[Congressional Record Volume 141, Number 142 (Wednesday, September 13, 1995)]
[Extensions of Remarks]
[Pages E1770-E1771]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                           DEFICIT REDUCTION

                                 ______


                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                      Wednesday, September 13, 1995
  Mr. HAMILTON. Mr. Speaker, I would like to insert my Washington 
Report for Wednesday, 

[[Page E 1771]]
September 13, 1995, into the Congressional Record.
                          Reducing the Deficit

       In recent years significant progress has been made in 
     reducing the federal budget deficit. When President Clinton 
     took office the deficit was at an all-time high of $290 
     billion and projected to continue to rise. But because of the 
     1993 deficit reduction package approved by Congress and a 
     stronger than expected recovery for the economy, the deficit 
     has been steadily falling. Last year it was down to $203 
     billion and this year will be $161 billion. Because the U.S. 
     economy has been steadily growing, the deficit is now smaller 
     relative to the size of the economy than at any time since 
     the 1970s.
       Despite this, the central issue in Congress for the rest of 
     the year will be making further progress on the budget 
     deficit. The reasons are that the country is focused on 
     deficit reduction as a national goal and that without 
     additional steps the deficit will rise again, driven largely 
     by increasing federal health care expenditures. Within two 
     years the deficit could again be over $200 billion.


                          balancing the budget

       The more the government borrows to meet its debts, the less 
     is available for productive investment, both private and 
     public, and the more we pass the burden on to our children. 
     Earlier this year Congress passed a plan developed by the 
     congressional leadership to balance the budget in seven 
     years. I supported a similar seven-year plan, as well as a 
     balanced budget amendment to help force Congress to stick to 
     the plan. President Clinton proposed a plan that would 
     balance the budget in ten years.
       It is questionable how much difference it makes whether we 
     balance the budget by 2002 or by 2005. After several years of 
     steady decline, the deficit between 2002 and 2005 would be so 
     small that it may be viewed as insignificant in an economy as 
     large as ours. What is important is to have a credible 
     commitment by Congress to put into place a mechanism that 
     will control spending and make sure that the actual deficits 
     are on a glide path towards zero. The debate will continue 
     over balancing the budget in seven years versus ten years. A 
     bipartisan budget will probably have to be reached that sets 
     a date somewhere in between.
                           Economic Projects

       One major question in the budget debate is the credibility 
     of economic projections. Everybody attacks the other person's 
     forecast of revenue and economic growth. Minor differences in 
     assumptions can over the years magnify into huge differences 
     in the projected deficit. All long-term projections about 
     economic growth and revenues are highly suspect and cannot be 
     made with any precision. Generally, since deficits almost 
     always turn out to be higher than forecast, my inclination is 
     to take the more conservative estimates.
       Tremendous pressure is placed on those who make economic 
     and budget projections. For example, the new congressional 
     leadership has been pushing the Congressional Budget Office 
     (CBO) to adopt ``dynamic'' methods, of calculating the 
     effects of their policies, so that their proposed tax cuts 
     and spending reductions would boost projected economic growth 
     beyond the estimates of most economists. But CBO has a 
     reputation for independence, and has not always been 
     cooperative. Last year for example, CBO dealt a crippling 
     blow to President Clinton's health care reform plan by 
     concluding that it would produce far smaller savings than the 
     President had claimed. It recently warned the new 
     congressional leadership that their proposal for moving 
     millions of Medicare recipient from a fee-for-service system 
     to managed health care would likely not save nearly as much 
     moneys as the leadership wanted. That could undermine their 
     efforts to balance the budget or to deliver a big tax cut.


                            Economic Growth

       The primary goal of deficit reduction is to help create an 
     economy that has strong investments, creates jobs, has a 
     sound dollar, and has low inflation. That is why it is 
     important not only that we balance the budget but how we 
     balance it. We should not gut the very programs that help 
     improve our long-term economic outlook--including education 
     and training, research, and roads and bridges.
       It is disturbing that the economic projections made in the 
     budget provide only modest growth for the rest of the decade. 
     Much more attention has to be directed towards what is an 
     acceptable rate
      of growth for the country and what kinds of investments are 
     needed in order to get that growth. Although the principle 
     of balancing the budget has been adopted by almost 
     everybody, the more fundamental questions about the 
     economy have gotten much less attention and need to be 
     addressed. How do we get more growth in the economy? How 
     do we ensure that the benefits of growth are felt more 
     broadly in our society?


                                Tax Cut

       I also believe that there should not be a tax cut at this 
     time. The reason the new congressional leadership has had to 
     propose such deep cuts in health care and other programs is 
     because of the huge tax breaks they have proposed, and 
     because they are working with less than half of the budget. 
     They have excluded defense, social security, and interest on 
     the debt. Their efforts have been to cut the programs for the 
     poor and lower-income working families. Savings can certainly 
     be had there, but nowhere near the savings the budget 
     resolution suggests without greatly adding to the burden of 
     people of modest income.
       The fact is that the tax cut is simply too large for too 
     many who do not need it. Tax breaks should wait until 
     spending cuts have achieved a balanced budget. And we should 
     broaden the base of deficit reduction--for example, cutting 
     corporate welfare and looking for ``frauds, waste, and 
     abuse'' also in Pentagon programs.


                              Omnibus bill

       The next few weeks will be very confusing. The 
     congressional leadership will be bringing up most of the cuts 
     to balance the budget in one mammoth bill, far bigger than 
     anything that has ever been seen in Congress. It will include 
     a rewrite of federal farm programs, an overhaul of Medicare, 
     welfare reform, major changes in student loans and trade 
     programs, among other things. Members will not be told the 
     contents of the bill until a day or so before the final vote 
     occurs, and will have very limited opportunities to improve 
     the package on the floor. We need to take serious steps to 
     balance the budget, but we need to think through the changes 
     we are making. Poorly thought out policies could be very 
     costly in the long run.
     

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