weakness.
In May 1992, Robert Reischauer, the Director of the nonpartisan
Congressional Budget Office, testified before the House Budget
Committee that a balanced budget amendment is not a solution; it is
``only a repetition in an even louder voice of an intention that has
been stated over and over again during the course of the last 50
years.'' Dr. Reischauer stated:

It would be a cruel hoax to suggest to the American public
that one more procedural promise in the form of a
constitutional amendment is going to get the job done. The
deficit cannot be brought down without making painful
decisions to cut specific programs and raise particular
taxes. A balanced budget amendment in and of itself will
neither produce a plan nor allocate responsibility for
producing one.

Dr. Reischauer further stated:

Without credible legislation for the transition that
embodies an effective mechanism for enforcement, government
borrowing is not going to be cut. But the transitional
legislation and the enforcement mechanism are 95 percent of
the battle. If we could get agreement on those, we would not
need a constitutional amendment.

The public understands this. They know the difference between
promises and action. Let me tell you what some of the commentators are
saying about the balanced budget amendment back in my home State. Here
is what the Detroit Free Press said on January 15:

You wouldn't take seriously any politician who promised to
be faithful to his spouse, beginning in 2002, so why do so
many people take seriously the proposed balanced-budget
amendment?
It's the same kind of empty promise to be good--not now,
but later. Putting it in the Constitution isn't likely to
confer on Congress the spine or the wisdom to fulfill it.
* * * [T]he way to cut the budget is to cut the budget, not
to promise to do it sometime in the future. * * * Gluing a
balanced budget amendment onto the Constitution only
postpones the moment of truth.

And here is what the Battle Creek Enquirer said on January 29:

If a balanced budget is such a good idea, we say to
Congress: ``Just do it!'' After all, waiting until a
constitutional amendment mandates it will just delay a
balanced budget--perhaps by years.
This Congress isn't likely to give the nation a balanced
budget, that's for certain. But, by touting the need for this
amendment, it sure can talk like a Congress that already has
* * * [I]t's all an illusion.

``Just do it!'' That's what the American people want, Mr. President.
They know the difference between promises and action, and they want the
latter. A constitutional amendment can promise a balanced budget, but
it cannot deliver a balanced budget. Only concrete action by the
Congress can do that.
Put another way, Mr. President, the proposed constitutional amendment
has no effective enforcement mechanism. The amendment relies on a
future Congress to act to implement and enforce it. That is the bottom
line. This is the same reed that proved so weak in the 1980's when the
President and the Congress quadrupled the national debt from $1
trillion to $4 trillion.
The argument has been made that we have tried everything else, why
not a constitutional amendment. We can't depend on legislation, the
argument goes, so let's try a constitutional amendment.
So what does this amendment do? It depends on the same kind of
legislation to be enacted which its sponsors say has not previously
been effective.
When we were debating this amendment in 1986, Senator Hatch
acknowledged the following:

[T]here is no question that Congress would have to pass
implementing legislation to make it effective. * * * It would
be the obligation of Congress, after the amendment is passed
by both Houses and ratified by three-quarters of the states
to * * * enact legislation that would cause this to come
about.

And again, CBO Director Reischauer pointed out that:

Just a few weeks ago, on January 30, Senator Hatch stated:

``* * * [U]nder section 6 of the amendment, Congress must--
and I emphasize must--mandate exactly what type of
enforcement mechanism it wants, whether it be sequestration,
rescission, or the establishment of a contingency fund.

In fact, the committee report accompanying this constitutional
amendment itself states that it ``* * * must be supplemented with
implementing legislation''.
Mr. President, I have offered an amendment to the constitutional
amendment to require this Congress to address this issue by adopting
legislation to implement and enforce a balanced budget requirement now.
Without my amendment, there are no real teeth in the promise of a
balanced budget contained in the proposed amendment.
Alexander Hamilton states in Federalist Paper No. 15, ``If there be
no penalty annexed to disobedience, the resolutions or commands which
pretend to be laws will, in fact, amount to nothing more than advice or
recommendation.''
If congressional weakness is the reason for this amendment--and it
is--then Congress will use the loopholes in this amendment to evade the
responsibility which it sets forth. My fear is that this amendment will
give us an excuse to duck the hard choices, as Congress has often
chosen to do, until it would become effective in 2002--at the earliest.
I am afraid that upcoming Congresses will say ``the balanced budget
amendment will take care of our problems, so we don't need to address
them now.''
Dr. Reischauer, in his 1992 testimony, listed a number of loopholes
that Congress could use to get around an apparently rigid balanced
budget rule:
Using timing mechanisms and other budget gimmicks to achieve short-
run budget targets, including such actions as shifting pay dates
between fiscal years, accelerating or delaying tax collections,
delaying needed spending until future fiscal years, and selling
government assets;
Basing the budget on overly optimistic economic and technical
assumptions; and
Creating off-budget agencies that would have authority to borrow and
spend but whose transactions would not be directly recorded in the
budget.
That is what we did in the 1980's. We used optimistic estimates or
``rosy scenarios''. Here are some of those estimates. In 1981, our
estimates were off by $58 billion. In 1982, our estimates were off by
$73 billion. In 1983, our estimates were off by $91 billion, and on and
on. In 1991, they were off by $119 billion--$119 billion in 1 year. You
talk about a loophole. This one is big enough to drive a $119 billion
deficit through. That is how big this loophole is.
The sponsors of the amendment say that the real enforcement mechanism
is in section 2. That section provides that it will take 60 percent of
the votes, a supermajority, to increase the debt ceiling. So if our
estimates are too rosy--if, for instance, we follow the 1980's model of
estimates in order to evade the constitutional requirement, then, we
are told, we can fall back on
[[Page S3330]] the requirement that the debt limit can only be
increased by a 60 percent vote in each House.
As Senator Graham of Florida has pointed out, however, the so-called
debt limitation provision in the proposed amendment would allow us to
run deficits in the first decade and a half of the next century of as
much as $120 billion a year, masked by taking that money from the
Social Security trust fund, without that counting toward the deficit.
The proposed amendment applies the 60-vote requirement to ``the limit
on the debt of the United States held by the public''. So the debt held
by the Social Security Administration isn't covered and the usual
majority rule would apply to raising that debt limit.
In any case, history has proven the debt limit is a weak reed to rely
on, because when you vote on whether or not to increase the debt limit,
you are voting whether or not to bring down the Government of the
United States. We have to pay our legitimate debts, however many votes
it may take. If we don't do that, we are finished economically. To make
that point, let me quote from a July 8, 1987 letter from Secretary of
the Treasury James A. Baker III to the Chairman of the Senate Finance
Committee:

I cannot overemphasize the damage that would be done to the
United States' credit standing in the world if the Government
were to default on its obligations, nor the unprecedented and
catastrophic repercussions that would ensue. Market chaos,
financial institution failures, higher interest rates, flight
from the dollar and loss of confidence in the certainty of
all United States Government obligations would produce a
global economic and financial calamity. Future generations of
Americans would have to pay dearly for this grave breach of a
200-year-old trust.

Mr. President, we are not going to achieve a balanced budget by
threatening not to raise the debt ceiling, because that is a nuclear
weapon aimed at the economy of this country. You don't balance the
budget by threatening suicide, and that is what a failure to pay our
debts would be. If we do not pay our debts, this country's economy is
finished. So whether it takes the usual majority or 61 votes, it
doesn't matter. We will have to increase the debt ceiling, because
after the debts have been incurred, we won't have any choice.
Mr. President, my second problem with the amendment is that if a
later Congress does adopt effective enforcement legislation, it would
be putting in the hands of a minority of Senators, representing as
little as 15 percent of the population, critical decision-making power
over the economy of this Nation. Under the proposed amendment, it is
intended that outlays not exceed receipts, and the debt limit not be
increased, unless three-fifths of both Houses of the Congress agreed.
The economic future of our country should not be put in the hands of a
minority by a constitutional amendment which would be so difficult to
change if it went awry.
My third problem with the amendment is that it would put the Social
Security trust fund at risk. By my count, during this debate the Senate
has rejected at least three amendments to protect the Social Security
trust fund. As the senior Senator from Florida explained, Mr.
President, that means that we will continue running deficits of at
least $120 billion a year for more than a decade after this amendment
would go into effect, and will conceal these deficits by taking the
money from the Social Security trust fund. The money in that trust fund
is exactly that--money that we have collected in trust. I cannot vote
for a constitutional amendment which allows the use of that money to
cover up huge deficit spending. That's simply wrong.
My fourth problem with the amendment is that, if effectively
implemented, it would preclude the use of deficit spending to cushion
the impact of a recession. A balanced budget amendment would force the
Federal Government to raise taxes and cut spending in recessions, to
offset the loss of revenue caused by declining income. These policies
would deepen the impact of a recession and could even turn a mild
recession into a depression.
Indeed, the Treasury Department has done a study showing that, were
it not for countercyclical deficit spending, roughly one and a half
million more people would have been unemployed in the 1991-92
recession. Mr. President, we should not ignore the real world hardships
caused by recessions and we should not act in a way which could cause
millions of Americans to lose their jobs.
Finally, Mr. President, I am troubled by the fact that the proposed
amendment is intentionally ambiguous on the role of the President in
carrying out the amendment. The resolution of this crucial issue will
determine how the amendment will affect the checks and balances placed
in the Constitution by our Founding Fathers.
With regard to Presidential impoundment, the Senator from Utah,
Senator Hatch, says the President would have no power to impound funds
unless expressly granted by Congress, but the sponsors refuse to make
this explicit in the amendment itself.
There are some, including Members of this Senate, who already believe
that the President has inherent impoundment powers under article II of
the Constitution. Would not that argument be reinforced by a
constitutional amendment prohibiting outlays from exceeding receipts,
in view of the President's duty to preserve, protect, and defend the
Constitution?
Former Reagan administration Solicitor General Charles Fried has
testified that such a power would exist. He stated:

Now, the command of section 1 is very unqualified. Total
outlays shall not exceed total receipts unless you have the
three-fifths vote. It seems to me that command
would give the President--any President--a far better claim
to impound funds than that which was asserted some years
ago by President Nixon, because the President's warrant
would not be drawn from, as President Nixon said it was,
inherent powers of the Presidency. He could point to the
Constitution itself. He would say that they shall not
exceed, and he swears an oath to see that the laws are
faithfully executed, and I would think his claim to
impound would be very strong. Not only his claim, but he
would argue with considerable plausibility his duty to do
so.

So again, the record is, at best, unclear.
The question whether the President could enforce the amendment by
impoundment would not be an insurmountable problem, had the majority
not chosen to make it so. For instance, when we approved a balanced
budget amendment in the Senate in 1982, we included language proposed
by the Senator from New Mexico, Mr. Domenici, to ensure that the
amendment could not be construed to grant the President impoundment
powers.
This year, however, the sponsors of the amendment decided to remain
silent on this issue. That is not the way we should address the
question of amending the Constitution. This is the Constitution we are
talking about, and we need to know what the amendment we are
considering means in this critical area.
In conclusion, Mr. President, the proposed amendment provides too
easy an excuse for Congress not to act now to reduce the deficit and it
doesn't force congressional action later either.
It lets us off the hook now, and there is no hook later.
It's based on the argument that a constitutional amendment is needed
because previous laws calling for a balanced budget didn't work. But
its success, by its own terms in section 6, is dependent upon a future
Congress enacting a similar law.
The amendment before us, in other words, is unlikely to reduce the
deficit, but is likely to increase public cynicism about the willpower
of Congress to act.
We can and we should adopt enforcement legislation to achieve a
balanced budget now, with or without a constitutional amendment.
There is only one way to balance the budget now, or in 2002--and that
is with the willpower to make the tough choices. I hope we will defeat
this constitutional amendment and instead show the will power to make
the tough choices and enact enforcement legislation actually needed to
balance the budget.
Mrs. MURRAY. Mr. President, I voted against House Joint Resolution 1,
the so-called balanced budget amendment.
I voted no because this amendment is a 10-second political sound bite
with decades of economic implications. It will handcuff future
generations to an
[[Page S3331]] economic blueprint this Congress dictates in 1995. And,
worst of all, it makes a mockery of the most important document this
country has ever produced.
I am a member of the Budget Committee. When I came to the Congress 2
years ago, I faced the largest debt ever amassed by any country in the
history of civilization. More debt was created during the 12 years of
Republican administrations in the 1980's and early 1990's than in the
entire 200 years preceding them.
I strongly support putting this country's economic house in order.
Mr. President, I support a balanced Federal budget. The people of this
Nation deserve nothing less. But this amendment does not get us there.
Words on a piece of paper cannot balance the budget, only legislators
like you and I can.
We have to make tough choices as we correct the fiscal mismanagement
of the 1980's. We have to balance the budget with surgical cuts; with a
scalpel, not a meat cleaver.
Mr. President, we have made some very tough decisions. I was one
Member of this body who voted for a plan--a plan with specific cuts and
common sense--which reduces the deficit by $505 billion over 5 years.
Program-by-program, cut-by-cut. Most of the Members of the Senate who
voted against the deficit reduction plan now support this
constitutional amendment.
Mr. President, where are the specifics? What will they cut? Which
taxes will they raise? Who will be hurt? The American people have a
right to know. Under this amendment, we have no idea.
For example, will they cut out funding for the Federal Government's
obligation to clean-up the Hanford Nuclear Reservation in my home State
of Washington? Will they eliminate the home mortgage deduction? Will
they cut Head Start, or WIC, or Ryan White? Will they stop guaranteeing
student loans? Will they block further assistance to our depressed
timber communities, or job training for laid-off aerospace workers?
Mr. President, just this week, we have seen some examples of how
careless cuts can be when they are made with a meat cleaver. The
rescissions package coming before the Senate soon is a mean-spirited
and irrational piece of legislation. As nasty as those cuts are, they
still do not get us to a balanced budget. Instead, they damage those we
can least afford to harm: our children.
If this body is serious about deficit reduction, we should resume the
debate on health care reform. Even cutting every discretionary program
will not get us to a balanced budget. We must control the growth of
health care costs. I find it ironic that many of the same Senators who
opposed the health care reform bill last year now support this
constitutional amendment.
This so-called balanced budget amendment is dangerous. It will remove
all our flexibility in dealing with emergencies--economic troubles like
recessions, or even natural disasters like volcanic eruptions,
earthquakes, flooding, hurricanes, and massive fires. My home State has
experienced many such disasters recently. If this amendment had been
part of the Constitution, how would my friends and neighbors have
coped?
Mr. President, I believe many of our colleagues would want to help in
these emergency situations. That is why the Congress is the proper
venue for deciding these issues--our Founding Fathers thought so, too.
This constitutional amendment throws our responsibility to the
courts. The courts will decide if funding is appropriate. Supreme Court
justices are not responsible to the people of my home State; they are
not elected by anyone. They are not sent to the Nation's capital to
tend to the needs of my constituents.
Mr. President, we have amended the Constitution only 17 times since
we adopted the Bill of Rights. We have never changed the Constitution
lightly. With each previous amendment, the American people voted to
expand rights and outline responsibilities--we have never inserted an
economic plan into the Constitution. This amendment sets a terrible
precedent.
I voted in favor of several amendments to the House Joint Resolution
1. I could see that the resolution had considerable support, and I
wanted to make sure that if it did indeed pass, we protected our most
vulnerable populations; that we maintained the integrity of the Social
Security trust fund; that we continued our fight against violent crime;
that we respected our veterans; and that we exempt natural disasters
from cuts.
I also believe that we should display common sense and work to reduce
the massive deficit before we enacted sweeping, across-the-board tax
cuts.
These safeguards all failed--every one of them. All attempts at
tempering the resolution, or placing some sensible priorities into the
legislation, were killed.
Mr. President, this is bad policy, and I cannot support any measure
that will handcuff our country's economic policy. When I stand in this
Chamber, I remember that I am not only a U.S. Senator but also a
mother.
It might be popular to vote yes, but I won't worry about my own
personal popularity until I know my children's economic future is safe.
I do not believe we should trivialize our Constitution in order to give
politicians a reason to make the kind of choices they should be making
anyway.
This resolution will hurt our country and handcuff future
generations. Amending the U.S. Constitution is not worth the gamble.
For these reasons, Mr. President, I did not support House Joint
Resolution 1.
Mr. PRESSLER. Mr. President, since 1981, there have been eight
balanced budget amendment measures that have been approved by the
Senate Judiciary Committee and reported to the Senate. Three of these
measures have received floor consideration.
In 1982, the Senate passed Senate Joint Resolution 58 by a 69-to-31
vote. This marked the first time either House of Congress had approved
such a measure. Although a substantial majority of the House of
Representatives voted in favor of a counterpart of Senate Joint
Resolution 58, the 236-to-187 margin fell short of the necessary two-
thirds vote.
In 1986, the Senate rejected a balanced budget amendment (S.J. Res.
225) by a vote of 66-to-34, thus failing to achieve the necessary two-
thirds majority by a single vote.
Then during 1994, the Senate defeated Senate Joint Resolution 41 by a
vote of 63-to-37, 4 votes short of the two-thirds necessary for
adoption.
Since coming to the Senate in 1979, I consistently have cosponsored
and supported balanced budget amendment measures, and have voted for
adoption of these measures at each and every opportunity. I strongly
support the proposed amendment before us which was approved by the
House of Representatives. With our vote today, the Senate will choose
between a failed status quo or a new road toward true fiscal
accountability.
Mr. President, there is compelling need for a balanced budget
amendment to the Constitution. The Federal Government has run deficits
for 23 years in a row and for 54 of the last 62 years. As a result, our
national debt has spiraled to more than $4.8 trillion. The gross annual
interest on the debt exceeds $300 billion.
Moreover, if we maintain the status quo--as reflected in the
President's budget request for fiscal year 1996--the national debt
would increase to more than $6.7 trillion in 2000. Mr. President, is
this the kind of legacy we want to impose upon our children and
grandchildren?
The harsh fact is that up until now we have tried every legislative
means possible to lower deficit spending and achieve tax revenues in
excess of outlays. In the past 10 years, we have seen Gramm-Rudman,
Gramm-Rudman II, the 1990 budget amendment, and the failed 1993 budget
plan. These well-intended measures have failed to move us closer to a
balanced budget. Even if it were to succeed for one budgetary cycle,
what assurances are there for continued balanced budgets and surpluses
sufficient to eliminate our national debt?
There must be a measure beyond Federal statute and outside the
present legislative process that would require continued balanced
Federal budgets. That is why a constitutional measure is necessary.
The constitutional amendment before the Senate today would prohibit
deficit spending except during any fiscal year in which a declaration
of war
[[Page S3332]] is in effect or when the country is engaged in an urgent
national security crisis. Also, the limit on deficit spending and the
limit on the national debt may be waived by a recorded vote of three-
fifths of the whole number of each House.
It seems that if the limits on deficit spending and the national debt
could be waived by a simple majority vote of the House and the Senate,
the purpose of the constitutional amendment would be nullified. It is
clear more than a majority should be required to waive the amendment.
Year after year huge deficits have been incurred by simple majority
votes.
Requiring a supermajority vote is not unique. The Constitution
currently has nine supermajority requirements on specific actions or
measures. These supermajorities include: ratification of treaties; veto
overrides; expulsion of a Member of the Senate or the House;
impeachment of the President, Vice President, and other Federal civil
officers and judges; waiver of disability of certain persons who
engaged in rebellion against the United States; election of a Vice
President by the Senate; and amendment of the Constitution. Also,
supermajorities are provided for in each House under its constitutional
right to determine the rules of its proceedings.
Measures such as a declaration of war or an amendment to the
Constitution were rightly considered by the framers to be the most
serious of policy commitments. They believed a broader consensus was
needed for these beyond a simple majority. The framers also imposed
supermajority requirements to ensure that the fundamental rights of
individuals were not overrun by the tyranny of a majority. Mr.
President, we have reached a point in our history that any serious
thought of further mortgaging the future of our children and
grandchildren should require a broader consensus than a simple
majority. It is for them that we must get our fiscal house in order. It
is for them that we must pass this balanced budget amendment.
The proposed amendment would take effect within 2 years after
ratification by three-fourths of the States, or by 2002, whichever
comes later. It is significant that 48 States, including my home State
of South Dakota, have constitutional provisions limiting their ability
to incur budget deficits. Such constraints have proven workable in the
States.
It is not surprising that a large majority of persons throughout the
country who have been polled on this issue support a balanced budget
amendment. Certainly, a large majority of South Dakotans from whom I
have heard and with whom I have met urge that this resolution be
adopted. They know it is the only way to achieve balanced Federal
budgets and reduction of the national debt. I hope, Mr. President, our
colleagues will bring that about.
Mr. LEAHY. Mr. President, during the past few days, I have been
dismayed at the attempts of the proponents of this constitutional
amendment to find a fix to pick up a vote or two in order to obtain
passage. It may make for high drama, but it also makes for bad law.
This is the United States Constitution that they are seeking to amend
and its provisions should be carefully crafted, studied and considered.
Back rooms and political dealmaking have no place in amending the
Constitution.
At the center of these desperate negotiations has apparently been a
belated effort to jerryrig some type of budget resolution or
implementing legislation to protect the Social Security trust fund from
being used to balance the budget under this so-called balanced budget
amendment. This is absurd.
The language of House Joint Resolution 1 is very clear. Section 1
states: ``Total outlays for any fiscal year shall not exceed total
receipts for that fiscal year.* * *'' And section 7 states: ``Total
receipts shall include all receipts of the U.S. Government except those
derived from borrowing. Total outlays shall include all outlays of the
U.S. Government except for those for repayment of debt principal.'' The
undisputed reading of this language is that the Social Security trust
fund will be covered by this constitutional amendment.
In addition to the unambiguous language of the constitutional
amendment itself, the legislative history of House Joint Resolution 1
makes it clear that the Social Security trust fund is not protected. In
fact, the proponents have fought back all efforts in the Senate
Judiciary Committee to amend the same language in Senate Joint
Resolution 1 and all amendments offered here on the Senate floor over
the past month.
During Senate Judiciary Committee consideration of this
constitutional amendment, Senator Feinstein offered an amendment to
exclude funds going in and out of the Social Security trust fund from
the definition of total receipts and total outlays. Unfortunately, a
majority of members of the Senate Judiciary Committee tabled Senator
Feinstein's amendment by a vote of 10 to 8 on January 18, 1995.
During the Senate debate on House Joint Resolution 1, Democrats
offered two separate amendments to take Social Security off the table.
Senator Reid offered an amendment to this constitutional amendment that
would have legally protected the
Social Security trust fund by excluding it from the definitions of
total outlays and total receipts in section 7 of House Joint Resolution
1. But that amendment was tabled by a vote of 57 to 41 on February 14,
1995.

Just a few days ago, Senator Feinstein offered a substitute balanced
budget amendment that again would have legally protected the Social
Security trust fund by excluding it from the definitions of total
outlays and total receipts in the substitute amendment. Again, the
proponents of this constitutional amendment tabled the Feinstein
substitute amendment by a vote of 60 to 39. Whether the Tennessee
Valley Authority is exempted and placed ``off budget'' may be in doubt,
but there is no doubt that the Social Security trust fund is included
by the proponents of this constitutional amendment.
Trying to craft some type of subsequent, legislative fix is folly. No
court in the country would enforce a statute that tries to overrule the
clear language of a constitutional amendment and the clear legislative
history supporting that language. The only way to protect the Social
Security trust fund from this so-called balanced budget amendment is to
write that protection into the text of House Joint Resolution 1 itself.
There is no other legally sound or enforceable way.
Moreover, any follow-up legislative effort to protect Social Security
could be changed at any time by subsequent legislation and would offer
no permanent protection. Unlike an amendment to the Constitution of the
United States, a simple majority of Senators, or in the case of
legislation changing the Budget Act 61 Senators, could change
legislation trying to take Social Security off the tale. The
legislation would fall far short of the protection of having something
enshrined in the Constitution, which the Founding Fathers purposely
made difficult to amend.
If proponents are finally willing to offer real protection for Social
Security, why do it with only a budget resolution or statute? And if
that is good enough for Social Security, why not cut the deficit
through the same mechanism?
Let us be honest with the American people. The real reason the
proponents of this so-called balanced budget amendment refuse to
protect Social Security in the constitutional amendment itself is that
they have no intention of protecting Social Security. Proponents of
this constitutional amendment plan to use the annual surpluses in the
Social Security trust fund to mask the true deficit. To make it easier
to thump their chests that the budget is balanced, the supporters of
this constitutional amendment hope to raid the $705 billion in annual
surpluses in the Social Security trust fund that will accumulate
between now and 2002.
It was most revealing that their recent offer to compromise with
Senators Conrad and Dorgan on this point was to stop counting the
surpluses in the Social Security trust fund in 2012, or about the time
that those surpluses are projected to dry up.
Let us put an end to this foolishness. Either protect Social Security
in the language of House Joint Resolution 1 or not, but quit playing
games with the Constitution of the United States. I have argued since
this measure began
[[Page S3333]] being considered that we needed to tackle the important
questions of implementing legislation first. But the proponents of this
measure have refused. They remain prepared to leave every concern and
serious problem for later.
But their mantra, that fundamental flaws in the constitutional
amendment itself can be fixed in implementing legislation, rings
hollow. Even if we believed their sudden change of heart on these
mattes signalled a real change in philosophy, some problems created by
the amendment cannot be corrected in mere implementing legislation. The
Constitution defines the ground rules, and the Constitution overrules
any contradictory implementing legislation.
Let us bring this sorry spectacle to an end. Let us vote to defeat
the so-called balanced budget amendment. Maybe then the Senate could
get past this slogan of an amendment and let us get on with real
business, making the tough choices needed to take real action to reduce
the deficit.
Mr. BIDEN. Mr. President, last week I announced my decision to
support the balanced budget amendment.
I rise today to explain my choice.
Considering amendments to our Constitution is one of the Senate's
most profound responsibilities. Our Nation has made only 17 such
changes since the Bill of Rights was ratified over 200 years ago.
But in recent decades a structural imbalance has occurred in the way
the Federal Government finances its operations. Each year, we find
ourselves deeper and deeper in debt, with no reasonable prospect for
constraining either the deficit or the debt.
We cannot balance our budget. Or, more precisely, we will not.
As I considered the balanced budget amendment as a possible solution
to this problem, I had to first answer an important question--Is this
an issue worthy of constitutional consideration?
From the point over 10 years ago when I offered my own constitutional
amendment to balance the Federal budget, up to my vote for Senator
Reid's balanced budget amendment last year, I have held that this is an
issue worthy of constitutional consideration.
The decision to encumber future generations with financial
obligations is one that can rightly be considered among the fundamental
choices addressed in the Constitution.
If this issue meets the test of constitutional significance, Mr.
President, then is House Joint Resolution 1 the way to address it?
Mr. President, many of my colleagues, whose very valid concerns I
have shared, have honored this Chamber with an eloquent presentation of
the problems this particular amendment could cause.
I will respond to some of those arguments later.
But none of their arguments has overcome my concern for the future of
our Nation's economy--for the country we will pass on to our children.
After so many years of seeking alternative solutions, I can see no
other reasonable prospect for sharply curtailing the debt than the
adoption of this amendment into our Constitution.
Mr. President, it is one thing to have deficits of $20 to $40 billion
per year, which we could live with for the foreseeable future. But it
is quite another thing to have deficits of $200 to $400 billion. And
just 6 years from now, Mr. President, $400 billion is just what our
deficit will be, not counting the surplus in the Social Security trust
fund.
Under these extraordinary circumstances, it seems reasonable to me to
require an extraordinary majority of Congress to continue deficit
spending.
Even if this amendment passes and is ratified by the States, I know
that we will continue to have some deficits. It is the potential size
of deficits that bothers me; there is nothing sacred about a balanced
budget.
But if we do decide to add to our national debt, it should be for
important reasons, such as managing recessions or natural disasters--or
securing the future well-being of our children--for reasons that can
command the support of three-fifths of both Houses.
Over a decade ago, Mr. President, we strayed from the course that
had, since the end of World War II, shrunk the national debt as a share
of our economy. Since the early 1980's, we have foolishly, and
significantly, increased our national debt year after year.
In 1980, Federal debt held by the public totalled $710 billion, and
the interest we paid on the debt was $52 billion. This year, that debt
has reached $3.6 trillion, and our interest payments will be $234
billion.
Recognizing the folly of this course, in 1984 I proposed a freeze on
every program of the Federal Government--across the board. Although I
wrote the plan with two Republican Senators, we received little support
for the proposal, from either side of the aisle.
By the way, I am convinced, Mr. President, that had we acted then,
the harm to many of the programs that I hold dear, responsibilities
that moved me to enter public life, would have been softened.
As it is, without the freeze--that we were warned would harm so-
called liberal programs--I have had to watch as those programs have
gone through the wringer.
In 1981, when we lost control of the deficit, human services programs
were 8.6 percent of Federal outlays. A decade later, they were 6.9
percent, a 20-percent reduction in their share of spending.
In 1981, education, training, employment and social services were 3.7
percent of Federal outlays. Over the next decade, as deficits and
interest payments grew, they shrank to 2.3 percent, a 40-percent cut in
their share of Federal spending.
After failing to pass the freeze, in the hope of restoring some
discipline to our finances and reducing the deficit, I supported the
Gramm-Rudman process, that put caps on the amount of deficit allowed,
and required a balanced budget.
But the requirements changed every year; the only constant in the
process was the annual increase in the national debt, and the guarantee
of annual deficits.
And in 1993, we passed an historic budget agreement at the beginning
of the Clinton administration, that will cut $500 billion from our
deficits over 5 years. The healthy economy that followed passage of
that plan has meant even more deficit savings.
If I thought that we could sustain this trend, Mr. President, I would
withhold my support for this amendment.
But, what was the political response to that serious deficit
reduction plan? It was denounced by those who now claim they want to
attack the deficit.
That plan was passed by a single vote in both Houses, without one
Republican vote. Moreover, that plan has been used by so-called deficit
hawks to defeat the very Members of Congress who had the courage to
vote for it.
And now we see again a plan by the new majority for tax cuts, defense
increases--including star wars--and, of course, the promise of a
balanced budget.
Mr. President, I've read this story before. We are all living out the
consequences of the first time we tried that program.
It is clear now that there are no options left before us to turn the
short-term success of the 1993 budget plan into a longer-term program
to bring down future deficits.
And there are no other options to force those who voted against
deficit reduction back then to face the consequences--requiring them to
look at everything including revenues rather than continue the charade
that the only thing we need to do to balance the budget is to cut
foreign aid and AFDC.
Because they--and we--have been so successful in misleading the
American people about the problem, those aspects of the Government's
responsibilities that I entered public life to support have already
been badly harmed as a consequence of these gigantic deficits:
children, education, fighting crime and drugs, supporting organizations
that promote international stability.
And those areas of the budget that need help the least--tax loopholes
for the privileged, exotic weapons systems, people who aren't middle
class or poor but who make money off of their programs--those have done
the best.
I offer as evidence the recent votes in the House. Now, without the
balanced budget amendment, our fiscal disarray is the pretext for cuts
in school
[[Page S3334]] lunches, infant nutrition, the successful and effective
Head Start Program, and educational programs that our future depends
on. Do my friends who share my values--who share my indignation at this
disregard for those least able to help themselves, this short-sighted
slighting of the future--do they really believe that if we were to vote
down the balanced budget amendment that those legislative priorities
would change?
I am convinced--reluctantly--that unless we use this opportunity to
try to restore control over our finances, we will not be able to re-
establish our priorities.
Our fight is not--or should not be--against making deficit spending a
more difficult choice.
Our fight, with or without a balanced budget amendment, is against
those who would walk away from Government's responsibilities and who
will sacrifice the future for short-term political advantage.
Despite the shrinkage in those programs in recent years, we still
face a future of increasing national debt, and rising annual deficits,
and those programs and responsibilities I feel most strongly about will
continue to take the hits.
This year alone, we will pay $234 billion in interest on the debt. By
1997, interest will be $270 billion--more than either our defense or
domestic spending.
If this trend is unsustainable--and it is--and if the hard choices we
make are turned against us--and they are--What, then can we do?
I have concluded, Mr. President, that there is nothing left to try
except the balanced budget amendment, forcing everything onto the
table, and requiring us to justify why some areas have escaped the
budget ax so far.
But what of the many arguments against this amendment--concerns that
I have shared in the past. Let me explain my thoughts on some of those
concerns today.
Mr. President, one of the strongest practical arguments raised
against the balanced budget amendment is that it will cost us our
ability to respond to recessions.
There are two points that I want to make in regard to that serious
charge. First, the sad fact is that we have already lost that
flexibility--by making deficits the norm in good times and in
recessions. Until we regain control of our finances, deficits will
remain an unintended consequence of our budget process, not a selective
policy choice.
Second, Mr. President, even under the constraints of this amendment,
it is possible to provide that flexibility. In Delaware, we have built
a two percent surplus into each year's budget, to assure that we can
cover unforeseen events that could raise spending or reduce revenues.
We could do that with the Federal budget, and restore its important
stabilizing role, a role that is now lost in the annual red ink. This
is not something that appears to be a realistic option in the near
term, but if that is the only way to restore the effect of automatic
stabilizers in the Federal budget, we will be able to choose that
option.
This amendment will make automatic stabilization more difficult, but
it will remain our choice to restore that function of the Federal
budget to its former effectiveness.
There are other concerns that I share with my colleagues who oppose
this amendment.
Together, we tried to make this a better proposal. I believe that
this amendment could be improved by changes I have supported here on
the floor and in the Judiciary Committee.
We tried to keep the Social Security trust fund off budget, where it
is now, and where it should stay. We failed to pass that amendment, and
this will allow us to continue to mask the current deficit with funds
that are needed to meet future obligations.
I believe that this failure takes us further from the truth about our
real deficit problems, and further from the truth about the very real
problems in the Social Security system itself.
But let me stress for those who are concerned about the effect of
this amendment on the Social Security system--this change in our
Constitution does not, by itself, cut a dime from current benefits.
Under current rules, Social Security is now off budget, but by law
its surpluses still go to purchase the accumulating pile Treasury bonds
that we will have to pay off in the future.
Taking Social Security out of the balanced budget amendment would not
change that aspect of the system, or prevent tampering with the
commitments we have made in the past.
My concern, in addition to the ways in which that accumulating
surplus will distort our definition of the budget, is that this
amendment will increase the temptation to use the Social Security
system to make the rest of the budget appear more balanced.
This is a valid reason to try to insulate Social Security from that
temptation--but not reason to renounce what I have concluded is our
last chance to restore control over our country's financial future.
We also tried, Mr. President, to assure that the real costs of a
balanced budget amendment, and not just its surface allure, are
apparent to the citizens who will be asked to ratify it in the coming
months.
And we tried to provide a capital budget--to treat public investments
the way families, businesses, and States treat their investments. And
we failed.
But I want the record to show that we are not prohibited by this
amendment from devising a capital budget. I predict that events and
experience will show us that a capital budget is essential to setting
priorities, and that we will find a way to fit such a process into our
budget system.
We tried to avoid a potential shift in the constitutional balance of
powers by ensuring that only the Congress would enforce a balanced
budget, Mr. President, and we tried to avoid tying up the courts with
constitutional questions about the President's role in enforcing a
balanced budget.
Mr. President, I believe that these constitutional issues remain the
greatest risk we will take when we add this amendment to our
Constitution.
Now, with the acceptance of Senator Nunn's amendment, Mr. President,
some of my concern on that issue has been relieved.
So where do we stand?
We can vote for this less than perfect amendment, that requires 60
percent majorities to permit deficits--and I predict that we will
choose to permit those deficits, but smaller deficits, and less
frequently, than before.
Or, Mr. President, we can continue to add every year to the debt
burden of future generations.
We will steal today from the next generation, squeezing out the
savings and investment that could increase future wealth.
We will continue to tie our own hands, to restrict our own ability--
indeed, our responsibility--to set priorities in our annual budget
process.
This year, interest on the national debt will cost the United States
$234 billion; the entire domestic discretionary budget will be $253
billion.
By the time this amendment is intended to become law, in the year
2002, interest on the debt will be $344 billion, larger than every
other category in the budget except for Social Security.
Given that prospect, Mr. President, I choose to take a chance on the
balanced budget amendment.
I hope that reverence for the Constitution and the procedural
roadblocks in the amendment will establish an ethic of budget balance
and a new, responsible, tradition will grow from the action we take
here today.
But only history will tell.
But I have sufficient confidence in our citizens and in our political
institutions that we will learn from any flaws that remain in this
amendment, and will make the best of its virtues.
Two hundred years of American history tells me it is right to have
that confidence.
But at the end of the day, Mr. President, I am willing to take the
first step today down this new path. I will vote for the balanced
budget amendment, but I will do so with my eyes open.
It is not the panacea some of its proponents have advertised, but
neither is it the plague its opponents have portrayed.
For me, it as a reluctantly chosen opportunity to regain responsible
control over our affairs.
And I hope that the record of my words and actions on this amendment
will help my fellow citizens, both in my
[[Page S3335]] State of Delaware and in the other States, as they
consider its ratification.
I hope that they consider fully the record of debate we have worked
to establish here in the Congress. That record should make us all, on
both sides of this profound issue, proud.
Mr. NUNN. Mr. President, on Wednesday, March 1, a story in the
Washington Post discussing my judicial review amendment to the balanced
budget amendment referred to the views of Prof. Kathleen Sullivan of
the Stanford Law School. The views of Professor Sullivan, as reported
in the Post, could be viewed as critical of my amendment limiting
judicial review. That would not be an accurate reflection of Professor
Sullivan's views.
I received a letter from Professor Sullivan yesterday in which she
notes:

I have had the opportunity to read your remarks in the
floor proceedings yesterday, and agree with you completely
that it would be imprudent to pass the [Balanced Budget]
Amendment in the mere unfounded hope that courts would not
entertain lawsuits arising under it. Addressing the judicial
review issue squarely, as you did, is plainly a step in the
right direction.

I ask unanimous consent that the text of the letter from Professor
Sullivan and the article in the Post be printed in the Record.
Mr. President, I am pleased that the Senate overwhelmingly adopted
the amendment to limit judicial review under the balanced budget
amendment. My amendment will ensure that no court interjects itself
into the balanced budget process except as specifically authorized by
Congress.
I look forward to working with the chairman of the Judiciary
Committee, Senator Hatch, in drafting implementing legislation,
including implementing legislation on the subject of judicial review.
To the extent that Congress exercises the authority in the amendment to
regulate the judicial role, there are ample precedents for statutory
provisions to ensure that judicial review does not interfere with the
taxing and spending powers of Congress. These could include, for
example, providing exclusive jurisdiction in the Federal courts or in a
designated Federal court; removal to Federal court of any case filed in
a State court; and restriction of the remedies, if any, that a court
could grant.
There being no objection, the material was ordered to be printed in
the Record, as follows:

Stanford Law School,

March 1, 1995.
Senator Sam Nunn,
U.S. Senate,
Washington, DC.
Dear Senator Nunn: Congratulations on your success
yesterday in persuading your colleagues of the danger that
the Balanced Budget Amendment, in its unamended form, would
unwisely transfer constitutional authority from the Congress
to the courts. I have had the opportunity to read your
remarks in the floor proceedings yesterday, and agree with
you completely that it would be imprudent to pass the
Amendment in the mere unfounded hope that courts would not
entertain lawsuits arising under it. Addressing the judicial
review issue squarely, as you did, is plainly a step in the
right direction. I am glad that you found my letter useful in
addressing this issue.
You may have read me quoted in the Washington Post this
morning as saying that your amendment renders the Balanced
Budget Amendment more an ``exhoration'' than an ``enforceable
requirement'' along the lines of many other constitutional
provisions. While this quote is accurate, it leaves out my
further comment to the reporter that the Balanced Budget
Amendment is, for that very reason, better with the Nunn
Amendment than without it. While I continue to believe that
there are strong reasons not to tamper with the existing
constitutional machinery in this area at all, I believe that
any measure that reduces the net transfer of power from the
legislative to the judicial and executive branches is
desirable.
Very truly yours,
Kathleen M. Sullivan.
____

[From the Washington Post, Mar. 1, 1995]

Dole Delays Budget Amendment Vote

one supporter short of passage, gop pressed holdout democrats

(By Eric Pianin and Helen Dewar)

Senate Majority Leader Robert J. Dole (R-Kan.) last night
abruptly put off a final vote on the proposed balanced budget
amendment after GOP leaders failed in a desperate daylong bid
to pluck the critical 67th vote from among wavering
Democrats.
Faced with almost certain defeat, Dole delayed the vote--
until today or perhaps later in the week--to buy time while
Republicans stepped up efforts to win over one of a handful
of Democrats, particularly North Dakota Sens. Kent Conrad and
Byron L. Dorgan, who have demanded changes in the measure to
protect Social Security as well as other safeguards.
Sen. Robert C. Byrd (D-W.Va.), a leading opponent of the
measure and a senior figure in the Senate, lashed out at Dole
for postponing the vote, charging that Republicans appeared
to be engaging in ``a sleazy, tawdry effort to win a victory
at the cost of amending the Constitution of the United
States.'' Byrd charged that Dole's action flouted a unanimous
agreement to hold the critical vote yesterday, following more
than a month of intense debate.
``This is a sad spectacle,'' Byrd said.
``I think the sad spectacle is that we may lose this
vote,'' Dole retorted.
Dole refused to back down, saying there was still a chance
Republicans could recruit at least one more senator to help
pass the amendment by the two-thirds majority required. He
said that in the wake of last fall's elections, when
Republicans swept to control of Congress pledging to balance
the budget and make dramatic changes in the face of
government, the Senate owed it to the American people to make
one more try.
``We still think there's some chance of getting this
resolved by tomorrow and getting 67 votes,'' Dole said. ``If
we fail, we fail.''
Dole's decision came after an extraordinary day of back-
room dealing in which Dole, Senate Judiciary Committee
Chairman Orrin G. Hatch (R-Utah) and other leaders pleaded
with and cajoled every Democrat they could collar.
Republican leaders had assumed until early yesterday that
the key to winning passage of the amendment was appeasing
Sen. Sam Nunn (Ga.), a highly influential Democrat who had
threatened to oppose the measure unless it was changed to
prohibit the courts from intervening in future congressional
tax and budget matters.
But even after Dole and other GOP leaders relented and the
amendment was revised to satisfy Nunn and one other waffling
Democrat, Sen. John Breaux (La.), Republican vote counters
still came up one vote shy of the two-thirds majority.
In the end, it came down to whether Republicans could win
the support of one or both of the Democrats from North
Dakota. While the packed Senate chamber buzzed with
anticipation during a half hour quorum call last evening,
Conrad moved back and forth between the Republican and
Democratic cloakrooms, conferring with each side.
Conrad had vowed to oppose the constitutional amendment
unless it were rewritten to guarantee that the budget would
not be balanced by using the Social Security trust fund. He
also has advocated other changes, including language to
ensure that Congress has some flexibility in responding to
economic crises.
At one point, Conrad, Dorgan, Sen. Wendell H. Ford (Ky.)
and other Democratic holdouts rejected a pledge from Dole and
House Speaker Newt Gingrich (R-Ga.) that Congress would pass
the Social Security guarantee in later legislation. But
Republicans said they were still discussing ways of trying to
guarantee passage of the bill protecting Social Security.
Hatch said last night that for a while it appeared
Republicans could reach agreement with Conrad on the Social
Security issue, but talks broke down when Conrad said he also
wanted an exclusion for economic emergencies. Republicans
said they hoped to pick up Dorgan's support if Conrad agreed
to back the amendment.
Last night's dramatic developments capped five weeks of
heated debate and political maneuvering over the amendment,
which requires a three-fifths majority of both houses before
Congress could spend in excess of projected revenue, except
in times of war.
The House approved the amendment in late January, 300 to
132. While the overwhelming support in the House reflected
the broad popular appeal of the measure in the abstract,
Senate Democrats, who hold the balance of power in passing or
defeating it, have played on voter concerns that Social
Security, Medicare and other politically sensitive programs
would become vulnerable if the amendment were adopted.
Others warned that it would dangerously alter the balance
of power in Washington, hamstringing Congress in times of
economic crisis and giving the president the upper hand in
controlling spending.
``The amendment is so full of flaws, so reflective of
flabby thinking, so arrogant in its disregard for the
traditional checks and balances and separation of powers that
its consequences could be nothing short of calamity,'' Byrd
said. Senate Minority Leader Thomas A. Daschle (D-S.D.)
described it as a ``shoot-now, ask-later approach'' that
Congress will regret.
Nunn's provision was the only change that Democrats
succeeded in making in the amendment; Republicans said they
agreed to it after getting assurances that the House will
accept it.
The provision would be unique in the Constitution. By
removing the balanced budget requirement from the
jurisdiction of federal courts, it would enable only Congress
to enforce the amendment's provisions.
``This is like tying yourself to the mast but ensuring that
you can untie yourself any time,'' said Stanford University
law professor Kathleen M. Sullivan. Laws ``only work when
there is pressure. [The Nunn amendment] renders the balanced
budget amendment an exhortation to the Congress to be
[[Page S3336]] good, rather than an enforceable
requirement.''
The tension-filled day began with an early morning meeting
in which Hatch and Sen. Paul Simon (D-Ill.), a major
proponent of the measure, told Nunn they would accept his
proposal, reflecting a decision reached by Dole the night
before that this was the only way to win passage of the
amendment.
On the floor, Breaux, another of the Democrats who had been
uncommitted, announced he would vote for the constitutional
amendment as long as it was changed to include Nunn's
proposal. In a soft voice, Hatch then said he would be
willing to accept Nunn's proposal. The night before, Hatch
had fervently vowed to oppose any change in the amendment's
language, even if that meant its defeat. Nunn thanked Hatch
and said he would now vote for the amendment.
But Nunn had hardly sat down before Dorgan was on the
floor, saying he could not vote for the amendment unless
Congress made clear in advance that it was not going to tap
the Social Security trust fund for revenue to balance the
budget.
While Democrats were resisting Republican entreaties,
Senate GOP freshmen trooped into the chamber, sitting in a
group in the back two rows, a visible reminder of the
political earthquake that brought them to Congress and the
balanced budget amendment to the forefront of the agenda of
the new GOP majority.
Sen. Rick Santorium (R-Pa.) got right to the heart of their
political message: ``The people who will stand in the way of
this balanced budget amendment today will not be around long
to stand in the way next time. It will pass. It is just a
matter of when.''

Mr. CRAIG. Mr. President, I rise in support of House Joint Resolution
1, the bipartisan, bicameral, consensus balanced budget amendment to
the Constitution.
There are many individuals who deserve special recognition for their
efforts on behalf of this amendment--more than it is possible to
include here at one time.
I want to begin by commending the former chairman of the Judiciary
Subcommittee on the Constitution, the senior Senator from Illinois [Mr.
Simon]. He has toiled for many years in this vineyard. In this area,
and in many others, Congress will miss his courage and leadership--and
we all will miss his warmth--when he retires at the end of the 104th
Congress. His staff, particularly Aaron Rappaport on the Judiciary
Committee, have always been professional, hardworking, and invaluable
to this effort.
It would not have been a debate on the balanced budget amendment
without the able leadership of the President pro tempore of the Senate,
Senator Thurmond of South Carolina. He has always been ahead of his
time, as he was some 40 years ago when he first arrived in this body
and became a principal sponsor of the balanced budget amendment.
I also want to recognized the chairman of the Judiciary Committee,
Senator Hatch of Utah, and his skilled and helpful staff. Senator Hatch
is an estimable constitutional lawyer, a skilled floor manager, and a
long-time leader in this effort.
On the committee, on the floor, and at every step, the Senators from
Alabama [Mr. Heflin] and Illinois [Mrs. Moseley-Braun] have poured much
time and dedication into this effort for years.
Many more Senators deserve recognition. I think almost every one who
votes ``aye'' today on final passage has done a lot of additional work
on behalf of this amendment. I don't know when I've seen so many give
so much for so worthy a cause.
Finally, I must recognize our distinguished majority leader, Senator
Dole of Kansas, the principal sponsor of Senate Joint Resolution 1,
this measure as introduced and reported in this body. Without his
guidance and leadership, the movement to pass this amendment would have
faded long ago. I also appreciate the long hours and capable work put
in by this staff over these recent, arduous weeks.
This extraordinary accomplishment, a bicameral, bipartisan, consensus
version of the most important legislation, never could have come this
far without the leadership and courage of my former colleagues in the
other body, Representatives Charlie Stenholm of Texas and Dan Schaefer
of Colorado. When the House made history last month by passing this
amendment for the first time in its history, it could not have happened
without the blood, sweat, and dedication of these two statesmen.
Representative Stenholm was my cofounder, 11 years ago, of CLUBB--
Congressional Leaders United for a Balanced Budget, an informal
bicameral group formed to keep this amendment alive after a decisive
House defeat in 1982. Pete Wilson of California was our first Senate
cochair. Former House CLUBB cochair Jim Inhofe of Oklahoma is now a
Member of this body, as are other veteran House leaders, including
Senators Snowe of Maine and Kyl of Arizona.
In language as well as congressional support, the language before us
today has a long and distinguished pedigree.
Outside Congress, this amendment is supported by a great groundswell
of public support and grass roots activism.
Otherwise the balanced budget amendment would not have come back
after losing in the House in 1982 and the Senate in 1986. Otherwise it
would not have come to the floor of one Chamber or the other a combined
total of seven times in the last 5 years--in 1990 in the House, in 1992
in both bodies, in 1994 in both bodies, and this year in both.
While a great many citizens, taxpayer groups, public interest
organizations, and trade associations have supported this movement over
the years, particular emphasis should be given to the work of the
National Taxpayers Union and, particularly, within that organization,
to Mr. Al Cors, the chairman of the nationwide Balanced Budget
Amendment Coalition.
I ask unanimous consent that, Mr. President, that at the end of my
statement I may include correspondence from that Coalition supporting
House Joint Resolution 1, as well as from other organizations.
this is the vote that counts; do we trust the people?

Mr. President, when the 55 delegates to the Philadelphia Convention
of 1787 convened at Independence Hall, they came with 55 perfect
Constitutions for the young republic. They emerged with one version
that, from any one of their points of view, was less than perfect.
But more than 200 years of history have shown that imperfect version,
full of compromise and an occasional complication, has been eminently
workable, has endured, and has remained a model for the world.
No matter how any of my colleagues may have voted on any amendment
earlier, you now have a chance to pass an amendment that unites the
underlying principle of virtually all versions of the balanced budget
amendment.
No matter what any one of my colleagues would have wanted in your
perfect version of such an amendment, we now have just one balanced
budget amendment remaining before us.
The only effective balanced budget amendment is the one that passes.
Your constituents will understand, and I know you understand: Vote
no, and you kill the only chance for an amendment, here and now.
Vote yes, and you will carry forward one of the great debates of our
age. This amendment will go back to the House of Representatives, and
from there to every State capital.
That's what this vote is really about--engaging the American people
in the most sweeping public debate about the appropriate size, scope,
and role of the Federal Government since the original Bill of Rights
was sent to the States by the First Congress.
The question is clear: Do we trust the people with that debate? Do we
trust the 80 percent of the people who demand this amendment? Do we
trust the voters who demanded last November that the Federal Government
change its ways?
This Senator does trust the American People.
That's why we have this process of amending the Constitution--because
the Constitution is the people's law, not the government's law, and
because the people have a right to take part in such a momentous
debate.

fundamental rights, limits on government

Before I start responding to points made in debate over the last few
days, I want to refocus us on why we are here considering this
amendment, in the first place.
A constitution is a document that enumerates and limits the powers of
the government to protect the basic
[[Page S3337]] 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, House Joint Resolution 1, fits
squarely within that constitutional tradition.
The case for the balanced budget amendment can be summed up best 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 judgements of transient majorities.
The right at stake is the right of the people--today and in future
generations--to be protected from the burdens and harms created when a
profligate government amasses an intolerable debt.
The Framers of the Constitution recognized that fundamental right. I
return once more to the words of Thomas Jefferson, who explicitly
elevated balanced budgets to this level of morality and fundamental
rights when he said:

The question whether one generation has the right to bind
another by the deficit it imposes is a question of such
consequence as to place it among the fundamental principles
of government. We should consider ourselves unauthorized to
saddle posterity with our debts, and morally bound to pay
them ourselves.

Woodrow Wilson said, ``Money being spent without new taxation . . .
is as bad as taxation without representation.''
Mr. President, deficit spending is taxation without representation.
Americans are told that deficit are Uncle Sam's way of giving them a
free lunch, providing $1.18 worth of government for just $1.00 in
taxes. In reality, taking gross interest into account, the government
has to spend $1.19 for every $1.00 of benefits, goods, services, and
overhead in the budget.
THE DEBT IS THE THREAT

Even as we speak, we are adding to the Federal debt: $829,440,000 a
day, 34,560,000 an hour, 576,000 a minute, and 9,600 a second.
In its January baseline, the Congressional Budget Office projects
that annual Federal deficits will grow from $176 billion this year to
more than double that amount, $351 billion, in fiscal year 2003, and to
$421 billion by fiscal year 2005.
Deficits are really the cruellest tax of all, since they never stop
taking the taxpayers' money. Americans are paying now, with a sluggish
economy, for the Government's past addiction to debt. According to the
Federal Reserve Bank of New York, the deficits of the 1980's already
have depressed our standard of living by 5 percent. Unless things
change, the next generation will pay even more dearly.
According to the National Taxpayers Union, for each year with a $200
billion deficit, a child born today will pay $5,000 in additional taxes
over his or her lifetime.
The President's own fiscal year 1995 Budget, in its ``Analytical
Perspectives'' volume, projects that future generations will pay as
much as 82 percent of their lifetime incomes in taxes, under the
current policies of borrow-and-spend.
In 1992, the nonpartisan General Accounting Office issued its report,
``Budget Policy: Prompt Action Necessary to Avert Long-Term Damage to
the Economy.'' At that time, GAO projected that failure to take action
on the deficit and the growing debt would produce a stagnant--even
slightly declining--standard of living for Americans in the year 2020.
In contrast, GAO said that simply balancing the Federal budget by 2001,
and keeping it balanced, would raise our children's standard of living
by 36 percent.
GAO and the Congressional Budget Office now project lower deficits,
as a result of their scoring of last year's budget plan. However, the
intermediate- and long-term deficit outlook has done no better than
decline form cataclysmic to intolerable.
The current CBO baseline looks a great deal like--indeed, a little
worse than--GAO's muddling through scenario report, in which the
deficit is held at 3 percent of gross domestic product.
Under this muddling through scenario, our children's standard of
living in 2020 would be 7 percent lower and the Federal debt would be 3
times larger than if the budget is balanced by 2001.
Our national economic policy should not be one of muddling through.
Even that scenario is based on somewhat optimistic assumptions.
Interest rates are now near a 30-year low. If they bounce back upward
some, the cost of interest payments on the debt will explode. Senator
Murkowski had a chart out here on the floor during this debate that
displayed that graphically.
So, we must keep in mind that small changes for the worse in our
economic picture over the next few years will make the deficit picture
far worse.
Today, Federal budget deficits are the single biggest threat to our
economic security. The Federal debt now totals $4.8 trillion, or about
$18,500 for every man, woman, and child in America, and is growing.
As deficits grow, as the national debt mounts, so do the interest
payments made to service that debt. Besides crowding out other fiscal
priorities, these amount to a highly regressive transfer of wealth.
About 20 percent of these payments go overseas.
Interest on the Federal debt is largely a transfer from middle-income
taxpayers to large institutions, banks, corporations, wealthy
individuals and foreign investors.
In fact, interest payments to wealthy foreigners make up the largest
foreign aid program in history. According to the President's budget, in
fiscal year 1994, the U.S. Government sent $44.5 billion overseas in
interest payments. That's more than twice as much as all spending on
actual international programs, including foreign aid and operating our
embassies abroad, which totalled about $21 billion. Also in fiscal year
1994, 33.9 percent--$62.6 billion--of the dollars borrowed from the
public came from overseas.
Annual gross interest on the debt now runs about $300 billion, making
it now the second largest item of Federal spending, and equal to about
half of all personal income taxes.
the framers' assumptions

The Framers thought that the limited size and enumerated powers of
Government, the limits on the money supply created by a gold standard,
the moral imperative of the unwritten constitution, and the House's
exclusive power to originate bills raising revenue all would protect
this right. Jefferson would have preferred to put this protection in
the Constitution. But others at the time viewed the idea that a
restraint on indebtedness would be needed as being beyond belief.
Times have changed, as have the nature of government, monetary
policy, and politics. The original constraints that protected the
people from a profligate government, all of which had constitutional
status, have all but dissolved. It's now about 60 years past time to
replace them.

political will

Critics of the balanced budget amendment argue that all we need is
the political will, the leadership to balance the budget. That argument
ignores the reality that the way the Federal Government makes its
economic and political decisions has changed fundamentally over the
last two generations.
The system is broken. The Government has spent more than it has taken
in for 57 of the last 65 years. The budget was last balanced in 1969,
and in 1960 before that. We are not talking here about some short-term
failure of will that was cured with the last election or will be cured
with the next one.
The impetus to borrow and spend has become a structural one in our
system of government. It is a constitution-class crisis that demands a
constitution-class solution.

not narrow policy, but perfecting democracy

The balanced budget is not narrow economic or fiscal policy. It is
structural, systemic change that would help perfect representative
democracy.
Over the last two generations, the political and budget processes
have evolved in such a way that virtually all of the political rewards
are for spending more and borrowing more. Narrow, highly organized,
interest groups mobilize to reward spending increases for specific
constituencies. The more general, public interest in restraining the
size and fiscal appetite of government
[[Page S3338]] has been put at a systematic disadvantage.
The only way to put the general public interest back on a level
playing field with the special interests is to make it harder to borrow
and spend.
That's what our amendment does. For the first time, it creates
accountability by requiring that deficits occur only when Members of
Congress cast an identifiable vote to run a deficit.
By providing for accountability and by restoring the general public
interest to a stronger representative voice, our amendment actually
perfects our democratic process.
The essence of this reform is that we finally restore the principle
that the government should grow no larger than the people are willing
to pay for and we should pay for all the government we demand.
It's often said that Congress underestimates the wisdom of the
people. Well, the people have spoken once again, and it's time for
Senators to realize that, today, as is usually the case, good policy is
good politics. The American people understand the balanced budget
amendment, they want Congress to pass it, and they are right.
majority rule

One of the curious objections raised against the balanced budget
amendment is that it would threaten majority rule.
Those that dwell on the difficulty of getting three-fifths majorities
to unbalance the budget or raise the debt limit are missing the point:
They are still thinking, ``What do we need to do in order to keep
deficit spending?''
That's why we put supermajorities in the amendment--not just to make
it harder to deficit spend and increase the debt, but to deter Congress
from deficit spending in all but legitimate and extraordinary
circumstances. Under our amendment, when you balance the budget, you
don't have to worry about mustering a supermajority.
Such a requirement is consistent with other provisions in the
Constitution. Freedom of speech is protected by a supermajority
requirement. So is freedom of religion. So is the right to keep and
bear arms and every other right in the Constitution.
Because it takes supermajorities to amend the Constitution, every
right protected in the Constitution by limiting the power of government
is protected by supermajorities.
In addition, as has been noted by both sides in this debate, specific
supermajorities are written into several procedures in the
Constitution, including treaty ratification and overriding vetoes.
In our amendment, we create procedural restraints on the Federal
Government to protect the right of the people to be free from excessive
government debt. We use 60 percent supermajorities instead of two-
thirds or absolute prohibitions because we foresee that the process
will need to be flexible on occasion.
The Framers wanted to protect majority rule for the transaction of
most of the Government's business. But sometimes, to protect
fundamental rights or the integrity of specific process, they employed
supermajority requirements to protect against, in the words of the
Federalist Papers, a tyranny of the majority.
Let's look at the will of the majority from one more angle.
Two-thirds to four-fifths of the American people want the balanced
budget amendment. Clear majorities of Congress want it. If it doesn't
pass today, if it doesn't go the American people for a full public
debate, it will be because a minority has blocked it here.

disaster assistance

Some are concerned about whether requiring a three-fifths vote to
deficit spend would thwart efforts to deal with natural disasters. From
1978-94, supplemental disaster appropriations topped $7 billion in only
1 year, 1992. We generally are talking about a very small portion of
the Federal budget.
As Senator Simon and others have suggested, creating a small disaster
revolving fund, or for that matter, just planning to run small
surpluses, would be sufficient to meet such needs.
On the other hand, Congress also has a history of dealing promptly
and compassionately in such situations. Only one time over the last 15
years did a disaster bill fail to clear either body with less than a 60
percent majority. That was in 1992, in the House, amid much contention
over the Budget Enforcement Act firewalls, the balanced budget
amendment and other issues. And that bill fell only one vote short of
60 percent.
Congress is not going to turn its back on natural disaster victims
under this amendment. To suggest it will is to ignore reality and
history.

separation of powers

Perhaps the most curious concern I have heard raised about the Simon-
Hatch-Craig amendment is that it would transfer powers from the
legislative branch to the Executive or the courts.
Let's look at the amendment. That doesn't occur in section 6, which
begins with the words, ``The Congress shall enforce and implement this
article * * *.''
This transfer doesn't appear later in section 6, which recognizes the
need of Congress to use estimates in implementing legislation,
obviously foreclosing some of the more inventive scenarios that might
tempt Executive or court action.
It certainly doesn't appear in the clarifying language that the
amendment's authors have added to section 6 to make sure that no one
thinks the courts can raise taxes or construct equitable remedies.
There's no lint-item veto in here. There's no delegation of Congress'
legislative power, implied or explicit, to anyone else.
In the same way that the first amendment begins with the words,
``Congress shall make no law * * *,'' this amendment restricts the
power of the entire Government by making it harder to enact something
into law.
The balanced budget amendment does not change in any way the balance
of power among the branches of government. It is absolutely consistent
with the spirit, the style, and the operations of the rest of the
Constitution.

slash-and-burn scenarios for priority programs

During the course of this debate, as seems to happen every time a
balanced budget amendment comes to the floor, the Treasury Department
and various special interest groups did a disservice to serious public
debate by releasing so-called studies that they tried to make look
legitimate by attaching tables of numbers.
In reality, they were scare tactics, using dubious assumptions, and
filled with manufactured numbers.
Such studies rely on sometimes questionable economic assumptions. But
in every case, they did not look to the long-range benefits of balanced
budgets. And in every case, they assumed a mindless, across-the-board,
meat-ax approach to budget changes.
One of the chief benefits of the balanced budget amendment is that it
will make Congress and the President set priorities. You don't have to
set priorities when you don't have a credit limit. In an effort to
scare as many people as possible, and attract as much attention as
possible, these studies, including one issued by the Treasury
Department, imply that the President and Congress have no priorities
and would not select or change priorities under the amendment.
To this Senator, what their arguments really say is, these opponents
are afraid that the amendment will work and that, when the Government
must set priorities, the American people may not agree with their
priorities.
Balanced budgets will produce a stronger economy, better able to
sustain its defense capabilities while meeting its other needs. And I
am confident that the people will demand, and willing to risk that
Congress will deliver, an adequate defense budget.
DRI/McGraw-Hill, which is one of the world's leading nonpartisan
economic analysis and forecasting firm has called on Congress to
approve the balanced budget amendment.
DRI believes BBA is the path to the benefits of a balanced Federal
budget. Their report, released just a few weeks ago, said, in part:

A major argument for the Constitutional amendment is the
credibility it may lend to the process. This credibility may
permit a sharper drop in bond yields and thus an earlier
boost in the economy.

The firm strongly endorsed the balanced budget amendment during a
recent news conference on Capitol Hill.
They predicted that 2.5 million new jobs could be created by 2002 as
more
[[Page S3339]] resources are freed up for private investment, interest
rates drop, and businesses can afford to expand, buying more equipment
and training.
The firm says the amendment should lower borrowing costs for
businesses, encouraging private investment. Real nonresidential
investment could grow by 4 to 5 percent by 2002, absent the $200
billion in Federal deficits which currently soak up capital.
The balanced budget amendment is the best friend of those who rely on
essential Government programs, and of all other Americans. Interest
payments on the Federal debt are already crowding out discretionary
spending. As DRI said:

The current generation does not need to sacrifice its
living standard to protect that of future generations from an
unbearable federal debt. Budget balance demands neither
recessions nor the dismantling of the federal government.

The amendment would relieve, rather then intensify, budget pressures
in part through lower interest rates, according to DRI:

A ``virtuous cycle'' of lower structural deficits, lower
federal debt, and lower interest rates can create half the
required long-term deficit reduction through lower federal
interest payments.
The lower interest rates and reduced borrowing would cut
interest costs for the federal government; in fact, by 2002
half the savings in our budget simulations come from lower
interest costs.

Lower interest rates mean the real glide path to a balanced budget
will involve less short-term pain than some have warned. Even the
Treasury Department, for example, in its study, which did not take into
account the positive economic impact of balancing the budget, assumed
interest cuts would provide less than a quarter of total savings in
fiscal year 2002.
DRI/McGraw-Hill predicts that in the course of creating 2.5 million
new jobs following passage of the BBA, increased business activity will
allow the Federal budget to be balanced 2 years ahead of schedule. This
could also provide the opportunity for an even more gradual glide path
to a balanced budget, moderating spending slow-downs.

Cutting federal spending and balancing the budget will
greatly benefit the U.S. economy in the long run. Shifting
spending from personal and government consumption toward
private investment raises the national capital stock, our
proportionate domestic (rather than foreign) ownership of
wealth, and thus our standard of living. (Source: DRI/McGraw-
Hill Special Report, February 1995).

Finally, DRI/McGraw-Hill is convinced that balancing the Federal
budget is in the best economic interest of the United States. They put
it in concrete terms:

Balancing the budget clearly helps the U.S. economy. By the
end of the 10 year forecast, real DGP is up $170 billion, or
2.5% from its baseline level. This is far from trivial and
translates to about $1000 per household at today's prices.

Thomas Jefferson--Revisited

I turn one more time to the words and works of Thomas Jefferson.
Jefferson balanced the budget in all 8 of his years in the White
House. He reduced the national debt by half during his first term and
set policies in motion that resulted in a national debt of a mere
$38,000--that's 38 thousand--in 1834 and 1855.
Jefferson's Louisiana Purchase has been tossed about as an example of
how going into debt can be beneficial. But let's look at what we can
learn from his experience.
It's true that the Louisiana Purchase was twice the size of the
Federal budget in 1803, as noted by the Senator from West Virginia [Mr.
Byrd]. But the Federal budget was only 1.63 percent of gross national
product at the time.
Relative to the size of the gross domestic product, the Louisiana
Purchase would translate into just under $225 billion in today's
dollars probably because the Federal deficit last year was $203
billion.
Jefferson and his successors sold the land acquired from France and
made a profit for the Federal Government.
Every year the Federal Government is borrowing the equivalent of a
Louisiana Purchase. And what are we getting for it? Nothing except a
higher bill for interest costs and a legacy of crushing debt to leave
behind for our children.
other issues, conclusion

There are many other issues relating to this amendment, too numerous
to discuss in the time allotted. To address those as a matter of
legislative history, I ask unanimous consent to insert various other
materials in the Record.
As for those additional facets of the debate, I want to note that,
with our approximately 4,000 pages of legislative history over the last
15 years, every question has been answered, every objection has been
dealt with.
This amendment has a history, it has a pedigree. It is the
bipartisan, bicameral, consensus that has been looked at by
constitutional scholars, economists, public interest groups, and
members of both bodies.
This is our one chance to vote, up or down, to send a balanced budget
amendment to the House and then to the people.
I'll turn one last time to the words of Thomas Jefferson, when he
wrote, in a 1798 letter to John Taylor:

* * * constitution. I would be willing to depend on that
alone for the reduction of the administration of our
government to the genuine principles of its constitution; I
mean an additional article, taking from the federal
government the power of borrowing.

And again, in 1798, he wrote:

If there is one omission I fear in the document called the
Constitution, it is that we did not restrict the power of
government to borrow money.

Just 3 years ago, 38 states ratified the 27th amendment, concerning
variations in congressional pay, as proposed by James Madison 200 years
ago.
It just goes to prove that occasionally it's time to turn to a new
idea, and sometimes the answer is to turn to a classic.
Today, Mr. President, my colleagues, it's time to add Mr. Jefferson's
amendment to the Constitution, right behind that of his friend, Mr.
Madison. We could hardly be in better company, we could hardly seek
wiser guidance, in contemplating this addition to our Constitution.
Thomas Jefferson also said:

I am not an advocate for frequent changes in laws and
constitutions. But laws and institutions must go hand in hand
with the progress of the human mind. As that becomes more
developed, more enlightened, as new discoveries are made, new
truths discovered and manners and opinions change, with the
change of circumstances, institutions must advance also to
keep pace with the times. We might as well require a man to
wear still the coat which fitted him when a boy as civilized
society to remain ever under the regimen of the their
barbarous ancestors.

If you want to ignore the lessons of the last 35 years of excessive
debt, vote no on this amendment.
If you are willing to leave our children a stagnant or declining
standard of living, vote no on this amendment.
If you want to continue the failed status quo, vote no on this
amendment.
If you agree with Jefferson that, ``as new discoveries are then vote
yes on the balanced budget amendment.
If you trust the American People, and understand their demand that
government change its ways, then vote yes on the balanced budget
amendment.
If you want today to be the first day of new hope and opportunity for
our Nation, our economy, and our children, then vote yes on the
balanced budget amendment.
I ask unanimous consent that I may have printed in the Record
numerous supporting materials, including letters and statements of
endorsement from citizens' groups, information on public support of the
balanced budget amendment, substantive analyses prepared by outside
groups, and supporters here within Congress, fact sheets, and newspaper
articles.
There being no objection, the material was ordered to be printed in
the Record, as follows:

The Balanced Budget Amendment

Coalition,

Washington, DC, February 6, 1995.
Dear Senator: The undersigned organizations strongly urge
you to vote for and support the Balanced Budget Amendment,
S.J. Res. 1, introduced by Senators Dole, Hatch, Simon,
Thurmond, Heflin, Craig, Moseley-Braun and others. This
bipartisan proposal (over 40 total Senate cosponsors) has
already passed the Senate Judiciary Committee on a 15 to 3
vote and is now being considered on the Senate floor.
The framers of the U.S. Constitution assumed each
generation of Americans would pay its own bills--and that the
federal budget would, over time, remain roughly in balance.
According to Thomas Jefferson, ``we should consider ourselves
unauthorized to saddle posterity with our debts, and morally
bound to pay them ourselves.''
In today's era of mass media, special interest politics,
and expensive and sophisticated election campaigns, the
checks and balances established 200 years ago are not up to
the job of controlling the federal deficit. Recent
[[Page S3340]] Congresses and presidents have proven
themselves incapable of acting in the broader national
interest on fiscal matters. Whenever Congress considers
spending cuts that could help balance the budget, only a few
Americans are aware of it, and fewer still express their
views about it. By contrast, those who stand to lose from
budget restraint--typically the beneficiaries and
administrators of spending programs--are well aware of what
they stand to lose. They mount intensive lobbying campaigns
to stop fiscal restraint.
This pro-spending and pro-debt bias has led to 25 straight
unbalanced budgets. It took our nation 205 years--from 1776
to 1981--to reach a $1 trillion debt. Now, just 14 years
later, the debt is $4.8 trillion. Each year, interest
payments rise as the overall debt grows. These payments have
been one of the fastest-rising items in the federal budget--
they now account for the entire deficit, all by themselves. A
succession of statutory remedies has failed to stem this
historic and highly dangerous turn of events.
S.J. Res. 1 is a sound amendment that has evolved through
years of work by the principal sponsors. It provides the
constitutional discipline needed to make balanced federal
budgets the norm, rather than the rare exception (once in the
past 34 years), and it offers the proper flexibility to deal
with national emergencies.
In addition to requiring a three-fifths majority vote to
deficit spend or increase the federal debt limit, S.J. Res. 1
is designed to make raising federal taxes more difficult. It
would require the approval of a majority of the whole number
of both the House and Senate--by roll call votes--in order to
pass any tax increase. This adds much-needed accountability.
Unless action is taken now, higher federal spending and
debt will continue to cripple our economy and mortgage our
children's future. We urge you to support S.J. Res. 1, the
Balanced Budget Amendment.
Sincerely,
National Taxpayers Union; International Food Service
Distributors Association; National Association of
Wholesale-Distributors; American Legislative Exchange
Council; National Association of Manufacturers;
National Association of Home Builders; The Seniors
Coalition; Financial Executives Institute; Concerned
Women for America; The Business Roundtable; American
Farm Bureau Federation; American Furniture
Manufacturers Association; United We Stand America;
United Seniors Association, Inc.; Howard Jarvis
Taxpayers Association; Independent Bakers Association;
Citizens for a Sound Economy; Council for Citizens
Against Government Waste; Traditional Values Coalition;
Automotive Service Association; National Retail
Federation; National Truck Equipment Association; Truck
Renting and Leasing Association.
National-American Wholesale Grocer's Association; U.S.
Chamber of Commerce; National Cattlemen's Association;
Associated Builders and Contractors, Inc.; National
Ready Mixed Concrete Association; U.S. Business and
Industrial Council; National Federation of Independent
Business; National Association of Realtors; Small
Business Survival Committee; Christian Coalition; The
Concord Coalition; Printing Industries of America;
International Council of Shopping Centers; Motorcycle
Industry Council, Inc.; American Tax Reduction
Movement; International Mass Retail Association;
Texaco, Inc.; U.S. Federation of Small Business;
American Machine Tool Distributors Assn.; Union
Pacific; Common Sense for America; Americans for Tax
Reform; American Bakers Association.
____

[IRET--Congressional Advisory, Feb. 27, 1995]

Keynes is Alive, But not Well, in Washington

(By Norman B. Ture, President)

Opponents of a Balanced Budget Amendment assert that
recessions will be deeper and more prolonged if the amendment
prohibits the federal government from running budget
deficits. According to this Keynesian article of faith,
increases in federal spending relative to federal tax
revenues expand total--government, household, and business--
spending and thereby produce increases in total production,
employment, and income.
Much of this increase in government spending and decrease
in government tax revenues occurs automatically as the
economy moves into recession. With falling output,
employment, and income, payroll and income taxes decrease,
while government outlays for such things as unemployment
compensation and food stamps go up. These so-called
``automatic stabilizers'' allegedly cushion the decline in
households' and businesses' disposable incomes, allowing them
to maintain higher spending levels than they otherwise would
be able to undertake. Moreover, according to this argument,
the federal government should take action to increase other
spending and/or to reduce taxes to fortify the automatic
bolstering of disposable income.
The argument is wrong analytically. It is also rejected by
history. It should be rejected by the Senate as the basis for
deciding the fate of the Balanced Budget Amendment.
It is certainly true that the government's revenues
automatically decline and certain of its outlays
automatically increase during a recession. These automatic
fiscal changes, however, don't--can't--increase total real
spending. The resulting gap between government spending and
government revenues has to be financed, either by the
government's borrowing the difference or by resorting to the
monetary printing press. If the government borrows the money
to finance the deficit, the lenders' disposable incomes--the
amount of their current after-tax incomes available to
purchase consumption products or business assets--is reduced
by the amount they lend the government--the same amount as
the increase in the disposable incomes of other people. No
net increase in income available for spending occurs.
The same thing is true if the government takes
discretionary actions to increase its spending and/or to cut
taxes. The government's borrowing to make up the difference
between its additional outlays and reduced revenues cancels
any increase in disposable income that allegedly would be
produced by running a deficit.
Of course, the government might resort to the money
printing press to finance the deficit. This might lead to an
increase in nominal aggregate demand but only at the cost of
pushing up the price level. Real disposable income and
spending would increase only if people were fooled and failed
to spot the inflationary erosion of their actual incomes and
purchasing power.
Public policy makers should not disregard Abe Lincoln's
famous homily in making their policy decisions. They should,
instead, rely on some homely, basic truths. Increases in the
nation's income can't be produced by fiscal sleight of hand.
Increases in real income depend on increases in real output.
Increases in real output depend on increases in production
inputs and/or in the efficiency of their use. Increases in
production inputs depend on increases in the real rewards for
supplying them.
Budget deficits will not maintain, let alone increase, real
disposable income unless they result from fiscal actions that
increase incentives for people to work, save, invest,
innovate, start new businesses or expand existing
enterprises.
History is no kinder to the Keynesian fiscalism than
analysis. The record of the economy's aggregate performance
reveals no evidence that budget deficits, per se, allay or
moderate recessionary developments, or, indeed, that they
exert any expansionary influence. Even the least demanding
statistical tests of a relationship between federal budget
outcomes and gross domestic product reject the notion that
budget deficits are significant in moderating recessionary
forces.
In this era of heightened concern about the federal
government's preempting too much of the nation's production
capability and misdirecting its use, opposition to curbing
the growth in government spending and federal deficits by
imposing a budget-balancing constitutional requirement is
truly bizarre. Basing that opposition on the Keynesian fiscal
mythology is even weirder. It is to be hoped that the U.S.
Senate will base its decision about a Balanced Budget
Amendment on consideration of the really relevant concern
about how most effectively to discipline fiscal and budget
policy decision making.
____

[American Legislative Exchange Council, Feb. 24, 1995]

More Than 200 Economists Publicly Support Balanced Budget Amendment

(By Kerry Jackson and Ian Calkins)

Washington, DC., February 24, 1995--By endorsing a letter
outlining their support for the Balanced Budget Amendment
(BBA), 219 economists from across the country have publicly
recognized the threat federal deficit spending poses to
America's future.
Included in the list are such prominent economists as Dr.
Richard Vedder of Ohio University, Dr. William Niskanen of
the CATO Institute, and Dr. Gordon Tullock of the University
of Arizona. The list was solicited by the American
Legislative Exchange Council (ALEC) in response to news
reports that many economists are opposed to the BBA. ALEC,
the nation's largest bipartisan membership organization of
state legislators, instead believes economists recognize the
harm in an annual spending deficit that has hit $200 billion
and is growing. With support from roughly 3,000 member state
legislators, ALEC has been at the forefront of the Balanced
Budget Amendment issue for 20 years.
``This list represents the most respected and brilliant
minds in the field of economics'' said ALEC Executive
Director Samuel A. Brunelli. ``What that tells us is simply
this: the Balanced Budget Amendment is sound economic
policy.''
Brunelli presented the letter and list Monday morning to
Senator Paul Coverdell (R-Ga.) during a BBA Coalition
meeting, where he reported the list was still growing as he
left his office.
``There is a strong intellectual foundation in support of
the Balanced Budget Amendment,'' Brunelli told Coverdell.
``This is just a representative group of scholars who realize
the danger reckless deficit spending has on our present and
future economy.''
By endorsing the letter, the economists are saying ``there
is no rational argument against the Balanced Budget
Amendment. Simple observation of the fiscal record of recent
years tell us that the procedures through which fiscal
choices are made are
[[Page S3341]] not working.'' And they understand the
``immorality of the intergenerational transfer that deficit
financing represents cries out for correction.''
They also acknowledge the BBA would produce an ``increase
in investor and business confidence, both domestic and
foreign.''
One of the primary arguments against the BBA is the
prospect that states will be forced to bear an inequitable
financial burden if costs are shifted in balancing the
budget, making them unwilling to ratify the measure. ALEC,
however, has addressed that problem in its recently published
Issue Analysis: Up to the Challenge: Why State and Local
Governments Can Flourish Under the Balanced Budget Amendment.
The paper exposes the cost-shifting argument as groundless
and goes on to outline a number of ways states can actually
save money if the BBA were enacted. As a membership
organization that is closely associated with state lawmakers,
ALEC believes there is enough support among the states to
ratify the BBA.
``Already 29 states have passed a resolution calling for a
limited Constitutional Convention to write a BBA,'' Brunelli
said. ``That's more politically difficult legislation to pass
than ratification, and it's only nine states shy of the
number of states required to amend the Constitution.''
Balanced Budget Amendment--An Open Letter To Congress, February 1995

It is time to acknowledge that mere statutes that purport
to control federal spending or deficits have failed. It is
time to adopt constitutional control through a Balanced
Budget Amendment. In supporting such an amendment, Congress
can control its spending proclivities by setting up control
machinery external to its own internal operations, machinery
that will not be so easily neglected and abandoned.
Why do we need the Balanced Budget Amendment now, when no
such constitutional provision existed for two centuries? The
answer is clear. Up until recent decades, the principle that
government should balance its budget in peacetime was,
indeed, a part of our effective constitution, even if not
formally written down. Before the Keynesian-inspired shift in
thinking about fiscal matters, it was universally considered
immoral to incur debts, except in periods of emergency (wars
or major depressions). We have lost the moral sense of fiscal
responsibility that served to make formal constitutional
constraints unnecessary. We cannot legislate a change in
political morality, we can put formal constitutional
constraints into place.
The effects of the Balanced Budget Amendment would be both
real and symbolic. Elected policitians would be required to
make fiscal choices within meaningfully-constructed
boundaries; they would be required to weigh predicted
benefits against predicted tax costs. They would be forced to
behave ``responsibly,'' as this word is understood by the
citizenry, and knowledge of this fact would do much to
restore the confidence of citizens in governmental processes.
It is important to recognize that the Balanced Budget
Amendment imposes procedural constraints on the making of
budgetary choices. It does not take away the power of the
Congress to spend or tax. The amendment requires only that
the Congress and the Executive spend no more than what they
collect in taxes. In its simplest terms, such an amendment
amounts to little more than ``honesty in budgeting.''
Of course, we always pay for what we spend through
government, as anywhere else. But those who pay for the
government spending that is financed by borrowing are
taxpayers in future years, those who must pay taxes to meet
the ever-mounting interest obligations that are already far
too large an item in the federal budget. The immorality of
the intergenerational transfer that deficit financing
represents cries out for correction.
Some opponents of the Balanced Budget Amendment argue that
the interest burden should be measured in terms of percentage
of national product, and, so long as this ratio does not
increase, all is well. This argument is totally untenable
because it ignores the effects of both inflation and real
economic growth. So long as government debt is denominated in
dollars, sufficiently rapid inflation can, for a short
period, reduce the interest burden substantially, in terms of
the ratio to product. But surely default by way of inflation
is the worst of all possible ways of dealing with the fiscal
crisis that the deficit regime represents.
Opponents also often suggest that Congress and the
Executive must maintain the budgetary flexibility to respond
to emergency needs for expanding rates of spending. This
prospect is fully recognized, and the Balanced Budget
Amendment includes a provision that allows for approval of
debt or deficits by a three-fifths vote of those elected to
each house of Congress.
When all is said and done, there is no rational argument
against the Balanced Budget Amendment. Simple observation of
the fiscal record of recent years tells us that the
procedures through which fiscal choices are made are not
working. The problem is not one that involves the wrong
political leaders or the wrong parties. The problem is one
where those whom we elect are required to function under the
wrong set of rules, the wrong procedures. It is high time to
get our fiscal house in order.
We can only imagine the increase in investor and business
confidence, both domestic and foreign, that enactment of a
Balanced Budget Amendment would produce. Perhaps even more
importantly, we could all regain confidence in ourselves, as
a free people under responsible constitutional government.
Dr. Burton A. Abrams, University of Delaware.
Dr. Ogden Allsbrook Jr., University of Georgia.
Dr. Robert Andelson (Ret), Auburn University.
Dr. Annelise Anderson, Stanford University.
Dr. Terry L. Anderson, Political Economy Research Center.
Dr. Richard Ault, Auburn University.
Dr. Charles Baird, California State University-Hayward.
Dr. Charles Baker, Northeastern University.
Dr. Doug Bandow, Cato Institute.
Dr. Eric C. Banfield, Lake Forest Graduate School of
Management.
Dr. Andy Barnett, Auburn University.
Dr. Carl P. Bauer, Harper College.
Dr. Joe Bell, SW Missouri State.
Dr. James Bennett, George Mason University.
Dr. Bruce L. Benson, Florida State University.
Dr. John Berthound, National Taxpayers Union.
Dr. Michael Block, University of Ariziona.
Dr. David Boaz, Cato Institute.
Dr. Peter J. Boettke, New York University.
Dr. Jeffrey Boeyink, Tax Education Foundation.
Dr. Cecil Bohanon, Ball State University.
Dr. Donald J. Boudreaux, Clemson University.
Dr. Samuel Bostaph, University of Dallas.
Dr. Dennis Brennen, Harper College.
Dr. Charles Britton, University of Arkansas.
Dr. Eric Brodin, Foundation for International Studies.
Dr. Richard C.K. Burdekin, Claremont McKenna College.
Prof. M.L. Burnstein, York University.
Dr. Henry Butler, University of Kansas.
Mr. Ian Calkins, American Legislative Exchange Council.
Dr. W. Glenn Campbell, Hoover Institute.
Dr. Keith W. Chauvin, University of Kansas.
Dr. Betty Chu, San Jose State University.
Dr. Will Clark, University of Oklahoma.
Dr. J.R. Clarkson, University of Tennessee.
Dr. Kenneth Clarkson, University of Miami.
Dr. J. Paul Combs, Appalachian State University.
Dr. John Conant, Indiana State University.
Dr. John F. Cooper, Rhodes College.
Mr. Wendell Cox, American Legislative Exchange Council.
Dr. Mark Crain, George Mason University.
Dr. Ward Curran, Trinity College.
Dr. Coldwell Daniel II, Memphis State University.
Dr. Michael R. Darby, U.C.L.A.
Dr. Otto A. Davis, Carnegie Mellon University.
Dr. Ted E. Day, University of Texas-Dallas.
Dr. Louis De Alessi, University of Miami.
Prof. Andrew R. Dick, U.C.L.A.
Dr. Tom Dilorenzo, Loyola College (MD).
Mr. James A. Dorn, Cato Institue.
Dr. Aubrey Drewry, Birmingham Southern College.
Dr. Gerald P. Dwyer Jr., Clemson University.
Dr. Robert B. Ekelund Jr., Auburn University.
Dr. Peter S. Elek, Villanova University.
Dr. Jerry Ellig, George Mason University.
Dr. John M. Ellis, University of California.
Dr. Kenneth G. Elzinga, University of Virginia.
Dr. David Emanuel, University of Texas-Dallas.
Dr. David J. Faulds, University of Louisville.
Mr. Richard A. Ford, Free Market Foundation.
Dr. Andrew W. Foshee, McNeese University.
Dr. William J Frazer, University of Florida.
Dr. Eirik G Furuboth, University of Texas-Arlington.
Dr. Lowell Galloway, Ohio State University.
Dr. David E.R. Gay, University of Arkansas.
Dr. Martin S Geisel, Vanderbilt University.
Dr. Fred R Glahe, University of Colorado.
Dr. Paul Goelz, St. Mary's University.
Dr. Robert Gnell, Indiana State University.
Mr. John C Goodman, National Center for Policy Analysis.
Dr. Kenneth V Greene, S.U.N.Y.--Binghamton.
Dr. Paul Gregory, University of Houston.
Dr. Gerald Gunderson, Trinity College.
Dr. James Gwartney, Florida State University.
Dr. Claire H Hammond, Wake Forest University.
Dr. Daniel J Hammond, Wake Forest University.
Dr. Ronald W Hanson, University of Rochester.
Dr. David R Henderson, Hoover Institution.
Dr. Robert Herbert, Auburn University.
Dr. A James Heins, University of Illinois.
Dr. John Heinke, Santa Clara University.
Dr. Alan Heslop, Claremont McKenna College.
Dr. Robert Higgs, Independent Institute.
Dr. P.J. Hill, Wheaton College.
[[Page S3342]] Dr. Mark Hirschey, University of Kansas.
Dr. Bradley K Hobbs, Bellarmine College.
Dr. Randall Holcombe, Florida State University.
Dr. Steven Horwitz, St. Lawrence University.
Dr. Doug Houston, University of Kansas.
Dr. David A Huettner, University of Oklahoma.
Dr. William J Hunter, Marquette University.
Dr. Thomas Ireland, University of Missouri.
Dr. Jesse M Jackson Jr, San Jose State University.
Dr. Gregg A Jarrell, University of Rochester.
Dr. Thomas Johnson, North Carolina State University.
Dr. David L Kaserman, Auburn University.
Dr. Robert Kleiman, Oakland University.
Dr. David Klingaman, Ohio University.
Dr. W F Kiesner, Loyola Marymount University.
Dr. David Kreutzer, James Madison University.
Dr. Michael Kurth, McNeese State University.
Dr. David N Laband, Auburn University.
Dr. Everett Ladd, University of Connecticut.
Dr. Harry Landreth, Centre College.
Dr. Stanley Leibowitz, University of Texas--Dallas.
Dr. Dwight Lee, University of Georgia.
Dr. David Levy, George Mason University.
Dr. Dennis Logue, Dartmouth College.
Dr. Robert F Lusch, University of Oklahoma.
Dr. R Ashley Lyman, University of Idaho.
Dr. Jonathon Macey, Cornell University.
Dr. Yuri Maltsev, Carthage College.
Dr. Alan B Mandelstamm, Roanoke, Virginia.
Dr. George Marotta, Hoover Institute.
Dr. J Stanley Marshall, The James Madison Institute.
Dr. Merrill Mathews Jr, National Center for Policy
Analysis.
Dr. Richard B Mauke, Tufts University.
Dr. Margaret N Maxey, University of Texas--Austin.
Dr. Thomas H Mayor, University of Houston.
Dr. Paul W McAvoy, Yale University School of Management.
Dr. Robert McCormick, Clemson University.
Dr. Paul McCracken, University of Michigan.
Dr. Myra J McCrickard, Bellarmine College.
Dr. J Houston McCulloch, Ohio State University.
Dr. Robert W McGee, Seton Hall University.
Dr. Mark Meador, Loyola College (MD).
Dr. Roger Meiners, Clemson University.
Dr. Lloyd J Mercer, University of California.
Dr. Richard Milam, Appalachian State University.
Dr. Dennis D Miller, Baldwin Wallace College.
Dr. Stephen Moore, Cato Institute.
Dr. John Moore, George Mason University.
Dr. John Moorhouse, Wake Forest University.
Dr. Laurence Moss, Babson College.
Mr. Bob Morrison, Tax Education Support Organization.
Dr. Timothy Muris, George Mason University.
Dr. J Carter Murphy, Southern Methodist University.
Dr. Gerald Musgrove, Economics America.
Dr. Ramon Myers, Stanford University.
Dr. Michael Nelson, Illinois State University.
Dr. William A Niskanen, Cato Institute.
Dr. Geoffrey Nunn, San Jose State University.
Dr. M Barry O'Brien, Francis Marion University.
Dr. David Olson, Olson Research Company.
Dr. Dale K Osborne, University of Texas--Dallas.
Dr. Allen M Parkman, University of Mexico.
Dr. E C Pasour Jr, North Carolina State University.
Dr. Timothy Patton, Ambassador University.
Dr. Judd W Patton, Bellevue College.
Dr. Sam Peltzman, University of Chicago Graduate School.
Dr. Garry Petersen, Tax Research Analysis Center.
Dr. Manfred O Petersen, University of Nebraska.
Dr. Steve Pejovich, Texas A&M University.
Dr. Timothy Perri, Appalachian State University.
Dr. William S Pierce, Case Western Reserve University.
Dr. Sally Pipes, Pacific Research Institute.
Dr. Yeury-Nan Phiph, San Jose State University.
Dr. Rulon Pope, Brigham Young University.
Dr. Robert Premus, Wright State University.
Dr. Jan S Prybyla, Pennsylvania State University.
Dr. Alvin Rabushka, Stanford University.
Dr. Don Racheter, Central College.
Dr. Ed Rauchutt, Bellevue University.
Dr. Robert Reed, University of Oklahoma.
Dr. John Reid, Memphis State University.
Dr. Barrie Richardson, Centenary College.
Dr. H Joseph Reitz, University of Kansas.
Dr. James Rinehart, Francis Marion University.
Dr. Mario Rizzo, New York University.
Dr. Jerry Rohacek, University of Alaska.
Dr. Simon Rottenberg, University of Massachusetts.
Dr. Roy J Ruffin, University of Houston.
Mr. John Rutledge, Rutledge & Company Inc.
Dr. Anandi P Sahu, Oakland University.
Dr. Thomas R. Saving, Texas A&M University.
Dr. Craig T Schulman, University of Arkansas.
Dr. Richard T Seldon, University of Virginia.
Dr. Gerry Shelley, Appalachian State University.
Dr. William Shughart II, University of Mississippi.
Mr. William E Simon, William E Simon & Sons.
Dr. Randy Simmons, Utah State University.
Dr. Daniel T. Slesnick, University of Tedas--Austin.
Dr. Frank Slesnick, Bellarmine College.
Dr. Daniel Slottje, Southern Methodist University.
Dr. Gene Smiley, Marquette University.
Dr. Barton Smith, University of Houston.
Dr. Lowell Smith, Nichols College.
Mr. Robert Solt, Iowans for Tax Relief.
Dr. John Soper, John Caroll University.
Dr. Michael Sproul, U.C.L.A.
Dr. Richard Stroup, Montana State University.
Dr. Michael P Sweeney, Bellarmine College.
Prof. Ronald Teeples, Claremont McKenna College.
Dr. Clifford Thies, University of Georgia.
Dr. Roy Thoman, West Texas State University.
Dr. Henry Thompson, Auburn University.
Dr. Mark Thornton, Auburn University.
Dr. Walter Thurman, North Carolina State University.
Dr. Richard Timberlake, University of Georgia.
Dr. Robert Tollison, George Mason University.
Prof. George W Trivoli, Jacksonville State University.
Dr. Leo Troy, Rutgers University.
Dr. Gordon Tullock, University of Arizona.
Dr. Norman Ture, Institute for Research on the Economics of
Taxation.
Dr. Jon G. Udell, University of Wisconsin.
Dr. Hendrik Van den Berg, University of Nebraska.
Dr. T. Norman Van Cott, Ball State University.
Dr. Charles D Van Eaton, Hillside College.
Dr. Richard Vedder, Ohio University.
Dr. George Viksnins, Georgetown University.
Dr. Richard Wagner, George Mason University.
Dr. Stephen J K Walters, Loyola College (MD).
Dr. Alan R Waters, California State University.
Dr. John T Wenders, University of Idaho.
Mr. Brian S Wesbury, Joint Economic Committee.
Dr. Allen J Wilkins, Marshall University.
Dr. James F Willis, San Jose State University.
Dr. Gene Wunder, Washburn University.
Dr. Bruce Yandle, Clemson University.
Dr. Jerrold Zimmerman, University of Rochester.
____

[National Taxpayers Union, Dec. 29, 1994]

Facts About The National Debt

In FY 1995, interest payments on the National Debt are
expected to be $310.0 billion. This is: the second largest
item in the budget. (20% of all Federal spending); more than
the total revenues of the Federal government in 1976; 92% of
Social Security payments; $4,628 per family of three; $5,979
million per week, $854 million per day, $593,151 per minute,
or $9,886 per second; 23% of all Federal revenues; and 52% of
all individual income tax revenues.
The National Debt has now topped $4.75 trillion.
The Federal government has run deficits 56 out of the last
64 years and 33 out of the last 34 years.
The national debt has increased 1536% since 1960, 777%
since 1975, 423% since 1980, 162% since 1985 and 49% since
1990.
During the 1960's deficits averaged $6 billion per year.
During the 1970's deficits averaged $35 billion per year.
During the 1980's deficits averaged $156 billion per year.
During the 1990's deficits averaged $248 billion per year.
It took over 200 years to accumulate our first trillion
dollars in national debt. In the next four years, we will
accumulate well over $1 trillion in additional debt.
____

[Congressional Leaders United for a Balanced Budget, Jan. 30, 1995]

The Regressive Effect of Deficit Spending--Interest Payments

While we hoard the crumbs, the whole loaf is being taken
away from us.--Joe Kennedy, in testimony before the House
Budget Committee.
Until we control our deficit problem, interest payments
will continue to devour increasingly larger portions of the
budget. Interest payments have increased from 6% of the
budget in 1960 to more than 14% of the
[[Page S3343]] budget today. After adjusting for inflation,
gross interest payments have increased by 97% since 1980.
This explosion in debt payments has forced a corresponding
reduction in the goods and services the government can
provide. Until we bring the budget under control, interest
payments will continue to devour a increasingly larger
portion of the budget.
Interest payments will cripple the ability of future
generations to make necessary investments in health care,
education, and other programs. Interest payments will
continue to crowd out funding for discretionary programs. GAO
has estimated that interest payments will reach $400 billion
dollars by the year 2020 if we fail to bring the deficit
under control. The growth of interest payments and
entitlement spending will force a half a trillion dollars of
deficit reduction each year just to maintain a deficit path
of three percent of GDP by the year 2020. All government
programs would be subject to severe cuts every year under
this scenario.
Interest payments already are crowding out worthy programs.
Net interest will be over $235 billion this year. This money
will not be available for federal investment, social programs
or defense. Interest payments are: 8 times higher than
expenditures on education; 50 times higher than expenditures
on job training; 55 times higher than expenditures on Head
Start; 140 times higher than expenditures on childhood
immunizations.
Interest payments represent a transfer of wealth from
middle-class taxpayers to upper-income individuals and
foreign investors. Interest is paid to individuals who own
Treasury Bills--primary the wealthiest 10% of citizens and
institutional investors. Nearly 20% of interest payments are
sent overseas to foreign investors. In 1993, the Treasury
sent $41 billion overseas in interest payments.

____

[Congressional Leaders United for a Balanced Budget, Jan. 30, 1995]

Facts About Our National Debt and Interest Payments

Our national debt currently exceeds $4.7 trillion--about
$18,500 for every man, woman and child in the United States.
(Source: Department of Treasury, Monthly Treasury Statement.)
The national debt has increased by $3.6 trillion since the
Senate last passed (but the House defeated) the Balanced
Budget Amendment in 1982. The debt has also increased by more
than $160 billion since the House voted on the BBA in March
1994. (Sources: Department of Treasury, Monthly Treasury
Statement; FT '95 Budget of the United States, Historical
Tables.)
Under current policies, future generations are projected to
face a lifetime net tax rate of 82% in order to pay the bills
that we are leaving them. (Source: FY '95 Budget of the
United States, Analytical Perspectives.)
If we continue current policies into the next century, we
may be forced to enact half-a-trillion dollars in deficit
reduction each year just to restrain the deficit to three
percent of GDP. (Source: General Accounting Office, Budget
Policy: Prompt Action Necessary to Avert Long-Term Damage to
the Economy)
In 1994, gross interest payments exceeded $296 billion.
This is greater than the total outlays of the federal
government in 1974. (Source: FY '95 Budget of the United
States, Historical Tables.)
In 1994, gross interest payments consumed about half of all
personal income taxes. (Source: National Taxpayers Union)
In FY '94 we spent an average of $811.7 million a day on
gross interest payments. That's $33.8 million an hour, and
$564,000 per minute. (Source: Congressional Budget Office,
The Economic and Budget Outlook: Fiscal Years 1995-1999.
In 1993, the U.S. government sent $41 billion overseas in
interest payments on Treasury bills held by foreign
investors. This represents more than twice the amount of
spending on all international programs. (Source: FY `95
Budget of the United States, Analytical Perspectives.)
Net interest payments in 1994 were five and a half times as
much as outlays for all education, job training and
employment programs combined. (Source: FY `95 Budget of the
United States, Historical Tables.)
The drain on national savings caused by the deficit during
the 1980's resulted in a loss of 5% growth in our national
income. This translates into roughly three and a quarter
million jobs lost. (Source: The New York Federal Resource
Board, CBO)
____

[Congressional Leaders United for a Balanced Budget, Jan. 30, 1995]

The Economic Consequences of Maintaining the Status Quo

According to the Congressional Budget Office, under current
policies the deficit will bottom out at $176 billion in FY
1995 before increasing again, reaching $284 billion in 2000
and $421 billion in 2004. In 1995, the year in which the
deficit is the lowest, the deficit will equal 2.5 percent of
Gross Domestic Product. The deficit will rise as a percentage
of GDP, reaching 3.1 percent of GDP in 2000 and continuing to
increase to 3.6 percent of GDP by 2005.
In June of 1992, the General Accounting Office released a
study entitled Prompt Action Necessary to Avert Long-Term
Damage to the Economy, which set out several scenarios for
budget policy, including one that is remarkably similar to
current budget projections--reducing the deficit enough to
hold annual deficits to approximately 3 percent of GDP. The
GAO found that this scenario, which it called the ``muddling
through option'' would not be sufficient to avoid the severe
economic consequences of deficit spending. Among the
conclusions that GAO reached:
A failure to reverse current trends in fiscal policy ``will
doom future generations to a stagnating standard of living,
damage U.S. competitiveness and influence in the world, and
hamper our ability to address pressing national needs.''
Simply maintaining a deficit at three percent of GDP
``offers no escape either from progressively harder decisions
or from an unacceptable economic future. It only postpones
the date of a full confrontation with the underlying
problem.''
If we continue on the current ``muddling through'' path, by
2005 ``the amount of deficit reduction that will be required
to limit the deficit to three percent of GDP will increase
exponentially. By the year 2020, it will require a half a
trillion dollars of additional deficit reduction each year
just to maintain a deficit path of three percent of GDP.''
``The muddling through path requires one to make harder and
harder decisions just to stay in place, partly just to offset
the growing interest costs that compound with the deficit. .
. . To select this path is to fend off the disaster of
inaction, but it would lock the nation into many years of
unpleasant and relatively unproductive deficit debates rather
than debates about what government ought to do and should be
done. It is death by a thousand cuts.''
____

[From Government Waste Watch, Winter 1994]

The Balanced Budget Amendment:--Our Economic Security in the Balance

(By Larry Craig and Paul Simon)

``The question whether one generation has the right to bind
another by the deficit it imposes is a question of such
consequence as to place it among the fundamental principles
of government. We should consider ourselves unauthorized to
saddle posterity with our debts, morally bound to pay them
ourselves.''
That statement, as relevant as today's headlines, was made
almost 200 years ago by Thomas Jefferson. This perspective,
once at the very foundation of our political system, urgently
needs to be reasserted.
It should be, as early as February, when Congress takes up
our Balanced Budget Amendment to the Constitution, S.J. Res.
41.
Our nation's founders saw a balanced budget and prompt
repayment of debt not merely as issues of fiscal policy, but
as a moral imperative. Failure to meet these goals was
considered not simply economic folly, but a violation of the
basic right of the people to be free from a profligate
government.
Yet today, federal budget deficits are the single biggest
threat to our economic security. The government has spent
more than it has taken in for 55 of the last 63 years. The
budget was last balanced in 1969. The result is a federal
debt totaling $4.4 trillion, or more than $17,000 for every
man, woman, and child in America, and growing.

What are the Harms of Budget Deficits?

Like every family and business, when the government
borrows, it must make interest payments. Annual gross
interest on the debt now runs about $300 billion, making it
the second largest item of federal spending next to Social
Security. This equals an incredible 57 percent of all
personal income taxes.
Now in a sluggish economy, Americans are paying for the
government's past addiction to debt. Unless things change,
the next generation will pay even more dearly.
Last year, Congress's nonpartisan General Accounting Office
(GAO) said that, under current trends, our children's
standard of living in the year 2020 would stagnate at today's
levels--extinguishing the prospect that each generation of
Americans would be able to leave the next a legacy of greater
opportunity. In contrast, GAO found that balancing the budget
by 2001 would produce a 36 percent improvement in the
nation's standard of living by 2020.
An added danger exists because the national government has
a power that families and business don't: It can put the
Treasury's printing presses in high gear, devalue the
currency, and monetize the debt. Of course, the resulting
inflation would depress the worth of people's incomes and
assets and produce the same outcome: a lower standard of
living.

why has it been so hard to balance the budget?

Our system of government has changed fundamentally: While
almost all Americans want a balanced budget, there's no way
to put this general public interest on a level playing field
with the specific demands of mobilized, organized interest
groups.
The unlimited ability to borrow naturally leads to
unlimited demands to spend beyond our means. Every American
belongs to at least one group that benefits from federal
spending. And everyone would like to see his or her taxes
held down. If they don't have to say ``no,'' many elected
officials see political peril in doing so.
That is, there's no way to make it a fair fight until we
put a rule in place that the government can't break or amend
with impunity, that guarantees we get no more government than
we are willing to pay for, and calls on us to pay for all the
government we demand.

[[Page S3344]]

HOW THE BALANCED BUDGET AMENDMENT WORKS

The amendment would prohibit federal outlays from exceeding
receipts unless three-fifths of both houses of Congress
specifically vote to run a deficit. Similarly, the limit on
the national debt could be increased only with a 60-percent
super majority vote. A ``constitutional,'' or absolute
majority on a roll call vote would be required to raise
taxes, contrasted with the current requirement for only a
simple majority of those present and voting--or even just a
voice vote. The president would be required to balance the
budget he or she submits to Congress.
By making it more difficult to continue deficit spending
and by requiring specific recorded votes, the amendment would
make Congress more accountable to the public. The difficulty
in obtaining ``super majorities'' to increase borrowing or
raise taxes would force the president and congressional
leaders to find ways to live within the confines of the
amendment.

WHAT DO THE AMENDMENT'S OPPONENTS HAVE TO SAY?

We have spent years working with colleagues, legal
scholars, economists, and public policy groups like the
Council for Citizens Against Government Waste to refine our
amendment and find out how it would work. We have become more
committed to passing the amendment, more certain of the need
for it, and more confident of its appropriateness to become
part of the Constitution, as we have seen every question
answered and every criticism solidly rebutted. For example:

IT'S NOT NEEDED

Opponents argue that ``political will'' and budget process
reforms should be sufficient to balance the budget. Perhaps
they should be; in reality, they haven't been.
In 1978, 1979, 1982, 1985, 1987, and 1990, Congress enacted
and presidents signed laws requiring balanced budgets. Every
one was amended or ignored when push came to shove. After
all, it is as easy to amend a law or waive a rule as it is to
pass it. Amending the Constitution requires two-thirds
majorities in Congress and ratification by three-fourths (38)
of the states, formidable hurdles that have allowed the
enactment of only 17 amendments since the original Bill of
Rights in 1789.
it won't work

Skeptics contend that presidents and congresses would evade
the amendment by using accounting gimmicks, such as putting
items off-budget. Our amendment is carefully drafted to avoid
this kind of danger. For example, precise definitions ensure
that no category of outlays or receipts can be placed outside
the scope of the amendment.

it would work too well

Forgetting that they also said the amendment wouldn't work
at all, opponents argue that it would put a ``straitjacket''
on the economy by preventing Congress from using fiscal
policy to counteract economic downturns.
Our amendment anticipates the need for flexibility that
could arise in the long term. During a true emergency,
Congress should be able to muster the three-fifths vote
needed to stimulate the economy through temporary deficit
spending. Our amendment would ensure that such spending is
the exception rather than the rule.
Years of unbalanced budgets, in good times and bad, have
made deficits the greatest danger to our economic well-being.
Keep in mind that most of the deficit spending this year went
simply to pay interest on the debt. To the extent that
deficits can stimulate the economy, today there's almost
nothing left over to do so after making interest payments.

it would thwart the will of the majority

The Constitution's framers wrote that one of the purposes
of a constitution is to protect certain rights deserved by
all Americans by placing these rights beyond the reach of a
``tyranny of the majority.''
The rights enshrined in the Constitution, such as freedom
of speech and religion, represent absolute prohibitions on
government action. Jefferson favored an absolute prohibition
on government borrowing. Our amendment does not go that far.
But it does recognize that to protect our children from a
tyranny of debt, deficit spending should require more than a
simply majority vote.
Moreover, our amendment requires a 60-percent majority in
exactly one circumstance: when spending in the budget would
exceed revenues. The amendment in no way affects the
majority's ability to set budget priorities within a balanced
budget. Therefore, the amendment would restore our system to
working the way the framers of the Constitution intended.

good programs might get cut

Every dollar borrowed incurs interest costs which already
result in significantly fewer dollars for high-priority
programs and in higher taxes. In fact, if no federal debt
ever had been accumulated in the first place, the government
would run a $200 billion surplus over the 1995-1999 period.
Some worry, if the budget must be balanced, it will be done
fairly. However, the government's escalating interest
payments--with gross interest totaling $294 billion in 1993--
are blatantly regressive. These represent a transfer of funds
from the working middle class--who pay the bulk of federal
taxes--to the large banks, corporations, and wealthy
individuals who hold Treasury securities. About 15 percent of
these payments go to rich investors of governments overseas.
The greatest unfairness is for the government to live off a
giant credit card today and send the bill to the next
generation amounting to a massive taxation without
representation.

conclusion

The best way to ensure the continued soundness of essential
programs, stabilize the economy and pass on a legacy of
economic opportunity to our children is to reverse the growth
in the federal debt. Without a balanced budget amendment to
the Constitution, it is unlikely we will ever find the
discipline to restore this rationality to our budget
decisions.
____

[From the Washington Times, October 1993]

Economic Security in the Balance

(By Larry Craig and Paul Simon)

``Once the budget is balanced and the debts paid off, our
population will be relieved from a considerable portion of
its present burdens and will find out new motives to
patriotic affection, (and) additional means for the display
of individual enterprise.''
That statement, as relevant as today's news, was made more
than 150 years ago by President Andrew Jackson. This
perspective on the federal government and the economic well-
being of the people, once at the very foundation of our
political system, urgently needs to be reasserted.
It should be, early in November when Congress takes up our
Balanced Budget Amendment to the Constitution, S.J. Res. 41.
Federal budget deficits are not an abstract problem; they
are now the single biggest threat to our nation's economic
security. When the economy is unstable, seniors on fixed
incomes suffer the most.
The government has spend more than it has taken in for 55
of the last 63 years; the budget was last balanced in 1969.
The result is a federal debt totaling $4.3 trillion, or about
$17,000 for every man, woman and child in America, and
growing.
Like every family and business, when the government
borrows, it must make interest payments. Annual gross
interest on the debt now runs about $300 billion, making it
the second-largest item of federal spending, next to Social
Security. This amount equals an incredible 57 percent of all
personal income taxes.
Every dollar borrowed incurs interest costs that result in
significantly fewer dollars for high-priority programs and in
higher taxes. With a growing population depending on Social
Security, the best way to ensure its continued soundness is
to stabilize the economy and reverse the growth in interest
costs--which compete with Social Security for dollars--by
balancing the budget.
The fiscal costs and economic drag of the federal debt
imperil both seniors today and their children. Last year,
Congress' nonpartisan General Accounting Office said that, if
nothing changes, our children's standard of living in the
year 2020 will stagnate at today's levels--putting an end to
the American dream of each generation leaving the next a
legacy of opportunity. In contrast, balancing the budget by
2001 would produce a 36 percent improvement in the nation's
standard of living by 2020.
Who collects interest payments on the federal debt? About
15 percent goes overseas. Almost all of the rest goes to
large banks, corporations, state and local governments, and
wealthy investors. Thomas Jefferson objected to any federal
indebtedness, fearing that taxes on farmers, laborers,
merchants and their families would escalate forever to pay
the interest on a growing debt.
Why has it been so hard to balance the budget? The
unlimited ability to borrow leads naturally to unlimited
demands to spend. Every American belongs to at least one
group that benefits from federal spending. And everyone would
like to see his or her taxes held down. If you don't have to
say ``no,'' then many elected officials see only political
peril in doing so.
Our system of government has changed fundamentally: While
almost all Americans want a balanced budget, there's no way
to put this general, public interest on a level playing field
with the specific demands of mobilized, organized interest
groups.
That is, there's no way to make it a fair fight until we
add to the Constitution a rule the government can't break,
that guarantees we get no more government than we are willing
to pay for and calls on us to pay for all the government we
demand.
Fifty years before Jackson, Jefferson said, ``We should
consider ourselves unauthorized to saddle posterity with our
debts, and morally bound to pay them ourselves.... I wish it
were possible to obtain a single amendment to our
Constitution...an additional article, taking from the
government the power of borrowing.''
It's time to live up to Mr. Jefferson's vision.
____

[From CLUBB--Congressional Leaders United for a Balanced Budget,
Revised January 30, 1995]

Factsheet: Alarmist Attacks on the Balanced Budget Amendment

Yesterday, the Treasury Department released a study
projecting several ``horror story'' scenarios of the kinds of
policy decisions the Administration foresees might be
[[Page S3345]] necessary if the Balanced Budget Amendment, is
added to the Constitution. The ``results'' of these studies
were broken down by state. Other studies have been released
by other organizations purporting to demonstrate the impact
that a balanced budget amendment will have.
These studies actually send four messages: (1) Opponents
fear the amendment will work; (2) The case against the
amendment is so weak that opponents must resort to scare
tactics; (3) The methodology used assumes arbitrary, across-
the-board approaches; and (4) The study represents a failure
to face up to long-term responsibilities and consequences.
(1) Opponents fear the amendment will work: Critics raise
the specter of what budget policy options might be considered
if Congress and the President must comply with a Balanced
Budget Amendment. However, their arguments are directed
against the deficit reduction that will be required to
balance the budget.
The study ignores the impact on government services,
program beneficiaries, and taxpayers from remaining on a
course that will result in the federal debt increasing 90%
over the next ten years, and annual spending on interest
payments increasing by two-thirds. As Senator Paul Simon has
pointed out, every dollar spent on interest payments is a
dollar that can not go to valued programs.
Forcing the government to live within its means will
require setting priorities and making some difficult
decisions. This will not happen without the Amendment and it
must happen to safeguard our future economic security.
(2) Scare tactics: As Rep. Olympia Snowe said in a 1994
Budget Committee hearing, people start pounding the table
when they're losing the argument. Arguments like those in the
Treasury and Wharton studies rely on alarming individuals and
groups about how severely they might be impacted. However,
even if federal spending continued to increase 3.1% a year,
it would fall into balance with revenues (as projected in
CBO's January baseline) by the year 2002. Currently, spending
is projected to grow an average of 5% a year through 2001.
If we act promptly, reasonable restraint, not massive
spending cuts or tax increases, will take us to a balanced
budget. However, CBO projects deficits again increasing
rapidly after 1996. The longer we wait, the greater the pain
of deficit reduction will become.
(3) Arbitrary, unrealistic methodology: The study assumes
that Congress will abdicate its responsibility to set
priorities and that the deficit reduction will occur in an
across-the-board manner. This approach, which is common in
such ``horror story'' reports regarding a BBA, implies that
the President and Congress have no priorities and assumes
they would not set priorities within a balanced budget
framework. The Treasury Department study manufactures per-
program and per-state numbers that likely bear no resemblance
to the decisions Congress and the President eventually will
make.
This very lack of priority-setting is at the root of the
$4.7 trillion national debt; today, marginal programs are
funded because they never have to compete with essential
programs. Under the amendment, Congress and the President
would be faced with a fiscal and political imperative to set
priorities. Government could promise no more than the people
were willing to pay for and we would pay for all the
government we demand.
Treasury acknowledges that its ``estimates are static in
nature and reflect no macroeconomic feedback.'' Thus, the
study does not discuss the long-term economic security,
growth, and higher living standards that will result from
balanced budgets and are at the core of the case for the
amendment. In 1992, the non-partisan General Accounting
Office compared the economic effects of balancing the budget
by the year 2002 with a ``muddling through'' scenario that
assumed policies to maintain deficits of 3% of GDP. GAO found
that balancing the budget by the year 2000 would promote
significantly greater economic growth than the muddling
through option.
(4) Failure to take responsibility for the long term: CBO's
preliminary budget projections found that the deficit will
leap back upward to $421 billion by FY 2005. The deficit as a
share of gross domestic product (GDP) would pass the 3% mark
before the next century.
The preliminary CBO baseline resembles the ``Muddling
Through'' scenario set out in GAO's 1992 report, Budget
Policy: Prompt Action Necessary to Avert Long-Term Damage to
the Economy. Under that scenario, by 2020, per capita GDP
would be 7% lower and the federal debt three times larger
than if the budget were balanced from the year 2001 on.
Moreover, the annual deficit reduction required to maintain
the deficit at 3% of GDP (``muddling through'') would give
rise to more than $500 billion a year by FY 2020.
Approaches like those taken by Treasury imply that
Americans will find each and every federal program so
indispensable, so sacred, that protecting every single
program, every interest today, outweighs our children's
standard of living and the government's ability to continue
providing priority services and benefits in the coming years.
(Prepared by the Offices of Senator Larry Craig (202) 224-
2752 Congressman Nathan Deal (202) 225-5211.)
____

[CLUBB--Congressional Leaders United for a Balanced Budget]

Factsheet: Balanced Budget Requirements in the States

Debate on a proposed Balanced Budget Amendment to the U.S.
Constitution highlights the status of the states as
``laboratories of democracy.'' While the supporters of H.J.
Res. 1 do not argue that the federal Constitution should have
a balanced budget requirement because the states have such
restraints, the experiences of the states are instructive.
While they vary widely in form, 49 of the 50 states have
significant balanced budget requirements.
It is also true that, while, standing alone, many of the
state provisions appear to be less restrictive than H.J. 1
for the federal government, there are important institutional
differences which dictate the terms of the federal proposal.
In 35 of the states, balanced budget requirements are
written into constitutions. In 13 others they are statutory.
Nine of those have constitutional debt limits that are
usually interpreted as constitutional balanced budget
requirements. In one (Wyoming), the unwritten imperative is
strong enough that it is regarded as having ``constitutional
status.''
But that's only a glimpse into the rich diversity through
which states control indebtedness.
In 43 or more states, balanced budget requirements are
supplemented by special executive branch budget powers.
Twenty-one states have spending limits, 7 have revenue
limits, and 3 have both. Fifteen require more than a simple
majority to pass any budget.
Noteworthy differences include whether capital, trust fund,
or other budgets are included under state balanced budget
requirements.
There's a lot we can learn from specific state balanced
budget initiatives and apply to the federal proposal.
The states can afford to exempt portions of their budgets
because state bond ratings--generally applying to capital
investments--serve as the ultimate disciplinarian. There are
no bond rating services for the federal government in part
because foreigners and others line up to bank on the full
faith and credit of the U.S. government. In addition, some
bond issues are subject to public referenda.
States sometimes mislead when defining a ``deficit.'' That
led to the language before Congress now, ``Total outlays for
any fiscal year shall not exceed total receipts for that
fiscal year . . .''
The processes of defining and amortizing ``capital
investments'' can be abused. For example, New York City,
prior to its financial crisis in the s, wrote off spending
for school textbooks by declaring their ``useful life'' to be
30 years.
Some states can use revenue and borrowing to meet balanced
budget requirements. Under H.J. Res. 1, raising the debt
limit requires a \3/5\ majority to counter this state-proven
tendency.
The imposition of budget discipline on states whether from
balanced budget requirements or bond ratings has led to
establishment of ``rainy day'' funds. Many states now set
aside excess revenues in good times requiring less
indebtedness during recessions.
Despite such diversity, the experience of the states shows
that balanced budget requirements have had a salutary effect.
From 1980 to 1992, the states' outstanding long-term debt
rose from $120 billion to $369 billion, a 208 percent
increase; total state spending growth was about 4 percent
greater than revenue growth. During the same period, federal
debt grew from $905 billion to $4.002 trillion, a 340 percent
increase; federal spending growth was about 38 percent
greater than revenue growth.
The similarities between state and federal budget
experiences support adoption of a federal balanced budget
amendment; the differences demonstrate why H.J. Res. 1 is the
approach best suited to the federal level.
That variance and relative complexity of state provisions
contributed to the development of the one-page simplicity of
the Stenholm/Smith federal amendment. An amendment to the
U.S. Constitution should state a broad, fundamental principle
and provide the bare bones of process necessary to enforce
that principle.
The states' experiences demonstrate that exempting any
portion of federal spending from a balanced budget amendment
would create potential loopholes. The ``higher authorities''
that generally check abuses at the state level do not exist
at the federal level. ``Pet programs'' could easily be pushed
into whatever funding category was not covered by a BBA. Debt
would continue to soar, and the Constitution would be
affronted.
The federal government has no line item veto and a
relatively weak rescission process. The lack of such
supplementary means for imposing discipline is among the
reasons why the federal BBA needs to be more restrictive than
state counterparts. At the same time, a BBA is the single
most important mechanism, and the most constitutionally
elegant, for enforcing the fundamental principle that the
people should be protected from the abuses of profiligate
government borrowing.

[[Page S3346]]

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 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.
CLUBB--Congressional Leaders United for a Balanced Budget

The following quotes are from a News Conference held by
Senators Craig, Simon and Robb joined by former Senator
Tsongas, and Robert Myers on February 7, 1995.
Concord Coalition co-chair and former Democratic Senator
Paul Tsongas responded to President Clinton's budget proposal
released Monday, which, as reported in the media, breaks
Clinton's campaign ledge to cut deficits in half during his
first term.
``The budget which came from the President yesterday said,
I've given up; that as long as I am President of the United
States there will never be a balanced budget. That is an
astonishing statement.''
Paul Tsongas, talking about Social Security and the BBA:
``It is embarrassing to be a Democrat and watch a
Democratic President raise the scare tactics of Social
Security.''
``It pains me that the Democratic party should be the party
that turns its back on the young.''
Paul Tsongas talked about those who've supported BBA in the
past, but who now say they will vote against a BBA without a
Social Security exemption.
``It's flushing out those who never meant it, those whose
cynicism I think is now going to be on display.''
``The calculation is quite explicit, how do I somehow kill
the Balanced Budget Amendment without having my fingerprints
on the deed. And the use of Social Security is the chosen
weapon.''
``The question is, where is the cover? And the cover is the
Social Security subterfuge.''
``Those who vote to exclude Social Security are voting to
kill the Balanced Budget Amendment. It is that simple, it is
that clean and should be stated.''
Senator Paul Simon (D-IL):
``Every time we have a deficit, we're borrowing from your
six year-old. And what we're saying is let's stop borrowing
from six year-olds.''
Tsongas, responding to Simon:
``Eventually the six year-old will rebel, having been given
massive debt by you and I.''
Paul Tsongas' general comments on BBA and balancing the
budget:
``Without the Balanced Budget Amendment the budget will
never be balanced--that's a given. There is simply not the
discipline and self will in this place to do it.''
``This is not rocket science. It's not what is in your head
or in your heart. It's what is in the lower part of your
regions that is in question.''
Tsongas responded to a question about how much budget cuts
to balance the budget would hurt people across the country.
``If you don't do it now; if you let those numbers run
themselves out for ten years, then you are looking at far
more draconian measures.''
____

The Seniors Coalition,

Fairfax, VA, March 1, 1995.
Hon. Larry Craig,
U.S. Senate,
Washington, DC.
Dear Senator Craig: I wanted to take just a moment to thank
you for your dedication and extraordinary effort to get a
Balanced Budget Amendment passed. We believe very strongly
that a bankrupted country cannot care for its elderly, its
young or its poor, and that a Balanced Budget Amendment is
desperately needed at this time.
The Seniors Coalition commissioned The Luntz Research
Companies to conduct a poll late last week to determine if
public support for the Balanced Budget Amendment was still as
strong as it had been at the end of January. I would like to
share some of the results with you.
As far as we have been able to determine, this nationwide
poll contains the most recent data available on the public's
opinion of the Balanced Budget Amendment. The questions were
asked as part of an omnibus national survey conducted of
1,000 registered voters from February 22nd to 23rd. The
survey has a margin of error of 3.1% at the 95%
confidence level.
When people were asked if they supported the Senate passing
the same Balanced Budget Amendment passed by the House of
Representatives, an overwhelming 79% of respondents supported
Senate passage of this measure. This figure is identical to
the results of a Wirthlin poll conducted January 25th to
28th. Public support for the Balanced Budget Amendment has
not fallen over this past month.
Of those supporting the Balanced Budget Amendment, 61% were
strongly supporting the BBA and 18% were somewhat supportive
of the BBA. Compared to the Wirthlin poll: 52% strongly
favored and 27% somewhat favored a BBA at the end
of January. This suggests that not only do people still
support a BBA, but they do so with a stronger conviction.
When senior citizens were asked how they felt about the
Balanced Budget Amendment, 80% of those age 55-64 and a
strong 71% of those age 65+ supported the BBA. By geographic
region, people in the Northeast support the BBA at 80%, those
in the South by 79%, those in the Midwest by 76%, in the West
by 78% and along the Pacific by 81%.
We were also curious to know how people would feel about
their Senator if the Balanced Budget Amendment failed.
Respondents were asked if they would vote for or against
their Senator in the next election if he or she were the one
to cause the BBA to fail by one vote. Nearly half, 46%, said
they would vote against their Senator if this were the case.
These were evenly split, 23% each, along the lines of
definitely against or probably against. Comparatively, of the
34% who answered they would vote for their Senator, only 11%
were firm in their conviction.
Senior citizens were consistent with this trend and 45% of
those age 55-64 and 41% of those age 65+ indicated they would
vote against their Senator if they blocked passage of the
Balanced Budget Amendment. Of interest in these numbers is
that seniors were lower than the general average of 34% in
stating they would vote for their Senator under this
scenario. Of those age 55-64, only 30% would vote in the
affirmative and 31% of those age 65+ would vote to re-elect
their Senator.
By geographic region, those that would vote against their
Senator if they were responsible for the failure of the
Balanced Budget Amendment was as follows: Northeast--43%;
South--50%; Midwest--46%; West--45%; and Pacific--48%.
The respondents were also asked if they felt that those
Senators who have claimed they want to learn more about the
Balanced Budget Amendment were correct in opposing the BBA,
or were they putting politics ahead of the national interest.
An astounding 60% of the voters surveyed thought that
politics was being put ahead of the national interest. This
number held strong among seniors of all ages at 59% in both
the 55-64 and 65+ categories.
In geographic regions, 58% of those in the Northeast, 65%
of those in the South, 56% of those in the Midwest, 60% of
the West and 58% of the Pacific thought that politics were
taking precedence over the national interest.
The results of this poll clearly show that despite all the
rhetoric and debate over the past month on what a Balanced
Budget Amendment would mean for America, seniors--and voters
in general--are still strongly committed to forcing Congress
to balance its budget, and they want their Senators to do the
right thing.
Sincerely,
Jake Hansen,
Vice President for Government Affairs.
____

The Seniors Coalition,

Fairfax, VA, March 2, 1995.

memorandum

Re The American Association of Retired Persons and the
Balanced Budget Amendment.
To: All Interested Parties.
From: Kimberly Schuld, Legislative Analyst.
The AARP commissioned The Wirthlin Group to conduct a
survey for them January 25-28, 1995 on a variety of questions
pertaining to the BBA. Since then, the AARP and the National
Council of Senior Citizens have been twisting the poll's
results and methodology to claim that public support for a
BBA is low--once Americans are told what the BBA will mean to
them.
The key word here is TOLD. The poll utilizes a series of
questions designed to lead people to a mis-informed and
generally incorrect impression of what the BBA will do.
Namely, the line of questioning implies that Social Security
and Medicare will face drastic cuts, and state and local
taxes will skyrocket as the federal faucet is turned off.
An AARP Press Release announcing the poll results states,
``. . . most Americans do not understand the potential impact
of the Balanced Budget Amendment and are adamantly opposed to
using Social Security and Medicare to reduce the federal
deficit.''
Quite bluntly, the AARP has effectively provided a
political scare campaign for those members of Congress
wishing to avoid facing
[[Page S3347]] their constituents with the news that they
want to vote against the BBA. We all know the arguments
against excluding Social Security from the constitutional
amendment, but the AARP has electrified the ``third rail'' to
the political benefit (is it really?) of the White House.

analysis of the aarp/wirthlin poll

The poll consisted of sixteen questions to 1,000 adults,
with a 200 oversample to adults 50 and older. The margin of
error is 2.8% at a 95% confidence level. A copy
of the questions is attached.
The poll starts off with a question about the direction of
the country and then asks: ``Do you favor or oppose a
balanced budget amendment to the U.S. Constitution that would
require the federal government to balance its budget by the
year 2002?'' Favor: 79%. Oppose: 16%.
The next question tests how people perceive the budget can
be balanced: spending cuts, taxes or both. This is followed
by a question on equal percentage across-the-board cuts in
every federal program.
The next two questions ask specifically if Social Security
and Medicare should be included in across-the-board cuts. As
could be expected, the respondents would favor exemptions for
both programs. A key element to these two questions (#5 and
#6) is the use of the word ``exempt''. The word ``exempt'' is
not used anywhere in the poll except in relation to Social
Security and/or Medicare. This sets up a connection in
people's minds that these programs may be in graver danger
than other government programs.
Question #7 sets up the respondent for the ``truth in
budgeting'' excuse the Administration has been spinning. When
offering people the choice between passing the BBA first, or
identifying cuts first, the poll throws in ``consequences''
associated with cuts. The connotation is that there are going
to be dire ``consequences'' to balancing the budget. This
sets up the respondent to answer question #15 (open-ended)
with a negative response on how they think the BBA will
affect them personally.
Questions #8, #9 and #10 ask about whether respondents
think it is necessary to cut Defense. Social Security and
Medicare to balance the budget, or whether the budget could
be balanced without these programs. As could be expected, the
response for cutting Defense is overwhelming compared to SS
and Medicare. The group of questions sets up a ``good cop/bad
cop'' scenario in the mind of the respondent whereby they
identify Defense as the ``bad guy'' as well as being reminded
which party tends to support Defense. It is also important to
remember that at the time this poll was taken the newspapers
and network news broadcasts were full of stories about the
Republicans wanting to increase Defense spending in the
Contract With America.
Questions #11 and #12 address taxes; their role in the
budget balancing process and reform ideas. This also serves
to set up negative responses to question #15. In #11, 48% of
the people believe there will have to be tax increases to
balance the budget. Then the next question, they are asked to
declare a preference for one of a variety of tax cuts. This
conflict sets up a negative impression that tax cuts are good
and the BBA is bad because there must be tax increases to
accomplish its goal.
Question #13 throws together ``programs for the poor,
foreign aid, and congressional salaries and pensions''.
Respondents are asked how far these programs COMBINED would
go toward balancing the budget if they were cut. By throwing
these widely divergent programs together, the pollsters are
setting up the respondent to believe that balancing the
budget will mean higher taxes and cuts in taxpayer-financed
programs.
Question #14 is the keeper. Respondents are asked if they
still support a BBA with the following choices: Social
Security should be kept separate from the rest of the budget
and exempted from a BBA because it is a self-financed by a
payroll tax or Social Security is part of the overall
government spending and taxing scenario, thus should be
subject to cuts along with the rest of the budget.
The results of this questions dramatically flip the BBA
support from question #2: BBA with SS Exempt: 85%. BBA that
cuts SS: 13%.
Question #16 now asks: ``Do you favor or oppose the
balanced budget amendment, even if it means that your state
income taxes and local property taxes would have to be raised
to make up for monies the federal government no longer
transfers to your state?'' Favor: 38%. Oppose: 60%.
This question ends the phone call on a gross mis-
interpretation that dire consequences of doom and gloom are
on the horizon, all at the voter's expense. This is exactly
the type of question that re-reinforces the ``angry voter''
complex of the middle class family.
These anti-BBA results are achieved by planting the seed of
doubt slowly but surely that:
1. It is the intention of BBA supporters to cut Social
Security and Medicare.
2. It is the intention of BBA supporters to beef up Defense
spending at the expense of everything else.
3. Taxes will inevitably go up with a BBA.
4. A BBA will have a negative direct impact on families
``beyond the beltway.''
Any time a Senator, Congressman, reporter or lobbyist
starts to talk about poll results showing 85% of Americans
oppose a BBA unless it exempts Social Security, bear in mind
that the spin-meisters achieved this number by forcing the
assumption that draconian Social Security cuts are a foregone
conclusion.
Leaders from the Republican party, the Democratic party,
the Administration and the President himself have all gone to
great lengths to state that social security benefits are off
the table.
Any member of congress who contends NOW that the new
Republican leadership cannot be trusted to keep their hands
off Social Security is also implicating their own party
leaders and the President of the same un-trustworthiness.
____

Testimony of Jake Hansen, Director of Government Affairs, the Seniors
Coalition for the Joint Economic Committee, January 23, 1995

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
an 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
[[Page S3348]] 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 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.
____

The Seniors Coalition,

Fairfax, VA, January 24, 1995.

memorandum

Re Balanced Budget Amendment.
To: Senator Craig.
From: 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.
____

Balanced Budget Amendment Alert From the Seniors Coalition, January 26,
1995.

This morning the opponent 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.
____

60 Plus,

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 103rd 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.
Continuted, 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
trillion--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
urges you and your colleagues to pass their 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 a vast
majority of seniors.
Sincerely.
James L. Martin,
Chairman, 60+.
____

National Taxpayers Union,

February 6, 1995.

[Legislative memo]

Re Balanced Budget Amendment--Critique of Amendment To Exempt
Social Security and Scoring in NTU Annual Rating of
Congress.
To: U.S. Senators.
From: David Keating, Executive Vice President.
An amendment to SJR 1 by Senators Reid, Feinstein, and
others will propose to exempt Social Security trust funds
(OASDI) from a balanced budget rule. A vote against this
proposal will be heavily counted as a pro-taxpayer vote in
our annual Rating of Congress.
NTU strongly supports prompt passage, early this year, of
the best Balanced Budget Amendment (BBA) that can get the
needed two-thirds vote. This means a genuine, effective BBA,
not the dishonest ``cover'' substitutes offered by BBA
opponents.

key reasons why congress should not exempt social security from the
balanced budget amendment

Exempting Social Security would render a Balanced Budget
Amendment meaningless and endanger Social Security. It would
give Congress an excuse to delay action on huge Social
Security deficits that will occur as today's younger workers
retire. Although the Social Security system currently
collects more in taxes than it spends on benefits, this will
change early in the next century and eliminate the
effectiveness of the balanced-budget rule. At that time,
other federal funds should be in a surplus position to
prevent large government budget deficits that would harm the
economy. But the Reid Amendment would only require a
balancing of non-Social Security receipts and outlays,
resulting in huge legal federal budget deficits at that time.
1. It would create a huge loophole in the Amendment and
encourage Congress to raid trust fund revenues.--A future
Congress that wished to circumvent the Amendment could, by a
simply majority vote, authorize deficits by reducing trust
fund taxes and revenues and increasing ``operating'' fund
taxes and revenues by an equal amount. Trust funds could pay
for Social Security benefits by
[[Page S3349]] running a deficit. This has the potential to
be more than a $300 billion loophole.
2. Congress could also create deficits by channeling other
programs aimed at aiding the elderly through the trust
funds.--Candidates include veterans' benefits and pensions,
which total over $20 billion a year. Supplemental Security
Income at over $25 billion a year is another likely
candidate, as is Medicare (over $110 billion) and the
approximately three-fourths of Medicaid spending (or over $65
billion) that benefits the aged. A portion of funds spent on
the retired poor by the Food Stamp, low-income home energy
assistance, housing subsidy, and other social service
programs might be transferred to newly exempt trust funds.
Some or all of federal employee or military retirement
programs may also become part of Social Security.
3. It would legalize an ANNUAL total budget deficit of over
$2,000,000,000,000 ($2 trillion) in the year 2050!--Even if
the Social Security exemption was faithfully observed, it
would allow huge deficits in the Social Security trust funds
in the next century that will occur under current policies as
today's children retire.
4. Such loopholes could result in spending money from trust
funds for other programs.--A future Congress and president
that wished to circumvent the balanced-budget rule could do
so simply by funding non-Social Security programs from trust
fund accounts. There is nothing in the proposed exemption
that would prohibit spending money from trust funds for non-
retirement or non-disability programs. A simple majority of
Congress could thus effectively circumvent any debt limit.
5. It would endanger Social Security.--Net interest on the
national debt has grown from a mere 7.7 percent of federal
spending in 1978 to 14 percent in 1995. Not only will
interest begin to crowd out Social Security, but the
continued buildup of debt will impair the ability of future
taxpayers to refund moneys borrowed from the trust fund. Only
an all-inclusive Balanced Budget Amendment will force
Congress to balance the budget and create a sound environment
for the future of Social Security.
____

IRET Congressional Advisory,

February 8, 1995.

A Balanced Budget Amendment Must Not Exclude Social Security

A few Senators who voted for a balanced budget amendment
last year are saying they may oppose the amendment this year
unless a special exemption for Social Security is attached to
it. This may be a gambit to kill the amendment. Granting
Social Security special constitutional status is not morally
or economically justified, would greatly weaken the
amendment, and ironically would add new burdens to the Social
Security System in the long run.
The purpose of a balanced budget constitutional amendment
is to compel Congress and the President to balance the
federal budget. That means holding overall government
expenditures at or below total government revenues. It does
not mean holding some spending to no more than some
revenues--with exemptions for national defense or the highway
trust fund or medicaid or Social Security or any other
program that might have a legitimate national purpose or
powerful constituency.
Carving out Social Security benefits and taxes from the
budget calculations would leave an especially large hole
because Social Security benefits are the federal government's
largest expenditure and second largest tax. Social Security
benefits already exceed total national defense spending,
formerly the largest expenditure category, and are growing
much more rapidly; by the end of the decade federal payments
of Social Security benefits will be about 60 percent greater
than what the nation spends on national defense. On the tax
side, the Social Security payroll tax is exceeded in size
only by the individual income tax. Millions of individuals
owe more in Social Security taxes than they do in income
taxes. The employer share of the Social Security tax is, by
itself, a bigger revenue source than the corporate income
tax. A balanced budget amendment that leaves out Social
Security would be seriously incomplete on both the
expenditure and tax sides.
A Social Security exclusion would jeopardize passage of a
balanced budget amendment in two ways. First, the exclusion
would complicate the task of balancing the (redefined) budget
in the near term. The Social Security trust fund is running a
surplus for the time being. If Social Security were
artificially removed from budget calculations, the deficit
would suddenly appear bigger and reducing it to zero over the
next several years would require extra large spending cuts or
tax increases. That would make a balanced budget amendment
appear more painful, which could scare away some potential
supporters. Second, the version of the amendment with the
exclusion gives political cover to opponents of a balanced
budget amendment. Because a balanced budget amendment has
strong public support, resisting it openly is politically
risky. By putting forward the flawed version, which has no
chance of passing Congress, opponents can to claim to voters
that they back a balanced budget amendment even as they fight
versions that would be more acceptable and effective. That is
known as having your cake and eating it too.
In addition, as Senator Dole and others have cautioned, a
Social Security exemption would create a giant loophole in
the amendment. The contents of Social Security are defined by
statute and can be modified by statute. If Social Security
were excluded from the amendment while other spending were
not, Congress could shield other programs from tough budget
choices by passing statutes to shift them into Social
Security. Under the pressure of dodging a constitutional
amendment, some of the government programs that might be
reclassified as part of Social Security are unemployment
compensation, worker retraining, and spending on the earned
income tax credit. And because Congress is inventive, this is
just for starters.
At present, the Social Security trust fund is running a
surplus. That would allow many other programs to be shifted
into Social Security without busting its trust fund in the
short run. When the baby boom generation starts retiring,
however, Social Security will experience unsustainably large
deficits under present benefit formulas. That looming crisis
has nothing to do with a balanced budget amendment. It will
be caused by the expanding number of retirees and other
taxpayers. If the Social Security System has become a
repository for myriad government programs when the
demographic crunch arrives, the squeeze on the core program,
benefits for the elderly, will come sooner and be harsher
because of the extraneous spending that has become embedded
in the Social Security System and is also making demands on
its revenues.
Social Security projections under current budget formulas
point to an enormously adverse impact on the availability of
saving for private sector uses. Federal ``entitlements'', of
which Social Security is the largest, already preempt much
private saving, and, if nothing is done, entitlement spending
will before very long consume all private saving. The core
economic objective of a balanced budget amendment is to
prevent federal budget developments from commandeering
private saving. The Social Security System is projected to go
into deficit early in the next century and thereafter fall
deeper and deeper into debt, becoming the biggest federal
government consumer of private saving. It makes no sense to
enact a balanced budget amendment but allow Social Security
to escape balanced budget discipline. To protect private
saving from the inroads of federal deficits, a balanced
budget amendment must apply to all government programs,
including Social Security and other ``entitlements''.
A balanced budget amendment would force hard choices to be
made regarding federal spending programs. Some defenders of a
special exemption for Social Security assert that Social
Security deserves privileged treatment. Although Social
Security is politically popular (which in itself affords much
protection), it is not clear on economic or moral grounds why
Social Security should receive higher priority than other
federal spending. For instance, is paying Social Security
benefits a more noble or urgent federal government function
than providing for the national defense, enforcing federal
laws, or undertaking basic scientific research?
Treating Social Security benefits and taxes differently
from all other government outflows and inflows would have
some economic justification if Social Security were analogous
to private saving, but it is not. Unlike private saving,
Social Security payments are not voluntary choices reflecting
individuals' preferences. As with other taxes, people can
face fines and prison if they refuse to pay Social Security
taxes.
With private saving, the funds are invested productively
and the eventual payouts to savers come from the returns on
those investments. Whereas many advocates of the Social
Security program describe it as an efficient government-run
saving program, it is, in reality, the largest Ponzi scheme
in the history of the world. Social Security payroll taxes go
to the U.S. Treasury, and the Treasury, after issuing IOUs to
the Social Security trust fund, uses the taxes to help pay
the government's current bills. That is not real saving. It
is akin to a person earning income, writing himself a bunch
of IOUs, putting those IOUs in a piggy bank, and then
spending all the money. No matter how full of IOUs the piggy
bank becomes, it will not hold even a dime of saving. In
other words, the government no more directs Social Security
revenues into productive investments than it does other tax
revenues.
If a balanced budget amendment to the constitution is to be
meaningful in subjecting federal budget policy to financial
discipline, it must apply to all federal spending and
revenues. It should not exempt the largest spending item and
the second largest tax. The national issues the amendment
addresses are too important to fall victim to a parliamentary
ploy.
Michael S. Schuyler,
Senior Economist.
____

Congressional Leaders United

for a Balanced Budget,

January 24, 1995.

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
[[Page S3350]] 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 ruinous
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 retrain 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 preserves 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 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.
____

Congressional Leaders United

for a Balanced Budget,

January 18, 1995.

Fact Sheet--A Balanced Budget Amendment Exemption Would Imperil Social
Security

A BBA exemption would threaten the reve- nues 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 place
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,

January 30, 1995.

The Balanced Budget Amendment--A Necessary and Appropriate Addition to
the Constitution

the amendment corrects an institutional bias toward deficit spending

Representatives may know that chronic deficits threaten the
nation's long-term prosperity, but they also know that their
short-term interest lies in spending more on the demands of
various special interests. When faced from all sides with
demands for more spending and less taxes, Congresses and
Presidents have taken the easy way out by borrowing more
money. A Balanced Budget Amendment corrects this bias by
creating immediate political and economic consequences for
running a deficit.

the amendment protects rights deserving constitutional protection

The ability to borrow money from future generations is a
power of such magnitude that should not be left to the
judgments transient majorities. Thomas Jefferson favored a
Constitutional prohibition of federal indebtedness, fearing
that taxes on farmers, laborers, merchants and their families
would escalate forever to pay the interest on a growing debt.
The threat of economic and political harm from deficit
spending is the type of governmental abuse appropriately
proscribed by the Constitution.
Even Professor Laurence Tribe of Harvard, a leading
opponent of the amendment, told the Senate Budget Committee
in 1992 that ``The Jeffersonian notion that today's populace
should not be able to burden future generations with
excessive debt, does seem to be the kind of fundamental value
that is worthy of enshrinement in the Constitution. In a
sense, it represents a structure protection for the rights of
our children and grandchildren.''

the amendment is consistent with the American principle of protecting
the interests of politically under-represented groups from majority
abuse

The Constitution has always served to protect unrepresented
minorities from the abuses of government. The framers of the
Constitution were extremely concerned that the rights of the
public would be trampled by the tyranny of the majority and
crafted a Constitution that balanced the protection of
minority rights against the principal of majority rule.
Senator Byrd made an eloquent
[[Page S3351]] statement on behalf of this principal during a
debate regarding the Senate filibuster, stating that ``There
have come times when the protection of minority is highly
beneficial to a nation. Many of the great causes in the
history of the world were at first only supported by a
minority. and it has been shown time and time again that the
minority can be right. So this is one of the things that's so
important to the liberties of the people.''
Living off a giant credit card and sending the bill to the
next generation is a form of taxation without representation
in a very real sense. Requiring a higher threshold of support
for deficit spending will protect the rights of future
generations who are not represented in our political system
but will bear the burden of our decisions today.
Requiring a higher threshold of support for deficit
spending will protect the rights of future generations who
are not represented in our political system but will bear the
burden of our decisions today. The ability to borrow money
from future generations is a power of such magnitude that it
should not be left to the judgments of transient majorities.
Thomas Jefferson agreed with BBA proponents that, ``The
question whether one generation has the right to bind another
by the deficit it imposes is a question of such consequence
as to place it among the fundamental principles of
government.'' With what does a constitution deal, if not with
``the fundamental principles of government?''
The BBA is based on exactly the same principles as the rest
of the constitution.--It would protect the fundamental rights
of the people by restraining the federal government from
abusing its powers. Morally dubious things should be
difficult to do. That's the underlying principle for
requiring 3/5 votes in both Houses to approve deficit
spending.
Conclusion.--Thousands of pages and hundreds of hours of
committee testimony, floor debate, and committee reports have
answered every question and concern about the BBA. The only
reason left for voting against the BBA is if you believe that
it's all right to leave our children a legacy of excessive--
and growing--debt. The determination of BBA opponents shows
that they fear what BBA supporters have promised all along:
the amendment will work.
____

Congressional Leaders United

for a Balanced Budget,

January 30, 1995.

Would the BBA ``End Majority Rule?'' No. It Would Protect Fundamental
Rights.

A common criticism of the balanced budget amendment is that
it would ``end majority rule.'' Those who focus on the
difficulty of achieving a 3/5 majority to approve deficit
spending are missing the point about this amendment. They are
stuck in the status quo, revealing their reverence to an
outdated pattern of thought; that deficits are the norm. Or,
alternately they betray preferences FOR deficit spending. The
mind-set exposed is, what would we need to do under the BBA
to continue deficit spending?
Opponents of requiring super majorities to approve deficit
spending ignore one point, intentionally or otherwise: Under
a balanced budget amendment simple majorities will continue
to rule. The amendment does not affect the ability of a
majority to spend on programs it deems important and to set
budget priorities as it sees fit. Super majorities would come
into play only when deficit spending looms because the
majority abdicates its responsibility to produce a balanced
budget. They would serve as a deterrent to irresponsible
fiscal policy, while allowing necessary flexibility when a
consensus emerges to deal with a national emergency.
Some opponents of the amendment write as though super
majorities were a foreign concept to the framers of the
constitution. One of their explicit purposes outlined in the
Federalist Papers, was to put certain rights and powers
beyond the reach of the ``tyranny of the majority,'' and
protect current minorities and future majorities from abuse
by transient, coalescing ``factions.'' The BBA is very much
within that spirit.
Every right protected in the constitution is protected with
super majority requirements. That's what is necessary to
amend the explicit rights stated in the document.
Senator Byrd of West Virginia, a leading opponent of this
measure, might himself have made our point best when he said,
``There have come times when the protection of a minority is
highly beneficial to a nation. Many of the great causes in
the history of the world were at first only supported by a
minority. And it has been shown time and time again that the
minority can be right. So this is one of the things that's so
important to the liberties of the people.''
The unfettered power to deficit spend carries with it the
temptation to exercise that power to the point of abuse.
Incurring huge debts on behalf of our children really is a
form of taxation without representation. Our children are a
minority whose economic interests demand to be represented
through the super majorities provided for in the balanced
budget amendment.
____

[U.S. Chamber of Commerce, Washington, DC]

Balanced Budget Amendment: Constitutional Issues

The U.S. Chamber of Commerce, the nation's largest business
federation, has endorsed S.J. Res. 1, the Balanced Budget
Amendment to the U.S. Constitution. The Chamber believes that
this measure will help move the federal government toward
fiscal responsibility. This paper discusses the most
significant constitutional and legal questions raised by this
landmark legislation, along with some of the conclusions
reached by the U.S. Chamber.

Is a Balanced Budget requirement appropriate subject matter for the
Constitution?

Some commentators have argued that a balanced budget
requirement is a mere rule of accounting, incompatible with
the broad principles embodied in the Constitution. It is
worth noting that the Constitution already contains several
narrowly-focused economic and fiscal provisions, including
the requirement of ``a regular statement and account of the
receipts and expenditures of all public money'' (Article I.
Section 9) and the requirement that ``duties, imposts and
excises . . . [be] uniform throughout the United States''
(Article I, Section 8).
Moreover, the Balanced Budget Amendment embodies two
principle themes of the Constitution: limitation on federal
power, and protection of politically under-represented groups
against majoritarian abuse. Thomas Jefferson, who perceived
the inherent tendency of central government to expand,
supported a constitutional prohibition of federal borrowing
as a means of protecting individual liberty. For most of the
nation's history the growth of the federal government was
held in check by an implicit policy against deficits, except
during war or recession. In recent times, the erosion of this
principle has created persistent structural deficits, removed
the need to limit and prioritize programs, and led to an
excessively large federal sector. The BBA requirement that
federal operations be funded from current revenues restores
an important principle of fiscal responsibility and limited
government.
Likewise, the protection of groups with limited access to
the political process has emerged as a major theme of
Constitutional law.\1\ Limitations have been placed on
governmental actions which unfairly impact racial minorities,
aliens and other ``discreet and insular'' groups.\2\ Because
future generations who will bear much of the burden of
current policy lack input in to the electoral process, it may
be that their interests are undervalued in federal budget
decisions. The Balanced Budget Amendment seeks to ensure that
the vital interest of young and future Americans are
reflected in the decisions of Congress, embodying a principle
of fairness and political inclusion consistent with the best
provisions of the Constitution.
can the deficit problem be solved short of amending the constitution?

Statutory attempts to impose fiscal discipline upon the
federal government have failed, largely because Congress was
able to change the rules in mid-game. The ambitious deficit
reduction targets of the 1985 Gramm-Rudman-Hollings law were
repeatedly modified when they conflicted with Congress'
spending ambitious. Likewise, big-ticket items such as
unemployment compensation payments and disaster relief are
customarily designated as ``emergency'' spending, which
exempts them from spending caps. Between 1980 and 1990, each
year's actual spending exceeded the targets of that year's
budget resolution by an average of $30 billion (the excess
was $85 billion in 1990).\3\
Each statutory response to the deficit has shown the same
vulnerability: hard-won budget rules can be waived or
modified by a simple majority vote. Not surprisingly, a
majority can usually be assembled to support more spending.
The key advantage of a Constitutional amendment is that tough
budgetary rules can be placed beyond the reach of simple
Congressional majorities S.J. Res. 1 requires yearly
enactment of a balanced budget, unless Congress approves a
specific deficit for that fiscal year by a three-fifths vote
of each house. (A simple majority of each house can waive the
balanced budget requirement during a time of war.) The
supermajority requirement reflects the view that incurring a
deficit should be an exceptional event that requires clear
consensus. This legislation commits future Congresses to
avoid structural deficits, while providing them the
flexibility to respond to true emergencies.

is there any place for statutory solutions?

While the Balanced Budget Amendment mandates a zero deficit
by FY 2002 (or the second fiscal year after enactment), it
does not specify how to get there. The Chamber believes that
enactment of a BBA will force Congress to take a close look
at statutory mechanisms designed to reach that goal, and this
will probably begin well in advance of final ratification by
the states. In approving S.J. Res. 41, the Senate Judiciary
Committee contemplated enactment of ``legislation that will
better enable the Congress and the President to comply with
the language and intent of the amendment.''\4\ Additional
budget process reforms may include tax and spending
limitations, line-item veto authority, and the creation of an
independent commission to recommend spending cuts. The BBA
will thus lay the groundwork for further budget process
reforms at the statutory level.
Footnote at end of article.
[[Page S3352]] will congress and the president still have the
flexibility to respond to national emergencies?

S.J. Res. 1 does not prohibit Congress from running a
deficit in a given year; it merely requires that this
decision be approved by three fifths of each house. This
degree or consensus is required for many important decisions,
including the approval of a treaty, and override of a
Presidential veto. In the BBA, the three-fifths requirement
reflects the view that incurring a deficit should be an
exceptional event that is carefully scrutinized. At the same
time, this provision allows Congress and the President the
flexibility to respond to genuine emergencies. Should large-
scale domestic problems such as recessions or natural
disasters alter budget needs, it will be possible to assemble
a three-fifths consensus that recognizes this. In the case of
foreign
aggression, the balanced budget requirement can be suspended
by a simple majority vote of each house.

Will the amendment thrust the courts into an inappropriate role of
cutting programs and raising taxes?

Some commentators have raised questions about the
enforcement of a Balanced Budget Amendment. A primary concern
is that Congressional efforts to meet the balanced budget
requirement would be challenged in the courts, and the
judiciary would be thrust into the role of weighing policy
demands, slashing programs and increasing taxes. On the other
hand, there is a legitimate and necessary role for the courts
in ensuring technical compliance with the amendment. The
Chamber believes that these concerns can be reconciled in
implementing legislation, which draws upon existing legal
principles.
In general, the courts have shown an unwillingness to
interject themselves into the fray of budgetary politics. The
New Jersey Supreme Court observed that ``it is a rare case .
. . in which the judiciary has any proper constitutional role
in making budget allocation decisions.''\5\ The judiciary has
remained clear of most budget controversies through doctrines
of ``nonjudiciability,'' including ``mootness,''
``standing,'' and the ``political question'' doctrine.
A case is considered moot and can be rejected by the court,
if the matter in controversy is no longer current (this will
be a factor in many budgetary controversies, such as those
based on unplanned expenditures or flawed revenue estimates
which become apparent near the end of the fiscal year). The
doctrine of standing limits judicial access to parties who
can show a direct injury over and above that incurred by the
general public. The logic is that the grievances of the
public (or substantial segments thereof) are the proper
domain of the legislature.\6\ The U.S. Supreme Court has held
that status as a taxpayer does not automatically confer
standing to challenge federal actions,\7\ and has barred
taxpayer challenges of budget and revenue policies in the
absence of special injuries to the plaintiffs.\8\ The
political question doctrine is a elated principle that the
courts should remain out of matters which the Constitution
has committed to another branch of government. The Supreme
Court has held that a ``political question'' exists when a
case would require ``nonjudicial discretion.''\9\ This would
be the case with many budgetary controversies, such as the
choice to cut particular programs, which by their nature
require ideological choices and the balancing of competing
needs.
In contrast, courts have asserted jurisdiction over
politically tinged controversies where they find
``discoverable and manageable standards'' for resolving them.
In Baker v. Carr,\10\ the U.S. Supreme Court reasoned that
objective criteria guide judicial decisionmaking and limit
the opportunity for overreaching. In the balanced budget
context, the ``discoverable and manageable standards''
principle can help demarcate lines between impermissible
judicial policymaking, and the needed enforcement of
accounting rules and budget procedures.
In all likelihood, a strong framework of accounting
guidelines will emerge from implementing legislation. The
Senate Judiciary Committee has interpreted Section 6 of the
bill to impose ``a positive obligation on the part of
Congress to enact appropriate legislation''
regarding this complex issue.\11\ Judiciary Committee staff
on both the House and Senate side have indicated their
intention that implementing legislation embrace stringent
accounting standards that will minimize the potential for
litigation. Should legitimate questions arise concerning
the methods by which Congress balances the budget, these
standards will also provide objective criteria which meet
constitutional standards for judicial intervention.
The implementing package is also likely to establish
guidelines for judicial involvement, defining what issues are
judiciable and which parties have standing to challenge
Congressional decisions. State budget officers, for example,
could be given standing to contest unfunded federal mandates.
The enforcement procedures, coupled with budget process and
accounting guidelines, will operate against a backdrop of
traditional legal principles to rationally limit judicial
action. The effect should be to prevent judicial overreaching
into legislative functions, while providing a check on
Congressional attempts to evade the requirements of the BBA
through procedural and numerical gimmickry.

footnotes

\1\See John Hart Ely, ``Toward A Representation-Reinforcing
Mode of Judicial Review,'' 37 Md. Law Review 451 (1978).
\2\United States v. Carolene Products Co., 304 U.S. 144
(1938), footnote 4.
\3\Source: ``The Economic and Budget Outlook,'' Congressional
Budget Office (January 1993), p. 108.
\4\S. Rpt. 103-163, 103rd Congress, 1st Session (1993), p. 6.
\5\Board of Education v. Kean, 457 A.2d 59 (1982).
\6\Flast v. Cohen, 392 U.S. 83 (1968) (Harlan, J.,
dissenting).
\7\Massachusetts v. Mellon, 262 U.S. 447 (1923).
\8\United States v. Richardson, 418 U.S. (1974) (plaintiffs
challenged a statute allowing the CIA to avoid public
reporting of its budget); Simon v. Eastern Kentucky Welfare
Rights Organization, 426 U.S. 26 (1976) (plaintiffs
challenged a Revenue Ruling granting favorable tax treatment
to certain hospitals as inconsistent with the Internal
Revenue Code).
\9\Id.
\10\Baker v. Carr, 369 U.S. 186 (1962).
\11\S. Rpt. 103-163, 103rd Congress, 1st Session (1993).
U.S. Chamber of Commerce,

Washington, DC, 20062-2000.

The Economic Effects of the Balanced Budget Amendment

The U.S. Chamber of Commerce, the nation's largest business
federation, endorses S.J. Res. 1, the Balanced Budget
Amendment of the U.S. Constitution. The Chamber believes that
this measure will help move the federal government toward
fiscal responsibility. This paper discusses the most
significant economic questions raised by this landmark
legislation along with some of the conclusions reached by the
U.S. Chamber.
Q. Why should we balance the federal budget?
A. There are several reasons why the federal budget should
be balanced. Most fundamentally, the Balanced Budget
Amendment would improve accountability in federal spending
decisions. Government officials are generally inclined to
increase government spending to improve services to their
constituents. This, of course, is countered by their
reluctance to raise taxes. But since borrowing can substitute
for raising taxes, legislators find they can offer high level
of services without the pain of raising the current level of
taxes. Consequently, when it's time to make tough spending
decisions, Congress finds it can dodge the question by just
borrowing the difference. The proper counterweight to higher
government spending--raising taxes--is circumvented by the
seemingly painless act of federal borrowing. This leaves us
with more government than taxpayers are willing to pay for.
Over time, such borrowing leaves us with a bloated government
sector and the problem of paying off the debt.
The Balanced Budget Amendment restores the proper balance
between spending and taxes, and forces government officials
to prioritize difficult spending choices. It improves the
process whereby such decisions are made, forcing Congress to
use much greater discipline.
Also, no matter whether the government finances its
spending through taxes or borrowing, its still spending and
therefore commanding economic resources. To those who believe
in limited government and market systems, the level of
federal spending is as much of a concern as how the amount is
financed. Limiting government borrowing blocks the path of
least resistance to government expansion, and so we expect
that a Balanced Budget Amendment would act to limit the reach
of government into the economy.
Q. Wouldn't Congress just raise taxes to close the deficit?
A. In a way. Congress already has. After all, the
difference between Government borrowing and raising taxes is
just a question of taxes today or taxes tomorrow. The
important point is that, no matter how it's financed, the
government is spending economic resources, and the amount of
spending will surely be greater when government is allowed to
use deficit spending.
And tax increases to close the deficit gap are being used
now anyway--witness the tax increases in 1982, 1983, 1984,
1985, 1988, 1989, 1990 and 1993. In other words, we're
already getting the tax increases. By requiring a balanced
budget, we expect to place additional pressure on Congress to
tackle the spending cuts that should be made.
To answer the question more directly. Congress can't just
raise taxes, leave spending intact, and walk away--if it
could, it would have done so a decade ago and spared us this
long debate on deficit spending. So while it may raise some
taxes to close the deficit, Congress will have to confront
its voracious spending habit. The end result will be a lower
level of government spending, and less government involvement
in the economy.
In addition, a couple of provisions in the BBA make it more
difficult to raise taxes. Under the amendment, tax increases
require both a roll call vote (instead of anonymous voice
votes) and a constitutional majority (which means 51 votes
would be required in the Senate and 218 votes in the House to
raise taxes, instead of a majority of those voting). This may
not sound like much of a hurdle, but note that President
Clinton's 1993 tax increase would have needed an additional
two Senate votes under such a requirement. Instead, it passed
after Vice President Gore's vote broke a 49-49 deadlock.
Finally, of course, congressmen and women would have to
face the political consequences of raising taxes at the
voting booth. Because a roll call vote would identify those
who voted to raise taxes, legislators would be held to a
higher level of accountability.
Q. What is the primary economic impact of running
government deficits?
A. The worst thing about government deficit spending is
that it distorts the economy's
[[Page S3353]] balance between saving and investment,
producing adverse long-term productivity growth. The funds
the government is borrowing have to come from somewhere, and
generally they come from private saving and private
investment. Throughout the 1980's and early 1990's, we've
seen the saving rate fall from about 8% to consistently below
4%--too low to fuel the kind of investment we need to keep up
our high productivity. Since long-term productivity growth is
the key to rising standards of living, it's dangerous to be
skimping on investment.
Federal borrowing is not inherently wrong or bad for the
economy; it depends on how the funds are used. If the funds
were being used exclusively to create stronger schools,
better highways, safer bridges, and so forth, we would be
increasing the productive capacity of the economy. This
means that we would be creating the means by which future
generations can create the wealth to pay back the borrowed
funds. But if we're using those funds to provide ourselves
with consumption-oriented short-term benefits that don't
improve our long-term productive capacity, then we're
raising our standard of living by lowering that of future
generations. To quote NationsBank economist Mickey Levy:
``Deficits matter most because they distort the way
current national resources are allocated, generally
favoring current consumption at the expense of private
investment.''\1\
\1\Footnotes at end of article.
---------------------------------------------------------------------------
Q. Are there other effects of deficit spending that harm
the economy?
A. In a complex, interlocking, international economy, you
can expect sustained deficit spending to cause other
distortions as well. First, chronic government borrowing
tends to put upward pressure on interest rates. Businesses
seeking to raise capital and households applying for
mortgages have to compete with the federal government in
securing loanable funds. This increase in demand pushes
interest rates up. Consequently, fewer loans are made to the
private sector, and those that are made carry a higher
interest rate. This is known as ``crowding out,'' since
government borrowing displaces some private borrowing.
Second, because our economy is increasingly linked to the
global market, there are important international impacts
related to the budget deficit.\2\ Higher interest rates tend
to raise the foreign exchange value of the dollar, meaning
that our trading partners face price increases on the goods
and services they buy from the U.S. This lowers our exports,
pushing up our trade deficit. Many contend that one of the
major forces behind the huge trade deficits of the 1980s was
the federal budget deficit.
Third, the amount we're paying to service our national debt
has grown almost fivefold since 1979--from $43 billion to
$203 billion in 1994. As a share of total government outlays,
interest payments on the debt have about doubled from 7.4%
during the 1970s to over 14% currently. That means that for
the same amount of revenue, there's less money for other
government programs, whether it's for national defense, our
court system, Head Start, or environmental clean-up. No
matter what the budget priorities are, fewer funds are
available.
To sum up, there are serious economic side-effects of
deficit spending that Washington tends to ignore. In addition
to restoring discipline to the spending decisions of
Congress, the Balanced Budget Amendment seeks to remove the
economic distortion caused by chronic deficit spending.
Q. Back to that notion of ``crowding out'' for a moment. If
increased government borrowing leads to higher interest
rates, as you claim, then why did interest rates fall during
the 1980s just as the budget deficit was expanding?
A. The key to this apparent paradox is the behavior of
inflation during the 1980s. After starting out the decade in
the double-digits, the inflation rate fell sharply due to
tighter monetary policy and, in mid-decade, the collapse of
oil prices. Since expectations of future inflation are
embedded in
market interest rates this decline in inflation pushed
interest rates down. This more than offset the impact of
increasing federal deficits which were working at the same
time to push interest rates up.
So while it's true that market interest rates fell
significantly during the 1980's it's correct to say that they
would have fallen even further had the federal budget been
brought into balance. In fact later in this document we'll
present results from an econometric study that show
significally lower interest rates as a result of moving to a
balanced budget.
Q. Doesn't government spending represent an investment in
the economy, with highway and transportation construction,
funds going to education, etc?
A. Some government spending can be regarded as ``investment
spending,'' meaning that funds spend now will generate
stronger economic growth later. Spending on infrastrucutre--
highways, bridges, dams, and mass transit, for example--and
other programs such as education are often thought of that
way, since they provide benefits over a long period of time.
But the bulk of government spending goes to projects and
programs that don't provide much of a return over time, but
instead represent ``current spending.'' Such programs include
Social Security, Medicare, federal retirement programs,
unemployment insurance, agricultural extension offices, and
so forth. While many of these programs are desirable, we need
to recognize that we're borrowing vast sums to pay for
benefits that are only short-lived. If this generation
believes that the current level of spending on entitlements
such as Social Security is appropriate, that's fine, but the
funding should therefore come from the current generation,
not the next.
Because an extra dollar of private investment is generally
more efficient that an extra dollar of government investment,
our productive capacity generally grows less when funds are
diverted away from the private sector. This means that
productivity and wage growth will be held back, lowering our
standard of living.
Q. Why a Balanced Budget Amendment now? After all, we've
gotten along without it for 200 years.
A. Until about 1960 or so, running a balanced over time was
almost an unwritten Constitutional amendment. The U.S.
government ran deficits during the War of 1812, the severe
recession of 1837-43, the Civil War, and the Spanish American
War, to name a few episodes. But in other periods, the
federal government ran surpluses to reduce its outstanding
debt. On the whole, only emergencies justified running a
deficit.
But since 1960, this informal rule apparently has gone by
the wayside. In the past 34 years, the U.S. has avoided a
deficit only once, when in 1969 there was a surplus of $3
billion. Given the chronic deficits we've come to expect, its
time to make explicit through a Constitutional amendment the
old implicit principle of government living within its means.
Q. Will passing a Balanced Budget Amendment really add
discipline to the federal government?
A. Lawmakers have tried statutory measure to rein in
government deficit spending, but they just haven't worked.
For example, in 1985 Congress passed the Gramm-Rudman-
Hollings deficit reduction bill, which was supposed to reduce
the deficit to zero by fiscal year 1991 from the $293 billion
deficit projected at the time for fiscal year 1991.\3\ As it
turned out, even with passage of GRH, we ended up with a $196
billion deficit in 1991 and a $289 billion deficit in 1992.
That's because hard-won budget rules can be waived or
modified by a simple majority vote. The Balanced Budget
Amendment, on the other hand, requires a three-fifths vote of
each house to enact a budget with a deficit (in times of war,
only a simply majority is required).
It's clear that these statutory measures haven't worked,
and so it's time to turn to the stronger medicine of a
balanced budget amendment.
Q. Didn't we move to balancing the budget with the passage
in August 1993 of President Clinton's budget package, the
Omnibus Budget Reconciliation (OBRA)?
A. Washington made some progress in trimming the deficit in
1993 when it passed OBRA. The nonpartisan Congressional
Budget Office estimated in September 1993 that OBRA will cut
$433 billion of debt over the next five years from the
projected baseline (i.e., pre-OBRA) level of debt.\4\ But not
only is the post-OBRA deficit still at $222 billion in FY
1998 (CBO January 1995 estimate), but it's also on the rise.
By 2005, according to CBO, the deficit is projected to hit
$421 billion. As a percentage of total output, that means the
deficit rises from 2.7% of GDP in FY 1998 to 3.6% in FY
2004.\5\
Like the budget deals in the previous decade before it,
OBRA clearly does not solve the deficit problem. That's why
it's imperative to turn to a constitutional, rather than a
statutory, remedy for our chronic deficit problem.
Q. What's the relationship between the federal deficit and
federal debt?
A. The federal deficit is the difference between the
government's outlays and receipts in any one year, while
federal debt is the total amount of government debt
outstanding. The debt, in other words, is the total
accumulation of deficits over the years. In 1994, the federal
deficit was $203 billion, and the total federal debt by year-
end was $4.64 trillion.\6\
Q. A federal debt of $4.6 trillion sounds like a lot, but
is it historically high?
A. In absolute terms, it's the highest it's ever been. But
because of inflation and the growth of our economy, it's best
to answer this question by measuring the federal debt
relative to the size of the economy; that is, to look at the
ratio of debt to GDP. Today, the total debt held by the
public is 52% of current GDP.\7\ While that's less than half
of 1946's 114% of GDP, we don't have as much to show for it.
The debt then paid for victory in World War II, while the
current debt is simply
funding higher levels of consumption.
Moreover, this ratio is currently moving in the wrong
direction. It's grown from below 30% during the 1970s to just
over 40% during the mid-1980s, and now to over 50%. In
contrast, the federal debt ratio in the postwar period was
pruned from 114% to 68% by 1951, and generally kept falling
until the early 1970s.
Q. So the federal debt's higher, and it's been growing for
twenty years. But while some continue to feel economic
discomfort from structural changes unrelated to the higher
federal debt (such as the defense build-down and the
commercial real estate overhang), the U.S. seems to be doing
fine. What's the crisis?
A. The growing federal debt is not a problem that can be
characterized as ``a wolf at the door,'' which requires
immediate attention. Instead, to use the analogy introduced
by President Carter's top economist, Charles
[[Page S3354]] Schultze, it's a ``colony of termites in the
wall.''\8\ In other words, it's a serious long-term problem
that can be ignored in the short-term. The damage--lower
investment, lower productivity, slower wage growth, etc.--may
be hard to perceive or even hidden by other economic forces,
but that doesn't mean it's not occurring. The termites are
still chomping away and must still be dealt with, because the
destruction can be massive.
Q. Won't the Balanced Budget Amendment hamper government
activity in times of a national emergency, such as a war?
A. The Amendment will not compromise America's ability to
respond to national emergencies. In general, the Amendment
can be suspended for a specific fiscal year whenever three-
fifths of both Houses of Congress vote to do so. In wartime,
this requirement is lowered to a simple majority.
Q. Won't balancing the budget cause a serious disruption of
economic growth?
A. If the deficit were reduced all at once--from FY 1995's
projected $162 billion to zero next year, for example--there
indeed would be a severe disruption. Because the removal of
so much fiscal stimulus in one year is not advisable, the
Balanced Budget Amendment calls for the provision to become
law in FY 1999 or two years after the ratification by three-
quarters of the states, whichever is later. The Amendment
does not provide a specific path for deficit reduction in the
meantime, but Congress would have five years to implement the
needed changes.
While we should expect some disruption--balancing the
budget is not, in the short-term, an economic growth policy--
we will see several long-term benefits after the budget is
balanced. And the short-term distress can be mitigated,
according to economic simulations performed in a 1992 study
conducted by Laurence H. Meyer & Associates, a nonpartisan
and highly regarded macroeconomic consulting firm based in
St. Louis, Missouri. If we had started in 1993 and balanced
the budget by 1998, using Federal Reserve policy to cushion
the economy, the LHM&A model shows that total output would be
between 1% to 1.6% higher in 2003.\9\ Even
1% additional output means an economy that's $80 billion
larger (measured in today's dollars).
Q. Does it make any difference whether Congress balances
the budget using tax increases or spending cuts?
A. It makes a big difference. In the study cited above,
LHM&A found that the highest gains from deficit reduction
come from expenditure cuts. That is because increases in
taxes create disincentives for labor and investment,
mitigating some of the beneficial effects of deficit
reduction on interest rates.
In the following table we report the results of two policy
simulations conducted by LHM&A in which the budget is
balanced, and compare it to the baseline case where policy is
left as is.
The first column shows where the economy would be if no
action were taken.
The second column shows where the economy would be if
expenditures were cut by the entire amount necessary to
balance the budget (``All Spending'').
The final column shows the results of balancing the budget
by raising spending and cutting expenditures by exactly the
same amount (``Mix'').
The two balanced budget scenarios assume that the Federal
Reserve eases monetary policy enough to maintain the
unemployment rate at the baseline level of 5.2%. The
following table compares how the economy would look with and
without deficit reduction by showing some of the results for
the first five years.

THE ECONOMIC IMPACT OF BALANCING THE BUDGET
[The First 5 Years of Deficit Reduction]
----------------------------------------------------------------------------------------------------------------
No deficit Deficit reduction scenarios
reduction -------------------------------
----------------
Baseline All spending Mix
----------------------------------------------------------------------------------------------------------------
Levels in the fifth year:
Federal deficit ($ bill).................................... -251 0 -1
3-month T-bill rate (percent)............................... 5.5 4.7 4.6
30-year Government bond yield (percent)..................... 6.9 5.7 5.8
AAA corporate bond yield (percent).......................... 7.1 5.8 5.9
Average annual growth, first 5 years (percent):
Real GDP.................................................... 2.6 2.8 2.7
Inflation................................................... 3.3 3.5 3.4
Real personal disposable income............................. 2.3 1.7 1.5
----------------------------------------------------------------------------------------------------------------

Notice how interest rates are significantly lower in the
scenarios where the deficit has been reduced. This is the
fuel for the higher level of business investment. In fact,
the inflation-adjusted value of the nation's plant and
equipment (what economists call the real capital stock) is 2%
higher after the first five years of deficit reduction, and
6% higher after ten years, when comparing the result of the
``All Spending'' scenario to the baseline. While those
figures may sound small, they mean $120 billion worth of
additional computers and manufacturing plants within five
years, and $390 billion more in ten years. And it should be
noted that the capital stock is almost 2% higher when the
budget is balanced entirely through spending cuts rather than
an equal mix of spending cuts and tax increases.
While inflation is a bit higher in the deficit-reduction
scenarios (due to the Federal Reserve's cushioning), growth
in real GDP (inflation-adjusted output) is stronger, on
average, in the five-year period, as the deficit is reduced.
Real personal disposable income grows at a slower rate (1.7%
and 1.5% versus 2.3%) in the cases where the deficit is
lowered. But note that it's stronger in the case where all of
the deficit reduction comes from reductions in government
spending. This shows that moving to a balanced budget will
inflict some economic pain. The short-term pain is
unavoidable, but it helps set the stage for stronger growth
in the years after the deficit has been balanced.
Of course, the active participation of Federal Reserve is
an important component of LHM&A's simulations, and it comes
with the price tag of slightly higher inflation. But the
important point is that the model suggests a path that the
economy can follow to get to a balanced budget without severe
economic hardship.
Another factor that would help the transition that's hard
to model is the boost to consumer and business confidence we
would expect to find once a credible balanced-budget plan
were enacted. Business investment should be higher, and the
return of resources from the public to the private sector as
government spending cuts are carried out should improve
overall productivity in the economy.
Q. Most of the states have some sort of balanced budget
requirement. What has been their experience?
A. According to the National Association of State Budget
Officers, the application of the state experience to the
Federal experience is not clear-cut. The state balanced
budget requirements are diverse and written so generally that
they're subject to varying interpretations. According to
their 1992 statement, the tradition of balanced budgets,
rather than the enforcement provisions or the threat of lower
bond ratings, plays the most important role in developing
balanced budgets.\10\
Footnotes

\1\Mickey D. Levy, Deficitphobia: Right for the Wrong
Reasons, in ``Economic and Financial Perspectives,'' CRT
Government Securities Ltd., New York, December 1993, pg. 1.
\2\Benjamin M. Friedman, U.S. Fiscal Policy in the 1980s:
Consequences of Large Budget Deficits at Full Employment, in
``Debt and the Twin Deficits Debate,'' James M. Rock, ed.
Mayfield Publishing Company, 1991.
\3\Laurence H. Meyer & Associates, Balancing the Budget by
1991: The Gramm-Rudman-Hollings Proposal, November 1985, pg.
5.
\4\Congressional Budget Office, The Economic and Budget
Outlook: An Update, September 1993, pgs. 26-29.
\5\Congressional Budget Office, The Economic and Budget
Outlook: FY 1996-2000, January 1995, pg. 58.
\6\Ibid, pg. 51.
\7\Congressional Budget Office, Federal Debt and Interest
Costs, May 1993, pg. 92.
\8\Charles L. Schultze, Of Wolves, Termites and Pussycats,
``The Brookings Review,'' Summer 1989, pgs. 26-33.
\9\Laurence H. Meyer & Associates, Balancing the Budget: An
Analysis of the Economic Effects of Deficit Reduction,
prepared for the Chase Manhattan Bank, December 1992, pg. 1.
\10\National Association of State Budget Officers, State
Balanced Budget Requirements: Provisions and Practices, June
1992, pg. 3.
____

U.S. Chamber of Commerce,

Washington, DC.

Balanced Budget Amendment: The Role of the Courts

Some lawmakers and commentators have raised questions about
the enforcement of a Balanced Budget Amendment to the U.S.
Constitution. A primary concern is that Congressional efforts
to meet the balanced budget requirement would be challenged
in the courts, and the judiciary would be thrust into a non-
judicial role of weighing policy demands, slashing programs
and increasing taxes.
On the other hand, there is a legitimate and necessary role
for the courts in ensuring compliance with the amendment.
Congress could potentially circumvent balanced budget
requirements through unrealistic revenue estimates, emergency
designations, off-budget accounts, unfunded mandates, and
other gimmickry. Certainly, the track record of the
institution under the spending targets of Gramm-Rudman-
Hollings and other statutory provisions is no cause for
optimism.
It is our view that the need to proscribe judicial
policymaking can be reconciled with a
[[Page S3355]] constructive role for the courts in
maintaining the integrity of the balanced budget requirement.
Congress is expected to address technical issues such as
accounting standards, budget procedures and judicial
enforcement in followup implementing legislation. By drawing
on the existing legal principles of ``mootness,''
``standing'' and ``nonjudiciability,'' implementing
legislation can define an appropriate role for the courts in
making the amendment work. The net effect can be to prevent
judicial assumption of legislative functions such as
selecting program cuts, while allowing the courts to police a
framework of accounting standards and budget procedures.

traditional limits on judicial intervention

In general, the courts have shown an unwillingness to
interject themselves into the fray of budgetary politics. The
New Jersey Superior Court observed that ``it is a rare case *
* * in which the judiciary has any proper constitutional role
in making budget allocation decisions.''\1\ The judiciary has
remained clear of most budget controversies through the
principles of ``mootness'' and ``standing,'' as well as the
``political question'' doctrine.
Footnotes at end of article.
---------------------------------------------------------------------------
A case is considered moot, and can be rejected by the
court, if the matter in controversy is no longer current. In
Bishop v. Governor, 281 Md. 521 (1977), taxpayers and
Maryland legislators claimed that the governor's proposed
budget violated the state's balanced budget law, because $95
million was contingent upon enactment of separate federal and
state legislation. The Maryland Court of Appeals dismissed
the case as moot because by that time the separate
legislation had been
approved, and the relevant fiscal year had elapsed. Mootness
will be a factor in many potential challenges to
Congressional action under a federal Balanced Budget
Amendment, particularly those based on unplanned
expenditures or flawed revenue estimates which become
apparent near the end of the fiscal year.
The doctrine of standing limits judicial access to parties
who can shoe a direct injury over and above that incurred by
the general public. The logic is that the grievances of the
public (or substantial segments thereof) are the proper
domain of the legislature.\2\ The U.S. Supreme Court has
generally held that status as a taxpayer does not confer
standing to a challenge federal actions\3\, and has barred
taxpayer challenges of budget and revenue policies in the
absence of special injuries to the plaintiffs.\4\ A state
cannot sue the federal government on behalf of its
citizens,\5\ and it is doubtful that Members of Congress have
standing to challenge federal actions in court.\6\
The political question doctrine is a related principle that
the courts should remain out of such matters which the
Constitution has committed to another branch of government.
The U.S. Supreme Court has held that a ``political question''
exists when a case would require ``nonjudicial
discretion.''\7\ This would be the case with many budgetary
controversies, such as the choice to cur particular programs,
which by their nature require ideological choices and the
balancing of competing needs. In theory, at least, Congress
brings to this task a ``full knowledge of political, social
and economic conditions. * * *,'' as well as the legitimacy
of elected representation.\8\ The New Jersey Supreme Court
recognized this in a case where local governments challenged
funding decisions made by the governor and legislature,
holding that the allocation of state funds among competing
constituent groups was a political question, to be decided by
the legislature and not the judiciary.\9\ The Michigan
Supreme Court has likewise held that program cutting
decisions are a non-judicial function.\10\

a role for the courts

The courts have asserted jurisdiction over politically
tinged controversies where they find ``discoverable and
manageable standards'' for resolving them. In Baker v. Carr,
the U.S. Supreme Court reasoned that objective criteria guide
judicial decisionmaking and limit the opportunity for
overreaching. In the balanced budget context, the
``discoverable and manageable standards'' principle can help
demarcate lines between impermissible judicial policymaking,
and the needed enforcement of accounting rules and budget
procedures.
In all likelihood, a strong framework of accounting
guidelines will emerge from implementing legislation. The
Senate Judiciary Committee has interpreted Section 6 of the
bill to impose ``a positive obligation on the part of
Congress to enact appropriate legislation'' regarding this
complex issue.\11\ Judiciary Committee staff on both the
House and Senate side have indicated their intention that
implementing legislation embrace stringent accounting
standards that will minimize the potential for litigation.
Should legitimate questions arise concerning the methods by
which Congress ``balances'' the budget, these standards will
also provide objective criteria which meet constitutional
standards for judicial intervention.
The implementing package is also likely to establish
guidelines for judicial involvement, defining what issues are
judiciable and which parties have standing to challenge
Congressional decisions. Where Congress has defined standing
within the relevant statute, the courts have generally
deferred to this request for judicial input, and entertained
suitable cases.\12\ This approach has the advantage of
defining appropriate controversies and plaintiffs more
precisely. In the Balanced Budget context, the right to raise
particular arguments could be delegated to specific public
officials. State budget officers, for example, could be given
standing to contest unfunded federal mandates.
We are satisfied that such enforcement procedures, coupled
with budget process and accounting guidelines, will operate
against a backdrop of traditional legal principles to
rationally limit judicial action. The effect should be to
prevent overreaching into legislative functions, while
providing a check on Congressional attempts to evade the
requirements of the BBA through procedural and numerical
gimmickry.

footnotes

\1\Board of Education f. Kean, 457 A.2d 59 (N.J. 1982).
\2\Flast v. Cohen, 392 U.S. 83 (1968), (Harlan, J.,
dissenting).
\3\Massachusetts v. Mellon, 262 U.S. 447 (1923). The courts
have allowed taxpayer claims that public funds were used to
support an unconstitutional purpose. The two important
decisions in this area are both establishment of religion
cases. Flast v. Cohen, 392 U.S. 83 (1968); Valley Forge
Christian College v. Americans United for Separation of
Church and State, 454 U.S. 464 (1982).
\4\United States v. Richardson, 418 U.S. 166 (1974)
(plaintiffs challenged a statute allowing the CIA to avoid
public reporting of its budget); Simon v. Eastern Kentucky
Welfare Rights Organization, 426 U.S. 26 (1976) (plaintiffs
challenged a Revenue Ruling granting favorable tax treatment
to certain hospitals as inconsistent with the Internal
Revenue Code).
\5\South Carolina v. Katzenbach, 383 U.S. 301 (1966).
\6\Goldwater v. Carter, 444 U.S. 996 (1979).
\7\Baker v. Carr, 369 U.S. 186 (1962).
\8\Id.
\9\Camden v. Byrne, 82 N.J. 133 (1980).
\10\Michigan Assn. of Countries v. Dept. of Management and
Budget, 418 Mich. 667 (1984).
\11\S. Rpt. 103-163, 103rd Congress, 1st Session (1993).
\12\Nowak, John E. et al. Constitutional Law, West Publishing
Co. (1983), p. 87. In Lujan v. Defenders of Wildlife, 112
Sup. Ct. 2130 (1992), the Court voided a citizen suit under
the Endangered Species Act, holding that Congress' power to
define standing by statute is limited by Article III of the
Constitution. The decision that citizen suit provisions must
be carefully articulated and supported by clear legislative
goals.
____

U.S. Chamber of Commerce,

Washington, DC, Thursday, February 9, 1995.

U.S. Chamber Throws Support Behind Balanced Budget Amendment

Washington.--The U.S. Chamber of Commerce today pledged to
``pull out all the stops'' to ensure passage of the balanced
budget amendment.
In a press conference rallying support for the upcoming
Senate vote, Chamber Senior Vice President Bruce Josten said,
``We believe that passage of the balanced budget amendment is
imperative if we are to restore the critical principle of
fiscal responsibility and limited government. It is the lynch
pin in our approach to taming government spending and
shrinking government waste.
``Large and growing federal deficits reduce savings and
investment, stymie income and job growth and lower
productivity growth and our standard of living,'' Josten
said. ``Deficits result in the accumulation of government
debt and ultimately lead to higher taxer.
``Together with the line-item veto and the prohibition on
unfunded mandates, passage of this balanced budget amendment
will place renewed emphasis on fiscal discipline, force
Congress to cut spending and constrain its ability to raise
taxes.''
Josten promised the full extent of the Chamber's
capabilities to ``pull out all the stops and pledge to use
every aspect of our broad grassroots organization to ensure
the passage of a balanced budget amendment.
``We urge all the senators to vote for its passage and we
will count it as a key vote in our chamber rating system,''
he said.
____

NFIB,

Small Business News,

Washington, DC.

Balanced-Budget Amendment Crucial to Small-Business Growth

Washington, February 9.--Jack Faris, president of the
National Federation of Independent Business, the nation's
largest advocacy group for small business, urged small-
business owners to write and call Congress to support the
idea of adding a balanced-budget amendment to the
Constitution.
Faris said Congress must heed broad-based public support
for a balanced-budget amendment, especially that coming from
the small-business sector.
``Small-business owners have voted overwhelmingly for a
balanced budget and deficit reduction in several NFIB
surveys,'' Faris said. ``They understand that high deficits
rob small businesses of available capital and mean less money
for private investment. When small firms can't afford to
expand and buy equipment, fewer jobs are created and less
revenue is sent to the Treasury.''
The 1994 deficit hit $223 billion, Faris said, pointing out
that the public debt, the accumulation of each year's
deficit, reached $4.7 trillion.
``It's inconceivable that a business could spend or borrow
as irresponsibly as the federal government has,'' Faris said.
``A small firm has to live within a budget. If owners spent
and borrowed money like the federal government, they'd be out
of business in a heartbeat.''
The NFIB Education Foundation, the organization's research
arm, found that federal taxes and frequent tax law changes
rank among the top problems of entrepreneurs.
[[Page S3356]] ``Small-business owners voted in November in
greater numbers than ever before to elect lawmakers who
wouldn't conduct `business as usual,' Faris said. ``and a
balanced-budget amendment would be a major step toward
controlling the size of the federal government.''
NFIB represents more than 600,000 small and independent
firms. Small business makes up 99 percent of the private
sector, hires approximately half of the country's workforce,
and creates some two-thirds of all new jobs, according to
NFIB.
____

[News release from Financial Executives Institute]

Financial Executives Institute Announces Top 10 Legislative Agenda

Morristown, NJ, January 16, 1995.--Financial Executives
Institute, a professional association of corporate financial
executives, is prepared to work with the Congressional
leadership to enact the initiatives contained in the
``Contract with America.'' In a letter that outlines its
legislative agenda for 1995, FEI urged its 14,000 members to
support such ``Contract'' initiatives as deficit reduction,
product-liability reform, regulatory reform, and capital-
gains reform.
``For years we've been urging Congress to put a lid on
spending and manage the taxpayers' money more wisely,'' says
P. Norman Roy, president of FEI. ``Now, we seem to have
people in Congress who are determined to give the taxpayers
good value for their tax dollars. It's a good start.''
Heading FEI's agenda of ten key issues is passage of the
Balanced Budget Amendment, which would prohibit federal
outlays from exceeding total receipts. If the amendment
passes, it will require a three-fifths majority in both
houses of Congress for the federal government to incur a
deficit. Despite strong Republican support, passage of the
Amendment is not certain; passage will require a two-thirds
majority in each house.
Other FEI ``top ten'' initiatives include:
Line-Item Veto--give the president the authority to strike
any appropriation or specific tax provision from proposed
legislation;
Product-Liability Reform--create uniform product-liability
laws, covering state and federal actions;
Securities-Litigation Reform--limit the growth of lawsuits
filed by class-action attorneys on behalf of shareholders
whose stock prices have shown unusual market performance and
make losing litigants responsible for winners' costs;
Tax Reform--allow individuals to exclude 50 percent of
capital-gains income from taxes and reduce the corporate
capital-gains tax to 17.5 percent. Also, explore alternatives
to the current tax system, such as a flat rate with higher
exemptions or replacing both corporate and individual taxes
with value-added and/or personal-consumption taxes;
Regulatory Reform--eliminate regulations that stifle
business initiative and competitiveness; also reduce
paperwork and require federal agencies to calculate the costs
and benefits of compliance;
Federal Financial Management Reform--strengthen the Chief
Financial Officers Act, the goal of which is to get the
government's fiscal house in order;
Entitlement Reform--resolve the long-term imbalance between
the government's entitlement promises and its ability to pay
for them and ensure the long-term solvency of Social Security
and Medicare;
Health-care Reform--develop broad national agreement on a
specific health-care reform initiative rather than leave the
solution to the individual states, which could lead to
multiple state rules and an onerous administrative burden for
companies with multi-state operations;
Procurement Reform--Pass and implement the Federal
Acquisition Streamlining Act of 1994, which is expected to
save taxpayers $12.3 billion over the next 5 years by
reducing cumbersome regulatory burdens and needless
bureaucracy in the government's acquisition of products and
services from the private sector.
Financial Executives Institute, the leading advocate for
the views of corporate financial management, is a
professional association of 14,000 senior financial
executives from nearly 8,000 major corporations throughout
the United States and Canada.
____

[News release from Associated Builders and Contractors, Inc., Rosslyn,
VA, February 9, 1995]

ABC Supports Balanced Budget Amendment

Passage of the Balanced Budget Amendment (S.J. Res. 1)
would promote much needed restraint in government taxation
and spending, according to Charlie Hawkins, senior vice
president of Associated Builders and Contractors.
``We can no longer tolerate the practice of freely granting
exceptions to budget rules in order to accommodate funding
demands. Congress must respond to the call to cease runaway
spending and begin the kind of reform that the Balanced
Budget Amendment dictates,'' Hawkins said.
Hawkins said the amendment would force the president and
Congress to set priorities rather than to continually
postpone making difficult choices. The prospect of having to
move toward balanced budgets in the near future would have an
immediate positive impact on the budget process and would
provide a Constitutional gurantee that we will adhere to a
deficit reduction plan, he said.
``Deficit spending should no longer be a way of life for
the federal government. Every American family must live
within its means and balance its budget. Forty-nine of the 50
states operate under some form of a balanced budget
requirement--it makes sense that the federal government would
compel itself to work with similar self-control,'' he said.
Hawkins added that the amendment should not include an
exemption for Social Security. Such an exemption would put
Social Security at risk by creating an incentive to link
other programs to the entitlement program to exempt them from
deficit calculations. ``The best protection for Social
Security is a balanced budget,'' he said.
Associated Builders and Contractors is a national
association representing more than 17,000 construction and
construction-related companies located in 80 chapters
throughout the country.
____

NAW Calls on the Senate to Pass the Balanced Budget Amendment

Washington, DC February 9, 1995.--The National Association
of Wholesaler-Distributors (NAW) today called on the United
States Senate to pass S.J. Res. 1, the Balanced Budget
Amendment to the Constitution.
``On behalf of the 45,000 companies represented by NAW, we
strongly urge every Member of the Senate to support S.J. Res.
1. An historic opportunity for national fiscal discipline has
finally arrived, and we must seize it,'' said Dirk Van
Dongen, NAW President.
``NAW and its member companies have actively supported a
Constitutional Amendment for a balanced Federal budget for
many years. After decades of uncontrolled Federal spending,
our members again state the obvious: government budget
discipline is essential. No longer should Federal outlays
exceed receipts. Furthermore, we strongly believe that
Congress should rely on spending restraints--not tax
increases--to balance the budget, rather than further
burdening hard-working American taxpayers.''
``There is little doubt that for too long American
companies have felt the effects of the Federal deficit; a
deficit that is projected to begin growing again soon. Now is
our best chance to show real leadership--to permanently rein
in government spending. If we are unsuccessful, Federal debt
and deficits--and politics--will continue to cripple our
economy and mortgage our future. The Balanced Budget
Amendment moves our country in the right direction and it
unburdens our employers and employees along the way. The
Senate should pass it and send it to the states without
hesitation,'' concluded Van Dongen.
(NAW represents 45,000 companies through a federation of
wholesale distribution firms and national, state and local
associations.)
____

Citizens Group Urges Senate To Pass Balanced Budget Amendment

statement of paul beckner, president citizens for sound economy

Washington, DC.--On behalf of Citizens for a Sound Economy
(CSE), I offer my strong support of the proposed balanced
budget amendment to the Constitution. Our 250,000 members are
among the 80% of Americans who believe it is time for the
federal government to put its fiscal house in order by doing
what every American family must do--balance its budget.
The federal government continues to be plagued by wasteful
deficit spending; Congress appropriates money it does not
have and should not spend. The American people are fed up
with the status quo that has given them $200 billion
deficits, a $4.8 trillion national debt, bigger government,
higher taxes, and a reduced standard of living. The House of
Representatives has acted. Now it is time for the Senate to
do its part.
The balanced budget amendment is about so much more than
November's elections or the ``Contract with America.'' It is
about Democrats and Republicans joining together to rise
above partisan interests to act in the national interest. It
is about the people's representatives finally standing up and
saying, ``Passing The Buck Stops Here.''
I urge the Senate to do the right thing--for America and
its future generations that we are so shamelessly willing to
burden with our debt. Pass the balanced budget amendment.
Pass it now.
CSE is a 250,000 member grassroots advocacy organization
founded in 1984 to defend and promote America's free
enterprise system.
____

Coalition Urges Passage of Balanced Budget Amendment in the Senate
``Get With the Program,'' Says Small Business Group

Washington, DC.--The Small Business Survival Committee
[SBSC] urged members of the United States Senate to swiftly
pass the Balanced Budget Amendment to begin restoring fiscal
sanity, as well as America's faith, in the federal
government.
``It is no surprise that those Senators lined up against
the Balanced Budget Amendment [BBA] are those who continue to
support big government, and continue to view government as
the solution--not the problem. President Clinton, Senator
Robert Byrd and the ``right to know'' crowd are fighting a
losing battle and should get with the fiscal accountability
program,'' said SBSC President Karen Kerrigan.
SBSC and a coalition of organizations supporting passage of
the Balanced Budget Amendment held a press conference today
to
[[Page S3357]] collectively voice support for swift action in
the United States Senate.
``I find it particularly insincere that Senators called for
a ``right to know'' amendment, are the same Members who
secretly stuff appropriation bills with pork and special
interest programs, and continue to push funding for programs
which have proven to be an abysmal failure. It seems to me
that these practices are now in ``the know,'' after years of
hiding such fiscal abuse, and taxpayers want this to end,''
added Kerrigan.
The Small Business Survival Committee is a 40,000-member
nonpartisan, nonprofit advocacy organization.
Statement on the Balanced Budget Amendment

(By Grover G. Norquist)

Americans for Tax Reform, the national clearinghouse for
the grassroots taxpayers movement, strongly supports the
Balanced Budget Amendment to the United States Constitution.
In addition, as the organization which opposes all tax
increases as a matter of principle, we are delighted to
support the Constitutional amendment requiring a 60%
supermajority to raise taxes, to be voted in the House of
Representatives on April 15, 1996. We are grateful for the
leadership of freshman Representatives John Shadegg (R-AZ)
and Linda Smith (R-WA) on this issue. In addition, we are
pleased to see the supermajority as a likely initiative issue
in several new states next year. Voters will choose the next
President of the United States in November, 1996 as they vote
on these initiatives.
Tax increases are not the solution to reducing the budget
deficit: they merely feed politicians' appetite for increased
federal spending. However, politicians use the federal
deficit as a bogus rallying cry for the supposed need to
raise taxes. That is why a balanced budget requirement and a
supermajority requirement are necessary to keep taxes down
and control federal spending. The Balanced Budget Amendment
shuts off one spigot feeding federal spending by prohibiting
deficit spending. The supermajority amendment shuts off the
other spigot by making tax increases difficult. Together,
they shut the valve which finally chokes off runaway federal
spending. In the nine states which currently have a
supermajority requirement, spending growth has slowed
dramatically.
Taxpaying Americans have been robbed of their prosperity in
the last half-century by the explosion of federal spending,
fueled by deficit spending and dramatic increases in taxes.
As Congressman Joe Barton has pointed out, federal taxes went
from 5% of a family's income in 1934 to almost 19% in 1994.
It is time that we reign in the beast. It is time that
taxpaying Americans finally have leverage over spending
interests. That is why we are strongly in support of the
Balanced Budget Amendment and the supermajority amendment.
Farm Bureau Calls for Balanced Budget Amendment

Washington, Jan. 5, 1995.--Passage of a balanced budget
amendment should be the first step in a series of needed
changes in the federal government's policies on taxation,
spending and regulations, Farm Bureau told the Senate
Judiciary Committee today.
``Farm Bureau has supported a balanced budget amendment to
the U.S. Constitution for 15 years,'' said Utah Farm Bureau
President Ken Ashby. ``Farmers and ranchers believe a
balanced budget amendment can help provide much needed budget
discipline that, unfortunately, seems impossible to achieve
in government today.''
Ashby, who grows alfalfa, hay and grain, said a more hands-
off approach of federal regulations on private economic
activity and on state and local governments, in combination
with a reduction in deficit spending, would benefit all
Americans. He said if a balanced budget amendment is passed,
Congress must not slow down on spending reform.
``These changes in public policies will take months of
serious consideration and debate by the Congress,'' Ashby
said. ``You cannot do everything at once, and we do not
expect you to. But we also do not want you to simply pass a
balanced budget amendment and then go back to business as
usual.''
As part of the Farm Bureau proposal, Ashby called on the
senators to push for a balanced budget amendment that would
require a three-fifths ``super majority'' vote of both houses
of Congress to ignore the balanced budget requirement. He
said ``this provision will elevate the scrutiny of proposed
new spending and force Congress to go on record when it
decides to increase spending.''
He told the Judiciary panel that as a result of the 1990
farm bill and the 1990 Omnibus Budget Reconciliation Act,
government payments to farmers have been reduced by
approximately one-third. He recognized some cuts as necessary
to reduce the Federal debt, but said farmers are not the only
segment of the population that needs to pitch in.
``Farmers have not been entirely happy with these
reductions but understand that cuts are necessary if a
balanced budget is to be achieved,'' Ashby said. ``Now it is
time for all government programs, including social security
and defense, to follow agriculture's example and contribute
to spending control.''
Farm Bureau, he said, also believes any amendment proposal
should require the president to submit a balanced budget to
Congress. Ashby said this provision would help spread the
responsibility for balancing revenue and spending among the
legislative as well as the executive branch.
Ashby told the panel that the current practice of allowing
passage of tax increases by a majority of the members present
on the floor of either house must change. He told the
committee that a majority of the total membership of each
house, recorded by a roll call vote, should be required for
future tax increases, making them more difficult to achieve.
Christian Coalition,

Capitol Hill Office,

Washington, DC, February 24, 1995.
Dear Senator: On behalf of the 1.5 million members and
supporters of the Christian Coalition, we urge you to support
the balanced budget amendment [BBA] to the Constitution.
The mounting national debt threatens our nation's economic
future. Unless we act today to restore fiscal sanity, more
private savings will be drawn away from investments necessary
for lasting economic growth. Without a BBA, the nation will
grow deeper in debt to foreign creditors, and the interest
payments on the soaring debt will preclude other budget
priorities. This is indeed a bleak legacy to leave our
children and grandchildren.
Moreover, we do not believe that the American people are
taxed too little. Rather we believe that the federal
government spends too much. According to the Tax Foundation,
federal, state and local taxes claimed 39.5 percent of the
income earned by a median two-earner family in 1994. Every
additional four year delay without a balanced budget could
result in another trillion dollars of debt, and another $55
billion in annual interest costs. According to the National
Taxpayers Union, these interest payments alone will cost
today's child over $130,000 in extra taxes, on average, over
his or her lifetime.
A balanced budget amendment is long overdue. We urge you to
pass it now to secure a sound fiscal future for America's
families.
Sincerely,
Marshall Wittmann,
Director, Legislative Affairs.
Heidi Scanlon,
Director, Governmental Affairs.
Congress of the United States,

Washington, DC, March 15, 1994.
Dear Colleague: What did Thomas Jefferson get for $225
billion? The Louisiana Purchase, which became all or part of
15 States.
What are we getting for $223 billion? Absolutely nothing,
except another year older and deeper in debt.

Thomas Jefferson and the Louisiana Purchase

overview--february 1994

When Balanced Budget Amendment (BBA) supporters have quoted
Thomas Jefferson's sentiments against government debt, Sen.
Byrd cited the Louisiana Purchase, arguing:
The purchase amount, $15 million, all borrowed, was almost
twice the size of the total annual federal budget in 1804.
The comparable figure would be translated into $2.8 trillion
today--a ``whopper'' of a transaction.
Jefferson talked tough against going into debt before he
was President, but obviously saw how the need for borrowing
could arise once he became President.
Jefferson had virtually no association with writing the
Constitution; Madison, who did, said that the wise incurring
of debt could benefit posterity.

responses

To buy the Louisiana Territory, Jefferson did borrow an
amount equal to twice the amount the federal government was
spending annually at the time. However, total federal outlays
amounted to only about 1.6% of gross domestic product in 1804
(compared to 22% in 1994). Jefferson's purchase was equal to
a less than 3.5% of GDP, the equivalent of about $224.5
BILLION in 1993 dollars.
In other words, in GDP-adjusted terms, the Louisiana
purchase cost Jefferson about the same amount the government
now deficit-spends every year, and about the same amount the
government spends on net interest payments just to service
the debt every year.
The BBA follows both Jefferson's philosophy and his
example. Obviously, his ultimate position was that debt was
acceptable (1) for extraordinary needs and (2) if it was
repaid.
S.J. Res. 41, requiring a \3/5\ vote to deficit spend or
raise the debt limit, provides both a norm of balanced
budgets and the flexibility to meet extraordinary needs.
Jefferson reduced the federal debt by half during his first
term.
Unlike today's general indebtedness, Jefferson paid for the
Louisiana Purchase with a specific, dedicated note. The debt
so incurred was paid off fully within 20 years, by 1823.
When Jefferson submitted the treaty and related legislation
to Congress in 1803, he stated his expectations that: (1) The
remaining national debt would be paid off before the
Louisiana note came due; and (2) the then-current growth in
revenues would enable retirement of the Louisiana debt in a
relatively short time.
The Louisiana Purchase was a once-in-a-lifetime
opportunity. Certainly you would expect to obtain a \3/5\
vote for such an extraordinary and beneficial investment. And
in fact, all of the relevant Congressional
[[Page S3358]] votes related to the Louisiana Purchase far
exceeded the \3/5\ margin required to borrow under S.J. Res.
41.
Madison, too, dedicated his Presidency to balanced budgets,
promising ``to liberate the public resources by an honorable
discharge of public debt.'' In fact, he retained Jefferson's
Treasury Secretary to continue Jefferson's responsible fiscal
policies.
This year the federal budget deficit will be, adjusted for
size of GNP, about equal to the amount that President
Jefferson borrowed for the Louisiana Purchase.
But the government is not ``investing'' this $223 billion.
Unlike that of 1804, 1994's borrowing is not buying us
306,573,740 acres of fertile prairies, navigable waterways,
and abundant natural resources, to resell at a profit and
with which to enrich the lives and well-being of our
children. Today's borrowing is for current consumption,
simply allowing government programs to spend beyond their
income.
Every year, this generation's government is incurring
additional debt of a magnitude that Jefferson and his
generation felt was appropriate only for a once-in-a-lifetime
endeavor.
The $15 million (in 1804 dollars) worth of bonds issued to
finance the Louisiana Purchase was paid off completely within
20 years. In GNP-adjusted 1993 dollars, this purchase turned
a $74 billion profit in land sales alone by 1823, and another
$132 billion profit in land sales by 1834. These proceeds
helped reduce the federal debt to $38,000--that's $38
thousand--in 1834 and `35, its lowest level before or since.
In contrast, over this past 20 years, the gross federal
debt will have increased by 869 percent--from $484 billion in
fiscal year 1974 to $4.69 trillion at the end of FY 1994, as
projected by CBO. In fact, the red ink has flowed in 56 of
the last 64 years.
The federal government has been accumulating debt so fast
and in such massive amounts that American taxpayers are now
servicing that debt with interest payments about equal--
again, adjusted for size of GNP--to what Jefferson and the
8th Congress borrowed to double the size of the nation. (CBO-
projected gross interest in FY 1994: $298 billion; Net
interest: $201 billion.)
Jefferson's government invested. Ours has been eating the
seed corn in increasing quantities for decades.
The above information on Jefferson's Louisiana Purchase has
been drawn from two papers prepared at our request:
Jefferson's Constitutional Dilemma with the Louisiana
Purchase, by James M. Hamilton (Stenholm staff), and An
Economic Analysis of the Jefferson Administration and the
Louisiana Purchase, by William A. Duncan, PhD (National
Taxpayers Union Foundation). Rather than send you a 22-page
Dear Colleague, we invite you to contact any of us or Ed
Lorenzen (5-6605), Andy Moore (5-6730), Donna Tobias (4-
2752), or Aaron Rappaport (4-5573) for copies of these
papers.
Sincerely,
Charles W. Stenholm.
Robert F. Smith.
Larry E. Craig.
Paul Simon.

____
a Balanced Budget.

H.J. Res. 1, The Jefferson Amendment

For over 140 years in this nation, balanced federal budgets
were part of the unwritten constitution just like the two
party system and the workings of the electoral college.
Modern necessity dictates change through a balanced budget
amendment to the constitution. Jefferson foresaw this some
200 years ago:
``I am not an advocate for frequent changes in laws and
constitutions. But laws and institutions must go hand in hand
with the progress of the human mind. As that becomes more
developed, more enlightened, as new discoveries are made, new
truths discovered and manners and opinions change, with the
change of circumstances, institutions must advance also to
keep pace with the times. We might as well require a man to
wear still the coat which fitted him when a boy as civilized
society to remain ever under the regimen of their barbarous
ancestors.'' (The Jefferson Memorial, Washington, D.C.)
Quotes from the Framers and others on the evils of public
debt:
``It is a miserable arithmetic which makes any single
privation whatever so painful as a total privation of
everything which must necessarily follow the living so far
beyond our income. What is to extricate us I know not,
whether law, or loss of credit. If the sources of the former
are corrupted, so as to prevent justice the latter must
supply its place, leave us possessed of our infamous gains,
but prevent all future ones of the same character.''
(Jefferson, 1787)
``I place economy among the first and most important of
republican virtues, and public debt as the greatest of the
dangers to be feared.'' (Jefferson, 1816)
``If we run into such debts, as that we must be taxed in
our meat and in our drink, in our necessaries and our
comforts, in our labors and our amusements, for our callings
and our creeds, as the people of England are, our people like
them, must come to labor sixteen hours in the twenty-four,
give the earnings of fifteen of these to the government for
their debts and daily expenses . . .'' (Jefferson, 1816)
I believe it may be regarded as a position warranted by the
history of mankind that, in the usual progress of things, the
necessities of a nation, in every stage of its existence,
will be found at least equal to its resources. (Alexander
Hamilton in the Federalist #30)
To liberate the public resources by an honorable discharge
of public debts. (President James Madison, Stating one of the
primary goals of his Administration)
Interest is now paid to capitalists out of the profits of
labor; not only will this labor be released from the burden,
but the capital, thus thrown out of an unproductive use, will
seek a productive employment; giving thereby a new impetus to
enterprise in agriculture, the arts, commerce, and
navigation. (Samuel Inghams, Secretary of the Treasury under
Andrew Jackson)
President Andrew Jackson, in proposing to effect
substantial reductions in the war debt, observed:
We should look at the national debt, as just as it is, not
as a national blessing but as a heavy burden on the industry
of the country to be discharged without unnecessary delay.
President Benjamin Harrison described unnecessary public
debt as ``criminal.''
[Even during unsatisfactory economic conditions,] * * *
``the government should not be permitted to run behind its
debt.'' (President William McKinley)
The nation must make financial sacrifices accompanied by a
stern self denial in public expenditures until we have
conquered the disabilities of our public finance * * * we
must keep our budget balanced for each year. (President
Calvin Coolidge)
``To preserve our independence, we must not let our rulers
load us with perpetual debt. We must make our election
between economy and liberty, or profusion and servitude.''
(Jefferson, 1816)
``There does not exist an engine so corruptive of the
government and so demoralizing of the nation as a public
debt. It will bring on us more ruin at home than all the
enemies from abroad against whom this army and navy are to
protect us.'' (Jefferson, 1821)
``The payments made in discharge of the principal and
interest of the national debt, will show that the public
faith has been exactly maintained.'' (Jefferson, 1801)
``The question whether one generation has the right to bind
another by the deficit it imposes is a question of such
consequence as to place it among the fundamental principles
of government. We should consider ourselves unauthorized to
saddle posterity with our debts, and morally bound to pay
them ourselves.'' (Jefferson)
``I wish it were possible to obtain a single amendment to
our constitution. I would be willing to depend on that alone
for the reduction of the administration of our government to
the genuine principles of its constitution; I mean an
additional article, taking from the federal government the
power of borrowing.'' (Jefferson, 1798)
``The consequences arising from the continual accumulation
of public debts in other countries ought to admonish us to be
careful to prevent their growth in our own.'' (President John
Adams in his Inaugural Address)
``Stewards of the public money should never suffer without
urgent necessity to be transcended the maxim of keeping the
expenditures of the year within the limits of its receipts.
(President John Quincy Adams)
``As the vicissitudes of nations begat a perpetual tendency
to the accumulation of debt, there ought to be a perpetual,
anxious, and unceasing effort to reduce that which at any
time exists, as fast as shall be practicable, consistent with
integrity and good faith.'' (Alexander Hamilton)
``Once the budget is balanced and the debts paid off, our
population will be relieved from a considerable portion of
its present burdens and will find not only new motives to
patriotic affection, but additional means for the display of
individual enterprise.'' (President Andrew Jackson)
``After the elimination of the public debt, the Government
would be left at liberty * * * to apply such portions of the
revenue as may not be necessary for current expenses to such
other objects as may be most conducive to the public security
and welfare.'' (President James Monroe)
``Money being spent without new taxation and appropriation
without accompanying taxation is as bad as taxation without
representation.'' (President Woodrow Wilson)
If there is one omission I fear in the document called the
Constitution, it is that we did not restrict the power of
government to borrow money. (Thomas Jefferson, 1798)
A wise and frugal government, which shall restrain men from
injuring one another, shall leave them otherwise free to
regulate their own pursuits of industry and improvement, and
shall not take from the mouth of labor the bread it has
earned. This is the sum of good government, and this is
necessary to close the circle of our felicities. (Thomas
Jefferson, First Inaugural Address, March 4, 1801)
The public debt is the greatest of dangers to be feared by
a republican government. (Thomas Jefferson)
The question whether one generation has the right to bind
another by the deficit it imposes is a question of such
consequences as to place it among the fundamental principles
of government. We should consider ourselves unauthorized to
saddle posterity with our debts, and morally bound to pay
them ourselves. (Thomas Jefferson, Quoted by George Will in
``It Ought To Be A Crime,'' Washington Post, April 30, 1992)

[[Page S3359]]

[Factsheet from Congressional Leaders United for a Balanced Budget]

Capital Budgeting--Not a Capital Idea for the Constitution

A Constitutional Amendment should reflect broad principles
and should not contain narrow policy decisions such as
defining a capital budget. There is wide disagreement among
policymakers about what should be included in a federal
capital budget. We should not place a concept such as capital
budgeting in the Constitution when there is no consensus on
what constitutes a capital budget.
State and local governments have a check on their use of
capital budgets through bond ratings. If a state government
were to abuse its capital budget, the states bond rating
would drop and the state would be unable to continue to
finance new capital expenditures for borrowing. In addition,
many states require that bond issues be approved by the
voters. These checks on the abuse of capital budgets would
not exist under a federal capital budget, making it far more
likely that a federal capital budget would be abused.
The justification that most businesses and state and local
governments have for capital budgeting is that they
occasionally need to make one-time, extraordinary
expenditures that are amortized over a long period of time.
The federal budget is so huge--$1.5 trillion in 1994--that
almost no conceivable, one-shot project would make even a
small dent in it.
Even the Federal Interstate Highway System, which has been
called the largest peacetime undertaking in all of human
history, was financed on a pay-as-you-go basis. President
Eisenhower initially proposed that the Interstate System be
financed through borrowing. However, Congress kept it on-
budget and financed it through a gas tax at the suggestion of
Senator Albert Gore, Sr. We are unlikely to have another
capital expenditure of this magnitude in the foreseeable
future.
While state capital spending is often placed off-budget, so
are trust fund surpluses. According to a Price-Waterhouse
study, state budgets would be roughly in balance if both
capital expenditures and trust funds were included on budget.
Exempting a capital budget from budget restraints ensures
that spending on capital investments--financed entirely by
debt--will increase. The debt incurred as a result of these
expenditures will crowd out spending on items other than
physical capital.
Less than four percent of federal outlays are for non-
defense physical investment. Given the relatively small and
constant share that capital expenditure have in the federal
budget, there is no need to remove capital expenditures from
the general budget.
S.J. Res. 1/H.J. Res. 28 does not prevent the creation of a
separate operating and capital accounts, but the total budget
must remain in balance. This is consistent with the
recommendations of GAO, which stated,
``. . . the creation of explicit categories for government
capital and investment expenditures should not be viewed as a
license to run deficits to finance those categories . . . .
The choice between spending for investment and spending for
consumption should be seen as setting of priorities within an
overall fiscal constraint, not as a reason for relaxing that
constraint and permitting a larger deficit.''
[Congressional Leaders United for a Balanced Budget--Revised January
30, 1995]

Balanced Budget Amendment--Promoting Honesty in Budgeting

H.J. Res. 1/S.J. Res. 1, the bi-partisan consensus Balanced
Budget Amendment to the Constitution, is written to foreclose
loopholes or evasions in its implementation and enforcement,
while allowing for necessary and beneficial flexibility. It
also will have the salutary effect of providing incentives
for more honest and accurate budgeting than now or in the
past.
The general self-enforcing mechanism in the BBA: The 3/5
vote on the debt limit:
No matter what accounting techniques are used to depict a
balanced budget, and regardless of any ``rosy scenario''
economic assumptions, smoke and mirrors, or honest estimating
mistakes, if actual outlays exceed actual receipts, the
Treasury ultimately would need to borrow in order to meet the
government's obligations. This would require 3/5 votes in
both the Senate and House to raise the debt limit.
The threat of a ``train wreck'' on the debt limit provides
a powerful incentive for truth-in-budgeting, because Congress
and the President could not escape the consequences of
policies that increased the debt. Opponents who focus on the
difficulty of achieving a 3/5 majority miss the point. They
are still focused on what's necessary to run a deficit. The
possibility of a 3/5 debt vote is a deterrent. Facing it is
so undesirable that Congress and the President generally
would do anything to avoid it--even balance the budget!
H.J. Res. 1/S.J. Res. 1 rules out loopholes and
``gimmicks;'' for example:
The amendment could not be evaded by moving items off-
budget. H.J. Res. 1 does not require that a single document,
a ``budget,'' be written in balance. It deals with how total
outlays conform to total receipts. Taking an item ``off-
budget'' in statute still could be used to give that item
priority over others or give it certain protections in the
budget process (as has been done with Social Security), but
would not affect the operation of the BBA. The amendment
would remove the current incentive to move items off-budget
for the purpose of masking a deficit. The possibility of a 3/
5 debt limit vote would deter moving deficit spending ``off-
budget.''
Definitions of terms could not be manipulated to evade the
BBA. Terms such as ``receipts,'' ``debt,'' ``revenue,''
``whole number,'' and ``war'' already appear in the
Constitution and have long-established meanings. Others, such
as ``outlays,'' ``debt held by the public,'' ``budget,'' and
``declaratory judgment'' are universally and solidly
understood, having been long-defined and used in OMB, CBO,
Congressional, legal, and other documents. Committee reports
and floor debates since 1981 have gone to great lengths to
establish a legislative history for, and preventing
misinterpretation of, these and other terms.
H.J. Res. 28/S.J.Res. 1 would promote honesty and accuracy
in budget estimates:
Congress and the President can not plan for a coming fiscal
year without making estimates. Section 1, requiring that
actual outlays and receipts be in balance, and Section 6,
allowing for the use of estimates, operate together as
follows:
Section 6 says estimates may be used in preparing a budget
plan;
Section 1 requires that such planned budgets be in balance;
Following such a budget plan, so long it is reasonable to
do so, complies with Section 1. This means Congress and the
President need not re-open the budget throughout the fiscal
year, simply because of month-to-month fluctuations in
receipts or outlays. (E.g., A wave of last-minute tax
payments could cause actual receipts to fall short of
estimates in one month's and exceed them in the next.)
Indeed, some previous versions have been criticized as
inflexible because they lacked estimates language.
The threat of a 3/5 debt limit vote will enforce the
accuracy of budget estimates.
The experience of our compliance with the caps on
discretionary outlays enacted as part of the 1990 Budget
Enforcement Act illustrates how budgetary restraints provide
an incentive for sound estimates. Although Congress
appropriates budget authority and must rely on estimates of
outlays, it has complied with the outlay caps by taking care
to ensure that the appropriations bills enacted did not pose
a risk of breaching the outlay caps. A balanced budget
amendment would provide a similar, but far stronger,
incentive for improving all budget estimates.
To be safe, Congress should, and probably would, plan small
surpluses in most years.
The BBA would be promoting honesty and accuracy in dealing
with contingent liabilities:
Currently, there is no incentive for Congress and the
President to tackle the politically difficult issues
associated with contingent liabilities such as government
pensions and savings and loan insurance. For example,
Congress repeatedly postponed action on the S & L cleanup,
even though that ultimately resulted in increased costs to
the federal government. By restraining the government's
ability to borrow, H.J.Res. 28/S.J.Res. 1 will provide a
powerful incentive to deal with contingent liabilities
promptly--before they result in unnecessary costs--and
honestly.
____

Emergency Appropriations Should Not be Exempted from the Balanced
Budget Amendment

An amendment to override the balanced budget in case of
disaster or national emergency is unnecessary.
According to the Congressional Budget Office, since 1978
there have been only seven years in which supplemental
appropriations for natural disasters have exceeded $100
million. The incidence of natural disasters requiring large
supplemental appropriations is historically unusual.
The text of the balanced budget amendment provides for the
constitutional requirement for a balanced budget to be waived
with a three-fifths vote of both Houses.
In the past five supplemental bills put before Congress,
both Houses have voted with at least a three-fifths majority
to approve the supplemental funding.
Congress has consistently voted to appropriate funds by at
least three-fifths majority, in the case of national
disaster, economic emergency and war.
In 1991 the Senate passed a bill to offset the costs of
Desert Storm to various governmental agencies, as well as
additional appropriations for food stamps, State unemployment
compensation operations, veterans compensations and pensions,
92 to 8. It passed the House 365 to 43.
Later that year the Senate passed another supplemental bill
providing disaster assistance funds to FEMA and to meet costs
of Desert Storm, 75 to 17. The House passed the same bill 303
to 114.
In 1992 the Senate passed a bill appropriating emergency
funds for hurricane Andrew and hurricane Iniki, 84 to 10. The
House had already passed this bill 297 to 124.
In 1993, the Senate passed a bill for emergency relief for
the major widespread flooding in the Midwest, by voice vote,
the House passed it 400 to 27.
In the most recent emergency supplemental bill that went in
large part to fund victims of the most recent Los Angeles
earthquake, the Senate approved the measure 85 to 10, the
House approved it 337 to 74.
[[Page S3360]] emergency supplemental votes february 1994

This is a summary of emergency supplemental appropriations
from FY '78 through FY '94. The statistics are based on a
review of funds appropriated to FEMA. There are a wide
variety of disaster bailout funds, but this is the best
measure because no broader study of federal disaster funding
is available.
The measures cited here include two non-FEMA supplemental
appropriations for the Small Business Administration and
which appear on the dollar amount list in this section.
____

History of Disaster Supplementals as of February 1994

The table below from the Congressional Budget Office shows
that in the sixteen years since 1978 there have been only
seven years in which Supplemental Appropriations for Natural
Disasters have exceeded $100 million. The incidence of
natural disasters requiring large supplemental appropriations
is historically unusual and the use of these funds has
clearly not been a ``budget buster.''

CERTAIN SUPPLEMENTAL APPROPRIATIONS FOR NATURAL DISASTERS\1\
[By fiscal year, in millions of dollars]
------------------------------------------------------------------------
1978 1980 1989 1990 1992 1993 1994
------------------------------------------------------------------------
P.L. 95-255:
Disaster
relief
(floods)..... 300 ...... ...... ...... ...... ...... ......
P.L. 95-284:
SBA disaster
loans
(floods)..... 758 0 0 0 0 0 0
P.L. 96-304:
FEMA (Love
Canal, NY)... 0 870 0 0 0 0 0
SBA disaster
loans (Mt.
St. Helens).. 0 1,177 0 0 0 0 0
P.L. 101-100:
FEMA disaster
relief (HUGO) 0 0 1,108 0 0 0 0
P.L. 101-130:
Loma Prieta:
Stafford
disaster
relief... 0 0 0 1,100 0 0 0
Federal-
aid to
highways. 0 0 0 1,000 0 0 0
SBA
disaster
loans.... 0 0 0 500 0 0 0
Unanticipa
ted needs 0 0 0 250 0 0 0
P.L. 102-229:
FEMA disaster
relief....... 0 0 0 0 943 0 0
Commodity
Credit
Corporation.. 0 0 0 0 1,750 0 0
P.L. 102-302:
FEMA disaster
relief....... 0 0 0 0 300 0 0
SBA disaster
loans........ 0 0 0 0 195 0 0
Employment &
training..... 0 0 0 0 500 0 0
P.L. 102-368:
Commodity
Credit
Corporation.. 0 0 0 0 430 100 0
SBA disaster
loans........ 0 0 0 0 357 0 0
FEMA disaster
relief....... 0 0 0 0 2,517 0 143
Assisted
housing...... 0 0 0 0 183 100 0
P.L. 103-76:
Commodity
Credit
Corporation.. 0 0 0 0 0 1,050 0
Prior
contingen
cy;
released
8/12/93.. 0 0 0 0 0 300 0
Borrowing
authority 0 0 0 0 0 0 900
Economic
development
assistance... 0 0 0 0 0 100 0
Corps of
Engineers.... 0 0 0 0 ...... ...... ......
Flood
control,
Mississip
pi River. 0 0 0 0 0 120 60
Federal-aid to
highways..... 0 0 0 0 0 100 0
Community
development
grants....... 0 0 0 0 0 200 0
FEMA disaster
loans........ 0 0 0 0 0 1,735 265
P.L. 103-121:
SBA disaster
loans (LA
earthquake).. 0 0 0 0 0 0 140
-------------------------------------------------------
Total... 1,058 2,047 1,108 2,850 7,175 3,805 1,508
------------------------------------------------------------------------
\1\The estimates on this table are for major disasters where the
appropriations exceeded $100 million.

TABLE 1.--HOUSE AND SENATE VOTES ON SELECTED APPROPRIATION MEASURES
INCLUDING DISASTER FUNDS, FY1978-FY1994
[as of February 1994]
------------------------------------------------------------------------
Fiscal Year/bill number/ Final passage\1\
name (Public law ------------------------------------------------
number) House Senate
------------------------------------------------------------------------
FY1978:
H.J.Res. 873, Voice\2\............... ......................
Supplemental (P.L.
95-284).
H.J.Res. 796, 393-4\3\............... Voice\3\
Supplemental (P.L.
95-255).
FY1979:
H.R. 4289, 284-132................ Voice
Supplemental (P.L.
96-38).
FY1980:
H.R. 7542, 291-117................ 37-19
Supplemental (P.L.
96-304).
FY1981:
None .....................
FY1982:
None .....................
FY1983:
None .....................
FY1984:
None .....................
FY1985:
None .....................
FY1986:
H.R. 4515, 355-52................. Voice
Supplemental (P.L.
99-349)
FY1987:
None .....................
FY1988:
None .....................
FY1989:
H.J.Res. 407, Voice\2\...............
Continuing
Resolution, (P.L.
101-100)\4\.
FY1990:
H.J.Res. 423, 303-107\2\.............
Supplemental (P.L.
101-130).
H.R. 4404, 308-108................ Voice
Supplemental (P.L.
101-302).
FY 1991:
None .....................
FY 1992:
H.R. 5620, Voice\5\............... Voice\5\
Supplemental (P.L.
102-368).
H.R. 5132, 249-168................ Voice
Supplemental (P.L.
102-302).
H.J. Res. 157, 303-114................ Voice
Supplemental (P.L.
102-229).
FY 1993:
H.R. 2667, Voice\5\............... Voice\5\
Supplemental (P.L.
103-75).
FY 1994:
H.R. 2519, 303-100................ 90-10
Commerce, Justice,
State (P.L. 103-
121).
H.R. 3759, 245-65................. Voice
Supplemental (P.L.
103-211).
------------------------------------------------------------------------
Sources: Library of Congress. Bill digest files in Scorpio (C103, C102,
C101, CG99, CG96); Daily Digest. Congressional Record, v. 124, March
22, 1978, p. D 230, March 23, 1978 p. D 234, & May 12, 1978, p. D 403;
Daily Digetst. Congressional Record, v. 132, June 24, 1986. p. D 433.
U.S. Library of Congress. Congressional Research Service. Federal
Funding for Disasters. Memorandum by Keith Bea, dated November 3,
1993.

\1\Votes on final passage are votes on conference reports, unless
otherwise noted.
\2\No conference report, House agreed to Senate amendments.
\3\On initial passage, the House and Senate passed the same bill.
\4\This was a continuing resolution, which included supplemental
appropriations.
\5\No conference report, both Houses considered amendments between the
two Houses. All votes were voice votes.

____
CRS Report for Congress,

April 30, 1992.

(By Robert Keith and Edward Davis)

A Balanced Federal Budget: Major Statutory Provisions

summary

During the remainder of the 102nd Congress, the House and
Senate are expected to consider whether the Constitution
should be amended to require a balanced Federal budget. Both
chambers have addressed this issue in past years, but
Congress has never enacted such an amendment for ratification
by the States. Although the Constitution does not prescribe a
balanced Federal budget, provisions have been enacted into
law on several occasions stating this as a goal or policy of
the Federal Government.
This report identifies and briefly discusses the major
statutory provisions that pertain to the goal or policy of a
balanced Federal budget. These provisions range in scope from
a simple, one-line statement to a lengthy set of provisions
involving complicated implementing procedures. Most of them
state that a balanced Federal budget is a national goal, or
require that the President include proposals or information
applicable to such a goal in his annual budget submission and
economic report to Congress, but do not establish procedures
to enforce compliance. While most of the provisions remain in
effect, some were applicable to fiscal-year periods that have
expired and have been repealed.
The most well-known statute in this category is the
Balanced Budget and Emergency Deficit Control Act of 1985,
commonly referred to as the Gramm-Rudman-Hollings (GRH) Act.
The 1985 GRH Act set forth annual deficit targets leading to
a balanced Federal budget by fiscal year 1991 and established
an automatic process for across-the-board spending cuts
(known as ``sequestration'') aimed at keeping the deficit
within the statutory targets. The detailed enforcement
mechanism distinguishes the GRH Act from other balanced-
budget statues.
[[Page S3361]] The GRH Act was amended extensively in 1987
and 1990. The 1987 amendments postponed the balanced-budget
goal until fiscal year 1993; the most recent amendments
extend the sequestration process through fiscal year 1995,
provide for adjustable deficit targets, and change the focus
of the GRH Act from achieving budgetary balance to
controlling the growth of discretionary spending and
maintaining deficit neutrality regarding legislative changes
in mandatory spending and revenues. During the period from
fiscal year 1986 through fiscal year 1991 (when fixed deficit
targets were in effect), the actual deficit exceeded the
deficit target in the GRH Act by between about $6 billion
(fiscal year 1987) and $205 billion (fiscal year 1991).
Other major statutes pertaining to the goal of a balanced
Federal budget include: a law increasing the public debt
limit in 1979, the Byrd Amendment of 1978, the Humphrey-
Hawkins Act of 1978, the Revenue Act of 1978, the Revenue Act
of 1964, and the Budget and Accounting Act of 1921.
introduction

gramm-rudman-hollings act of 1985

The most well-known statute in this category is the
Balanced Budget and Emergency Deficit Control Act of 1985
(Title II of P.L. 99-177, Increase in the Public Debt Limit;
99 Stat. 1038-1101; December 12, 1985), commonly referred to
as the Gramm-Rudman-Hollings (GRH) Act. The 1985 GRH Act set
forth annual deficit targets leading to a balanced Federal
budget by fiscal year 1991 and established an automatic
process for across-the-board spending cuts (known as
``sequestration'') aimed at keeping the deficit within the
statutory targets. The detailed enforcement mechanism
distinguishes the GRH Act from other balanced-budget
statutes.
The Act was modified extensively in 1987 by the Balanced
Budget and Emergency Deficit Control Reaffirmation Act 1987
(Title I of P.L. 100-119, Increase in the Public Debt Limit;
101 Stat. 754-784; September 29, 1987), which extended the
goal of a balanced budget to fiscal year 1993.
Most recently, the GRH Act was amended extensively by the
Budget Enforcement Act (BEA) of 1990 (Title XIII of P.L. 101-
508, Omnibus Budget Reconciliation Act of 1990; 104 Stat.
1388-573 through 1388-630; November 5, 1990). The BEA revised
the deficit targets in the GRH Act, making the targets
adjustable rather than fixed, and extended the sequestration
process for two more years--through fiscal year 1995
(although the budget is not required, and is not expected, to
be in balance by that time). Additionally, two new procedures
enforceable by sequestration were established: (1) adjustable
limitations on different categories of discretionary spending
funded in the annual appropriations process and (2) a ``pay-
as-you-go'' process to require that increases in direct
spending (i.e., spending controlled outside of the annual
appropriations process) or decreases in revenues due to
legislative action are offset so that there is no net
increase in the deficit.
The 1990 amendments changed the focus of the GRH Act from
achieving budgetary balance to controlling the growth of
discretionary spending and maintaining deficit neutrality
regarding legislative changes in mandatory spending and
revenues. This change in focus is reflected in Table 1, which
shows the original and revised GRH deficit targets.

TABLE 1. ORIGINAL AND REVISED DEFICIT TARGETS
[In billions of dollars]
------------------------------------------------------------------------
Revision
Original 1987 1990 in fiscal
Fiscal year target revision revision year 1993
budget
------------------------------------------------------------------------
1986.......................... 171.9 ........ ........ .........
1987.......................... 144 ........ ........ .........
1988.......................... 108 144 ........ .........
1989.......................... 72 136 ........ .........
1990.......................... 36 100 ........ .........
1991.......................... 0 64 327 .........
1992.......................... ......... 28 317 .........
1993.......................... ......... 0 236 419.4
1994.......................... ......... ........ 102 304.9
1995.......................... ......... ........ 83 300.5
------------------------------------------------------------------------
Note: The targets set in 1990 and revised subsequently, unlike the
targets set in 1985 and revised in 1987, do not reflect the Social
Security trust fund surpluses or the Postal Service.

The GRH Act is linked to the Congressional Budget Act of
1974 (P.L. 93-344, as amended), principally by the
requirement in Section 606 of the 1974 Budget Act that budget
resolutions not recommend deficits in excess of the GRH Act
targets. Additionally, the unadjusted deficit targets and
discretionary spending limits are set forth in Section 601(a)
of the 1974 Budget Act.
During the period that the GRH Act has been in effect,
sequestration has been triggered five times--once each for
fiscal years 1986, 1988, and 1990, and twice for fiscal year
1991. The sequestration reductions made for fiscal year 1986
were voided by court action and later reaffirmed, the
reductions for fiscal year 1988 were later rescinded, the
reductions for fiscal year 1990 were modified substantially,
and the reductions for fiscal year 1991 were applied in one
instance to domestic discretionary programs and in another to
international discretionary programs (the latter reductions
were later rescinded). With regard to the other two fiscal
years, sequestration was forestalled for fiscal year 1987 by
the enactment of alternative deficit reduction measures and
was avoided for fiscal year 1989 because the estimated
deficit excess was less than the $10 billion margin-of-error
amount.
During the period from fiscal year 1986 through fiscal year
1991 (when fixed deficit targets were in effect), the actual
deficit exceeded the deficit target in the GRH Act (see Table
2). The overage ranged from about $6 billion for fiscal year
1987 to nearly $205 billion for fiscal year 1991.

TABLE 2.--ACTUAL DEFICIT COMPARED TO MAXIMUM DEFICIT AMOUNT: FISCAL YEAR
1986-1991
[In billions of dollars]
------------------------------------------------------------------------
Actual
Maximum Actual deficit
Fiscal year deficit deficit over
amount target
------------------------------------------------------------------------
1986................................... 171.9 221.2 49.3
1987................................... 144.0 149.8 5.8
1988................................... 144.0 155.2 11.2
1989................................... 136.0 153.5 17.5
1990................................... 100.0 220.5 120.5
1991................................... 64.0 268.7 204.7
------------------------------------------------------------------------
Note: Deficit amounts are presented on a consolidated basis (including
the transactions of off-budget entities--the Social Security trust
funds and the Postal Service).

The major provisions of the Gramm-Rudman-Hollings Act and
the 1974 Budget Act are codified in Titles 2 and 31 of the
United States Code. The text of these laws is contained in
publications of the House and Senate Budget Committees: (1)
House Budget Committee, Congressional Budget and Impoundment
Control Act of 1974 and Part C (and Sections 274 and 275) of
the Balanced Budget and Emergency Deficit Control Act of 1985
and Subtitles C and
E of Title XIII of the Budget Enforcement Act of 1990 as
Amended Through December 31, 1990, committee print, serial
no. CP-2, February 1991, and (2) Senate Budget Committee,
Budget Process Law Annotated, committee print, S. Prt.
102-22, April 1991.

TEMPORARY INCREASE IN THE PUBLIC DEBT LIMIT (1979)

In 1979, Congress added two sections to a measure providing
an increase in the debt limit (P.L. 96-5, Temporary Increase
in the Public Debt Limit; 93 Stat. 8; April 2 1979). The
provisions were intended to bring balanced budget proposals
for fiscal year 1981 and 1982 before Congress for
consideration by requiring both the Budget Committees and the
President to submit them. Both sections were repealed on
September 13, 1982, upon the enactment of P.L. 97-258, which
recodified Title 31 of the United States Code (``Money and
Finance'').
Budget Committee Reports.--The first provision, Section 5,
required the House and Senate Budget Committees to report
balanced budgets by April 15 of 1979, 1980, and 1981. Section
5 stated:
Congress shall balance the Federal budget. Pursuant to this
mandate, the Budget Committees shall report, by April 15,
1979, a fiscal year budget for 1981 that shall be in balance,
and also a fiscal year budget for 1982 that shall be in
balance, and by April 15, 1980, a fiscal year budget for 1981
that shall be in balance and by April 15, 1981, a fiscal year
budget for 1982 that shall be in balance; and the Budget
Committees shall show the consequences of each budget on each
budget function and on the economy, setting forth the effects
on revenues, spending, employment, inflation, and national
security.
1979 Reports. In 1979, the House Budget Committee complied
with the requirement by issuing Toward a Balanced Budget:
Report Pursuant to Public Law 96-5 (House Report 96-96, April
13, 1979, 102 pages) and a companion committee print that
included majority and minority staff reports. The Committee
reported the budget resolution for fiscal year 1980 (H. Con.
Res. 107) the same day, but it did not include
recommendations for fiscal years 1981 or 1982 (House Report
96-95, April 13, 1979)
The Senate Budget Committee reported two budget resolutions
for fiscal year 1980 (Senate Report 96-68, April 12, 1979);
both resolutions included recommendations for fiscal years
1981 and 1982. The principal budget resolution, S. Con. Res
22, proposed a surplus of $0.5 billion for fiscal year 1981
and $0.7 billion for fiscal year 1982. The second resolution,
S.
[[Page S3362]] Con. Res. 23, was referred to as the
``alternative congressional budget.'' It recommended a
deficit of $18.2 billion for fiscal year 1981, but a surplus
of $12.3 billion for fiscal year 1982.
The House and Senate agreed to a final version of H. Con.
Res. 107 (the House adopted the Senate amendment of May 24,
1979) that recommended surpluses of $5.0 billion and $4.1
billion for fiscal years 1981 and 1982, respectively.
1980 Reports. In 1980, the House Budget Committee reported
a budget resolution for fiscal year 1981 (H. Con. Res. 307,
House Report 96-857, March 26, 1980) that recommended
surpluses of $2.0 billion and $11.7 billion for fiscal years
1981 and 1982, respectively. The Senate Budget Committee
reported a budget resolution (S. Con. Res. 86, Senate Report
96-654, April 9, 1980) that recommended a balanced budget for
fiscal year 1981 (a deficit of zero) and a surplus of $10.0
billion for fiscal year 1982.
The final version of the budget resolution (H. Con. Res.
307) agreed to by the House and Senate (the Senate adopted
the House amendment of June 12, 1980 to its amendment)
recommended a surplus of $0.2 billion for fiscal year 1981.
With respect to fiscal year 1982, the House recommended a
surplus of $26.8 billion and the Senate recommended a surplus
of $5.8 billion.
1981 Reports. In 1981, the House Budget Committee reported
a budget resolution for fiscal year 1982 (H. Con. Res. 115,
House Report 97-23, April 16, 1981) that recommended a
deficit of $25.6 billion for that fiscal year, but a surplus
of $25.8 billion by fiscal year 1984. The Senate Budget
Committee reported a budget resolution (S. Con. Res. 19,
Senate Report 97-49, May 1, 1981) that recommended a deficit
of $48.8 billion for fiscal year 1982, but a balanced budget
(a deficit of zero) for fiscal year 1984.
The House and Senate finally agreed on a budget resolution
(H. Con. Res. 115, House Report 97-46, May 15, 1981) that
recommended a deficit of $37.65 billion for fiscal year 1982,
but a surplus of $1.05 billion for fiscal year 1984.
Alternate Budget Proposals of the President.--The second
provision, Section 6, required the President to submit
alternate proposals for a balanced budget if his budget
submission for fiscal years 1981 or 1982 recommended a
deficit for either fiscal year. Section 6 stated:
(a) If a budget which is transmitted by the President to
the Congress under section 201 of the Budget and Accounting
Act, 1921, would, if adopted, result in a deficit in fiscal
year 1981 or in fiscal year 1982, the President shall also
transmit alternate budget proposals which, if adopted, would
not result in a deficit.
(b) Such alternate budget proposals shall be transmitted
with the budget and, except as provided in subsection (c),
shall be in such detail as the President determines necessary
to carry out the purposes of this section.
(c) Alternate budget proposals for a fiscal year
transmitted under subsection (a) shall include a clear and
understandable explanation of specific differences between
the budget and alternate budget proposals.
Fiscal Year 1981 Budget. President Carter submitted his
budget for fiscal year 1981 to Congress on January 28, 1980.
The President proposed a deficit for fiscal year 1981 of
$15.8 billion and a surplus for fiscal year 1982 of $4.8
billion. The alternate proposals required by P.L. 96-5 were
set forth on pages 319-326 of the budget and explored the
impact of both $20 billion in revenue increases and spending
reductions (including such options as a six-percent surtax on
individual and corporate income, increased payroll taxes, the
elimination of Federal pay raises, no real growth in defense,
and holding cost-of-living increases in indexed programs to
three-fourths of the increase in the Consumer Price Index).
On March 31, 1980, President Carter sent a package of
budget revisions to Congress, calling for surpluses of $16.5
billion for fiscal year 1981 and $41.5 billion for fiscal
year 1982.
Fiscal Year 1982 Budget. President Carter submitted his
budget for fiscal year 1982 to Congress on January 15, 1981,
shortly before leaving office. He proposed a deficit of $55.2
billion in fiscal year 1981 and $27.5 billion for fiscal year
1982. The alternate proposals required by P.L. 96-5 were
included on pages 312-320 of the budget.
On March 10, 1981, President Reagan submitted to Congress
revisions to the Carter budget for fiscal year 1982. The
revised budget proposals recommended deficits for fiscal year
1981 and 1982 of $54.9 billion and $45.0 billion,
respectively.
The actual deficits (on a consolidated basis) for fiscal
years 1981 and 1982 were $79.0 billion and $128.0 billion,
respectively.

byrd amendment of 1978

The ``Byrd Amendment,'' named for former Harry F. Byrd, Jr.
of Virginia, was included in the Bretton Woods Agreements
Amendments Act of 1978 (Section 7 of P.L. 95-435; 92 Stat.
1053; October 10, 1978). In its original form, the Byrd
Amendment stated: ``Beginning with fiscal year 1981, the
total budget outlays of the Federal Government shall not
exceed its receipts.''
Two years later, the Byrd Amendment was modified by the
Bretton Woods Agreements Amendment Act of 1980 (Section 3 of
P.L. 96-389; 94 Stat. 1553; October 7, 1980) to read as
follows: ``The Congress reaffirms its commitment that
beginning with fiscal year 1981, the total outlays of the
Federal Government shall not exceed its receipts.''
In 1982, as part of the recodification of Title 31 of the
United States Code (P.L. 97-258; 96 Stat. 908; September 13,
1982), the Byrd Amendment was restated in its current form:
``Congress reaffirms its commitment that budget outlays of
the United States Government for a fiscal year may not be
more than the receipts of the Government for that year'' (see
31 U.S.C. 1103 (Budget Ceiling)).
humphrey-hawkins act of 1978

The Full Employment and Balanced Growth Act of 1978 (P.L.
95-523), commonly known as the Humphrey-Hawkins Act, included
two provisions (in the form of amendments to the Employment
Act of 1946) that pertain to the goal of a balanced Federal
budget. First, Section 103(a) of the Act (92 Stat. 1892-1893)
amended the required elements of the President's annual
economic Report to Congress to include numerical goals for
certain measurements of economic activity consistent with,
among other things, a balanced Federal budget. The amended
provision of the Employment Act of 1946 (15 U.S.C. 1022,
Economic Report of the President) states in part:
The President shall transmit to the Congress during the
first twenty days of each regular session * * * an economic
report (hereinafter in this chapter referred to as the
``Economic Report'') together with the annual report of the
Council of Economic Advisers, submitted in accord with
section 1023(c) of this title, setting forth--
(2)(A) annual numerical goals for employment and
unemployment, production, real income, productivity, Federal
outlays as a proportion of gross national product, and prices
for the calendar year in which the Economic Report is
transmitted and for the following calendar year, designated
as short-term goals, which shall be consistent with achieving
as rapidly as feasible the goals of full employment and
production, increased real income, balanced growth, fiscal
policies that would establish the share of an expanding gross
national product accounted for by Federal outlays at the
lowest level consistent with national needs and priorities, a
balanced Federal budget, adequate productivity growth, price
stability, achievement of an improved trade balance, and
proper attention to national priorities * * * [Emphasis
added; other provisions relating to the Economic Report and
the goal of obtaining a balanced Federal budget are contained
in 15 U.S.C. 1022a and 1022b]
Second, Section 106 of the Act (92 Stat. 1895-1896) added a
new section to the Employment Act of 1946 (15 U.S.C. 1022c,
inclusion of Priority Policies and Programs in President's
Budget), which states in part:
To contribute to the achievement of the goals under the
Full Employment and Balanced Growth Act of 1978, the
President's Budget for each fiscal year beginning after
October 27, 1978, shall include priority policies and
programs, which shall include, to the extent deemed
appropriate by the President, consideration of the
following--
(I) proper attention to balancing the Federal budget; * * *
revenue act of 1978

The Revenue Act of 1978 (P.L. 95-600) called for a balanced
budget in fiscal years 1982 and 1983. Section 3 of the Act
(Policy With Respect to Additional Tax Reductions; 26 U.S.C.
1 note; 92 Stat. 2767), stated:
As a matter of national policy the rate of growth in
Federal outlays, adjusted for inflation, should not exceed 1
percent per year between fiscal year 1979 and 1983; Federal
outlays as a percentage of gross national product should
decline to below 21 percent in fiscal year 1980, 20.5 percent
in fiscal year 1981, 20 percent in fiscal year 1982 and 19.5
percent in fiscal year 1983; and the Federal budget should be
balanced in fiscal years 1982 and 1983. If these conditions
are met, it is the intention that the tax-writing committees
of Congress will report legislation providing significant tax
reductions for individuals to the extent that these
reductions are justified in the light of prevailing and
expected economic conditions. [Emphasis added]

revenue act of 1964

The Revenue Act of 1964 (P.L. 88-272) included a statement
that Congress' action on the measure was intended to bring
about a balanced budget, although no reference was made to a
specific fiscal year. Section 1 of the Act (Declaration by
Congress; 78 Stat. 19), stated:
It is the sense of Congress that the tax reduction provided
by this Act through stimulation of the economy, will, after a
brief transitional period, raise (rather than lower) revenues
and that such revenue increases should first be used to
eliminate the deficits in the administrative budgets and then
to reduce the public debt. To further the objective of
obtaining balanced budgets in the near future, Congress by
this action, recognizes the importance of taking all
reasonable means to restrain Government spending and urges
the President to declare his accord with this objective.

budget and accounting act of 1921

Section 202 of the Budget and Accounting Act of 1921 (P.L.
67-13; 42 Stat. 21; June 10, 1921) requires the President to
make appropriate recommendations to Congress in the budget
whenever the estimates of revenues and spending in the budget
show a deficit or a surplus. In its original form, the
section directed the President to recommend ``new taxes,
loans, or other appropriate action'' to meet a projected
deficit. When the section was restated in the 1982
recodification of
[[Page S3363]] Title 31 of the United States Code, the
specific reference to new taxes and loans was removed. In its
current form (31 U.S.C. 1105(c)), the section states:
The President shall recommend in the budget appropriate
action to meet an estimated deficiency when the estimated
receipts for the fiscal year for which the budget is
submitted (under laws in effect when the budget is submitted)
and the estimated amounts in the Treasury at the end of the
current fiscal year available for expenditure in the fiscal
year for which the budget is submitted, are less than the
estimated expenditures for that year. The President shall
make recommendations required by the public interest when the
estimated receipts and estimated amounts in the Treasury are
more than the estimated expenditures.
____

Mr. LEAHY. Mr. President, I am proud of the action taken by the
Senate today. This vote was what serving in the Senate is really
about--having the courage to do what is right, refusing to pass the
buck to the States, standing up to special interest groups and voting
our conscience. Once it become obvious that proponents of this
constitutional amendment planned to use the annual surpluses in the
Social Security trust fund to mask the true deficit, the so-called
balanced budget amendment was doomed.
If this vote had been a secret ballot, it would have been lucky to
get 40 votes. This is a lesson in why you don't amend the Constitution
by taking a poll.
I have commended many of my colleagues for voting against the so-
called balanced budget amendment. In particular, I believe that the
senior Senator from West Virginia [Mr. Byrd] and the senior Senator
from Oregon [Mr. Hatfield] should be commended. They were true profiles
in courage and the country is indebted for their courageous leadership.

the proposed constitutional amendment requiring a balanced budget

Mr. ROCKEFELLER. Mr. President, this has been a historic day in the
U.S. Congress. This afternoon, each of us casted our vote on whether to
attach an amendment to the U.S. Constitution that would require in the
strictest possible terms a balanced Federal budget in the next 7 years.
And I joined my fellow and senior Senator from West Virginia, Senator
Byrd, who led a serious and important battle against the amendment, in
voting against this idea. I voted to defend West Virginians from the
flaws and dangers of this amendment, and to help ensure that our State
is not forced once again to pay the costs of others' political agendas,
past mistakes, and potential for reckless harm.
Today's vote was another victory for the idea that promises like
Social Security should be kept. That Congress should focus on making
real choices and setting priorities in dealing with the Federal
Government's budget, instead of using the Constitution to blindly do
the job.
I have no doubt this idea for a constitutional amendment will be
pushed again. For that reason, I want to outline my concerns again.
This proposed constitutional amendment will affect the lives of every
single West Virginian, and every single American--children, parents,
and grandparents; seniors, workers, and students; our large and small
businesses, and all their workers; the poor and the disabled--everyone.
So it is critical that we fully understand what it proposes to do and
how it will work.
I suggest that we all have to be able to answer a few key questions:
First, can the constitutional balanced budget amendment accomplish its
goal of bringing the deficit down to zero in 7 years? Second, how it
will accomplish that goal? And third, what are the consequences of
moving to a zero deficit over a short period of time? Who will
sacrifice, what programs will be cut, what programs will be spared?
In short, who wins and who loses? That's what West Virginians tell me
they want to know about the balanced budget amendment. They're willing
to participate in a national crusade to get the deficit down--they
supported the significant downpayment we made on reducing the deficit
in 1993. As always, West Virginians are willing to do their fair
share--but they want to know what that share will be. They want to know
up front. And so do I. Before I give you my
best answers to those three key questions, I want to note why the
answers to these questions are essential.

West Virginia has been told to trust Washington's promises about
balancing the budget and cutting taxes in the past, as recently as the
early 1980's. We didn't have the say in the matter then, and we were
devastated. we don't want to let that happen again. We remember very
well what happens when the Federal Government claims it can reduce its
own costs, and then ignores the costs it foists onto the States.
I remember well because I was Governor of West Virginia, when all too
similar promises were made. I watched Congress promise to balance the
budget while cutting taxes. I saw what happened in living Color. West
Virginia's plants shut down and threw working families into
foreclosures and bankruptcies. Our kids were forced to drop out of
college because tuition money had to go to their families' mortgage
payments and medical expenses. Our senior citizens had to keep their
thermostats at 58 degrees because they could not afford heating oil.
When I say I want to see the hidden details of this balanced budget
amendment, it is not a political ploy or out of intellectual curiosity.
It is because I have a contract with West Virginia. This time around
I am here in Congress, not working in the State House, and I insist
that West Virginia be told how this is going to be done. I insist on
behalf of the residents of West Virginia. West Virginians take their
right to know so seriously that the West Virginia Legislature passed a
bipartisan resolution on February 14, 1995, reaffirming the importance
of their right to know the details of the balanced budget amendment.
The West Virginia resolution urged Congress to submit:

[A] Balanced Budget Constitutional Amendment to the States
for ratification only if Congress provides a detailed
projection of what reductions will be made in the Federal
budget and how these will affect the government and people of
West Virginia, including, but not limited to, the effect on
Social Security benefits, Medicare, Medicaid, education,
highway moneys, including completion of the Appalachian
corridor system, and other programs necessary to the health
and well-being of the people of our State.

It's that simple. If you don't tell me how reaching a balanced budget
is going to be achieved so I can share that information with West
Virginia, you won't have my vote.
Democrats proposed just such an amendment. This amendment, the
citizens' right to know amendment, would have given the States and
their residents the right to know how we intend to reach a zero deficit
by 2002. This improvement was offered by Senator Daschle on behalf of
our Democratic Senate colleagues. It was summarily rejected, mostly on
party lines, early in the debate on the balanced budget amendment.
I am both shocked and disappointed that a majority of Members serving
in the U.S. Senate chose to deny the people whom they represent the
right-to-know what it would take to reach a balanced budget. And I am
forced to conclude what a number of Republican leaders have stated
publicly is the case, they believe that if the people knew what it
would take to balance the budget--they might not support the
constitutional amendment.
The Senate also considered a proposed revision to this constitutional
amendment to protect Social Security's trust funds. I voted for that
idea, and watched my colleagues in support of the amendment proceed to
vote to not protect Social Security. How can West Virginians--working
people and seniors--trust their elected officials when they pay into a
trust fund that's supposed to be dedicated only to Social Security, and
see this rejection of the idea of keeping that promise. The failure of
this constitutional amendment to protect Social Security is a reason
alone to reject it.
In fact, surveys of public opinion show over and over again that
support for this amendment plummets to 32 percent when they learn that
Social Security could be cut. I want to be clear. The constitutional
amendment before the Senate today could lead to cuts in Social
Security, and if it had prevailed, I am sure it would result in cuts in
Social Security.
Having said that, let us turn to the key questions: Can the amendment
do what its exponents claim and how, and what does that mean?
[[Page S3364]] Question 1--Can the constitutional amendment achieve a
balanced budget by 2002?
A careful reading of the actual legislative language of the balanced
budget amendment makes clear the amendment alone will do nothing to
balance our budget. It will not make us any smarter or wiser, or fairer
when it comes time to proceed with the actual budget bills required to
make tangible progress toward deficit reduction.
This Congress does not need a constitutional amendment to perform its
job of deficit reduction and fiscal prudence. Nothing in this provides
Congress with any new authority to reduce the deficit, make tough
budget cuts, or increase revenues. What the amendment says is that the
Constitution requires Congress to balance the budget--and little more.
Provisions are included which permit waiving the balanced budget
requirements, but they have extraordinary hurdles attached to them in
the form of supermajority rollcall votes. Other unprecedented
provisions in this amendment would
rewrite our Constitution's system of checks and balances, in addition
to the provisions which upset the fundamental principles of majority
rule.

The amendment does not lay out explicit definitions of what should or
should not be counted in tallying up the deficit, or reducing it. It
doesn't protect any program, not Social Security, not Medicare, not
defense, not veterans, not children's programs, not disaster aid.
Congress already has the power to reduce the deficit. It doesn't need
the algebra of fiscal policy written into the Constitution to do its
job. And some of us in Congress, myself and my fellow West Virginian,
the great Senator Byrd included, have stepped up to the plate and
helped reduce the deficit. Congress has proven it can reduce the
deficit on its own. We proved that in 1993 during the budget
reconciliation debate--and we should all learn from that lesson. That
congressional budget resolution, not a constitutional dictate, reduced
the deficit. And Congress can and should reduce the deficit again. We
should make our choices about how to do it prudently. We should take
into consideration the benefits provided by certain Government programs
and services, from Medicare to veterans benefits to public health
programs to environmental protection. But continue on the path of
deficit reduction we can and must.
In 1993, when the Vice President had to cast the final Senate vote
for the President's budget to put us over the edge and ensure we made a
sizeble downpayment on the deficit, Democrats voted to streamline and
cut popular Federal programs, to ask individual Americans to contribute
to our national effort to reduce the deficit, and to increase Federal
revenues where appropriate.
That vote was about real deficit reduction--not a popular gimmick,
not a quick constitutional fix that pretends to reduce the deficit, but
is nothing more than a soundbyte so we can say we've resolved to get
our financial house in order.
Should a balanced budget amendment pass this year, the national
deficit for 1995 will be exactly the same tomorrow as it is today, even
if this constitutional balanced budget amendment were to pass
overwhelmingly. That fact seems to have been obscured by much of the
talk surrounding this amendment.
The truth is that those who believe we need to start making the tough
choices about how to reduce the deficit won't find any tough choices in
the actual amendment. Indeed, I would argue that this amendment is an
easy way out--it allows Members to declare their support for a balanced
budget amendment, and lets them avoid the question of how we're going
to do it. That's a copout in my book. And it is a huge step backward
from the progress we made under the administration's 1993 budget that
put us on the path to a reduced deficit with explicit, program-by-
program cuts.
A specific budget plan that details how we will achieve a balanced
budget is the only real way to reduce the deficit and balance the
budget--with or without this constitutional amendment. We have seen no
such plan from the Republican majority during the debate of this
amendment, although the new majority leader has shared his speculation
about the level of some cuts which might be necessary with some news
organizations.
Just this week, the new chairman of the Finance Committee, Senator
Packwood, has speculated what kind of cuts would be necessary out of
the health care programs for the elderly and disabled, and for poor
children and pregnant women--$250 billion out of Medicare and Medicaid
over the next 5 years, and some $400 billion over the full 7-year
timeframe to reach balance. That's late breaking news from some of the
Republican leaders and it raises real questions about why we have been
provided with so little in terms of hard numbers to date.
I know West Virginia seniors, rural hospitals, the disabled, and
doctors who care for Medicare and Medicaid patients will be
significantly affected by the unprecedented cuts described by Senator
Packwood. But even as the new congressional leadership begins to give
us real numbers about what will be required of certain programs--I have
heard very little about how they are going to make those cuts--which
providers' rates will be cuts, how much more seniors will pay out-of-
pocket, if children can still count on receiving basic health care
services, and so on. The lack of details has been astounding.
Question 2--How will we achieve the goal of a balanced budget in 7
years?
My answer to question 1 was that the constitutional amendment would
not, of and unto itself, balance the budget. It merely says we have to
do it. The only answer I can offer to question 2 is those in control of
the numbers haven't told us how they will achieve the goal. They just
say they will. They say ``trust us.'' That is it. Thats all the detail
you get from the amendment.
True, by thinking about the basic components of the Federal budget,
you can start figuring out what programs will take major hits under a
balanced budget amendment--the health programs, Medicare and Medicaid,
Social Security if Congress reneges on its ephemeral promise to protect
it. Even the staff of the Republican chairman of the Budget Committee,
Senator Domenici's staff, has concluded that over $664 billion
in cuts will be required in non-Social Security, non-defense mandatory
entitlement programs to reach a zero deficit by the year 2002. That's
nearly $100 billion in cuts every year if you spread it out. But they
will not tell you how.

I want to take a moment to explain a couple of very important
amendments to the balanced budget resolution, and my views of them. You
will recall that the Democratic amendment to exempt the Social Security
Program from the calculations of the constitutional balanced budget
amendment was rejected by a majority of Members. I voted for that
initial amendment to protect Social Security because I saw it as a way
to protect Social Security--and other--people from unfair harm, from
broken promises, and for the sound financial reason that Social
Security has not contributed to our deficit problems. It is a trust
fund.
During the amendment process, I also voted for additional protections
for other vital programs as well, but that approach to protecting
certain populations from the ravages of the balanced budget amendment
failed.
Recognizing that a series of those protective amendments failed to
win passage, I could not vote for the substitute balanced budget
amendment offered by Senator Feinstein. The amendment has the laudable
goal of, once again, attempting to protect Social Security
beneficiaries as I voted to do earlier in this process, but it still
would have required a balanced budget in a 7-year timeframe. This
amendment would still put a straitjacket on the country's economic and
budget policy, it could still cause the devastating effects that the
main proposal before us poses for West Virginians and the rest of
Americans. It still could turn a period of high unemployment into a
recession. In protecting Social Security, but serving as the same
speeding train, the Feinstein amendment might also mow down benefits
for war-injured veterans, Medicare payments that rural hospitals depend
on to survive, the programs that help create jobs in our communities,
funds for our schools. Had the Feinstein amendment prevailed, it would
have forced even more draconian cuts in services and benefits where
[[Page S3365]] they shouldn't be made. You can be sure that I will
fight as hard as anyone to protect Social Security, but slapping a
balanced budget amendment onto the Constitution is not the way to do
that.
Many Members also claim they want to protect defense from cuts as a
result of the balanced budget, but haven't made any hard promises that
they will do it. Other programs like veterans compensation and health
care were not protected during the amendment process either--despite my
offering what I believe to be a very surgical way to protect a special
category of particularly needy and deserving veterans. It failed.
Veterans have no guarantees that they are safe from the balanced
budget's requirements for cuts.
And that leads us to question three.
Question 3--What are the consequences for our families, for our
businesses, and for our States, of balancing the budget in 7 years?
Even if one accepts the lack of specific information regarding how we
would actually reach a balanced budget, one of the things Congress is
always responsible for doing is assessing the consequences of our
actions. That's impossible to do without the detailed plan or road map
of how we are going to get from here to there.
The amendment itself has been the subject of serious debate over the
last few weeks in the U.S. Senate. Much of that debate has been a
direct result of the tremendous effort and careful analysis of the
senior Senator from West Virginia, Robert C. Byrd--we all owe him a
debt of gratitude for the numerous illuminations he has provided. And I
thank each of my colleagues for their various contributions and
commentary on a whole list of amendments which have been offered as
modifications to the amendment. I would like to be able to point to a
single strengthening amendment beyond the limitation of how the courts
can intervene in setting our budgetary and tax policies, but cannot.
But I do honestly believe that the Senate has come to understand what
is decipherable from the text of the amendment, and the intent of its
proponents, because of this debate--even though we have not been
provided the critical road map which would show us how we would achieve
the balance of the Federal budget. What we do know about how this
amendment would work is troubling to me as well.
It astounds me to see Senators voting for this amendment without
knowing how this amendment affects their States and our citizens, how
vulnerable populations like children and seniors would fare under this
amendment. I believe the citizens of West Virginia deserve to know how
this amendment will affect their daily lives, the safety of the water
they drink, the quality of the air they breathe, the health care
services they need, the student loans their children need to make
college affordable, and the roads which they drive on to get to and
from work every day.
They deserve to know how this amendment will affect the basics of
their daily lives--and because the majority voted down the right to
know amendment offered by the minority leader they will not know. They
cannot know because Congress does not know. All Congress knows is the
amendment will constitutionally mandate us to find a way to make sure
we do not spend any more than we take in every year--that's the only
assurance in the entire amendment--every other provision is a maybe.
The cost-shifting that the balanced budget would cause to families
and businesses in my State of West Virginia and in every State is
mammoth. Statistics compiled by the Treasury Department, by the
respected Wharton School, and by the Center for Budget and Policy
Priorities, among others, give us a picture of how the amendment will
affect our citizens even in the absence of detailed numbers, and
program by program explanations.
The different analyses I have seen tell us that under the balanced
budget amendment, in West Virginia, 22,000 jobs will be lost, personal
income will drop, health care services will be limited, and State and
local taxes will have to be increased by over 20 percent to compensate
for lost Federal dollars.
The studies show that the State of West Virginia would have to raise
its State and local taxes 20.6 percent across the board to compensate
for the funds it would lose under the balanced budget amendment; that
22,000 jobs are projected to be lost in West Virginia as a result of
the balanced budget amendment (in 2003); that personal income in West
Virginia is projected to drop by 8 percent as a result of the balanced
budget amendment (in 2003); that the balanced budget amendment and the
House contract's fiscal agenda would result in a loss of $96 million in
Federal grants in 1996--which is $53 per resident.
West Virginia would lose $322 million in 1998, $175 per resident of
West Virginia.
West Virginia would lose $841 million in 2002, $457 per person in
West Virginia.
West Virginia Medicare benefits would be cut by $824 million per year
(by the year 2002), and total over $3 billion cumulatively.
West Virginia Medicaid funding would be cut by $488 million per year
(by the year 2002).
Those projections provide a pretty stark picture of the consequences
of this amendment. They tell me I cannot support this balanced budget
amendment. And they raise a whole lot of additional questions about how
this amendment will affect our national economy. How will the amendment
affect West Virginia's economic recovery, and the economic future of
our States? How will our most vulnerable populations fare under the
amendment? How will defense be treated in the process? What kind of
cuts, reforms, or increased revenues are necessary to take us from
today's deficit, (which has steadily
been reduced over the last 3 years for the first time since Harry
Truman was President due to Democratic budget initiatives), to a zero
deficit and how will we maintain that during natural disasters,
recessions, or national security threats? How will we get from here to
there?

These are more of the kind of questions that West Virginians have
called my office asking me and my staff. These are the kind of
questions I want hard answers to before I vote in favor of any balanced
budget amendment. Because this is such a serious matter, amending the
document which enshrines our Nation's guiding principles and which is
our Nation's organic law, I would like to list a series of additional
concerns about the amendment which the Senate debate of recent weeks
has only served to highlight.
In some cases, we have had assurances from the amendments' proponents
that some of these concerns will be met in implementing legislation, or
because there is strong support for certain programs. But West
Virginians have no guarantee of anything under this amendment. I cannot
cast my vote on a constitutional amendment based on personal assurances
of Members, even those from Members for whom I have the utmost regard.
I have to cast my vote based on the actual language of the
constitutional amendment and it remains deeply troubling to me.
First, I reiterate, nothing in the balanced budget amendment makes
government more efficient, less wasteful, or stops unnecessary
spending. Only specific legislation, like the President's own deficit
reduction initiative, which passed without a solitary Republican vote,
can do that. The debate makes it sound like this amendment is a magic
bullet to our perplexing budget dilemmas.
Second, this amendment would result in big increases in State and
local taxes. One Governor concludes that without seeing the plan for
how balancing the budget will be accomplished, this amendment should be
considered a vote to raise State and local taxes. He dubbed the
existing amendment a ``trickle down tax increase''.
Third, the balanced budget amendment is bad economic policy. Basic
economics tells us the size of the deficit is directly related to the
health of the economy. The deficit rises when the economy weakens--but
temporary increases in the deficit act as automatic economic
stabilizers. When family and business incomes decline, their tax
liabilities decline more than proportionately. The resulting deficit
means the government is paying out more than it takes in,
counterbalancing the fall in the economy. This is true on the spending
side as well. For example, when workers lose their jobs, higher
outlays
[[Page S3366]] for unemployment, Medicaid, and other programs help fill
the gap in family budgets, and in overall economic activity, until the
economy or people's individual situations improve. If a balanced budget
were required every year, that cushioning effect would not be there.
A balanced budget amendment would force us to cut spending or raise
taxes to eliminate increases in the deficit caused by a slowing
economy. Our fiscal policies would make the natural swings in the
economy more pronounced--recessions will be deeper and longer.
The proposed super-majority vote that would permit a deficit to exist
during times of economic weakness is ineffective. Congress would have
to be more prescient than private sector forecasters in order to
develop the needed consensus to waive the strict balanced budget
requirement.
Fourth, the amendment does not adequately address how it will be
enforced--making it either unenforceable or turning over enforcement to
the courts or the President. The amendment would fundamentally
restructure the balance of power set forth in the Constitution and
could still empower unelected judges to raise taxes or cut spending,
despite a restriction placed on the courts in an amendment offered by
Senator Nunn in the closing moments of this debate. If the amendment
were deemed unenforceable, respect for the Constitution would be
severely diminished and rule of law would be undermined.
The question of who will enforce this amendment has not been
adequately answered by its proponents. Will it be the courts or the
President--or is it intended not to be enforceable? Placing an
unenforceable amendment in our Nation's charter would result in
countless constitutional violations and make all other constitutional
rights, by extension, violable as well.
Judicial involvement in the budgetary process would be unprecedented,
even for declaratory judgments, and yet the balanced budget amendment
significantly increases judicial authority. Under this amendment,
judges may be the ones asked to make the hard choices about that the
Congress is accountable for making today--and I strongly believe judges
lack the institutional capacity to make those decisions. It's wholly
inappropriate to shift that duty to them.
The Constitution's decision to give the ``power of the purse'' to the
legislature was not made lightly. This amendment could transfer some of
that power to the courts.
Fifth, rules for fiscal policy should not be written into the
Constitution.
The Constitution is a miraculous document precisely because it
establishes transcendent national ideals and freedoms and the structure
of our Government, without micromanaging its performance. It sets
individual rights and creates a system of separation of powers, our
checks and balances, which protect against any one branch of government
becoming too powerful.

Fiscal policies respond to current economic conditions and the
structure of the economy--those conditions and structures are
constantly changing and should not be restricted to today's needs.
Fiscal policy should reflect a constantly changing economic
environment, not written in stone in the Constitution.
Sixth, the amendment violates the our traditionally democratic
principle of majority rule. The amendment requires a three-fifths
supermajority vote to pass a law that allows deficit spending or a debt
increase. For more than two centuries, the Constitution has only
required a supermajority vote for measures vetoed by the President.
Giving a minority the power to absolutely block legislative action
would be an unprecedented undermining of majority rule. The wholesale
transfer of power from the majority to the minority in cases where
there is a recession, need to respond to an international or natural
crisis, or to extend the Treasury's ability to borrow to pay the
government's bills should not be permitted.
Seventh, the balanced budget amendment will create uncertainty about
the reliability of government services and obligations. There is a real
practical difficulty in insuring the government's budget is balanced
every year. If estimates are inaccurate (as they can very well be) and
mid-year revised projections show a deficit by year's end--where will
the money to compensate for the deficit come from? Interest payments
can't be defaulted on, cutting entitlement programs like Medicare with
millions of beneficiaries count on would be extremely unpopular,
especially in the circumstance that there is very little notice--which
means discretionary programs would probably take the mid-year hit.
Discretionary programs like student loans could be totally shut down.
In sum, this constitutional amendment is the most expansive amendment
to our Constitution brought to a vote in both Houses in the last 206
years. The amendment is almost as long as the entire Bill of Rights,
and it would embed fiscal policy in our Constitution. It's called the
balanced budget amendment but does nothing more than say we should
balance the budget--the amendment is misnamed, it should be called the
``Let's Use the Constitution to Promise We Will Balance the Budget
Amendment.''
When the rhetoric of the virtues of financial responsibility or
balance has to be translated into action which will cut the deficit, it
will mean across the board cuts in programs which millions of Americans
rely on for their health care and nutritional needs, to help send their
children to college, to improve their highways and bridges, and to
protect our environment. It dodges the toughest questions of how we can
get our national health care costs, private and public, under control--
and that is both a fundamental flaw of this amendment and a disgrace.
In my judgment it will hurt West Virginians and have the harshest
effect on the most vulnerable people in my State and in our country. I
cannot in good conscience vote for this amendment.
But I can, and will, continue my efforts to reduce the deficit, and
to make government programs more responsive to those they serve, and to
eliminate duplication and waste as we strive to make government leaner
and more efficient, and to manage the costs of priority government
programs. A lion's share of that work will be in finally dealing with
health care costs and access problems that we failed to address, in
part, because the importance of comprehensive health care reform to
getting our national deficit under control was not sufficiently
understood.
I will continue to be willing to stand up and cast the tough votes if
they are necessary to improve our Nation's overall economic health. But
I cannot vote for this amendment because my constituents have been
denied the basic information about how this amendment would affect
their daily lives. In the absence of real information of its
consequences, I have had to piece together the effects based on common
sense assumptions of what will happen. I am dismayed that there has
been a almost uniform refusal to improve this amendment to address the
real concerns which have been raised.
It seems appropriate to reflect upon the words of our Founders. I
close with the words of Thomas Jefferson who drafted the venerable
Constitution which this amendment proposes to radically alter. Thomas
Jefferson said:

I know of no safe depository of the ultimate powers of
society but the people themselves; and if we think them not
enlightened enough to exercise their control with a wholesome
discretion, the remedy is not to take it from them, but to
inform their discretion.

That is a perpetual responsibility of Congress and the business we
should be getting about today.

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