[Congressional Record Volume 141, Number 45 (Friday, March 10, 1995)]
[Senate]
[Pages S3770-S3771]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       BALANCED BUDGET AMENDMENT

  Mr. SIMON. Mr. President, let me say first that I agree with three-
fourths of what my colleague from North Dakota has just said. First, I 
think it makes absolutely no sense to be talking about a tax cut now. I 
think it is just absolutely irrational. It politically makes sense but 
it does not make sense any other way. And so I agree with him.
  Let me point out one other area where we can save money and do a 
great deal of good for the people in our country. That is if we pass a 
minimum wage bill. If we pass a minimum wage bill, we will spend less 
money on food stamps; we will spend less money on welfare. That is very 
practical. I do not know the precise numbers, but I saw one figure 
yesterday that we will save approximately $1.8 billion a year if we 
pass a minimum wage bill, in terms of a Federal budget. I do not know 
how thoroughly documented that is.
  Where I differ slightly from my colleague from North Dakota--I agree 
with him that we ought to be moving away from reliance on the Social 
Security trust fund in balancing the budget, and we came very close to 
an agreement on that--where I do differ is that it seems to me that the 
Krauthammer column is correct in saying the great threat to Social 
Security is the debt. Because if we do not change our policies, we will 
end up monetizing the debt, printing money, devaluing our currency. We 
are already seeing some of that. I want to comment on that in just a 
moment. We are already seeing some of that, just in the days since we 
failed to pass the balanced budget amendment last Thursday.
  I am a cosponsor of the bill to move, by legislation, toward a 
balanced budget by the year 2002. There are two problems with that. I 
hope it can have some impact. I, frankly, do not think ultimately it is 
going to work, because as soon as the squeeze gets on we simply change 
the law. That is the reality. There is a second problem with it. 
Assuming that it works. And that is interest by the financial markets 
is composed of two things. One is they want to have a margin of profit. 
That is always going to be there. The second thing the financial 
markets do is they put into interest, a hedge against inflation. So 
every study, CBO, Data Resources, Inc., Wharton--all of them say if we 
pass a balanced budget amendment interest rates will go down. We have 
seen what has happened to interest rates since a week ago Thursday. We 
did not pass the balanced budget amendment.
  There will be no similar confidence in the financial markets by any 
statutory change that we make. So we will be paying a premium on 
interest for our failure to pass a constitutional amendment. We will 
spend hundreds of billions of dollars, in my opinion--and no one knows 
this precisely--unnecessarily on interest because of our failure to 
pass a balanced budget amendment.
  Data Resources, Inc., one of the two most prominent econometric 
forecasters in the Nation, predicts that, by the year 2002, if we pass 
it, the prime rate will drop 2.5 percent. Wharton says 4 percent. But 
Data Resources, 2.5 percent. They say half the savings that we must get 
can come from interest savings. That is a very significant savings.
  Finally--and this is not in relation to the comment of my colleague 
from North Dakota, but to what has happened--I notice the international 
publications are very clear in pointing to our failure to pass the 
balanced budget amendment. Some of the domestic publications are, too, 
though there is much more focus on Mexico as a reason for the fall of 
the dollar. The reality is, if we had our fiscal house in order, what 
we have done by guaranteeing $20 billion in loans to Mexico would be 
just a blip on the horizon. A $20 billion loan guarantee for a country 
with a $6 trillion economy is not that significant an item. But when 
you compound it with our failure to pass a balanced budget amendment, 
then you have a problem.
  I would like to quote a few items here, if I can find them. 
Yesterday's Los Angeles Times lead story, ``Greenspan Asserts Deficit 
Sank Dollar. Fed chief says defeat of balanced-budget amendment sent 
wrong signal to global markets. He says Washington must cut deficit to 
ease pressure on greenback.''
  Then let me read the lead story by James Risen.

       Federal Reserve Board Chairman Alan Greenspan on Wednesday 
     blamed last week's Senate defeat of the balanced-budget 
     amendment for the sudden plunge in the value of the dollar 
     and pointedly warned Congress that the currency will remain 
     under pressure until Washington tackles the deficit.

  There are a number of stories along the same line. I am not going to 
bother reading all of them at this point.
  The point is, it is easy for us here to point to Mexico and say that 
is the cause of our problem. The reality of the cause of our problem is 
right here in the U.S. Senate, and we have to face up to that reality. 
The longer we postpone facing up to that reality, the greater the 
jeopardy we put the dollar in and all the ramifications that will have 
on the standard of living of our people.
  I hope we will face up to reality.
  Mr. President, since I do not believe anyone else seeks the floor 
right now, let me glance through a few of these things here. Here is 
the Financial Post, from Great Britain, ``The Current U.S. 
[[Page S3771]] Dollar Crisis Was Exacerbated by Congress' Inability To 
Get the Balanced Budget Amendment Passed.''
  Here is the Independent, also a British publication.

       * * * defeat of the balanced budget amendment only 
     reinforced in foreign eyes Washington's reputation for 
     incurable fiscal profligacy. And most important of all, the 
     tectonic plates of interest rate expectations have abruptly 
     shifted.

  AFX News. I confess I do not know where that is from.

       I think some of the support the dollar got from the 
     election of the Republican Congress has faded with the defeat 
     of the balanced budget.

  Quoting some analyst here.
  Here, from Singapore, the Straits Times.

       The dollar's fall began last Friday, after Federal Reserve 
     Board member, Mr. Lawrence Lindsay, told reporters that the 
     yen-dollar rate had not reached a ``critical level.''
       It coincided with the failure of the U.S. Senate to pass a 
     constitutional amendment requiring a balanced Federal budget.
       The failure was seen as a lack of political will by the 
     United States to tackle its twin deficits--budget and trade 
     deficits--widely seen as among the factors contributing to 
     the weak dollar.

  And the stories go on. Here is one from Japan, the Daily Yomiuri.

       The move was accompanied by news that the U.S. Senate voted 
     down an amendment to the U.S. Constitution that would have 
     forced balancing of the national budget by 2002. This 
     combination caused the mark to soar, followed by the surge of 
     the yen.

  And the stories go on.
  Clearly we have the ability here to get ahold of this thing. We ought 
to do it for the future of our country. But it is affecting us right 
now, and I hope in some way we can find one more Member of the U.S. 
Senate who will vote for a constitutional amendment. I think when that 
happens, if that happens, you will see a reversal. Obviously, I cannot 
predict and guarantee this. But the evidence is pretty overwhelming. 
You are going to see a reversal of what has happened to the dollar.
  I hope we do the sensible thing.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. SIMON. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  

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