[Congressional Record Volume 141, Number 46 (Monday, March 13, 1995)]
[Senate]
[Pages S3827-S3829]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


               REPORTING OF THE BALANCED BUDGET AMENDMENT

  Mr. HOLLINGS. Madam President, I rise today to comment on the Record 
made earlier this morning by my distinguished colleague from New 
Mexico, Senator Domenici, the chairman of our Budget Committee. Let me 
say at the outset that I have the highest regard for Senator Domenici. 
He is very conscientious, very hard-working, and very honest in his 
beliefs and his work in the Senate. So in rising I do not intend to 
reflect on him, but rather to reflect on Charles Krauthammer's recent 
article concerning Social Security that the distinguished Senator from 
New Mexico included in the Record.
  So there will not be any trouble referring to it, I ask unanimous 
consent that the article of Charles Krauthammer entitled ``Social 
Security `Trust Fund' Whopper'' of last Friday, March 10 be printed in 
the Record.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

               [From the Washington Post, Mar. 10, 1995]

                 Social Security ``Trust Fund'' Whopper

                        (By Charles Krauthammer)

       Last week, Sens. Kent Conrad and Byron Dorgan managed to 
     (1) kill the balanced budget amendment, (2) deal Republicans 
     their first big defeat since November and (3) make Democrats 
     the heroes of Social Security. A hat trick. How did they do 
     it? By demanding that any balanced budget amendment ``take 
     Social Security off the table''-- 
     [[Page S3828]] i.e., not count the current Social Security 
     surplus in calculating the deficit--and thus stop ``looting'' 
     the Social Security trust fund.
       In my 17 years in Washington, this is the single most 
     fraudulent argument I have heard. I don't mean politically 
     fraudulent, which is routine in Washington and a judgment 
     call anyway. I mean logically, demonstrably, mathematically 
     fraudulent, a condition rare even in Washington and not a 
     judgment call at all. Consider:
       In 1994 Smith runs up a credit card bill of $100,000. 
     Worried about his retirement, however, he puts his $25,000 
     salary into a retirement account.
       Come Dec. 31, Smith has two choices: (a) He can borrow 
     $75,000 from the bank and ``loot'' his retirement account to 
     pay off the rest--which Conrad-Dorgan say is unconscionable. 
     Or (b) He can borrow the full $100,000 to pay off his credit 
     card bill and keep the $25,000 retirement account 
     sacrosanct--which Conrad--Dorgan say is just swell and 
     maintains a sacred trust and staves off the wolves and would 
     have let them vote for the balanced budget amendment if only 
     those senior-bashing Republicans had just done it their way.
       But a child can see that courses (a) and (b) are identical. 
     Either way, Smith is net $75,000 in debt. The trust money in 
     (b) is a fiction: It consists of 25,000 additionally borrowed 
     dollars. His retirement is exactly as insecure one way or the 
     other. Either way, if he wants to pay himself a pension when 
     he retires, he is going to have to borrow the money.
       According to Conrad-Dorgan, however, unless he declares his 
     debt to be $100,000 rather than $75,000, he has looted his 
     retirement account. But it matters not a whit what Smith 
     declares his debt to be. It is not his declaration that is 
     looting his retirement. It is his borrowing (and 
     overspending).
       Similarly for the federal government. In fiscal 1994, 
     President Clinton crowed that he had reduced the federal 
     deficit to $200 billion. In fact, what Conrad calls the 
     ``operating budget'' was about $250 billion in deficit, but 
     the treasury counted the year's roughly $50 billion Social 
     Security surplus to make its books read $200 billion. 
     According to Conrad-Dorgan logic, President Clinton 
     ``looted'' the Social Security trust fund to the tune of $50 
     billion.
       Did he? Of course not. If Clinton had declared the deficit 
     to be $250 billion and not ``borrowed'' $50 billion Social 
     Security surplus--which is nothing more than the federal 
     government moving money from its left pocket to its right--
     would that have made an iota of difference to the status of 
     our debt or of Social Security?
       Whether or not you figure Social Security in calculating 
     the federal deficit is merely an accounting device. 
     Government cannot stash the Social Security surplus in a 
     sock. As long as the federal deficit exceeds the Social 
     Security surplus--that is, for the foreseeable forever--we 
     are increasing our net debt and making it harder to pay out 
     Social Security (and everything else government does) in the 
     future.
       Why? Because the Social Security trust fund--like Smith's 
     retirement account--is a fiction. The Social Security system 
     is pay-as-you-go. The benefits going to old folks today do 
     not come out of a huge vault stuffed with dollar bills on 
     some South Pacific island. Current retirees get paid from the 
     payroll taxes of current workers.
       With so many boomers working today, pay-as-you-go produces 
     a cash surplus. That cash does not go into a Pacific island 
     vault either. In a government that runs a deficit, it cannot 
     be saved at all--any more than Smith can really ``save'' his 
     $25,000 when he is running a $100,000 deficit. The surplus 
     necessarily is used to help pay for current government 
     operations.
       And pay-as-you-go will be true around the year 2015, when 
     we boomers begin to retire. The chances of our Social 
     Security benefits being paid out then will depend on the 
     productivity of the economy at the time, which in turn will 
     depend heavily on the drag on the economy exerted by the net 
     debt that we will have accumulated by then.
       The best guarantee, in other words, that there will be 
     Social Security benefits available then is to reduce the 
     deficit now. Yet by killing the balanced budget amendment, 
     Conrad-Dorgan destroyed the very mechanism that would force 
     that to happen. The one real effect, therefore, that Conrad-
     Dorgan will have on Social Security is to jeopardize the 
     government's capacity to keep paying it.
       Having done that, Conrad-Dorgan are now posing as the 
     saviors of Social Security from Republicans looters. A neat 
     trick. A complete fraud.

  Mr. HOLLINGS. Madam President, it really disturbed me when I saw our 
two distinguished Senators from North Dakota, Senator Dorgan and 
Senator Conrad, described as being tricky, or outright fraudulent.
  It's getting difficult to serve in the Senate. You have the Speaker 
of the House calling some Senators ``liars.'' You have some of our 
colleagues parading in front of the Capitol with a poster containing 
the pictures of some Senators and a headline at the top saying, 
``Wanted for flip-flopping.''
  But if we want to get past the grandstanding and get to the truth of 
the matter, what we were trying to do was to keep our word by 
protecting Social Security. The American people should know that the 
real flip-floppers are those who voted in 1990 to protect Social 
Security but were willing to sacrifice it under the language of Section 
7 in House Joint Resolution 1.
  Charles Krauthammer's Social Security article is, to use his own 
language, the single most fraudulent article that our friend, Mr. 
Krauthammer, has written because he equates an individual with a 
$100,000 debt with the Government having a $100,000 debt. He claims 
that an individual borrowing $25,000 from a retirement account and 
borrowing the remaining $75,000 from the bank is in the same position 
as the Government borrowing its $25,000 from the Social Security 
account and the remaining $75,000 from the markets. But here's the 
difference. In borrowing $25,000 from his retirement, the individual is 
truly at zero because he has borrowed his own money. In the 
Government's case, the budget is not balanced because the $25,000 has 
been borrowed from future retirees.
  Madam President, the Social Security surpluses were planned in 1983 
with a special FICA tax to bring in funds in excess of the immediate 
need. We were not just trying to balance the Social Security budget. 
There was an affirmative intent that more moneys than were necessary 
would be collected so that we could build up surpluses and provide for 
the baby boomers that will retire early in the next century. The idea 
of the Greenspan Commission was that a sufficient Social Security 
reserve or trust be built up so that there would not be a call on 
general revenues. Of course, what has been happening, Madam President, 
is that administrations, Congresses, and columnists have all engaged in 
the deceptive reporting by using the Social Security surpluses to 
diminish the size of the deficit. This charade does not eliminate the 
deficit, it merely moves the deficit from the Federal Government over 
to the Social Security fund.
  Of course, this trick does not eliminate the deficit. Already, $464 
billion has been moved--by the year 2000 the Government will owe Social 
Security $1 trillion. As a result, the baby boomers, who are presently 
being taxed to pay for the Social Security of persons who have reached 
72 years of age, like this particular Senator, will have to be taxed 
again to receive their benefits.
  In addition, Mr. Krauthammer's claims that the Social Security system 
is a pay-as-you-go program. But as the record will show, that is not 
the case. In fact, Senator Patrick Moynihan and I were the ones who 
offered an amendment to put Social Security on a pay-as-you-go basis, 
but that effort was defeated.
  Moreover, in 1990 the distinguished former Senator from Pennsylvania, 
Senator John Heinz, and I, were successful in passing legislation 
forbidding the use of Social Security trust funds to mask the size of 
the deficit. It remains on the books as section 13301 of the Budget 
Enforcement Act. Thus, I might point out that what Mr. Krauthammer 
calls a fiction and a fraud is actually a law that was signed by 
President George Bush on November 5, 1990.
  Mr. Krauthammer knows full well the Congress would never have voted 
the tax increases for Social Security in 1983 if these revenues were to 
be used to spend on foreign aid, welfare, or the deficit. He disregards 
the representation by the sponsors of the balanced budget amendment 
that Social Security trust funds will be protected. He disregards the 
formal resolution by Senator Dole, the majority leader, requiring that 
the Budget Committee demonstrate how the budget can be balanced without 
using Social Security funds. He disregards the formal statutory law 
that requires this, and he fails to mention that the two Senators he 
chastises joined with three others in a formal letter of commitment to 
vote for the balanced budget amendment if the protection for Social 
Security were included.
  To quote Mr. Krauthammer, ``A neat trick. A complete fraud.'' That is 
the trick and that is the fraud that has ensued here within the 
National Government.
  Madam President, I ask unanimous consent to have printed in the 
Record at this point an article entitled, ``Stop Playing Games With 
Social Security'' 
[[Page S3829]] that appeared in the Columbia, SC, ``The State'' as of 
yesterday, March 12, 1995.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

                Stop Playing Games With Social Security

                      (By Senator Fritz Hollings)

       ``Nobody, Republican, Democrat, conservative, liberal, 
     moderate, is even thinking about using Social Security to 
     balance the budget.''--Sen. Trent Lott, R-Miss., ``Face the 
     Nation,'' Feb. 2
       In the recent weeks of floor debate and television 
     interviews, many senators repeatedly pledged not to use 
     Social Security funds to balance the budget.
       They even passed an amendment by Senate Majority Leader Bob 
     Dole to instruct the Budget Committee to develop a budget 
     that didn't use Social Security funds but would conform with 
     the constitutional balanced-budget amendment.
       In the meantime, while Dole was struggling to pick up one 
     vote to pass the amendment, five Democrats vowed they were 
     ready, willing and able to vote for Social Security. In fact, 
     the night before the vote, the five sent Dole a letter of 
     commitment to vote for the amendment if Social Security were 
     protected.
       On March 2, the constitutional amendment failed by one 
     vote. And over that weekend on ``Face the Nation'' Dole again 
     reaffirmed his intent on Social Security when he said, ``We 
     are going to protect Social Security.''
       If he remains that committed, why did he refuse to put his 
     word on the line in black and white on March 2 and pass a 
     constitutional amendment by at least 70 votes? Because he 
     knew that accepting the five Democratic votes would have cost 
     him an equal number of votes of Republicans determined to 
     spend Social Security surpluses on the deficit.
       Dole didn't want to expose his Republican troops or expose 
     the truth. While Republican rhetoric pledged to protect 
     Social Security, Sen. Pete Domenici, chairman of the Budget 
     Committee, and other Republicans were telling Dole that the 
     budget could not be balanced without using Social Security 
     surplus funds.
       All of this word-battling--of saying one thing in public 
     and trying to work around it in private--has led Americans to 
     believe that there is a free lunch, that all we have to do to 
     eliminate the deficit is to cut spending. The vote on Social 
     Security exposes this myth.
       Republican senators have no real intent on eliminating the 
     deficit; they just want to move it from the federal 
     government to Social Security.
       Currently, Section 13.301 of the Budget Enforcement Act 
     prohibits the use of Social Security funds for the deficit. 
     But part of the balanced-budget amendment would repeal 
     current law.
       Even with all the promises tendered to correct Social 
     Security with future legislation, any civics student knows 
     you can't amend the Constitution with legislation. That's why 
     the five Democrats--me included--insisted on including Social 
     Security protection in the wording of the constitutional 
     amendment.
       Dole's stonewalling against our five votes on the 
     constitutional amendment reveals another harsh truth: $1.8 
     trillion in spending cuts is necessary to balance the budget 
     in seven years. But many senators reveal their intent to use 
     Social Security surpluses when they state that only $1.2 
     trillion is necessary.
       Let's face realities: There won't be enough cuts in 
     entitlements. A jobs program for welfare reform will cost. 
     Savings here are questionable.
       You can and should save some on health reform, but slowing 
     the growth of health costs from 10 percent to 5 percent still 
     means increased costs. Social Security won't be cut, and any 
     savings by increasing the age of retirement would be 
     allocated to the trust fund, not the deficit.
       Both the GOP's ``Contract with America'' and President 
     Clinton have called for increases in defense spending. 
     Results: No savings.
       Therefore, savings must come from spending freezes and cuts 
     in the domestic discretionary budget.
       Coupling these cuts and freezes with a closing of tax 
     loopholes still isn't enough to meet the target of a balanced 
     budget in seven years. That's why Domenici has determined 
     that Social Security funds will have to be used.
       But using Social Security won't eliminate the deficit. It 
     simply would increase the amount we owe Social Security. 
     Already we owe $470 billion to the trust fund. If we keep 
     raiding it, the government will owe Social Security more than 
     $1 trillion by 2002.
       Harsh realities. But there's a fifth and even harsher 
     reality. All of the spending cuts in the world aren't 
     politically attainable now. Domenici knows it's hard to get 
     votes for enough cuts. To his credit, he tried in 1986 with a 
     long list of cuts by President Reagan and the Grace 
     Commission. But he got only 14 votes in the Senate.
       Rep. Gerald Solomon, a New York Republican, also tried a 
     list of $1 trillion in cuts just a year ago in the House. He 
     got only 73 votes of 435.
       In addition, the problem of balancing the budget with 
     spending reductions is exacerbated by the ``Contract With 
     America's'' call for a $500 billion tax cut.
       The reality today is that a combination of cuts, freezes, 
     loophole closings and tax increases must be cobbled together 
     to put us on a glide path to balancing the budget. Now is the 
     time to stop the finger-pointing, the blaming of the other 
     guy. Now is the time to stop dancing around the fire of 
     changes in the process.
       It's a pure sham to think that a constitutional balanced-
     budget amendment will give Congress discipline.
       If you put a gun to the head of Congress, it will get more 
     creative. The proof is in the pudding that's being cooked all 
     over town.
       Some tout abolishing departments, like Commerce and 
     Education. But their functions would continue somewhere. 
     Others say send everything back to the states. But that way, 
     the states would pick up deficits instead of the federal 
     government.
       Of course we know some want to use $636 billion in Social 
     Security funds. And there's talk of picking up $150 billion 
     by recomputing the Consumer Price Index and another $150 
     billion of re-estimating the growth of Medicare and Medicaid.
       There are even those who want one-time savings, like 
     selling the electric power grid or switching to the capital 
     budget system.
       In other words, there are people throughout town who are 
     figuring out ways to make the federal budget appear balanced 
     with hardly any cuts. With a balanced-budget amendment, they 
     would be able to play this game for seven years.
       Time out!
       The gamesmanship, the charade, must stop. If this nonsense 
     goes on for seven years, the United States will be down the 
     tubes.
       For all the talk about eliminating the deficit, the debt 
     snowballs. Why? Because we add $1 billion a day to the debt 
     by borrowing to pay interest.
       In January and throughout February, I offered 110 spending 
     cuts or eliminations from domestic discretionary spending. 
     This was worth $37 billion in the first year and put deficit 
     reduction on the glide path toward a balanced budget by 2002.
       But even if these politically impossible cuts were agreed 
     upon, the interest cost on the debt is growing at more than 
     $40 billion a year.
       The United States is in a downward budget spiral and we are 
     meeting ourselves coming around the corner. Like the Queen in 
     ``Alice in Wonderful'' told Alice: ``It takes all the running 
     you can do, to keep in the same place. If you want to get 
     somewhere else, you must run at least twice as fast as 
     that!''
       Let's get past all the shenanigans. Let's include Social 
     Security protection in the balanced-budget amendment. Then we 
     could pass the amendment and get down to the hard work of 
     balancing the budget.

  Mr. HOLLINGS. Madam President, this article brings right into true 
focus exactly what is going on.
  If, as Mr. Krauthammer says in this particular article, it was just 
``a fiction'', then why not just include this exception in the language 
of the constitutional amendment?
  The distinguished leaders of the legislation willingly accepted an 
exception for borrowed funds. The distinguished leaders of the balanced 
budget amendment willingly accepted the provision dealing judicial 
enforcement in order to pick up the one vote of the Senator from 
Georgia.
  Why, Madam President, did they not accept five votes when all they 
had to do was put in black and white what they were publicly saying? 
There are five Senators who are ready, willing, and able to vote for a 
constitutional amendment for a balanced budget if they include a 
provision protecting Social Security funds.
  The real flip-floppers are those who have abandoned their position 
taken in 1990 that Social Security funds should not be used in deficit 
calculations. It is very difficult to get that message out, but we will 
keep hammering. The distinguished majority leader says that he will 
continue to bring this up. I look forward to that debate and can 
likewise promise that this Senator will continue to push for language 
that excludes Social Security from deficit calculations.
  I yield the floor.
  

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