[Congressional Record Volume 141, Number 45 (Friday, March 10, 1995)]
[Senate]
[Pages S3799-S3800]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             BALANCED BUDGET AMENDMENT TO THE CONSTITUTION

  Mr. HATCH. Mr. President, I do not intend to be long but I would like 
to say a few words about the balanced budget amendment.
  Mr. President, the international financial markets and the Chairman 
of the Federal Reserve Board have passed judgment on America's future 
economic power in the wake of the Senate's failure to adopt a balanced 
budget amendment. Their reaction paints a bleak picture of the future 
of our country, and does not suggest we will leave a legacy to our 
children we can be proud of. I ask those colleagues who once supported 
this amendment and who changed their votes this year to rethink their 
position again in light of this judgment.
  Mr. President, the balanced budget amendment vote suggested to the 
world that the success of President Clinton and the Senate Democratic 
leadership in blocking the amendment signaled the triumph of business-
as-usual and a continuation of the big-spending practices of the past. 
The markets reacted swiftly and strongly, and, I think, justly. The 
dollar dropped precipitously to record low exchange rate levels against 
the Japanese yen and the German mark.
  Fed Chairman Greenspan, in testimony before the House Budget 
Committee on Wednesday, attributed the precipitous fall of the dollar 
in large part to the failure of this body to adopt the balanced budget 
amendment. The Wall Street Journal, the New York Times, and the 
Washington Times all reported that Chairman Greenspan agreed with those 
who pointed to the Senate's rejection of the balanced budget 
amendment--and its implication of continued fiscal irresponsibility--as 
the cause of the dollar's drop.
  Chairman Greenspan reportedly opined that ``in futures markets--an 
important indicator that doesn't reflect current ups and downs in the 
economy--the dollar didn't begin to fall significantly until the Senate 
rejected the balanced budget amendment. * * *'' (Wall Street Journal, 
Mar. 9, 1995) He was quoted as saying, ``[t]here was apparent concern 
in the international financial markets that something significant was 
happening to our resolve with respect to coming to grips with the 
balanced-budget issue.'' (Id.)
  He further noted that to continue on the path of $200 billion 
deficits--and I would add that that is precisely the path President 
Clinton has laid out for this country in his proposed budget--``would 
be unwise and probably impossible. * * * Indeed, given the weakness in 
the foreign exchange value of the dollar, world capital markets may be 
sending us just that message.'' (Washington Times, Mar. 9, 1995, p. 1)
  In his testimony, Chairman Greenspan also pointed out the benefits of 
a balanced budget, which would be obtained through passage of a 
balanced budget amendment: a stronger dollar, lower interest rates, and 
a stronger economy.
  Mr. President, I think the message is clear. The victory of President 
Clinton and a few of the Democrats who want to keep this country on a 
path of increasing debt and the business-as-usual spend and borrow 
policies was a defeat for the American economy and for the American 
people.
  As we have said throughout the balanced budget amendment debate, the 
benefits of passing the amendment begin immediately and keep improving 
as Congress returns to a more rational fiscal regime. Failure to adopt 
the amendment means not just a continuation of the weakness of the 
past, but a worsening picture.
  This Nation's fiscal freedom is at risk if we continue on President 
Clinton's path of irresponsible spending. If we wish to remain the 
power that we have been, we need to rekindle the values of thrift and 
responsibility in this Congress. And we should lock those values in 
place with a constitutional amendment to require a balanced budget.
  The Senate should learn from its mistake--a mistake heralded as a 
serious economic mistake by world financial markets--and adopt the 
balanced budget amendment, and get on with balancing the budget. If we 
do this we can have the benefits Alan Greenspan pointed to: a stronger 
dollar, lower interest rates, and a stronger economy. And I would add 
to those benefits a more responsive and more responsible Government. 
All these things can be the legacy we leave our children. The 
alternative legacy is not one I would be proud to leave. We must pass 
the balanced budget amendment.
  I believe that the time is this year. So I hope our colleagues will 
reconsider. I hope we can pass it.
  I ask unanimous consent a number of articles from the various 
newspapers be printed in the Record.
  There being no objection the articles were ordered to be printed in 
the Record, as follows:

              [From the Wall Street Journal, Mar. 9, 1995]

             Fed Chairman Blames Deficit for Dollar's Fall


  greenspan also cites defeat of budget amendment, backing gop charges

                  (By Lucinda Harper and David Wessel)

       Washington.--Federal Reserve Chairman Alan Greenspan blamed 
     the weak dollar on a persistent U.S. government fiscal 
     deficit and failure of Congress to pass a constitutional 
     amendment to force a balanced budget.
       Calling the dollar's fall ``overdone . . . unwelcome and 
     troublesome,'' Mr. Greenspan told the House Budget Committee 
     that it ``adds to potential inflation pressures in our 
     economy.''
       The dollar rebounded yesterday for the first time in days. 
     The rise, which began before Mr. Greenspan's testimony, took 
     the dollar to 91.35 yen from 90.05 yen the day before and to 
     1.3940 marks from 1.3688 marks. Several European nations 
     yesterday raised interest rates to try to boost their 
     currencies against the German mark.
       Mr. Greenspan said nothing yesterday to suggest he 
     contemplates raising U.S. interest rates to help the dollar. 
     Indeed, he repeatedly said the best way to help it is to 
     reduce the budget deficit. But in his testimony, he avoided 
     the word ``ease''; his use of that word in earlier testimony, 
     when referring to U.S. interest rates, has been cited by some 
     analysts as one factor contributing to the weak dollar.
       In his most detailed commentary since the dollar began 
     plunging, Mr. Greenspan said the U.S. currency began to get 
     weaker ``as the economy started to give evidence of slowing 
     down'' and interest rates on one- and two-year maturities 
     fell. Lower U.S. interest rates make the dollar less 
     attractive to global investors.
       But in futures markets--an important indicator that doesn't 
     reflect current ups and downs of the economy--the dollar 
     didn't begin to fall significantly until the
      Senate rejected the balanced-budget amendment, Mr. Greenspan 
     said. The Fed chairman opposed the amendment, but said 
     that with its rejection. ``There was apparent concern in 
     the international financial markets that something 
     significant was happening to our resolve with respect to 
     coming to grips with the balanced-budget issue.''
       Mr. Greenspan's analysis lent support to Republican charges 
     that defeat of the amendment caused the dollar's collapse. 
     ``The dollar has been sliding against the yen and the mark 
     ever since the amendment went down,'' House Speaker Newt 
     Gingrich said yesterday.
       Although Clinton administration officials remained publicly 
     silent on the dollar, the 
     [[Page S3800]] German Bundesbank--normally pleased when the 
     mark is strong--said in a statement that the dollar's fall 
     was exaggerated and wasn't justified by ``economic 
     fundamental factors.''
       The German central bank praised Treasury Secretary Robert 
     Rubin's one public utterance on the dollar so far: that a 
     stronger dollar is in the U.S. national interest. In a speech 
     scheduled for this morning, Mr. Rubin is expected to 
     elaborate on this theme, particularly on his view that U.S. 
     support for Mexico isn't any reason for the dollar to be 
     weak.
       During some past episodes of dollar weakness in recent 
     years, other Clinton administration officials have 
     occasionally suggested the benefits of a weak dollar, but 
     they now are avoiding saying anything that suggests they 
     favor its decline.
       Fed Governor Lawrence Lindsey, who has in the past made 
     statements that hurt the dollar, wouldn't discuss it 
     yesterday. ``I don't have a yen to make a mark,'' he told 
     wire-service reporters.
       On the state of the economy, Mr. Greenspan reiterated that 
     he sees ``some indications that the expansion may be slowing 
     from its torrid and unsustainable pace of 1994. . . . while 
     there are signs that spending is slowing, the jury remains 
     out on whether that will be sufficient to contain inflation 
     pressure.'' He noted slowing of the housing sector and 
     consumer spending, but said there are ``few indications of 
     that degree of slowing'' in orders for nondefense capital 
     goods or investment in commercial buildings.
                                                                    ____

               [From the Washington Times, Mar. 9, 1995]

                      Fed Chief Helps Dollar Soar


 greenspan cites Senate Budget Vote as Trigger for All, Urges deficit 
                                 action

                           (By Patrice Hill)

       Federal Reserve Chairman Alan Greenspan touched off a 
     powerful dollar rally yesterday by signaling the Fed's 
     concern about the beleaguered currency and calling on 
     Congress to move quickly to cut the budget deficit.
       Mr. Greenspan agreed with observers who think the failure 
     of the balanced-budget amendment last week triggered the 
     dollar's fall to record lows against the German mark and 
     Japanese yen because it raised questions about Washington's 
     willingness to control spending. He stressed that it is 
     within Congress' power to reverse the currency's decline.
       ``A key element in dealing with the dollar's weakness is to 
     address our underlying fiscal imbalance convincingly,'' he 
     told the House Budget Committee, which is preparing a plan to 
     balance the budget by 2002, as the constitutional amendment 
     would have required.
       To forever rely on foreign money to finance a $200 billion 
     budget deficit and a $150 billion trade deficit ``would 
     certainly be unwise and probably impossible,'' he said. 
     ``Indeed, given the recent weakness in the foreign exchange 
     value of the dollar, world capital markets may be sending us 
     just that message.''
       Mr. Greenspan said an all-out effort by Congress to 
     eliminate the deficit not only would bolster the dollar, but 
     also substantially lower interest rates and stimulate the 
     economy.
       ``The productive potential of the U.S. economy will be 
     shaped significantly by the actions of this
      Congress,'' he said, predicting a ``startling'' pickup in 
     growth, more stability on financial markets and an 
     increasing standard of living if Congress acts decisively 
     to cut the deficit.
       Mr. Greenspan's statement, combined with his assurances 
     that the Fed is prepared to do what is necessary to deal with 
     the ``troublesome'' fall of the dollar, dramatically lifted 
     the U.S. currency against the mark and yen.
       In New York trading, the dollar leaped to 1.3935 marks 
     after hitting an all-time low of 1.3440 marks earlier 
     yesterday in European trading. It had closed at 1.3702 marks 
     Tuesday in New York.
       The dollar sprang to 91.33 yen from the record low of 88.70 
     reached in European trading overnight. Its Tuesday close in 
     New York was 90.05 yen. Stocks and bonds rallied modestly 
     with the dollar.
       While Mr. Greenspan's talk was a salve for the dollar, some 
     traders questioned whether the gains will last unless 
     Congress acts or the Fed boosts interest rates. Raising 
     interest rates would bolster the dollar by making U.S. bonds 
     more attractive to investors. Mr. Greenspan appeared to leave 
     that possibility open yesterday.
       ``Greenspan is telling all these congressmen that what's 
     happening to the dollar now is a symptom of the problem,'' 
     said Dan Seto, an economist at Nikko Securities in New York. 
     He said the Senate's balanced-budget vote was a negative for 
     investors who thought the amendment would keep the federal 
     government from living beyond its means.
       ``It's loud and clear,'' he said of Mr. Greenspan's 
     message, ``but, unfortunately, a lot of congressmen have 
     their own Walkmans on, and they're hearing other music.''
       Several congressmen at the Budget Committee hearing accused 
     the Fed and the Treasury of causing the currency crisis by 
     getting involved in Mexico's financial problems and depleting 
     the central bank's foreign exchange reserves by committing 
     $20 billion to prop up the Mexican peso.
       Sen. Byron L. Dorgan of North Dakota, one of six Democratic 
     senators who switched votes to block the balanced-budget 
     amendment, brought up the peso when told about the Fed 
     chairman's comments.
       ``The dollar was dropping rapidly before the Senate vote, 
     and Greenspan knows that. He linked the dollar to the ailing 
     peso,'' said Mr. Dorgan, a persistent Fed
      critic. ``The marriage of the dollar and the peso has caused 
     the trouble for the dollar.''
       Despite falling against other major currencies, the dollar 
     has been hitting new highs against the peso. Yesterday it 
     took 7.02 pesos to buy a dollar, near 50 percent more than it 
     did Dec. 20, when Mexico devalued its currency.
       ``The dollar's problems began to mount when Mexico devalued 
     the peso,'' Mr. Seto said, primarily because people wonder if 
     the Mexican bailout leaves the Fed with enough reserves to 
     influence movements in the dollar market, where $1 trillion 
     changes hands each day.
       Comparing the meager reserves of most central banks to a 
     ``bowling trophy on the mantle,'' he said such reserves can't 
     prop up a currency experiencing a fall like the dollar's.
       Mr. Greenspan insisted yesterday that the Fed's reserves 
     are sufficient to defend the dollar.
       Another Democrat who opposed the balanced-budget measure, 
     Sen. Dale Bumpers of Arkansas, said, ``The slide of the 
     dollar obviously shows the financial markets are deeply 
     concerned about the deficit.''
       But he and other Democrats said a constitutional amendment 
     is not the solution.
       They said they are willing to work with Republicans right 
     away on a plan to balance the budget with the usual budget-
     writing procedures.
       ``We're dead serious,'' said Sen. Wendell H. Ford, Kentucky 
     Democrat and another of the vote-switchers on the amendment.
       ``There's a difference between posing and lifting,'' Mr. 
     Dorgan said. Pointing to his vote for President Clinton's 
     $500 billion deficit-reduction plan in 1993, he said, ``I'm 
     perfectly willing to cast that kind of vote again.''
       Sen. Paul Simon, Illinois Democrat and author of the 
     proposed constitutional amendment, called on other Democrats 
     to reconsider their votes and halt the slide of the dollar.
       ``When the balanced-budget amendment went down,'' House 
     Speaker Newt Gingrich said, ``that was a signal to the world 
     money markets that the United States is not going to be 
     serious about balancing its budget.''
       While ``the decay of the dollar as a reserve currency for 
     the world is not a new thing,'' the Georgia Republican said, 
     borrowing at the rate of $200 billion a year ``implies a 
     level of inflation and a level of decay of the currency that 
     is almost Mexican in proportions.''

  The PRESIDING OFFICER. The Senator from Washington is recognized.

                          ____________________