[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.
____________________